<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
AMERICAN CELLULAR CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 4812 22-3043811
(STATE OR OTHER JURISDICTION
OF INCORPORATION OR PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
1336 BASSWOOD STREET, SUITE F
SCHAUMBURG, ILLINOIS 60173
(847) 843-9081
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JAMES J. WALTER, JR.
1336 BASSWOOD STREET, SUITE F
SCHAUMBURG, ILLINOIS 60173
(847) 843-9081
----------------
(NAME, ADDRESS, INCLUDING ZIP CODE, TELEPHONE NUMBER, INCLUDING AREA CODE, OF
AGENT FOR SERVICE)
COPIES TO:
SCOTT R. HABER, ESQ.
GREGORY K. MILLER, ESQ.
LATHAM & WATKINS
505 MONTGOMERY STREET
SUITE 1900
SAN FRANCISCO, CALIFORNIA 94111
(415) 391-0600
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
<CAPTION>
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS TO BE PRICE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED PER UNIT PRICE FEE
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Notes due 2008... $285,000,000 99.24% $282,834,000 $83,437
- ---------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------
</TABLE>
----------------
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>
PROSPECTUS
$285,000,000
OFFER TO EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING 10 1/2% SENIOR NOTES DUE 2008
OF
AMERICAN CELLULAR CORPORATION
---------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1998 UNLESS EXTENDED.
American Cellular Corporation, a Delaware corporation ("American Cellular"
or the "Company"), hereby offers (the "Exchange Offer"), upon the terms and
subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), to exchange $1,000
principal amount of its 10 1/2% Senior Notes due 2008 (the "Exchange Notes"),
which exchange has been registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to a registration statement of which
this Prospectus is a part (the "Registration Statement"), for each $1,000
principal amount of its outstanding 10 1/2% Senior Notes due 2008 (the
"Private Notes"), of which $285,000,000 in aggregate principal amount are
outstanding as of the date hereof. The form and terms of the Exchange Notes
are the same as the form and terms of the Private Notes except that (i) the
exchange will have been registered under the Securities Act, and, therefore,
the Exchange Notes will not bear legends restricting the transfer thereof and
(ii) Holders of the Exchange Notes will not be entitled to certain rights of
Holders of the Private Notes under the Registration Rights Agreement (as
defined), which rights will terminate upon the consummation of the Exchange
Offer. The Exchange Notes will evidence the same indebtedness as the Private
Notes (which they replace) and will be entitled to the benefits of an
indenture dated as of May 13, 1998 governing the Private Notes and the
Exchange Notes (the "Indenture"). The Private Notes and the Exchange Notes are
sometimes referred to herein collectively as the "Notes." See "The Exchange
Offer" and "Description of Exchange Notes."
The Exchange Notes will bear interest at the same rate and on the same terms
as the Private Notes. Consequently, the Exchange Notes will bear interest at
the rate of 10 1/2% per annum and the interest thereon will be payable semi-
annually in arrears on May 15 and November 15 of each year, commencing
November 15, 1998. The Exchange Notes will bear interest from and including
the date of issuance of the Private Notes (May 13, 1998). The Exchange Notes
will be redeemable at the option of the Company, in whole or in part, on or
after May 15, 2003, at the redemption prices set forth herein, plus accrued
and unpaid interest thereon, if any, to the date of redemption. Holders whose
Private Notes are accepted for exchange will be deemed to have waived the
right to receive any interest accrued on the Private Notes.
The Exchange Notes will be unsecured (except as described), unsubordinated
obligations of the Company, ranking senior to all subordinated Indebtedness
(as defined) of the Company and pari passu in right of payment to all other
existing and future Indebtedness of the Company. Since the business operations
of the Company will be conducted through its subsidiaries, the Exchange Notes
will be effectively subordinated to all existing and future liabilities of the
Company's subsidiaries. As of March 31, 1998, on the pro forma basis (as
defined), the Company (without its subsidiaries) would have had no
Indebtedness outstanding other than the Exchange Notes offered hereby and the
Company's guarantee under the Credit Facility (as defined). In addition, as of
March 31, 1998, on the pro forma basis, the aggregate principal amount of
Indebtedness of the Company's subsidiaries would have been approximately
$885.7 million (excluding intercompany indebtedness).
The Company will accept for exchange any and all validly tendered Private
Notes not withdrawn prior to 5:00 p.m., New York City time, on ,
1998, unless the Exchange Offer is extended by the Company in its sole
discretion (the "Expiration Date"). Tenders of Private Notes may be withdrawn
at any time prior to the Expiration Date. Private Notes may be tendered only
in integral multiples of $1,000. The Exchange Offer is subject to certain
customary conditions. See "The Exchange Offer--Conditions."
(Continued on next page)
---------------
SEE "RISK FACTORS," BEGINNING ON PAGE 16, FOR A DISCUSSION OF CERTAIN
FACTORS THAT INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER
AND AN INVESTMENT IN THE EXCHANGE NOTES.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
The date of this Prospectus is , 1998.
<PAGE>
(Continued from cover page)
Upon the occurrence of a Change of Control (as defined), Holders of the
Exchange Notes will have the right to require the Company to repurchase their
Exchange Notes, in whole or in part, at a purchase price equal to 101% of the
aggregate principal amount thereof, plus accrued and unpaid interest and
Additional Interest (as defined), if any, thereon to the date of repurchase.
See "Description of Exchange Notes."
Based on an interpretation by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Private Notes may be offered for resale, resold
and otherwise transferred by a Holder thereof (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
a person that is an affiliate of the Company within the meaning of Rule 405
under the Securities Act), without compliance with the registration and
Prospectus delivery provisions of the Securities Act; provided that the Holder
is acquiring the Exchange Notes in the ordinary course of its business and is
not participating, and had no arrangement or understanding with any person to
participate, in the distribution of the Exchange Notes. Holders of Private
Notes wishing to accept the Exchange Offer must represent to the Company, as
required by the Registration Rights Agreement, that such conditions have been
met. Each broker-dealer that receives Exchange Notes for its own account in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a Prospectus in connection
with any resale of such Exchange Notes. The Company believes that none of the
registered Holders of the Private Notes is an affiliate (as such term is
defined in Rule 405 under the Securities Act) of the Company.
Prior to the Exchange Offer, there has been no public market for the Notes.
The Exchange Notes will not be listed on any securities exchange, but the
Private Notes are eligible for trading in the National Association of
Securities Dealers, Inc.'s Private Offerings, Resales and Trading through
Automatic Linkages (PORTAL) market. There can be no assurance that an active
market for the Notes will develop. To the extent that a market for the Notes
does develop, the market value of the Notes will depend on market conditions
(such as yields on alternative investments), general economic conditions, the
Company's financial condition and certain other factors. Such conditions might
cause the Notes, to the extent that they are traded, to trade at a significant
discount from face value. See "Risk Factors--Absence of a Public Market."
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a Prospectus in
connection with any resale of such Exchange Notes. The Letter of Transmittal
states that by so acknowledging and by delivering a Prospectus, a broker-
dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Private Notes where
such Private Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities. The Company has indicated its
intention to make this Prospectus (as it may be amended or supplemented)
available to any broker-dealer for use in connection with any such resale for
a period of 180 days after the Expiration Date. See "The Exchange Offer--
Resale of the Exchange Notes" and "Plan of Distribution."
The Company will not receive any proceeds from, and has agreed to bear the
expenses of, the Exchange Offer. No underwriter is being used in connection
with this Exchange Offer. See "The Exchange Offer--Resale of the Exchange
Notes."
----------------
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF PRIVATE NOTES IN ANY JURISDICTION IN
WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE
WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
(Continued on next page)
2
<PAGE>
(Continued from previous page)
NO PERSON IS AUTHORIZED IN CONNECTION WITH THE EXCHANGE OFFER TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS OR
THE ACCOMPANYING LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS OR THE
ACCOMPANYING LETTER OF TRANSMITTAL, NOR ANY EXCHANGE MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS OFFERING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS
IN CONNECTION THEREWITH. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
THE EXCHANGE NOTES WILL BE AVAILABLE INITIALLY ONLY IN BOOK-ENTRY FORM. THE
COMPANY EXPECTS THAT THE EXCHANGE NOTES ISSUED PURSUANT TO THE EXCHANGE OFFER
WILL BE ISSUED IN THE FORM OF ONE OR MORE FULLY REGISTERED GLOBAL NOTES THAT
WILL BE DEPOSITED WITH, OR ON BEHALF OF, THE DEPOSITORY TRUST COMPANY ("DTC"
OR THE "DEPOSITARY") AND REGISTERED IN ITS NAME OR IN THE NAME OF CEDE & CO.,
AS ITS NOMINEE BENEFICIAL INTERESTS IN THE GLOBAL NOTE REPRESENTING THE
EXCHANGE NOTES WILL BE SHOWN ON, AND TRANSFERS THEREOF WILL BE EFFECTED ONLY
THROUGH, RECORDS MAINTAINED BY THE DEPOSITARY AND ITS PARTICIPANTS. AFTER THE
INITIAL ISSUANCE OF SUCH GLOBAL NOTE, EXCHANGE NOTES IN CERTIFICATED FORM WILL
BE ISSUED IN EXCHANGE FOR THE GLOBAL NOTE ONLY IN ACCORDANCE WITH THE TERMS
AND CONDITIONS SET FORTH IN THE INDENTURE. SEE "THE EXCHANGE OFFER--BOOK-ENTRY
TRANSFER" AND "BOOK ENTRY; DELIVERY AND FORM."
3
<PAGE>
CERTAIN TERMS
Interests in cellular markets that are licensed by the FCC are commonly
measured on the basis of the population of the market served, with each person
in the market area referred to as a "Pop." The number of Pops or Net Pops
owned is not necessarily indicative of the number of subscribers or potential
subscribers. As used in this Prospectus, unless otherwise indicated, the term
"Pops" means the estimate of the 1996 population of a Metropolitan Statistical
Area ("MSA") or Rural Service Area ("RSA"), as derived from the 1997 Kagan
Cellular Telephone Atlas population estimates. The term "Net Pops" means the
estimated population with respect to a given service area multiplied by the
percentage interest that the Company owns in the entity licensed in such
service area. MSAs and RSAs are also referred to as "markets." The term
"wireline" license refers to the license for any market initially awarded to a
company or group that was affiliated with a local landline telephone carrier
in the market, and the term "non-wireline" license refers to the license for
any market that was initially awarded to a company, individual or group not
affiliated with any landline carrier. The term "System" means a FCC-licensed
cellular telephone system. The term "ILEC" means an incumbent local exchange
carrier. The term "NACN" means the North American Cellular Network. The term
"PCS" means personal communications services.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by, and should
be read in conjunction with, the more detailed information and financial
statements, including the related notes, appearing elsewhere in this
Prospectus. Unless the context otherwise requires, all references to "American
Cellular" or the "Company" shall mean, collectively, American Cellular
Corporation and its subsidiaries on a consolidated basis, or with respect to
the period prior to the Merger, PriCellular Corporation and its subsidiaries.
See "Certain Terms" for definitions of certain industry terms used herein and
see "--Summary Historical and Pro Forma Financial Information" for the
definition of the "pro forma basis" used herein.
THE COMPANY
The Company is one of the largest independent rural cellular telephone system
operators in the United States. It owns and operates non-wireline FCC-licensed
cellular telephone systems primarily in rural areas of the Midwestern and
Eastern portions of the United States with approximately 5.1 million Net Pops.
The Company's licenses are grouped in four main clusters of smaller MSAs and
strategically located RSAs covering over 110,000 square miles. The Company
markets all of its cellular products and services under the name CELLULARONE,
one of the most recognized brand names in the cellular industry. In marketing
its products and services, the Company utilizes its distribution network of
over 90 retail locations, a direct sales force and a group of agents.
The Company has experienced strong growth since 1995 which has been achieved
through both selected acquisitions and internal growth. As of March 31, 1998,
the Company provided cellular service to approximately 275,000 subscribers,
representing a penetration rate of 5.4%, and had revenues and EBITDA of $51.5
million and $21.4 million, respectively. Additionally, the Company's historical
revenues and EBITDA have increased at a compound annual growth rate for the
past two calendar years of 109% and 165%, respectively.
SYSTEMS
American Cellular believes its predominantly rural cellular systems provide
strong growth opportunities due to lower penetration rates, higher subscriber
growth rates and a higher proportion of roaming revenue compared to cellular
systems located in large MSAs. The Company focuses on underdeveloped rural
cellular areas which have a significant number of potential customers with
demand for wireless communication. American Cellular believes these areas have
not yet been as fully developed as large MSAs, which were licensed earlier by
the FCC, and have the potential for increased cellular usage and superior
financial performance. In addition, American Cellular believes that in the near
term rural cellular areas will be subject to less competition from other
wireless providers (such as PCS) as compared to larger MSAs.
Through selective acquisitions and asset swaps, the Company has concentrated
its efforts on creating an integrated network of rural cellular systems in
contiguous service areas. The Company's cellular interests consist principally
of four large operating clusters of cellular systems:
Upper Midwest Cluster--a 1.8 million Net Pop cluster of 15 Systems
covering approximately 78,000 contiguous square miles in Minnesota,
Wisconsin and Michigan.
Mid-Atlantic Cluster--an 857,000 Net Pop cluster of five contiguous
Systems consisting of five RSAs in Ohio, Pennsylvania and West Virginia
covering approximately 10,000 contiguous square miles.
New York Cluster--a 1.1 million Net Pop cluster of two MSAs and two RSAs
covering more than 8,000 contiguous square miles in suburban New York
located between the New York City MSA of AT&T Wireless Services Inc. and
Southwestern Bell's Albany, NY MSA.
5
<PAGE>
Kentucky Cluster--a 1.0 million Net Pop cluster of four RSAs adjacent to
Louisville and Lexington, Kentucky and one RSA in Tennessee which abuts
Knoxville, Tennessee. The 38 counties in Kentucky and the six counties in
Tennessee cover more than 15,000 square miles.
BUSINESS STRATEGY
American Cellular's primary business strategy is to focus on the development
of the Company's existing clusters and the selective acquisition of additional
rural cellular systems. The principal elements of this strategy include:
Develop Rural Market Clusters. American Cellular believes that its focus on
small- and medium-sized markets will provide it with several competitive
advantages. The majority of the Company's operations are in the early stages of
their growth cycle and therefore afford significant opportunities for
improvements in performance, particularly with respect to rates of penetration.
The Company's modestly populated markets exhibit a concentration of small
businesses, long commute times, and well-traveled roadways that have the
potential to generate a high level of cellular use. Additionally, the Company
enjoys above-average roaming revenues because the majority of the Company's
markets are contiguous with more densely populated areas. Finally, because the
majority of the Company's markets consist of a population density that the
Company believes is too low to make PCS services economically attractive, the
Company is in position to benefit from PCS roaming revenues while generally
remaining relatively insulated from direct PCS competition.
Market Through Local Promotions. The Company markets its services to increase
subscriber activations, to minimize churn and to promote its nationally known
CELLULARONE branded products and services. Many of its marketing programs are
tailored for individual markets and are designed to distinguish the Company as
the local market's highest quality cellular service provider, stressing its
local retail stores, customer service and commitment to the community. A key
element of the Company's market positioning is its use of local retail stores
and a direct sales force. A retail location complemented by a direct sales
force provides the Company with more control over the sales process than if it
were to rely exclusively on independent agents. The Company believes that its
over 90 retail locations enhance its ability to provide quality customer
service and generate customer loyalty, as well as to provide convenient
distribution locations. While American Cellular plans to continue to develop
its direct sales force and to add additional retail locations to increase
subscriber penetration, it also plans to augment its sales network by taking
advantage of cost-effective distribution channels, including independent
dealers and contract sales, to increase further market penetration.
Introduce Flexible and Innovative Pricing and Billing Plans. The Company
currently offers a wide selection of pricing plans tailored to its current high
credit-quality customer base. In order to further expand its customer base and
increase its penetration, American Cellular intends to introduce certain new
pricing packages. These new packages will include prepaid plans which decrease
bad debt risk and also reduce the cost of subscriber acquisitions through the
elimination or significant reduction of equipment subsidies to subscribers.
Additionally, in order to increase cellular phone use, American Cellular plans
to support ongoing efforts of the industry to provide "calling party pays"
service whereby the cost to the cellular subscriber is reduced as the
initiating caller is charged for a call placed to the cellular phone.
Continue Build Out of Advanced Network. American Cellular intends to continue
to expand and improve coverage, increase capacity and build out its systems.
American Cellular believes that expanding and improving coverage and capacity
in its systems will attract additional subscribers, increase usage by existing
subscribers, increase roaming activity, and further enhance the efficiency of
its networks. Additionally, the Company's advanced digital-ready network allows
the Company the flexibility to offer digital features and analog coverage in
the same cell. American Cellular intends to take advantage of the digital
capability of the network by introducing creative price plans and premium
service offerings (such as caller ID and message waiting indicator), thereby
enhancing the average revenues generated per subscriber as well as fortifying
the Company's competitive position.
6
<PAGE>
Achieve Cost Savings Through Selective Centralization. While maintaining its
local marketing and sales focus, American Cellular intends to reduce overhead
expenses by opportunistically centralizing certain business functions.
Prepare for Future Competition. American Cellular believes that it is well
positioned to compete against present and future competitive wireless service
providers through its extensive footprint, distribution channels, customer
service capabilities, experienced management team and high quality, digital-
ready network. The Company is one of two incumbent cellular providers in its
markets. American Cellular believes that the extensive capital expenditures
required to deploy the requisite infrastructure in order to offer PCS services
is more readily justifiable from an economic standpoint in larger, more densely
populated urban markets. As a result of these capital requirements for PCS
operators, American Cellular believes that its service areas will not support
widespread PCS competition, thus positioning American Cellular to provide
roaming services to PCS customers.
Continue Selective Acquisition Strategy. American Cellular's strategy is to
continue to expand its current clusters through the selective acquisition of
small to mid-sized MSAs and strategic RSAs that it believes are undervalued,
underdeveloped or that possess traits indicative of potentially high cellular
usage and superior financial performance. Upon acquiring a System, American
Cellular's aim will be to make certain operational and organizational changes
reflective of its operating philosophy in order to increase the number and
quality of subscribers and enhance operating cash flow, while controlling
subscriber acquisition costs and promoting superior customer service.
THE MERGER
On June 25, 1998, American Cellular acquired all the operations of
PriCellular Corporation, a Delaware corporation ("PriCellular") pursuant to an
Agreement and Plan of Merger, dated March 6, 1998, by and between PriCellular
and American Cellular, as amended (the "Merger Agreement"). See "The Merger."
New Management. American Cellular's management has extensive experience in
various communications businesses. As a group they have been owners of and
managed two cellular holding companies, managed and operated what was at the
time the largest paging operation in the U.S. and developed paging companies in
South America. The Chief Executive Officer and President of American Cellular,
John Fujii and Brian McTernan, respectively, began working together in 1984 at
Metromedia Telecommunications, which, at the time, was the largest wireless
telecommunications company in the U.S. After managing Metromedia's Chicago
cellular operations, Mr. Fujii became Chief Financial Officer for the wireless
communications division and Mr. McTernan became Executive Vice President in
charge of all cellular operations.
Prior to forming American Cellular, Messrs. Fujii and McTernan were the
founding principals of MLC Industries, Inc. ("MLC"), a management company
responsible for the construction, maintenance, operations and financial control
of ACME Paging L.P. ("ACME"), a large multinational paging operation which they
founded in 1994. Messrs. Fujii and McTernan developed paging companies in
Brazil, Argentina and Colombia. Prior to the start-up of ACME, MLC's principals
operated two domestic cellular communications companies: Crowley Cellular
Telecommunications LP ("Crowley") and Mid-South Cellular LP ("Mid-South").
During their tenure at Crowley (1988-1994), management developed 13 cellular
systems throughout the U.S., developed a proprietary telecommunications billing
system, and negotiated several financings. With its partner Inepar S.A., MLC
constructed a rural cellular system for TELESC, the telephone company in the
state of Santa Catarina, Brazil. At Mid-South, Messrs. Fujii and McTernan built
out and operated cellular networks in a cluster of three cellular markets.
Equity Investors. A group of institutional investors led by Spectrum Equity
Investors II ("Spectrum") and Providence Equity Partners ("PEP") has invested
$350 million in the Company in the form of equity in connection with the
financing of the Merger (the "Equity Contribution"). The managing general
partners of Spectrum have invested in the communications industry since 1980,
making investments in 52 companies,
7
<PAGE>
including Illuminet, Inc., Milliwave, LP (Winstar), PathNet, Inc. and WNP
Communications, Inc. PEP is a private investment firm that specializes in
equity investments in telecommunications and media companies in the U.S. and
abroad. The principals of PEP have managed funds with over $900 million in
equity commitments and have made investments in companies including Brooks
Fiber Properties, Inc., Continental Cablevision, Inc., MetroNet Communications
Corp., Verio Inc. and Western Wireless Corporation.
Other Equity Investors include: Sandler Investment Partners, Triumph
Partners, Tandem Wireless Investments, First Union Capital Partners,
HarbourVest Partners, Trident Capital Management, KECALP (an affiliate of
Merrill Lynch), Toronto Dominion Investments (an affiliate of TD Securities
(USA) Inc.), SG Capital Partners (an affiliate of Societe Generale), and
Generation Capital Partners.
American Cellular's principal executive offices are at 1336 Basswood Street,
Suite F, Schaumburg, Illinois 60173.
Sources and Uses. The Company will not receive any cash proceeds from the
exchange of the Private Notes for the Exchange Notes pursuant to the Exchange
Offer. The following table sets forth the approximate sources and uses of funds
in connection with the financing of the Merger as of March 31, 1998 on the pro
forma basis:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Cash on hand................................................ $ 86.1
Credit Facility:
Revolving Credit Facility (a)............................. 35.7
Term Loans................................................ 850.0
Private Notes net of expenses (b)........................... 272.5
Redeemable Preferred Stock.................................. 323.0
--------
Total Sources of Funds.................................... $1,567.3
========
USES OF FUNDS:
Cash merger consideration (c)............................... $ 802.0
Repayment of net existing indebtedness (d).................. 588.2
Debt Tender Offer Payments (e).............................. 69.4
Restricted Escrow Investment (b)............................ 82.4
Fees and expenses........................................... 25.3
--------
Total Uses of Funds....................................... $1,567.3
========
</TABLE>
- -------
(a) The Revolving Credit Facility provides for total borrowings of up to $150
million. Borrowings under the Credit Facility may be increased by up to
$250 million upon request of American Cellular Wireless LLC ("American
Wireless"), a direct wholly-owned subsidiary of American Cellular, and
consent of a majority of lenders.
(b) Approximately $82.4 million of the proceeds from the Notes were used to
purchase the Pledged Securities to pay the first six scheduled interest
payments on the Notes (unless already paid) at the stated interest rate.
(c) Represents the Merger consideration paid to the PriCellular stockholders
(reflecting that all of PriCellular's 10 3/4% Senior Subordinated
Convertible Discount Notes due 2004 (the "Convertible Notes") were
converted into common stock), reduced by the estimated proceeds from the
exercise of certain warrants and options.
(d) Represents the funds required to repay total existing indebtedness of the
Company. In connection with the Merger, the Company purchased (the "Debt
Tender Offers") the 10 3/4% Senior Notes due 2004 (the "10 3/4% Notes") of
PriCellular Wireless Corporation ("Wireless"), the 12 1/4% Senior
Subordinated Discount Notes due 2003 (the "12 1/4% Notes") of Wireless and
the 14% Senior Subordinated Discount Notes due 2001 (the "14% Notes") of
Wireless (collectively, the "Old Notes"). See "The Merger--Debt Tender
Offers and Solicitations."
(e) Includes amounts for the consent solicitation fees associated with the Debt
Tender Offers.
8
<PAGE>
THE EXCHANGE OFFER
The Exchange Offer.......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each
$1,000 principal amount of Private Notes that are
properly tendered and accepted. The Company will
issue Exchange Notes on or promptly after the
Expiration Date. There is $285,000,000 aggregate
principal amount of Private Notes outstanding.
See "The Exchange Offer--Purpose of the Exchange
Offer."
Based on an interpretation by the staff of the
Commission set forth in no-action letters issued
to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Private Notes may be
offered for resale, resold and otherwise
transferred by a Holder thereof (other than (i) a
broker-dealer who purchases such Exchange Notes
directly from the Company to resell pursuant to
Rule 144A or any other available exemption under
the Securities Act or (ii) a person that is an
affiliate of the Company within the meaning of
Rule 405 under the Securities Act), without
compliance with the registration and Prospectus
delivery provisions of the Securities Act;
provided that the Holder is acquiring Exchange
Notes in the ordinary course of its business and
is not participating, and had no arrangement or
understanding with any person to participate, in
the distribution of the Exchange Notes. Each
broker-dealer that receives Exchange Notes for
its own account in exchange for Private Notes,
where such Private Notes were acquired by such
broker-dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a Prospectus in
connection with any resale of such Exchange
Notes. See "The Exchange Offer--Resale of the
Exchange Notes."
Registration Rights
Agreement.................. The Private Notes were sold by the Company on May
13, 1998 to Merrill Lynch & Co., TD Securities
and Wasserstein Perella Securities, Inc.
(collectively, the "Initial Purchasers") pursuant
to a Purchase Agreement, dated May 6, 1998, by
and among the Company and the Initial Purchasers
(the "Purchase Agreement"). Pursuant to the
Purchase Agreement, the Company and the Initial
Purchasers entered into a Registration Rights
Agreement, dated as of May 13, 1998 (the
"Registration Rights Agreement"), which grants
the Holders of the Private Notes certain exchange
and registration rights. The Exchange Offer is
intended to satisfy such rights, which will
terminate upon the consummation of the Exchange
Offer. See "The Exchange Offer--Termination of
Certain Rights."
Expiration Date............. The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless the
Exchange Offer is extended by the Company in its
sole discretion, in which case the term
"Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended. See
"The Exchange Offer--Expiration Date; Extensions;
Amendments."
Accrued Interest on the
Exchange Notes and the
Private Notes.............. The Exchange Notes will bear interest from and
including the date of issuance of the Private
Notes (May 13, 1998). Holders whose
9
<PAGE>
Private Notes are accepted for exchange will be
deemed to have waived the right to receive any
interest accrued on the Private Notes. See "The
Exchange Offer--Interest on the Exchange Notes."
Conditions to the Exchange
Offer...................... The Exchange Offer is subject to certain
customary conditions that may be waived by the
Company. The Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Private Notes being tendered for exchange. See
"The Exchange Offer--Conditions."
Procedures for Tendering
Private Notes.............. Each Holder of Private Notes wishing to accept
the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal, or
such facsimile, together with such Private Notes
and any other required documentation to Chase
Manhattan Bank and Trust Company, National
Association, as exchange agent (the "Exchange
Agent"), at the address set forth herein. By
executing the Letter of Transmittal, the Holder
will represent to and agree with the Company
that, among other things, (i) the Exchange Notes
to be acquired by such Holder of Private Notes in
connection with the Exchange Offer are being
acquired by such Holder in the ordinary course of
its business, (ii) if such Holder is not a
broker-dealer, such Holder is not currently
participating in, does not intend to participate
in, and has no arrangement or understanding with
any person to participate in a distribution of
the Exchange Notes, (iii) if such Holder is a
broker-dealer registered under the Exchange Act
or is participating in the Exchange Offer for the
purposes of distributing the Exchange Notes, such
Holder will comply with the registration and
Prospectus delivery requirements of the
Securities Act in connection with a secondary
resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of
the staff of the Commission set forth in no-
action letters (see "The Exchange Offer--Resale
of Exchange Notes"), (iv) such Holder understands
that a secondary resale transaction described in
clause (iii) above and any resales of Exchange
Notes obtained by such Holder in exchange for
Private Notes acquired by such Holder directly
from the Company should be covered by an
effective registration statement containing the
selling securityholder information required by
Item 507 or Item 508, as applicable, of
Regulation S-K of the Commission and (v) such
Holder is not an "affiliate," as defined in Rule
405 under the Securities Act, of the Company. If
the Holder is a broker-dealer that will receive
Exchange Notes for its own account in exchange
for Private Notes that were acquired as a result
of market-making activities or other trading
activities, such Holder will be required to
acknowledge in the Letter of Transmittal that
such Holder will deliver a Prospectus in
connection with any resale of such Exchange
Notes; however, by so acknowledging and by
delivering a Prospectus, such Holder will not be
deemed to admit that it is an "underwriter"
within the meaning of the Securities Act. See
"The Exchange Offer--Procedures for Tendering."
10
<PAGE>
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Private Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender such Private Notes in
the Exchange Offer should contact such registered
Holder promptly and instruct such registered
Holder to tender on such beneficial owner's
behalf. If such beneficial owner wishes to tender
on such owner's own behalf, such owner must,
prior to completing and executing the Letter of
Transmittal and delivering such owner's Private
Notes, either make appropriate arrangements to
register ownership of the Private Notes in such
owner's name or obtain a properly completed bond
power from the registered Holder. The transfer of
registered ownership may take considerable time
and may not be able to be completed prior to the
Expiration Date. See "The Exchange Offer--
Procedures for Tendering."
Guaranteed Delivery
Procedures................. Holders of Private Notes who wish to tender their
Private Notes and whose Private Notes are not
immediately available or who cannot deliver their
Private Notes, the Letter of Transmittal or any
other documentation required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Private Notes
according to the guaranteed delivery procedures
set forth under "The Exchange Offer--Guaranteed
Delivery Procedures."
Acceptance of the Private
Notes and Delivery of the
Exchange Notes............. Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company
will accept for exchange any and all Private
Notes that are properly tendered in the Exchange
Offer prior to the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will
be delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer--Terms of the Exchange Offer."
Withdrawal Rights........... Tenders of Private Notes may be withdrawn at any
time prior to the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders."
Material Federal Income Tax
Considerations............. For a discussion of certain material federal
income tax considerations relating to the
exchange of the Exchange Notes for the Private
Notes, see "Material Federal Income Tax
Considerations."
Exchange Agent.............. Chase Manhattan Bank and Trust Company, National
Association is serving as the Exchange Agent in
connection with the Exchange Offer.
11
<PAGE>
THE EXCHANGE NOTES
The Exchange Offer applies to $285.0 million aggregate principal amount of
the Private Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Private Notes, except that (i) the exchange will have
been registered under the Securities Act and, therefore, the Exchange Notes
will not bear legends restricting the transfer thereof and (ii) Holders of the
Exchange Notes will not be entitled to certain rights of Holders of the Private
Notes under the Registration Rights Agreement, which rights will terminate upon
consummation of the Exchange Offer. The Exchange Notes will evidence the same
debt as the Private Notes (which they replace) and will be issued under, and be
entitled to the benefits of, the Indenture. For further information and for
definitions of certain capitalized terms used below, see "Description of
Exchange Notes."
Notes....................... $285.0 million aggregate principal amount of the
Company's 10 1/2% Senior Notes due 2008.
Company..................... American Cellular Corporation
Maturity Date............... May 15, 2008.
Interest Payment Dates...... The Exchange Notes will bear interest at the rate
of 10 1/2% per annum, and such interest will be
payable semi-annually in arrears of May 15 and
November 15, commencing on November 15, 1998.
Optional Redemption......... The Exchange Notes are redeemable for cash at any
time on or after May 15, 2003, at the option of
the Company, in whole or in part, at the
redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date
of redemption. In addition, at any time prior to
May 15, 2001, the Company may redeem up to 35% of
the aggregate principal amount of the Notes
originally issued with the net cash proceeds of
one or more Public Equity Offerings or Strategic
Equity Offerings at a redemption price equal to
110.5% of the principal amount thereof, together
with accrued and unpaid interest, if any, to the
date of redemption; provided that not less than
65% of the aggregate principal amount of Notes
originally issued remain outstanding immediately
after such redemption.
Change of Control........... Upon the occurrence of a Change of Control, each
holder of the Exchange Notes may require the
Company to repurchase all or a portion of such
holder's Exchange Notes at a purchase price in
cash equal to 101% of the principal amount
thereof, together with accrued and unpaid
interest, if any, to the date of repurchase.
See "Description of Exchange Notes--Certain
Covenants --Repurchase of Notes at the Option of
the Holder Upon a Change of Control."
Ranking..................... The Exchange Notes are unsecured (except as
described under "--Security"), unsubordinated
obligations of the Company ranking senior to all
subordinated Indebtedness of the Company and pari
passu in right of payment to all other existing
and future Indebtedness of the Company. Since the
business operations of the Company will be
conducted through its subsidiaries, the Exchange
12
<PAGE>
Notes will be effectively subordinated to all
existing and future liabilities (including trade
payables) of the Company's subsidiaries. The
Exchange Notes will also be effectively
subordinated to secured Indebtedness of the
Company as to the assets securing such
Indebtedness. As of March 31, 1998, on the pro
forma basis, the Company (without its
subsidiaries) would have had no Indebtedness
outstanding other than the Exchange Notes offered
hereby and the Company's guarantee under the
Credit Facility. In addition, as of March 31,
1998, on the pro forma basis, the aggregate
principal amount of Indebtedness of the Company's
subsidiaries would have been approximately $885.7
million (excluding intercompany indebtedness).
Security.................... Pursuant to the pledge and escrow agreement (the
"Pledge and Escrow Agreement"), the Company
purchased and pledged to the Trustee the Pledged
Securities as security for the benefit of the
holders of the Notes in an amount sufficient to
provide for payment in full of the first six
scheduled interest payments (unless already paid)
due on the Notes at the stated interest rate.
Certain Covenants........... The Indenture contains certain restrictive
covenants, including covenants with respect to
the following matters: (i) limitation on
incurrence of additional indebtedness; (ii)
limitation on restricted payments; (iii)
limitation on restricting subsidiary dividends;
(iv) limitation on transactions with related
persons; (v) limitation on issuances of
guarantees of indebtedness; (vi) limitation on
asset sales and sales of subsidiary stock; (vii)
limitation on liens; (viii) limitation on merger,
sale or consolidation; (ix) limitation on lines
of business; and (x) limitation on sale and
issuance of subsidiary stock. See "Description of
Exchange Notes--Certain Covenants."
RISK FACTORS
Prospective investors should carefully consider the information set forth
under the caption "Risk Factors" and all other information set forth in this
Prospectus in connection with the Exchange Offer before making an investment in
the Exchange Notes.
13
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth certain summary historical consolidated
financial data for the Company as of March 31, 1998 and 1997 and for the five
years ended December 31, 1997. The summary historical financial data has been
derived from the Company's consolidated financial statements for the years
ended December 31, 1993, 1994, 1995, 1996, and 1997, which statements have been
audited by Ernst & Young LLP, independent auditors. The unaudited pro forma
statement of operations and other unaudited pro forma supplemental financial
data gives effect to (i) the Merger, (ii) the Equity Contribution, the Credit
Facility and the Offering and the application of the net proceeds therefrom
(collectively, the "Merger Financings"), (iii) the Debt Tender Offers and the
repayment or conversion of all other existing Indebtedness of the Company, and
(iv) the purchase of TN-4 RSA by the Company, as if each such transaction had
occurred on January 1, 1997 ((i) through (iv) collectively, the "pro forma
basis"). The pro forma balance sheet data as of March 31, 1998 has been
prepared as if such transactions had occurred on that date. The financial
information for TN-4 RSA as of and for the period ended December 31, 1997
precedes TN-4 RSA's acquisition by the Company and is based upon the books and
records of TN-4 RSA and has not been audited.
The following table should be read in conjunction with "--Sources and Uses of
Funds," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Unaudited Pro Forma Financial Information" and the
consolidated financial statements, including in each case the notes thereto,
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
----------------------------- ----------------------------------------------------------
PRO FORMA PRO FORMA
1998 (A) 1998 1997 1997 (A) 1997 1996 1995 1994 1993
--------- -------- -------- --------- -------- -------- -------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT CERTAIN OPERATING DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues..... $ 51,503 $ 51,503 $ 35,566 $ 196,264 $181,000 $112,616 $ 41,504 $ 5,209 $ 3,809
Cost of cellular
service............... 13,460 13,460 9,274 52,344 48,691 29,571 10,694 1,892 835
Cost of equipment
sold.................. 2,630 2,630 2,467 13,875 12,841 10,073 4,951 814 255
-------- -------- -------- --------- -------- -------- -------- ------- -------
Gross margin........... 35,413 35,413 23,825 130,045 119,468 72,972 25,859 2,503 2,719
Selling, general and
administrative........ 14,779 14,779 11,278 56,705 53,485 34,502 16,512 6,005 1,659
Nonrecurring changes... -- 2,389 -- -- -- -- -- -- --
Depreciation and
amortization.......... 14,759 8,532 6,724 54,563 28,759 19,537 10,337 2,720 1,695
-------- -------- -------- --------- -------- -------- -------- ------- -------
Operating income
(loss)................ 5,875 9,713 5,823 18,777 37,224 18,933 (990) (6,222) (635)
Gain (loss) on sale of
investments in
cellular operations... -- -- 8,451 -- 8,423 (1,401) 11,598 6,819 11,986
Interest expense, net.. (30,202) (17,854) (14,696) (121,844) (62,528) (42,201) (18,839) (1,940) (271)
Other income (expense),
net................... 812 812 812 3,250 3,250 1,626 520 (97) (464)(b)
-------- -------- -------- --------- -------- -------- -------- ------- -------
Net income (loss)....... $(23,515) $ (7,329) $ 390 $ (99,818) $(13,631) $(23,043) $ (7,711) $(1,440) $10,616
======== ======== ======== ========= ======== ======== ======== ======= =======
Ratio of earnings to
fixed charges (c)...... -- -- 1.0 -- -- -- -- -- 22.7
======== ======== ======== ========= ======== ======== ======== ======= =======
CERTAIN OPERATING DATA:
EBITDA (in
thousands) (d)........ $ 21,446 $ 19,057 13,359 $ 76,590 $ 69,233 $ 40,096 $ 9,867 $(3,599) $ 621
EBITDA margin.......... 41.6% 37.0% 37.6% 39.0% 38.3% 35.6% 23.8% (69.1)% 16.3%
Capital expenditures
(in thousands)........ $ 11,459 $ 11,459 6,494 $ 26,483 $ 25,717 $ 29,470 $ 6,794 $ 3,013 $ 205
Ending subscribers
(e)................... 275,000 275,000 179,000 261,991 250,441 150,328 78,227 17,344 9,886
Ending penetration
(f)................... 5.4% 5.4% 3.8% 5.1% 5.2% 3.8% 2.2% .95% .53%
Ending net pops (in
millions)............. 5.1 5.1 4.8 5.1 4.8 3.9 3.6 1.8 1.8
Churn (g).............. 1.4% 1.4% 1.6% 1.6% 1.5% 1.6% 2.0% 2.7% 3.2%
Average monthly revenue
per subscriber (h).... $ 60 $ 60 $ 66 $ 73 $ 72 $ 82 $ 107 $ 123 $ 156
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
AS OF MARCH 31, 1998 1997
--------------------- ------------
PRO FORMA(A) ACTUAL ACTUAL
------------ -------- ------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................... $ (20,262) $ 40,635 $ 44,518
Net fixed assets............................ 147,337 113,190 104,854
Total assets................................ 1,539,435 812,970 747,656
Long-term debt.............................. 1,168,535 635,016 568,323
Total liabilities........................... 1,237,187 686,119 613,476
Stockholders' equity (deficit).............. (20,752) 126,851 134,180
</TABLE>
- --------
(a) Pro forma for (i) the Merger, (ii) the Merger Financings, (iii) the Debt
Tender Offers and the repayment or conversion of all other existing
Indebtedness of the Company and (iv) the purchase of the TN-4 RSA, as if
each such transaction had occurred on January 1, 1997 for Statement of
Operations and Certain Operating Data and March 31, 1998 for Balance Sheet
Data. See "Unaudited Pro Forma Financial Information."
(b) Extraordinary loss on early extinguishment of debt of $172 is shown as part
of other income (expense), net.
(c) The ratio of earnings to fixed charges is determined by dividing the sum of
earnings before extraordinary items and accounting changes, interest
expense, taxes and a portion of rent expense representative of interest by
the sum on interest expense and a portion of the rent expense
representative of interest. For the three months ended March 31, 1998 and
the years ended December 31, 1997, 1996, and 1995, the deficiency of
earnings to fixed charges was $7,329, $13,631, $23,043, $7,711 and $1,440,
respectively. The pro forma deficiency of earnings to fixed charges for the
three months ended March 31, 1998 and the year ended December 31, 1997 was
$23,515 and $99,818, respectively.
(d) EBITDA represents earnings before depreciation and amortization, interest
expense, interest income, and gains on sales of cellular properties. EBITDA
is not intended to be a performance measure and should not be regarded as
an alternative to either operating income or net income as an indicator of
operating performance or to cash flows as a measure of liquidity.
Furthermore, EBITDA is not a GAAP-based financial measure, and it should
not be considered as an alternative to GAAP-based measures of financial
performance. In addition, EBITDA as determined by the Company may not be
comparable to related or similar measures as reported by other companies
and do not represent funds available for discretionary use.
(e) Each billable telephone number in service represents one subscriber, not
including test, demonstration or other telephone numbers for which payment
is not expected.
(f) Represents the ratio of ending subscribers to the estimated total net
population of owned Systems.
(g) Represents the average of the monthly churn rates during the periods
presented. Churn equals the ratio of disconnected monthly subscribers to
average monthly subscribers.
(h) Represents the ratio of total monthly service revenues to average monthly
subscribers.
15
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus,
prospective investors should carefully consider all of the information
contained in this Prospectus and, in particular, should evaluate the following
risk factors. Certain statements in this Prospectus that are not historical
fact constitute "forward-looking statements." Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual results of the Company to be materially different from
results expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors include, but are not limited to, the
following:
LEVERAGE AND DEBT SERVICE
As a result of the Offering and the Merger, the Company is highly leveraged.
The proceeds of the Merger Financings were used to (i) fund payment of the
cash consideration in the Merger, (ii) repay or repurchase certain
indebtedness of PriCellular and Wireless (including the Old Notes purchased in
the Debt Tender Offers), (iii) pay the fees and expenses incurred in
connection with the Merger, the Merger Financings and any other transactions
contemplated by the Merger Agreement and (iv) purchase the Pledged Securities.
See "Use of Proceeds."
As of March 31, 1998, on the pro forma basis, the Company's consolidated
long-term indebtedness would have been approximately $1.17 billion, a level
substantially greater than the Company's pre-Merger consolidated long-term
indebtedness. Such high leverage may have important consequences for the
Company, including: (i) the Company's ability to obtain additional financing
for future acquisitions (if any), working capital, capital expenditures or
other purposes may be impaired or any such financing may not be on terms
favorable to the Company; (ii) a substantial portion of the Company's cash
flow available from operations after satisfying certain liabilities arising in
the ordinary course of business will be dedicated to the payment of principal
of and interest on its indebtedness, thereby reducing funds that would
otherwise be available to the Company for future business opportunities and
other purposes; (iii) a substantial decrease in net operating cash flows or an
increase in expenses of the Company could make it difficult for the Company to
meet its debt service requirements or force it to modify its operations; (iv)
high leverage may place the Company at a competitive disadvantage and may make
it vulnerable to a downturn in its business or the economy generally; and (v)
certain of the Company's borrowings will be at variable rates of interest,
which could cause the Company to be vulnerable to increases in such interest
rates. See "The Merger" and "Unaudited Pro Forma Financial Information."
If the Company is unable to comply with all of the covenants under the
Credit Facility, including financial covenants, the Company will be in default
under the Credit Facility, which may require accelerated repayment of amounts
outstanding thereunder and which may constitute an Event of Default under the
Exchange Notes. Any failure by the Company to obtain additional financing on
favorable terms (including through borrowings under the Credit Facility or any
replacement credit facility), when and as needed to successfully implement its
business strategy, could result in the delay or abandonment of some or all of
the Company's plans, which could materially adversely affect the Company's
business, prospects, operating results and ability to service its
indebtedness, including the Exchange Notes. In addition, upon a payment
default or a default under any financial maintenance covenant under the Credit
Facility, the Company's subsidiaries will not be able to pay dividends to the
Company. Such dividends are expected to be the only source of funds for the
payment of interest on the Exchange Notes after the first six interest
payments (which will be satisfied from the Pledged Securities).
LIMITED OPERATING HISTORY; NET LOSSES; EXPECTATION OF FUTURE NET LOSSES
Since its formation, the Company has concentrated on the acquisition,
exchange, construction, initial operation and development of cellular
telephone systems. The Company has operated cellular telephone systems since
1989; however, it has acquired all of its existing Systems between April 1994
and January 1998. On the pro forma basis, the Company would have incurred a
net loss of $23.5 million for the three months ended March 31, 1998 and $99.8
million for the year ended December 31, 1997. American Cellular expects to
report net losses for the foreseeable future due to interest and non-cash
charges such as depreciation and amortization. There can be no assurance that
in future periods the Company's operations will generate sufficient earnings
to pay its obligations.
16
<PAGE>
HOLDING COMPANY STRUCTURE; STRUCTURAL SUBORDINATION
The Exchange Notes will be unsubordinated obligations of the Company ranking
senior to all subordinated Indebtedness of the Company and pari passu in right
of payment to all other existing and future Indebtedness of the Company. Since
the business of the Company will be conducted through its subsidiaries, the
Exchange Notes will be effectively subordinated to all existing and future
liabilities of the Company's subsidiaries. As of March 31, 1998, on the pro
forma basis, the Company (without its subsidiaries) would have had no
Indebtedness outstanding other than the Exchange Notes offered hereby and the
Company's guarantee under the Credit Facility. In addition, as of March 31,
1998, on the pro forma basis, the aggregate amount of Indebtedness of the
Company's subsidiaries would have been approximately $885.7 million (excluding
intercompany indebtedness). Because the Exchange Notes are not secured by any
assets (other than the Pledged Securities), in the event of a dissolution,
bankruptcy, liquidation or reorganization of any of the subsidiaries of the
Company, holders of the Exchange Notes may receive less ratably than the
creditors of the subsidiaries. See "Capitalization" and "Unaudited Pro Forma
Financial Information."
The Company is dependent on the cash flow of its subsidiaries to meet its
obligations, including the payment of interest and principal obligations on
the Exchange Notes when due. Accordingly, the Company's ability to make
principal, interest and other payments to holders of the Exchange Notes when
due is dependent on the receipt of sufficient funds from its subsidiaries.
Receipt of such funds will be restricted by the terms of existing and future
indebtedness of its subsidiaries, including the Credit Facility. Under the
Credit Facility, the Company's subsidiaries will be able to pay dividends to
the Company to make interest payments on the Exchange Notes unless a payment
default or any default under any financial maintenance covenant under the
Credit Facility shall have occurred and be continuing or would arise as a
result thereof. Dividends from the Company's subsidiaries are expected to be
the only source of funds for the payment of interest on the Exchange Notes
after the first six interest payments (which will be satisfied from the
Pledged Securities). The terms of any other indebtedness of the Company's
Subsidiaries may also contain similar restrictions. See "Description of Credit
Facility."
RISKS ASSOCIATED WITH NEW MANAGEMENT
In connection with the consummation of the Merger, the former President and
Chief Executive Officer of PriCellular resigned and no longer has any
affiliation with the Company. John Fujii, currently a principal with MLC, was
appointed the Company's Chief Executive Officer, and Brian McTernan, also
currently a principal with MLC, was appointed the Company's President.
Although Messrs. McTernan and Fujii each has more than 15 years of experience
in the telecommunications industry, neither of them has had any experience
managing the operations of the Company. If the Company's executive officers do
not achieve their management objectives in a timely manner, the Company's
business, prospects, operating results and ability to service its
indebtedness, including the Exchange Notes, may be materially adversely
affected.
The Company continues to retain much of the Company's decentralized
management philosophy following the Merger, whereby most day-to-day operating
decisions are delegated to the local system managers. The Company's affairs
will therefore continue to be managed by a small number of corporate
management personnel, the loss of any of whom could have an adverse impact on
the Company. The success of the Company's operations and expansion strategy
depends on its ability to retain and to expand its staff of qualified
personnel in the future. The Company does not have any employment contracts
with corporate management personnel.
COMPETITION
The Company competes with one other cellular licensee in each of its
cellular markets, most of which are larger and have greater financial
resources than the Company, as well as paging companies and landline telephone
service providers. Current policies of the FCC authorize only two licensees to
operate cellular systems in each market, and the Company expects there will
continue to be competition from the other licensee authorized to service each
cellular market in which the Company operates. Competition for subscribers
between cellular licensees is based principally upon the services and
enhancements offered, the technical quality of the cellular system, customer
service, system coverage and capacity and price.
17
<PAGE>
As a result of recent regulatory and legislative initiatives, the Company's
cellular operations are subject to increased competition from entities using
or proposing to use other comparable communications technologies. The FCC
currently is licensing commercial PCS. The FCC identified two categories of
PCS: broadband and narrowband. PCS is not a specific technology, but a variety
of potential technologies that could compete with cellular telephone systems.
For example, the broadband PCS systems licensed to operate in the 2 GHz band
provide wireless two-way telecommunications services for voice, data, graphic
and other transmissions. Equipment used for broadband PCS includes small,
lightweight and wireless telephone handsets, computers that can communicate
over the airwaves wherever they are located, and portable facsimile machines
and other graphic devices. Many PCS systems have commenced operations in the
last two years. When a PCS system employs microcell technology, as is common,
it uses a network of small, low-powered transceivers placed throughout a
neighborhood, business complex, community or metropolitan area to provide
customers with mobile and portable voice and data communications. Many PCS
licensees who will compete with the Company have access to substantial capital
resources. In addition, many of these companies, or their predecessors and
affiliates, already operate large cellular telephone systems and thus bring
significant wireless experience to this new marketplace. To date, the Company
has experienced little impact from PCS competition. However, there can be no
assurance of the long-term effect these new PCS may have on the Company.
Enhanced Specialized Mobile Radio ("ESMR") is a two-way wireless
communications service that incorporates characteristics of cellular
technology, including multiple low-power transmitters and interconnection with
the landline telephone network. ESMR service may compete with cellular service
by providing digital communication technology, lower rates, enhanced privacy
and additional features such as electronic mail and built-in paging.
The Company may also face competition from satellite-based services.
Satellite-based services are distance-insensitive and are therefore not
subject to the geographic constraints facing the Company and its terrestrial-
based competitors. There are currently a number of "low-earth-orbit"
satellites in operation, which will also be able to provide voice and data
services to end users in the Company's service areas. In addition, other
companies with financially capable investors have been licensed or are seeking
licenses to provide services by satellite that could also provide competition
to the Company.
The Company is unable to predict whether such competing technologies will be
successful and, if successful, whether any will provide significant
competition for the Company. There can be no assurance, however, that one or
more of the technologies currently used by the Company in its business will
not become inferior or obsolete at some time in the future.
RISKS ASSOCIATED WITH ACQUISITIONS
In January 1998, the Company acquired from Bachtel Liquidity, L.P., an
affiliate of Bachow & Associates, Inc., the TN-4 RSA which contains
approximately 264,000 Pops for approximately $73 million in cash (subject to
adjustments). This RSA, adjacent to three MSAs, including Knoxville, TN, is
located south of the Company's Kentucky Cluster. The Company will be subject
to risks that new Systems and existing Systems which have been acquired in the
past will not perform as expected and that the returns from such Systems will
not support the indebtedness incurred to acquire, or the capital expenditures
needed to develop, such Systems.
The Company may expand its current clusters through the acquisition of
properties and target for purchase other small to mid-sized MSAs and strategic
RSAs that it believes are undervalued, underdeveloped or that possess traits
indicative of potentially high cellular usage and superior financial
performance. There can be no assurance, however, that the Company will seek to
acquire or be successful in acquiring any of these Systems.
The Company is subject to risks that the Systems acquired and to be acquired
in any future acquisitions will not perform as expected and that the returns
from such Systems will not support the indebtedness incurred to acquire, or
the capital expenditure needed to develop, the Systems. In addition, expansion
of the Company's operations may place a significant strain on the Company's
management, financial and other resources. The
18
<PAGE>
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. A
failure to expand these areas or to implement and improve such systems,
procedures and controls in an efficient manner and at a pace consistent with
the growth of the Company's business could have a material adverse effect on
the Company's business, prospects, operating results and ability to service
its indebtedness, including the Notes. In addition, the integration of
acquired Systems with existing operations will entail considerable expenses in
advance of anticipated revenue and may cause substantial fluctuations in the
Company's operating results. This will involve, among other things,
integration of switching, transmission, technical, sales, marketing, billing,
accounting, quality control, management, personnel, payroll, regulatory
compliance and other systems and operating hardware and software, some of
which may be incompatible with the Company's existing systems. In addition,
telecommunications providers generally experience higher customer and employee
turnover rates during and after an acquisition. There can be no assurance that
the Company will be able to successfully integrate the Systems acquired and to
be acquired in any future acquisitions or any other businesses it may acquire
or that any such acquired business will not experience high employee or
customer turnover rates after such acquisition.
RAPID TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology, including advancements protected by intellectual property laws.
In particular, the wireless telecommunications industry is experiencing
significant technological change, as evidenced by the increasing pace of
digital upgrades in existing analog wireless systems, evolving industry
standards, the availability of new radio frequency spectrum allocations in
which to develop wireless services, ongoing improvements in the capacity and
quality of digital technology, shorter development cycles for new products and
enhancements, and changes in end-user requirements and preferences. There is
also uncertainty as to the extent of customer demand as well as the extent to
which airtime and monthly access rates may continue to decline. The effect of
technological changes on the business of the Company cannot be predicted, and
there can be no assurance that technological developments will not have a
material adverse effect on the Company.
RELIANCE ON USE OF THIRD-PARTY SERVICE MARK
The Company currently uses the registered service mark CELLULARONE(R) to
market the services of its non-wireline Systems. The Company's use of this
service is governed by five-year contracts between the Company and Cellular
One Group, the owner of the service mark. Such contracts expire on various
dates and each is renewable at the option of the Company for three additional
five-year terms, subject to the attainment of certain customer satisfaction
ratings. Under these agreements, the Company has agreed to meet a consistent
set of operating and service quality standards for its cellular service areas.
If these agreements were not renewed upon expiration or if the Company were to
fail to meet the applicable operating or service quality standards, and
therefore was no longer permitted to use the CELLULARONE service mark, the
Company's ability both to attract new subscribers and retain existing
subscribers could be materially impaired. In addition, if for some reason
beyond the Company's control, the name CELLULARONE were to suffer diminished
marketing appeal, the Company's ability both to attract new subscribers and
retain existing subscribers could be materially impaired.
REGULATORY CONSIDERATIONS
The licensing, construction, operation, sale and acquisition of cellular and
PCS systems are regulated by the FCC. In addition, certain aspects of cellular
operations may be subject to public utility regulation in the state in which
the service is provided. The ongoing operations of the Company may require
permits, licenses and other authorization from regulatory authorities
(including but not limited to the FCC) not now held by the Company. There can
be no assurance that the applicable regulatory authority including, without
limitation, the FCC, will grant such authorizations and approvals in a timely
manner, if at all.
19
<PAGE>
Changes in regulation, such as increased price regulation or deregulation of
interconnection arrangements, could adversely affect the Company's financial
condition and operating results. Under the FCC rules, licenses for cellular
systems are generally issued for ten-year terms. Although a licensee may apply
for renewal and, under certain circumstances, may be entitled to a renewal
expectancy, renewal is not automatic. The Company's renewal applications may
be subject to petitions to deny or competing applications. Therefore, no
assurance can be given that any license will be renewed.
Many aspects of the regulations affecting the Company have recently been
impacted by the enactment of the Telecommunications Act of 1996 (the "Telecom
Act") and are currently the subject of administrative rulemakings that are
significant to the Company. Neither the outcome of these rulemakings nor their
impact upon the cellular telephone industry or the Company can be predicted at
this time. However, certain provisions of the new statute relating to
interconnection, telephone number portability, equal access and resale could
subject the Company to additional costs and increased competition. In
addition, the FCC has initiated a rulemaking proceeding to implement
provisions of the Telecom Act to ensure that wireless handsets and other
technological equipment are accessible to people with disabilities.
From time to time, legislation that potentially could affect the Company,
either beneficially or adversely, is proposed by federal or state legislators.
There can be no assurance that legislation will not be enacted by the federal
or state governments, or that regulations will not be adopted or actions taken
by the FCC or state regulatory authorities that might adversely affect the
business of the Company. Changes such as the allocation by the FCC of radio
spectrum for services that compete with the Company's business could adversely
affect the Company's business, prospects, operating results or ability to
service its indebtedness, including the Notes.
FLUCTUATIONS IN MARKET VALUE OF LICENSES
A substantial portion of the Company's assets consists of its interests in
cellular licenses. While there currently exists a market for the purchase and
sale of cellular licenses, including those in the Company's markets, such a
market may not exist in the future or the values obtainable may be
significantly lower than at present. The future value of the Company's
interests in its cellular licenses will depend significantly upon the success
of the Company's business. The transfer of interest in such licenses is
subject to prior FCC approval, which may have the effect of reducing the value
of the license. As a consequence, a significant reduction in the market value
of the Company's cellular licenses could result in a loss upon any sale
thereof.
EQUIPMENT FAILURE; NATURAL DISASTER
The Company currently carries "business interruption" insurance and the
Company expects to carry similar insurance; however, a major equipment failure
or a natural disaster affecting any one of the Company's central switching
offices or certain of its cell sites could have a material adverse effect on
the Company's business, prospects, operating results or ability to service its
indebtedness, including the Exchange Notes.
RADIO FREQUENCY EMISSION CONCERNS
Media reports have suggested that certain radio frequency ("RF") emissions
from portable cellular telephones may be linked to cancer and interfere with
heart pacemakers and other medical devices. Concerns over RF emissions and
interference may have the effect of discouraging the use of cellular
telephones, which could have an adverse effect upon the Company's business.
During the past two years, the FCC has updated its guidelines and methods for
evaluating the environmental effects of RF emissions. The updated guidelines
generally are more stringent than the previous rules, based on recommendations
of federal health and safety agencies, including the Environmental Protection
Agency and Food and Drug Administration. However, the Company does not believe
these guidelines will have a material impact on the Company's operations.
Among the guidelines are limits for specific absorption rate for evaluation of
certain hand-held devices such as cellular telephones, as well as guidelines
for the evaluation of cellular transmitting facilities. The Company believes
that the cellular telephones currently marketed and generally used, as well as
the Company's transmitting facilities,
20
<PAGE>
comply with the new standards. Moreover, the FCC preempted state and local
government regulation of cellular and other personal wireless services
facilities based on RF environmental effects to the extent that such
facilities comply with the FCC's rules concerning such RF emissions. Potential
interference to medical devices involves primarily digital transmissions
rather than analog. Industry, government and medical experts have been
conducting tests and developing methods for reducing or eliminating such
interference.
CHANGE OF CONTROL
The Indenture provides that upon the occurrence of any Change of Control the
Company will be required to make an offer to purchase all of the Exchange
Notes then outstanding under the Indenture at a purchase price equal to 101%
of the principal amount thereof, plus accrued and unpaid interest, if any,
thereon to the date of purchase. The Credit Facility contains a change of
control provision, and future credit or other borrowing agreements may contain
similar restrictions. The Company's unavailability of sufficient cash may not
allow the Company to honor its repurchase obligation to the holders of
Exchange Notes upon a Change of Control or otherwise prior to their stated
maturity, which would constitute an event of default thereunder. See
"Description of the Exchange Notes--Certain Covenants."
If a Change of Control were to occur, it is unlikely that the Company would
be able to both repurchase all of the Exchange Notes and repay all of its
obligations under other indebtedness that would become payable upon the
occurrence of such Change of Control, unless it could obtain alternate
financing. There can be no assurance that the Company would be able to obtain
any such financing on commercially reasonable terms or at all, and
consequently no assurance can be given that the Company would be able to
purchase any of the Exchange Notes tendered pursuant to a Change of Control
Offer (as defined).
OPERATING COSTS DUE TO ANTI-FRAUD MEASURES
Like most companies in the cellular industry, the Company incurs costs
associated with unauthorized use of its network. Fraud impacts interconnection
costs, capacity costs, administrative costs, costs incurred for fraud
prevention and payments to other carriers for unbillable fraudulent roaming.
The Company intends to continue to develop and invest in measures to prevent
cellular fraud. Even so, there can be no assurance that the Company will not
incur substantial costs due to fraud. In addition, while the costs of the
Company's anti-fraud measures have not been significant in the past, there can
be no assurance that these costs will not become substantial in the future.
COVENANT RESTRICTIONS
The instruments governing the indebtedness of the Company under the Credit
Facility and the Notes impose significant operating and financial restrictions
on the Company. Such restrictions affect, and in many respects significantly
limit or prohibit, among other things, the ability of the Company to incur
additional indebtedness, pay dividends, repay indebtedness prior to stated
maturities, sell assets, make investments, engage in transactions with
stockholders and affiliates, issue capital stock, create liens, or engage in
mergers or acquisitions. In addition, the Credit Facility requires the Company
to maintain certain financial ratios. These restrictions could also limit the
ability of the Company to effect future financings, make needed capital
expenditures, withstand a future downturn in the Company's business or the
economy in general, or otherwise conduct necessary corporate activities. A
failure by the Company to comply with these restrictions could lead to a
default under the terms of such indebtedness notwithstanding the ability of
the Company to meet its debt service obligations. In the event of a default,
the holders of such indebtedness could elect to declare all such indebtedness
to be due and payable together with accrued and unpaid interest. In such
event, a significant portion of the Company's other indebtedness (including
the Exchange Notes) may become immediately due and payable and there can be no
assurance that the Company would be able to make such payments or borrow
sufficient funds from alternative sources to make any such payment. Even if
additional financing could be obtained, there can be no assurance that it
would be on terms that are acceptable to the Company.
21
<PAGE>
In addition, the Company has pledged as security the equity interest in
American Wireless to the Lenders (as defined) under the Credit Facility. The
pledge of such equity interest in American Wireless could impair the Company's
ability to obtain future financing on favorable terms, if at all. Further, in
the event American Wireless were to default on its obligations under the
Credit Facility and the Lenders were to foreclose upon such pledged equity
interest in American Wireless, the Company, as the holding company of American
Wireless, would likely be unable to service or repay its indebtedness,
including the Exchange Notes. See "Description of Credit Facility."
FRAUDULENT CONVEYANCE
Management of the Company believes that the indebtedness represented by the
Notes is being incurred for proper purposes and in good faith, and that, based
on present forecasts, asset valuations and other financial information, after
the consummation of the Merger, the Company will be solvent, will have
sufficient capital for carrying on its business and will be able to pay its
debts as they mature. See "--Leverage and Debt Service." Notwithstanding
management's belief, however, if a court of competent jurisdiction in a suit
by an unpaid creditor or a representative of creditors (such as a trustee in
bankruptcy or a debtor-in-possession) were to find that, at the time of the
incurrence of such indebtedness, the Company was insolvent, was rendered
insolvent by reason of such incurrence, was engaged in a business or
transaction for which its remaining assets constituted unreasonably small
capital, intended to incur, or believed that it would incur, debts beyond its
ability to pay such debts as they matured, or intended to hinder, delay or
defraud its creditors, and that the indebtedness was incurred for less than
reasonably equivalent value, then such court could, among other things, (a)
void all or a portion of the Company's obligations to the holders of the
Notes, the effect of which would be that the holders of the Notes may not be
repaid in full and/or (b) subordinate the Company's obligations to the holders
of the Notes to other existing and future indebtedness of the Company to a
greater extent than would otherwise be the case, the effect of which would be
to entitle such other creditors to be paid in full before any payment could be
made on the Notes.
YEAR 2000
The Company has reviewed the possible effect of the Year 2000 on the
computer systems currently in use, including the software that is an integral
part of the Company's switches and the related billing information. The
Company does not believe that any significant financial expenditure or
investment is expected to be required to make any modifications that may
become necessary; however, the Company is unable to predict whether its third-
party billing provider or its principal sources of purchased or leased
cellular equipment have made sufficient modifications to address the potential
problems of the Year 2000 software shortcomings on their computer systems. Any
additional costs of this nature, to the extent they are passed on to the
Company or affect or delay the Company's business, bill collection or cellular
equipment installation, could have a material adverse effect upon the
Company's business or results of operations.
FAILURE TO EXCHANGE PRIVATE NOTES
The Exchange Notes will be issued in exchange for Private Notes only after
timely receipt by the Exchange Agent of such Private Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documentation. Therefore, Holders of Private Notes desiring to tender such
Private Notes in exchange for Exchange Notes should allow sufficient time to
ensure timely delivery. Neither the Exchange Agent nor the Company is under
any duty to give notification of defects or irregularities with respect to
tenders of Private Notes for exchange. Private Notes that are not tendered or
are tendered but not accepted will, following consummation of the Exchange
Offer, continue to be subject to the existing restrictions upon transfer
thereof. In addition, any Holder of Private Notes who tenders in the Exchange
Offer for the purpose of participating in a distribution of the Exchange Notes
will be required to comply with the registration and Prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives Exchange Notes for its own accounts in
exchange for Private Notes, where such Private Notes were acquired by such
broker-dealer as a result of market-making activities or any other trading
activities, must acknowledge that it will deliver a
22
<PAGE>
Prospectus in connection with any resale of such Exchange Notes. To the extent
that Private Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered and tendered but unaccepted Private Notes could
be adversely affected due to the limited amount, or "float," of the Private
Notes that are expected to remain outstanding following the Exchange Offer.
Generally, a lower "float" of a security could result in less demand to
purchase such security and could, therefore, result in lower prices for such
security. For the same reason, to the extent that a large amount of Private
Notes are not tendered or are tendered and not accepted in the Exchange Offer,
the trading market for the Exchange Notes could be adversely affected. See
"Plan of Distribution" and "The Exchange Offer."
ABSENCE OF A PUBLIC MARKET
The Exchange Notes have no established trading market and will not be listed
on any securities exchange. The Initial Purchasers have advised the Company
that they intend to make a market in the Exchange Notes as permitted by
applicable laws and regulations; however, the Initial Purchasers are not
obligated to do so, and may discontinue any such market making activities at
any time without notice. In addition, such market making activity may be
limited during the Exchange Offer. Therefore, there can be no assurance that
an active market for the Exchange Notes will develop. If a trading market
develops for the Exchange Notes future trading prices of such securities will
depend on many factors, including, among other things, prevailing interest
rates, the market for similar securities, the performance of the Company and
other factors. In addition, based on such factors, the Notes may trade at a
discount from their initial offering price. See "The Exchange Offer" and "Plan
of Distribution."
23
<PAGE>
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Private Notes were sold by the Company on May 13, 1998 (the "Closing
Date") to the Initial Purchasers pursuant to the Purchase Agreement. The
Initial Purchasers subsequently sold the Private Notes to "qualified
institutional buyers" ("QIBs"), as defined in Rule 144A under the Securities
Act ("Rule 144A"), in reliance on Rule 144A. As a condition to the sale of the
Private Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on May 13, 1998. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would (i) file with the
Commission a Registration Statement under the Securities Act with respect to
the Exchange Notes ("Registration Statement") within 60 days after the closing
of the Merger, (ii) use its best efforts to cause such Registration Statement
to become effective under the Securities Act within 120 days after the closing
of the Merger, (iii) to keep such Registration Statement effective until the
closing of the Exchange Offer, and (iv) to cause the Exchange Offer to be
consummated within 150 days of the closing of the Merger. Promptly after the
Registration Statement has been declared effective, the Company will offer the
Exchange Notes in exchange for surrender of the Private Notes. A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement. The Exchange Offer Registration Statement is intended to satisfy
certain of the Company's obligations under the Registration Rights Agreement
and the Purchase Agreement.
RESALE OF THE EXCHANGE NOTES
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a Holder (other than (i) a broker-dealer
who purchases such Exchange Notes directly from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act or (ii)
any such Holder that is an "affiliate" of the Company within the meaning of
Rule 405 under the Securities Act) who exchanges Private Notes for Exchange
Notes in the ordinary course of business and who is not participating, does
not intend to participate, and has no arrangement with any person to
participate, in a distribution of the Exchange Notes, will be allowed to
resell Exchange Notes to the public without further registration under the
Securities Act and without delivering to the purchasers of the Exchange Notes
a Prospectus that satisfies the requirements of Section 10 of the Securities
Act. However, if any Holder acquires Exchange Notes in the Exchange Offer for
the purpose of distributing or participating in the distribution of the
Exchange Notes or is a broker-dealer, such Holder cannot rely on the position
of the staff of the Commission enumerated in certain no-action letters issued
to third parties and must comply with the registration and Prospectus delivery
requirements of the Securities Act in connection with any resale transaction,
unless an exemption from registration is otherwise available. Each broker-
dealer that receives Exchange Notes for its own account in exchange for
Private Notes, where such Private Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a Prospectus in connection with any resale of
such Exchange Notes. The Letter of Transmittal states that by so acknowledging
and by delivering a Prospectus, a broker-dealer will not be deemed to admit
that it is an "underwriter" within the meaning of the Securities Act. This
Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received
in exchange for Private Notes where such Private Notes were acquired by such
broker-dealer as a result of market-making or other trading activities.
Pursuant to the Registration Rights Agreement, the Company has agreed to make
this Prospectus, as it may be amended or supplemented from time to time,
available to broker-dealers for use in connection with any resale for a period
of 180 days after the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the Letter of Transmittal, the Company will accept any and all Private
Notes validly tendered and not withdrawn prior to the Expiration Date. The
Company will issue $1,000 principal amount of Exchange Notes in exchange for
each $1,000 principal
24
<PAGE>
amount of outstanding Private Notes surrendered pursuant to the Exchange
Offer. Private Notes may be tendered only in integral multiples of $1,000.
The form and terms of the Exchange Notes are the same as the form and terms
of the Private Notes except that (i) the exchange will be registered under the
Securities Act and, therefore, the Exchange Notes will not bear legends
restricting the transfer thereof and (ii) Holders of the Exchange Notes will
not be entitled to any of the rights of Holders of Private Notes under the
Registration Rights Agreement, which rights will terminate upon the
consummation of the Exchange Offer. Holders tendering their Private Notes for
exchange in the Exchange Offer will be deemed to have voted such Notes in
favor of the amendment of the Indenture to revise the defined term "Excluded
Group." Holders may not tender their Notes for exchange without voting such
Notes in favor of such amendment. The Exchange Notes will evidence the same
indebtedness as the Private Notes (which they replace) and will be issued
under, and be entitled to the benefits of, the Indenture, which also
authorized the issuance of the Private Notes, such that both series of Notes
will be treated as a single class of debt securities under the Indenture.
As of the date of this Prospectus, $285.0 million in aggregate principal
amount of the Private Notes is outstanding. Only a registered Holder of the
Private Notes (or such Holder's legal representative or attorney-in-fact) as
reflected on the records of the Trustee under the Indenture may participate in
the Exchange Offer. There will be no fixed record date for determining
registered Holders of the Private Notes entitled to participate in the
Exchange Offer.
Holders of the Private Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Company intends
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the
Securities Act, the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and the rules and regulations of the Commission thereunder.
The Company shall be deemed to have accepted validly tendered Private Notes
when, as and if the Company has given oral or written notice thereof to the
Exchange Agent. The Exchange Agent will act as agent for the tendering Holders
of Private Notes for the purposes of receiving the Exchange Notes from the
Company.
Holders who tender Private Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Private
Notes pursuant to the Exchange Offer. The Company will pay all charges and
expenses, other than certain applicable taxes described below, in connection
with the Exchange Offer. See "--Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; AMENDMENTS
The term "Expiration Date" shall mean 5:00 p.m., New York City time on
, 1998, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will (i) notify the
Exchange Agent of any extension by oral or written notice, and (ii) mail to
the registered Holders an announcement thereof which shall include disclosure
of the approximate number of Private Notes deposited to date, each prior to
9:00 a.m., New York City time, on the next business day after the previously
scheduled Expiration Date.
The Company reserves the right, in its reasonable discretion, (i) to delay
accepting any Private Notes, (ii) to extend the Exchange Offer or (iii) if any
conditions set forth below under "--Conditions" shall not have been satisfied,
to terminate the Exchange Offer by giving oral or written notice of such
delay, extension or termination to the Exchange Agent. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly
as practicable by oral or written notice thereof to the registered Holders. If
the Exchange Offer is amended in a manner determined by the Company to
constitute a material change, the Company will promptly disclose such
amendment by means of a Prospectus supplement that will be distributed to the
registered Holders,
25
<PAGE>
and the Company will extend the Exchange Offer for a period of five to ten
business days, depending upon the significance of the amendment and the manner
of disclosure to the registered Holders, if the Exchange Offer would otherwise
expire during such five to ten business day period.
INTEREST ON THE EXCHANGE NOTES
The Exchange Notes will bear interest at a rate equal to 10 1/2% per annum.
Interest on the Exchange Notes will be payable semi-annually in arrears on
each May 15 and November 1, commencing November 15, 1998. Holders of Exchange
Notes will receive interest on November 15, 1998 from the date of initial
issuance of the Private Notes, plus an amount equal to the accrued interest on
the Private Notes from the date of initial delivery to the date of exchange
thereof for Exchange Notes. Holders of Private Notes that are accepted for
exchange will be deemed to have waived the right to receive any interest
accrued on the Private Notes.
PROCEDURES FOR TENDERING
Only a registered Holder of Private Notes may tender such Private Notes in
the Exchange Offer. To tender in the Exchange Offer, a Holder of Private Notes
must complete, sign and date the Letter of Transmittal, or a facsimile
thereof, have the signatures thereon guaranteed if required by the Letter of
Transmittal, and mail or otherwise deliver such Letter of Transmittal or such
facsimile to the Exchange Agent at the address set forth below under "--
Exchange Agent" for receipt prior to the Expiration Date. In addition, either
(i) certificates for such Private Notes must be received by the Exchange Agent
along with the Letter of Transmittal, (ii) a timely confirmation of a book-
entry transfer (a "Book-Entry Confirmation") of such Private Notes, if such
procedure is available, into the Exchange Agent's account at the Depositary
pursuant to the procedure for book-entry transfer described below, must be
received by the Exchange Agent prior to the Expiration Date or (iii) the
Holder must comply with the guaranteed delivery procedures described below.
The tender by a Holder that is not withdrawn prior to the Expiration Date
will constitute an agreement between such Holder and the Company in accordance
with the terms and subject to the conditions set forth herein and in the
Letter of Transmittal.
THE METHOD OF DELIVERY OF PRIVATE NOTES AND THE LETTER OF TRANSMITTAL AND
ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK
OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE
AN OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR PRIVATE NOTES SHOULD
BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
Any beneficial owner(s) of the Private Notes whose Private Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered Holder
promptly and instruct such registered Holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Private Notes, either make appropriate
arrangements to register ownership of the Private Notes in such owner's name
or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "--Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution (as defined below) unless the Private Notes
tendered pursuant thereto are tendered (i) by a registered Holder who has not
completed the box titled "Special Delivery Instructions" on the Letter of
Transmittal or (ii) for the account of an Eligible Institution. In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantee must be made by a
member firm of a registered national securities
26
<PAGE>
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or correspondent in the
United States or an "eligible guarantor institution" within the meaning of
Rule 17d-15 under the Exchange Act which is a member of one of the recognized
signature guarantee programs identified in the Letter of Transmittal (an
"Eligible Institution").
If the Letter of Transmittal is signed by a person other than the registered
Holder of any Private Notes listed therein, such Private Notes must be
endorsed or accompanied by a properly completed bond power, signed by such
registered Holder as such registered Holder's name appears on such Private
Notes.
If the Letter of Transmittal or any Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with the Letter of Transmittal.
The Exchange Agent and the Depositary have confirmed that any financial
institution that is a participant in the Depositary's system may utilize the
Depositary's Automated Tender Offer Program to tender Private Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Private Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and
all Private Notes not properly tendered or any Private Notes the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Private Notes. The
Company's interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Private Notes must be cured within such time as the
Company shall determine. Although the Company intends to notify Holders of
defects or irregularities with respect to tenders of Private Notes, neither
the Company, the Exchange Agent nor any other person shall incur any liability
for failure to give such notification. Tenders of Private Notes will not be
deemed to have been made until such defects or irregularities have been cured
or waived.
While the Company has no present plan to acquire any Private Notes that are
not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Private Notes that are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Private Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "--Conditions,"
to terminate the Exchange Offer and, to the extent permitted by applicable
law, purchase Private Notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or offers could
differ from the terms of the Exchange Offer.
By tendering, each Holder of Private Notes will represent to the Company
that, among other things, (i) Exchange Notes to be acquired by such Holder of
Private Notes in connection with the Exchange Offer are being acquired by such
Holder in the ordinary course of the respective business of such Holder, (ii)
such Holder has no arrangement or understanding with any person to participate
in the distribution of the Exchange Notes, (iii) if such Holder is a resident
of the State of California, it falls under the self-executing institutional
investor exemption set forth under Section 25102(i) of the Corporate
Securities Law of 1968 and Rules 260.102.10 and 260.105.14 of the California
Blue Sky Regulations, (iv) if such Holder is a resident of the Commonwealth of
Pennsylvania, it falls under the self-executing institutional investor
exemption set forth under Sections 203(c), 102(d) and (k) of the Pennsylvania
Securities Act of 1972, Section 102.111 of the Pennsylvania Blue Sky
Regulations and an interpretive opinion dated November 16, 1985, (v) such
Holder acknowledges and agrees that any person who is a broker-dealer
registered under the Exchange Act or is participating in the Exchange Offer
for the purposes of distributing the Exchange Notes must comply with the
registration and Prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (vi) such Holder understands that a
secondary resale transaction described in clause (v) above and any resales of
Exchange Notes obtained by such Holder in exchange for Private Notes acquired
by such
27
<PAGE>
Holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission and (vii) such Holder is not an "affiliate," as defined in Rule 405
under the Securities Act, of the Company. If the Holder is a broker-dealer
that will receive Exchange Notes for such Holder's own account in exchange for
Private Notes that were acquired as a result of market-making activities or
other trading activities, such Holder will be required to acknowledge in the
Letter of Transmittal that such Holder will deliver a Prospectus in connection
with any resale of such Exchange Notes; however, by so acknowledging and by
delivering a Prospectus, such Holder will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
RETURN OF PRIVATE NOTES
If any tendered Private Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Private Notes are
withdrawn or are submitted for a greater principal amount than the Holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Private Notes
will be returned without expense to the tendering Holder thereof (or, in the
case of Private Notes tendered by book-entry transfer into the Exchange
Agent's account at the Depositary pursuant to the book-entry transfer
procedures described below, such Private Notes will be credited to an account
maintained with the Depositary) as promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Private Notes at the Depositary for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depositary's systems may make book-
entry delivery of Private Notes by causing the Depositary to transfer such
Private Notes into the Exchange Agent's account at the Depositary in
accordance with the Depositary's procedures for transfer. However, although
delivery of Private Notes may be effected through book-entry transfer at the
Depositary, the Letter of Transmittal or facsimile thereof, with any required
signature guarantees and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at the address set forth
below under "--Exchange Agent" on or prior to the Expiration Date or pursuant
to the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Private Notes and (i) whose Private Notes
are not immediately available or (ii) who cannot deliver their Private Notes,
the Letter of Transmittal or any other required documents to the Exchange
Agent prior to the Expiration Date, may effect a tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the Holder, the certificate number(s) of such Private Notes and
the principal amount of Private Notes tendered, stating that the tender is
being made thereby and guaranteeing that, within five New York Stock
Exchange trading days after the Expiration Date, the Letter of Transmittal
(or a facsimile thereof), together with the certificate(s) representing the
Private Notes in proper form for transfer or a Book-Entry Confirmation, as
the case may be, and any other documents required by the Letter of
Transmittal, will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) Such properly executed Letter of Transmittal (or facsimile thereof),
as well as the certificate(s) representing all tendered Private Notes in
proper form for transfer and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
28
<PAGE>
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to Holders who wish to tender their Private Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Private Notes may be
withdrawn at any time prior to 5:00 P.M. on the Expiration Date.
To withdraw a tender of Private Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Private Notes to be withdrawn (the "Depositor"), (ii) identify the Private
Notes to be withdrawn (including the certificate number or numbers and
principal amount of such Private Notes) and (iii) be signed by the Holder in
the same manner as the original signature on the Letter of Transmittal by
which such Private Notes were tendered (including any required signature
guarantees). All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company in its sole
discretion, whose determination shall be final and binding on all parties. Any
Private Notes so withdrawn will be deemed not to have been validly tendered
for purposes of the Exchange Offer and no Exchange Notes will be issued with
respect thereto unless the Private Notes so withdrawn are validly retendered.
Properly withdrawn Private Notes may be retendered by following one of the
procedures described above under "The Exchange Offer--Procedures for
Tendering" at any time prior to the Expiration Date.
CONDITIONS
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Private Notes, and may terminate the Exchange Offer as provided herein before
the acceptance of such Private Notes, if the Exchange Offer violates
applicable law, rules or regulations or an applicable interpretation of the
staff of the Commission.
If the Company determines in its reasonable discretion that any of these
conditions are not satisfied, the Company may (i) refuse to accept any Private
Notes and return all tendered Private Notes to the tendering Holders, (ii)
extend the Exchange Offer and retain all Private Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of Holders
to withdraw such Private Notes (see "--Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Private Notes that have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a Prospectus supplement that will be
distributed to the registered Holders of the Private Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered Holders, if the Exchange Offer would otherwise expire during
such five to ten business day period.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of Holders of the Private Notes eligible to participate in the
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify such
Holders (including any broker-dealers) and certain parties related to such
Holders against certain liabilities (including liabilities under the
Securities Act), (ii) to provide, upon the request of any Holder of a
transfer-restricted Private Note, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Private Notes
pursuant to Rule 144A, (iii) to use its best efforts to keep the Registration
Statement effective to the extent necessary to ensure that it is available for
resales of transfer-restricted Private Notes by broker-dealers for a period of
up to 120 days from the Expiration Date and (iv) to provide copies of the
latest version of the Prospectus to broker-dealers upon their request for a
period of up to 180 days after the Expiration Date.
29
<PAGE>
ADDITIONAL INTEREST
In the event of a Registration Default (as defined in the Registration
Rights Agreement), the interest rate borne by the Notes shall be increased by
one-quarter of one percent per annum upon the occurrence of each Registration
Default, which rate (as increased as aforesaid) will increase by one-quarter
of one percent each 90-day period that such additional interest continues to
accrue under any such circumstance, with an aggregate maximum increase in the
interest rate equal to one percent per annum. Following the cure of all
Registration Defaults the accrual of additional interest ("Additional
Interest") will cease and the interest rate will revert to the original rate.
Holders of Transfer Restricted Securities will be required to make certain
representations to the Company (as described in the Registration Rights
Agreement) in order to participate in the Exchange Offer and will be required
to deliver information to be used in connection with the Shelf Registration
Statement and to provide comments on the Shelf Registration Statement within
the time periods set forth in the Registration Rights Agreement in order to
have their Transfer Restricted Securities included in the Shelf Registration
Agreement and benefit from the provisions regarding Additional Interest set
forth above.
EXCHANGE AGENT
Chase Manhattan Bank and Trust Company, National Association has been
appointed as Exchange Agent of the Exchange Offer. Questions and requests for
assistance, requests for additional copies of this Prospectus or of the Letter
of Transmittal and requests for Notice of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
Chase Manhattan Bank and Trust Company, Chase Manhattan Bank and Trust Company,
National Association National Association
c/o Chase Manhattan Bank c/o Chase Manhattan Bank
55 Water Street, Second Floor, Room 234 55 Water Street, Second Floor, Room 234
New York, New York 10041 New York, New York 10041
Attention: Carlos Esteves Attention: Carlos Esteves
By Overnight Delivery: By Facsimile:
Chase Manhattan Bank and Trust Company, (212) 638-7380
National Association
c/o Chase Manhattan Bank Confirm by Telephone:
55 Water Street, Second Floor, Room 234 (212) 638-0828
New York, New York 10041
Attention: Carlos Esteves
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The Company, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith.
The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$150,000. Such expenses include registration fees, fees and expenses of the
Exchange Agent and the Trustee, accounting and legal fees and printing costs,
among others.
30
<PAGE>
The Company will pay all transfer taxes, if any, applicable to the exchange
of Private Notes pursuant to the Exchange Offer. If, however, a transfer tax
is imposed for any reason other than the exchange of the Private Notes
pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered Holder or any other persons) will be
payable by the tendering Holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
Holder.
CONSEQUENCE OF FAILURES TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Private
Notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take.
The Private Notes that are not exchanged for the Exchange Notes pursuant to
the Exchange Offer will remain restricted securities. Accordingly, such
Private Notes may be resold only (i) to a person whom the seller reasonably
believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii)
in a transaction meeting the requirements of Rule 144 under the Securities
Act, (iii) outside the United States to a foreign person in a transaction
meeting the requirements of Rule 904 under the Securities Act, (iv) in
accordance with another exemption from the registration requirements of the
Securities Act (and based upon an opinion of counsel if the Company so
requests), (v) to the Company or (vi) pursuant to an effective registration
statement and, in each case, in accordance with any applicable securities laws
of any state of the United States or any other applicable jurisdiction.
ACCOUNTING TREATMENT
For accounting purposes, the Company will recognize no gain or loss as a
result of the Exchange Offer. The expenses of the Exchange Offer will be
amortized over the term of the Exchange Notes.
31
<PAGE>
THE MERGER
The following is a summary of the structure of the Merger. This summary does
not purport to be complete and is qualified in its entirety by reference to
the Merger Agreement.
STRUCTURE OF THE MERGER
Pursuant to the Merger Agreement, American Cellular merged with and into
PriCellular on June 25, 1998 (the "Merger Date") with PriCellular as the
surviving corporation in the Merger. The surviving corporation in the Merger
is operating under the name American Cellular Corporation. At the effective
time of the Merger, by virtue of the Merger, (i) each issued and outstanding
share of (x) Class A Common Stock, par value $0.01 per share of PriCellular
("PriCellular Class A Shares"), and (y) Class B Common Stock, par value $0.01
per share, of PriCellular, was converted into the right to receive $14.00 in
cash, without interest, and (ii) each issued and outstanding share of
PriCellular Series A Preferred Stock was converted into the right to receive
the product of the Merger Consideration and the number of PriCellular Class A
Shares into which each such share of PriCellular Series A Preferred Stock was
convertible. As a result of these transactions, the surviving corporation
succeeded to American Cellular's obligations under the Indenture and is the
primary obligor of the Notes.
FINANCING OF THE MERGER
A total of approximately $1.5 billion was required to pay the consideration
to PriCellular stockholders in the Merger, repay indebtedness of PriCellular
and Wireless (including the purchase of Old Notes in the Debt Tender Offers),
pay the related fees and expenses, and purchase the Pledged Securities. See
"Summary--The Merger--Sources and Uses of Funds." The sources of funding for
the Merger and the related transactions were the Credit Facility, the Equity
Contribution and the Offering.
In connection with the Merger, a subsidiary of American Cellular borrowed
approximately $900 million under the $1.0 billion Credit Facility, comprised
of an $850 million term loan facility and a $150 million revolving credit
facility. Merrill Lynch Capital and an affiliate of TD Securities (USA), Inc.
provided the Company with the Credit Facility. See "Description of Credit
Facility."
In addition, American Cellular received the $350 million Equity Contribution
from the Equity Investors pursuant to the Stock Purchase Agreement, as amended
(the "Stock Purchase Agreement"). On the Merger Date, the Company loaned
approximately $1.0 million to each of Messrs. Fujii and McTernan to purchase
a portion of the Series A Preferred Stock. American Cellular has also issued
shares of its Class B Common Stock to certain employees. See "Management--
Management Incentive Plan" and "Certain Relationships and Related
Transactions."
DEBT TENDER OFFERS AND SOLICITATIONS
In connection with the Merger, American Cellular purchased in connection
with the Debt Tender Offers all of the outstanding Old Notes of Wireless to
eliminate the interest expense associated with the Old Notes. Pursuant to
consent solicitations which were made in order to enhance the operating and
financial flexibility of the Company, American Cellular received the required
number of consents from the holders of the Old Notes to eliminate most of the
restrictive covenants contained in the indentures governing the Old Notes and
to amend certain other provisions contained in such indentures. The Company
entered into supplemental indentures effecting such changes.
CONVERTIBLE NOTES
All of the Convertible Notes, which were convertible into PriCellular Class
A Shares at $9.94 per share, were converted into PriCellular Class A Shares
prior to the consummation of the Merger and, therefore, received the Merger
Consideration of $14.00 per share.
32
<PAGE>
USE OF PROCEEDS
The Company will not receive any cash proceeds from the Exchange Offer. The
net proceeds from the Private Offering, which were approximately $272.5
million after deducting discounts, commissions and estimated fees and expenses
incurred in connection therewith, were used to finance the Merger.
The following table sets forth the estimated sources and uses of funds in
connection with the Merger, the Debt Tender Offers and the Merger Financings,
on a pro forma basis as of March 31, 1998:
<TABLE>
<CAPTION>
AMOUNT
-------------
(IN MILLIONS)
<S> <C>
SOURCES OF FUNDS:
Cash on hand................................................. $ 86.1
Credit Facility:
Revolving Credit Facility (a).............................. 35.7
Term Loans................................................. 850.0
Private Notes net of expenses (b)............................ 272.5
Redeemable Preferred Stock................................... 323.0
--------
Total Sources of Funds..................................... $1,567.3
========
USES OF FUNDS:
Cash merger consideration (c)................................ $ 802.0
Repayment of net existing indebtedness (d)................... 588.2
Debt Tender Offer Payments (e)............................... 69.4
Restricted Escrow Investment (b)............................. 82.4
Fees and expenses............................................ 25.3
--------
Total Uses of Funds........................................ $1,576.3
========
</TABLE>
- --------
(a) The Revolving Credit Facility provides for total borrowings of up to $150
million. Borrowings under the Credit Facility may be increased by up to
$250 million upon request of American Wireless and consent of a majority
of the lenders thereunder.
(b) Approximately $82.4 million of the proceeds from the Notes were used to
purchase the Pledged Securities to pay the first six scheduled interest
payments on the Notes (unless already paid) at the stated interest rate.
(c) Represents the Merger consideration paid to the PriCellular stockholders
(reflecting that all of PriCellular's 10 3/4% Senior Subordinated
Convertible Discount Notes due 2004 (the "Convertible Notes") were
converted into common stock), reduced by the estimated proceeds from the
exercise of certain warrants and options.
(d) Represents the funds required to repay total existing indebtedness of the
Company. In connection with the Merger, the Company purchased (the "Debt
Tender Offers") the 10 3/4% Senior Notes due 2004 (the "10 3/4% Notes") of
Wireless, the 12 1/4% Senior Subordinated Discount Notes due 2003 (the "12
1/4% Notes") of Wireless and the 14% Senior Subordinated Discount Notes
due 2001 (the "14% Notes") of Wireless (collectively, the "Old Notes").
See "The Merger--Debt Tender Offers and Solicitations."
(e) Includes amounts for the consent solicitation fees associated with the
Debt Tender Offers.
33
<PAGE>
CAPITALIZATION
The following table sets forth (i) the capitalization of the Company as of
March 31, 1998, and (ii) the unaudited pro forma combined capitalization of
American Cellular on the pro forma basis. This table should be read in
conjunction with the financial statements of American Cellular, including the
notes thereto, and the consolidated financial statements of PriCellular,
including the notes thereto, included herein and the unaudited pro forma
financial statements included herein. See "Unaudited Pro Forma Financial
Information."
<TABLE>
<CAPTION>
AS OF MARCH 31,
1998
--------------------
PRO
ACTUAL FORMA(1)
-------- ----------
(IN THOUSANDS)
<S> <C> <C>
Cash..................................................... $ 60,884 $ --
======== ==========
Pledged Securities....................................... $ -- $ 82,413
======== ==========
Long-term debt, including current portion:
Existing Credit Facility............................... $ 60,000 $ --
10 3/4% Senior Notes due 2004.......................... 170,000 --
14% Senior Subordinated Discount Notes due 2001........ 165,000 --
12 1/4% Senior Subordinated Discount Notes due 2003.... 193,200 --
10 3/4% Senior Subordinated Convertible Discount Notes
due 2004.............................................. 46,816 --
Revolving Credit Facility.............................. -- 35,701
Term Loans............................................. -- 850,000
Private Notes(2)....................................... -- 282,834
-------- ----------
Total debt............................................... 635,016 1,168,535
Redeemable Preferred Stock, $0.01 par:
New Series A, net of $2,000,000 of notes receivable
from stockholder: Authorized no shares actual;
5,000,000 shares pro forma; issued and outstanding no
shares actual; 3,250,000 shares pro forma............. -- 323,000
Stockholders' equity (deficit):
Series A: Authorized 10,000,000 shares actual; no
shares pro forma;
issued and outstanding 96,000 shares actual; no shares
pro forma............................................. 1 --
Common Stock, $0.01 par:
Class A: Authorized 100,000,000 shares actual; 425,000
shares pro forma;
issued and outstanding 21,824,566 shares actual;
325,000 shares pro forma.............................. 220 3
Class B: Authorized 50,000,000 shares actual; 250,000
shares pro forma;
issued and outstanding 13,134,275 shares actual; no
shares pro forma...................................... 129 --
Additional paid-in capital............................... 180,704 24,997
Basis adjustment(3)...................................... -- (45,772)
Retained earnings (deficit).............................. (54,203) 20
-------- ----------
Total stockholders' equity (deficit)................. 126,851 (20,752)
-------- ----------
Total capitalization................................. $761,867 $1,470,783
======== ==========
</TABLE>
- --------
(1) Reflects that 100% of each series of Old Notes were tendered and accepted
for payment pursuant to the Debt Tender Offers and that all of the
Convertible Notes were converted into PriCellular Class A Shares prior to
the consummation of the Merger. Borrowings under the Credit Facility may
be increased by up to $250 million.
(2) A portion of the net proceeds were used to purchase the Pledged Securities
to pay the first six scheduled interest payments on the Notes at the
stated interest rate.
(3) As certain PriCellular stockholders are also stockholders of American
Cellular, the step-up in value of assets has been limited by EITF 88-16.
34
<PAGE>
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma financial information presented herein gives effect
to (i) the Merger, (ii) the Merger Financings, (iii) the Debt Tender Offers
and the repayment or conversion of all other existing Indebtedness of the
Company and (iv) the purchase of the TN-4 RSA by PriCellular in January 1998
(collectively the "Transactions"). The pro forma financial information is
based on the historical financial statements of American Cellular and
PriCellular, although the financial information for TN-4 RSA as of and for the
period ended December 31, 1997 precedes the acquisition of the TN-4 RSA by
PriCellular and is based upon the books and records of the TN-4 RSA and has
not been audited or reviewed.
The acquisition of PriCellular has been accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed
have been recorded at their estimated fair values, which are subject to
further adjustment based upon appraisals and other analyses, with appropriate
recognition given to the effect of the Issuer's borrowing rates and income tax
rates. As certain of the PriCellular stockholders will remain stockholders of
American Cellular, in accordance with EITF 88-16 the step-up in value of the
assets has been limited.
The unaudited pro forma condensed combined statement of operations for the
three months ended March 31, 1998 and for the year ended December 31, 1997
give effect to the Transactions as if they had been consummated on January 1,
1997. The unaudited pro forma condensed combined balance sheet as of March 31,
1998 gives effect to the Merger as if it had been consummated March 31, 1998.
The pro forma adjustments are based upon available information and
assumptions that the Company believes are reasonable at the time made. The
unaudited pro forma condensed combined financial statements do not purport to
present the financial position or results of operations of the Company had the
Merger occurred on the dates specified, nor are they necessarily indicative of
the financial position or results of operations that may be achieved in the
future.
35
<PAGE>
AMERICAN CELLULAR CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------
AMERICAN PRO FORMA PRO
CELLULAR PRICELLULAR ADJUSTMENTS FORMA
-------- ----------- ----------- --------
<S> <C> <C> <C> <C>
Revenues......................... $ -- $ 51,503 $ 51,503
Costs and expenses:
Cost of cellular service....... 13,460 13,460
Cost of equipment sold......... 2,630 2,630
Selling, general and
administrative................ 14,779 14,779
Non-recurring charges.......... 2,389 (2,389)(a) --
Depreciation and amortization.. -- 8,532 6,227 (b) 14,759
----- -------- --------
-- 41,790 45,628
----- -------- --------
Operating income................. -- 9,713 5,875
Other income (expense):
Interest expense............... (18,822) (12,513)(d) (31,335)
Interest income................ 33 968 132 (e) 1,133
Other income, net.............. 812 812
----- -------- --------
33 (17,042) (29,390)
----- -------- --------
Net income (loss) before income
taxes........................... 33 (7,329) (23,515)
Income taxes..................... 13 (13)(f) --
----- -------- --------
Net income (loss)................ 20 (7,329) (23,515)
Preferred stock dividends and ac-
cretion......................... 1,699 7,991 (g) 9,690
----- -------- --------
Net income (loss) applicable to
common stock.................... $ (20) $ (9,028) $(33,205)
===== ======== ========
</TABLE>
36
<PAGE>
AMERICAN CELLULAR CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
-------------------- PRO FORMA
PRICELLULAR TN-4 RSA ADJUSTMENTS PRO FORMA
----------- -------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues......................... $181,000 $15,264 $ 196,264
Costs and expenses:
Cost of cellular service....... 48,691 3,653 52,344
Cost of equipment sold......... 12,841 1,034 13,875
Selling, general and
administrative................ 53,485 3,220 56,705
Depreciation and amortization.. 28,759 894 24,910 (b) 54,563
-------- ------- ---------
143,776 8,801 177,487
-------- ------- ---------
Operating income................. 37,224 6,463 18,777
Other income (expense):
Gain on sale of investments in
cellular operations........... 8,423 (8,423)(c) --
Interest expense............... (67,392) (2,051) (55,898)(d) (125,341)
Interest income................ 4,864 142 (473)(e) 4,533
Other income, net.............. 3,250 -- 3,250
-------- ------- ---------
(50,855) (1,909) (117,559)
-------- ------- ---------
Net loss......................... (13,631) 4,554 (98,782)
Preferred stock dividends and
accretion....................... 6,540 -- 32,220 (g) 38,760
-------- ------- ---------
Net loss applicable to common
stock........................... $(20,171) $ 4,554 $(137,542)
======== ======= =========
</TABLE>
37
<PAGE>
AMERICAN CELLULAR CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AT MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
--------------------
AMERICAN PRO FORMA
CELLULAR PRICELLULAR ADJUSTMENTS PRO FORMA
-------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents.... $25,233 $ 60,884 (86,117)(h) $ --
Other current assets......... -- 26,002 26,002
------- -------- ----------
Total current assets........... 25,233 86,886 26,002
Fixed assets................... 113,190 34,147 (i) 147,337
Pledged securities............. -- 82,413 (j) 82,413
Investment in cellular opera-
tions......................... 37,007 37,007
Intangibles.................... -- 560,706 653,287 (k) 1,213,993
Deferred financing costs....... -- 13,939 17,502 (l) 31,441
Other assets................... 1,242 1,242
------- -------- ----------
Total assets................... $25,233 $812,970 $1,539,435
======= ======== ==========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIENCY)
Current liabilities............ $ 213 $ 46,251 200 (m) $ 46,264
Long-term debt................. 635,016 533,519 (n) 1,168,535
Deferred taxes................. 3,797 17,536 (o) 21,333
Other long-term liabilities.... 1,055 1,055
Redeemable preferred stock, net
of notes receivable
from stockholders............. 323,000 (p) 323,000
Stockholders' equity (deficien-
cy)........................... 25,020 126,851 172,623 (q) (20,752)
------- -------- ----------
Total liabilities and stock-
holders' equity (deficiency).. $25,233 $812,970 $1,539,435
======= ======== ==========
</TABLE>
38
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
For the purposes of determining the pro forma effect of the transactions
described above on the Company's consolidated statement of operations for the
three months ended March 31, 1998 and the year ended December 31, 1997, the
following pro forma adjustments have been made:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
MARCH 31, YEAR ENDED
1998 DECEMBER 31, 1997
------------ -----------------
<S> <C> <C>
(a) Represents the elimination of non-recurring
charges incurred by PriCellular in
connection with the sale of the Company... -- $ (2,389)
======== ========
(b) Reflects the increase in depreciation of
fixed assets and amortization of intangi-
ble assets resulting from the purchase
price allocation:
Fixed assets--depreciated over 7 years..... $ 1,219 $ 4,877
Subscriber list--amortized over 3 years.... 1,000 4,000
FCC licenses--amortized over 40 years...... 4,008 16,033
-------- --------
$ 6,227 $ 24,910
======== ========
(c) Represents the elimination of the gain on
sale of cellular systems.................. -- $ (8,423)
======== ========
(d) To reflect interest expense and amortiza-
tion of deferred financing costs on the
following:
Private and Exchange Notes................. $ (7,513) $(30,051)
Term Loans at 10% to 10.5%................. (21,625) (86,500)
Revolving Credit Facility at 10%........... (888) (3,550)
Amortization of deferred financing costs... (1,309) (5,240)
Elimination of existing interest expense... 18,822 69,443
-------- --------
$(12,513) $(55,898)
======== ========
(e) Interest earned on Initial Escrow Funds as-
suming 5.5%................................... $ 1,133 $ 4,533
Loss of interest income due to zero cash
balance..................................... (1,001) (5,006)
-------- --------
$ 132 $ (473)
======== ========
(f) To eliminate American Cellular's tax provi-
sion as a result of utilizing PriCellular
net operating losses...................... -- $ (13)
======== ========
(g) Elimination of dividends on PriCellular Se-
ries A Preferred Stock as result of the
conversion to PriCellular Class A Shares.. $ (1,699) $ (6,540)
Dividends on American Cellular Redeemable
Preferred Stock at 12%...................... 9,690 38,760
-------- --------
$ 7,991 $ 32,220
======== ========
</TABLE>
39
<PAGE>
For the purposes of determining the pro forma effect of the transactions
described above on the Company's consolidated balance sheet as of March 31,
1998, the following pro forma adjustments have been made:
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1998
--------------
<S> <C>
(h) Cash and Cash Equivalents:
Net proceeds from the sale of the Private Notes after
placing $82,413 in escrow................................. $ 190,087
Proceeds from the Revolving Credit Facility................ 35,701
Proceeds from the Term Loans............................... 850,000
Proceeds from Redeemable Preferred Stock................... 323,000
Purchase of PriCellular stock net of proceeds received from
exercise
of PriCellular stock options and warrants of $18,964...... (790,092)
Purchase of PriCellular debt including debt tender offer
payments ................................................. (657,586)
PriCellular severance payments............................. (4,000)
Merger, Revolving Credit Facility and Term Loan fees....... (33,237)
----------
$ (86,117)
==========
(i) To record the allocation of purchase price to fixed
assets........................................................ $ 34,147
==========
(j) Portion of the net proceeds from the sale of the Private
Notes to purchase pledged securities........................ $ 82,413
==========
(k) Intangibles:
To reflect the excess of purchase price from the Merger:
Purchase Price (net of $18,964 cash received from the
exercise of
stock options and warrants)............................... $1,459,598
Incremental deferred taxes................................. 17,536
Basis adjustment........................................... (45,772)
Less: Net assets of PriCellular at March 31, 1998.......... (126,851)
Step-up allocated to fixed assets to record them at fair
market value............................................ (34,147)
Repayment of outstanding debt............................ (588,200)
Conversion of Convertible Notes.......................... (46,816)
PriCellular severance costs.............................. 4,000
Write-off of PriCellular's deferred financing costs...... 13,939
----------
$ 653,287
==========
(l) Deferred Financing Costs:
Write-off of existing deferred financing costs of
PriCellular............................................... $ (13,939)
Deferred financing costs from the debt portion of the
Merger Financings......................................... 31,441
----------
$ 17,502
==========
(m) To reflect return of over funding by stockholder........... $ (200)
==========
(n) Long-term Debt:
Issuance of the Private Notes.............................. $ 282,834
Revolving Credit Facility.................................. 35,701
Term Loans................................................. 850,000
Purchase of Old Notes...................................... (588,200)
Conversion of Convertible Notes into 4,589,839 PriCellular
Class A Shares............................................ (46,816)
----------
$ 533,519
==========
(o) To record the incremental deferred taxes resulting from the
purchase price allocation..................................... $ 17,536
==========
(p) Redeemable Preferred Stock:
Issuance of American Cellular Series A Preferred Stock..... $ 323,000
==========
(q) Stockholders' Equity:
Purchase of PriCellular net assets......................... $ (192,631)
Conversion of Convertible Notes into 4,589,839 PriCellular
Class A Shares............................................ 46,816
Exercise of stock options and warrants to purchase
PriCellular Class A Shares................................ 18,964
Basis adjustment........................................... (45,772)
----------
$ 172,623
==========
</TABLE>
40
<PAGE>
SELECTED FINANCIAL DATA
The Company acquired all of its existing Systems (excluding minority
interests) between April 1994 and January 1998. The following selected
historical financial data is not necessarily indicative of future results of
operations. The selected financial data set forth below for PriCellular for
the three months ended March 31, 1998 and 1997 is unaudited. The selected
financial data for the years ended December 31, 1997, 1996 and 1995 and as of
December 31, 1997 and 1996, is derived from, and qualified by reference to,
the audited consolidated financial statements included elsewhere herein. The
selected financial data set forth below for PriCellular for the years ended
December 31, 1994 and 1993 and as of December 31, 1995, 1994 and 1993 are
derived from audited consolidated financial statements not included elsewhere
herein. The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere herein.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ -----------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Operating revenues.... $ 51,503 $ 35,566 $181,000 $112,616 $41,504 $ 5,209 $ 3,809
Cost of cellular
service.............. 13,460 9,274 48,691 29,571 10,694 1,892 835
Cost of equipment
sold................. 2,630 2,467 12,841 10,073 4,951 814 255
-------- -------- -------- -------- ------- -------- --------
Gross margin.......... 35,413 23,825 119,468 72,972 25,859 2,503 2,719
Selling, general and
administrative....... 14,779 11,278 53,485 34,502 16,512 6,005 1,659
Non-recurring
charges.............. 2,389 -- -- -- -- -- --
Depreciation and
amortization......... 8,532 6,724 28,759 19,537 10,337 2,720 1,695
-------- -------- -------- -------- ------- -------- --------
Operating income
(loss)............... 9,713 5,823 37,224 18,933 (990) (6,222) (635)
Gain (loss) on sale of
investments in
cellular operations.. -- 8,451 8,423 (1,401) 11,598 6,819 11,986
Interest expense,
net.................. (17,854) (14,696) (62,528) (42,201) (18,839) (1,940) (271)
Other income
(expense), net....... 812 812 3,250 1,626 520 (97) (464)(a)
-------- -------- -------- -------- ------- -------- --------
Net income (loss)....... $ (7,329) $ 390 $(13,631) $(23,043) $(7,711) $ (1,440) $ 10,616
======== ======== ======== ======== ======= ======== ========
Net income (loss) after
adjustment for accrued
preferred stock
dividends.............. $ (9,028) $ (1,209) $(20,171) $(29,221) $(7,711) $((1,440) $110,616
======== ======== ======== ======== ======= ======== ========
Ratio of earnings to
fixed charges (b)...... -- 1.0 -- -- -- -- 22.7
======== ======== ======== ======== ======= ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF DECEMBER 31,
MARCH 31, ------------------------------------------
1998 1997 1996 1995 1994 1993
--------- -------- -------- -------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital
(deficit)............. $ 40,635 $ 44,518 $ 89,749 $116,415 $ 26,488 $ (139)
Net fixed assets....... 113,190 104,854 73,327 52,041 26,144 389
Total assets........... 812,970 747,656 735,816 544,766 215,744 6,755
Long-term debt......... 635,016 568,323 524,517 315,216 113,683 4,000
Total liabilities...... 686,119 613,476 555,897 339,038 137,508 4,680
Stockholders' equity... 126,851 134,180 179,919 205,728 78,236 2,075
</TABLE>
- --------
(a) Extraordinary loss on early extinguishment of debt of $172 is shown as
part of other income (expense), net.
(b) The ratio of earnings to fixed charges is determined by dividing the sum
of earnings before extraordinary items and accounting changes, interest
expense, taxes and a portion of rent expense representative of interest by
the sum on interest expense and a portion of the rent expense
representative of interest. For three months ended March 31, 1998 and the
years ended December 31, 1997, 1996, 1995 and 1994 the deficit of earnings
to fixed charges was $9,028, $13,631, $23,043, $7,711 and $1,440,
respectively.
41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the "Selected
Financial Data" and the consolidated financial statements, including notes
thereto, of the Company appearing elsewhere in this Prospectus. Certain
information in this section includes forward-looking statements. Such forward-
looking statements relate to the Company's financial condition, results of
operations, expansion plans and business. Actual results could differ
materially from the forward-looking statements due to, among other things, the
risks and uncertainties noted under the heading "Risk Factors" in this
Prospectus.
GENERAL
The current three month period ending March 31, 1998 reflects the continuing
financial growth of the Company's operations. Net subscriber additions
approximated 25,000 for the current quarter of which approximately 14,400 were
from internal growth, which is comparable to last year's first quarter. The
Company ended the current period with approximately 275,000 subscribers
resulting in penetration of 5.4% compared to approximately 179,000 subscribers
and penetration rate of 3.8% at March 31, 1997. Churn for the Company
continued its improvement ending the current quarter at a rate of 1.4%
compared to 1.6% for last year's three month period.
Except for the acquisition of the TN-4 RSA in January 1998, the financial
results of the Company are substantially comparable.
The following discussion and analysis is based upon information obtained
from and publicly reported by the Company for the periods indicated.
HISTORICAL RESULTS OF OPERATIONS
Three Months Ended March 31, 1998 Compared With Three Months Ended March 31,
1997.
Revenues for the quarter ended March 31, 1998 increased to $51.5 million
(consisting of cellular service revenues of $48.0 million, equipment sales
revenues of $1.3 million and other revenues of $2.2 million) from $35.6
million consisting of cellular service revenues of $32.7 million, equipment
sales revenues of $1.1 million and other revenue of $1.8 million). The
significant increase in the subscriber base which generates additional monthly
revenue and increased air time revenue is the primary reason for the increase.
In addition the Company's commitment to improving coverage in the markets
through capital additions has resulted in increased roaming revenue.
Total expenses for the quarter ended March 31, 1998 increased to $41.8
million (consisting of cost of cellular service of $13.5 million, cost of
equipment sold of $2.6 million, selling, general and administrative expenses
of $14.8 million, non-recurring charges related to the sale of the Company of
$2.4 million and depreciation and amortization of $8.5 million) from $29.7
million of operating expenses for the quarter ended March 31, 1997 (consisting
of cost of cellular service of $9.3 million, cost of equipment sold of $2.4
million, selling, general and administrative expenses of $11.3 million and
depreciation and amortization of $6.7 million). The primary factor
contributing to the increase in expenses is the increase in the volume of
revenue due to the growth of the business. On a percentage basis the cost of
cellular service represents 28% of cellular revenue both for the current and
prior three-month periods. Operating expenses consisting of the cost of
cellular service, the cost of equipment and selling, general and
administrative expenses increased by $7.9 million, but as a percentage of
total revenue decreased from 65% for the quarter ending March 31, 1997 to 60%
for the current quarter.
The gain on sale of investment in cellular operations resulted from the sale
in January 1997 of the Florence AL MSA and AL-1B RSA.
42
<PAGE>
Interest expense, net increased to $17.9 million from $14.7 million due to
the Company's issuance of $60.0 million senior secured reducing revolver at an
effective rate of approximately 7.7% per annum in January 1998, a reduction in
the amount of interest earned resulting from the lower cash balances for the
current three months and higher interest expense for the discounted
indebtedness outstanding as their balances approach the face value of the
Notes.
Year Ended December 31, 1997 Compared to the Year Ended December 31, 1996
Operating revenue increased from $112.6 million in 1996 (consisting of
$105.2 million of cellular service, $3.4 million of equipment sales and $4.0
million of other) to $181.0 million in 1997 (consisting of $168.4 million of
cellular service, $5.4 million of equipment sales and $7.2 million of other).
The primary reason for the increase in cellular service revenue and equipment
sales is the addition of the Kentucky Cluster, the WI-4 RSA and the WI-5 RSA
in 1997 and the fact that Poughkeepsie, NY-6, and WV-3 markets were acquired
over the course of 1996 and therefore generated a full year of revenue in 1997
but were included for only part of the year in 1996.
Total costs and expenses increased from $93.7 million in 1996 (consisting of
$29.6 million for cellular service, $10.1 million for cost of equipment sold,
$34.5 million for selling, general and administrative and $19.5 million for
depreciation and amortization) to $143.8 million in 1997 (consisting of $48.7
million for cellular service, $12.8 million for cost of equipment sold, $53.5
million for selling, general and administrative and $28.8 for depreciation and
amortization). The increases are principally a result of the markets added in
1996 and 1997 as stated above.
The increase in interest expense from $47.1 million in 1996 to $67.4 million
in 1997 is a result of a full year's worth of interest on the $170.0 million
10% Notes issued in November 1996 compared to only one and one-half months in
1996.
The gain on sale of investments in cellular operations resulted from the
sale in January 1997 of the Florence AL MSA and AL-1B RSA ("Florence
License"). In 1996, the net loss resulted from the sale of the AL-4 RSA ($1.6
million loss) and the sale of the MI-2 RSA ($1.6 million loss) offset by the
sale of minority Pops ($1.8 million gain).
Other income increased to $3.3 million in 1997 from $1.6 million in 1996
principally due to the amortization of the covenant not to compete associated
with the sale of the Florence License in January 1997.
Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995
Operating revenues increased from $41.5 million in 1995 (consisting of
cellular revenues of $38.8 million, equipment sales of $1.7 million and other
revenues of $1.0 million) to $112.6 million in 1996 (consisting of cellular
revenues of $105.2 million, equipment sales of $3.4 million and other revenues
of $4.0 million). The significant increase in cellular revenues and equipment
sales resulted from properties added in 1996 which were not present in 1995
including the addition of the New York Cluster and significant additions to
the Mid-Atlantic Cluster and Upper Midwest Cluster in the latter half of 1995
for which a full year of revenue was earned in 1996. The increase in other
revenue from $1.0 million in 1995 to $4.0 million in 1996 is principally a
function of the inclusion of the guaranteed preferential distributions from
the Joint Venture agreement with SBC Corporation for a full year in 1996 ($3.4
million) compared to only one month in 1995 ($275,000) partially offset by the
income recorded in 1995 from the management of the AL-4 RSA ($755,000) which
is not present in 1996.
Total costs and expenses rose from $42.5 million for 1995 to $93.7 million
for 1996. The increase is principally a result of the factors stated above,
new markets in 1996 for which no expenses were incurred in 1995 and the
addition in 1995 toward the latter part of the year of a significant number of
markets which therefore have a full year of expenses for 1996 but less than
six months of expenses for 1995.
The result of these factors is an increase in the cost of cellular service
to $29.6 million in 1996 from $10.7 million in 1995, an increase to $10.1
million in 1996 for the cost of equipment sold from $5.0 million in
43
<PAGE>
1995 and an increase in selling, general and administrative expenses to $34.5
million in 1996 from $16.5 million in 1995. The Company's aggressive marketing
and sales promotion efforts are geared towards increasing subscribers. The
addition of retail locations combined with the increase in the number of
markets also contributed to this increase.
Depreciation and amortization increased to $19.5 million in 1996 from $10.3
million in 1995 because of the additional equipment and cellular licenses
associated with the acquisition of new markets in 1996 and a full year's
depreciation and amortization in 1996 for markets acquired during 1995.
The loss on sale of investments in cellular operations in 1996 of $1.4
million is a result of the loss from the sale of the AL-4 RSA of $1.6 million
and the MI-2 RSA of $1.6 million partially offset by the gain on the sale of
minority Pops of $1.8 million. The gain in 1995 of $11.6 million is due to the
disposition of the Company's interest in the non-wireline system serving the
Abilene, TX MSA.
The increase in interest expense from $23.0 million in 1995 to $47.1 million
in 1996 is a function of a full year of interest for 1996 on the 12% Notes
issued in September 1995 compared with only three months in the prior year,
combined with additional interest related to the issuance of the 10%
Poughkeepsie Note (as defined) in the amount of $19.0 million for
approximately six and one-half months and the interest for one and one-half
months on the 10% Notes, face amount of $170.0 million issued in November
1996.
Other income for 1996 includes $625,000 related to the two-year covenant not
to compete from the sale of the AL-4 RSA in July 1996, $1.0 million for the
covenant not to compete from the Lubbock/Minnesota exchange in July 1995 for
which one-half year or $500,000 is included for 1995.
The increase in interest income from $4.1 million in 1995 to $4.9 million in
1996 is a result of the increased cash flow for 1996 combined with the cash on
hand resulting from the proceeds of the $170.0 million 10% Notes received in
November 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has, on a consolidated basis, Indebtedness aggregating
approximately $1.2 billion. Substantially all such Indebtedness was incurred
to pay the consideration to the PriCellular stockholders in the Merger, repay
the indebtedness of PriCellular and Wireless (including the purchase of Old
Notes in the Debt Tender Offers), pay the related fees and expenses and
purchase the Pledged Securities. See "Use of Proceeds."
As a result of the Merger, the Company has significant cash requirements for
debt service. To meet its liquidity needs, the Company will rely on internally
generated funds, borrowings under the revolving facility of the Credit
Facility and, for the first six scheduled interest payments of the Notes, the
Pledged Securities. On the pro forma basis, at March 31, 1998, the Company
would have had $114.3 million available under the revolving facility of the
Credit Facility.
As of March 31, 1998, the Company had $60.9 million of cash and cash
equivalents and $40.6 million of working capital. During the first three
months of 1998, the Company's principal source of cash was $12.7 million from
operations. The principal use of cash was $11.5 million for the acquisition of
cellular equipment. The acquisition of the TN-4 RSA for approximately $73.0
million was financed through the issuance of $60.0 million of debt and the
utilization of $13.0 million of cash previously reflected as cash committed
for the acquisition of cellular operations on the balance sheet of the Company
at the end of 1997, and not included in the opening cash balance of $61.4
million.
The Company believes that based on the current level of operations and
anticipated internal growth, cash flow from operations, together with other
available sources of funds, including borrowings under the Revolving Credit
Loans (as defined) of the Credit Facility, will be adequate to make required
payments of principal and interest on the Company's Indebtedness and to fund
anticipated capital expenditures and working capital requirements. A portion
of the Company's debt bears interest at floating rates; therefore, its
financial condition is and will continue to be affected by changes in
prevailing interest rates.
44
<PAGE>
The Company plans to continue to expand its marketing efforts which will
include, but are not limited to, an increase in funds for advertising,
cellular telephone inventory purchases and other expenditures relating to
subscriber growth. During the 1998 and 1999 calendar years, American Cellular
anticipates that it will spend an aggregate of approximately $55 million in
capital expenditures. However, actual capital requirements may change. The
ability of the Company to meet its debt service obligations and reduce its
total debt will be dependent on the future performance of the Company, which
in turn, will be subject to general economic conditions and to financial,
business and other factors, including factors beyond the Company's control.
The Company has reviewed the possible effect of the Year 2000 on the
computer systems currently in use including the software that is an integral
part of the Company's switches and the related billing information. The
Company does not believe that any significant financial expenditure or
investment is expected to be required to make any modifications that may
become necessary; however, the Company is unable to predict whether its third
party billing provider or its principal sources of purchased or leased
cellular equipment have made sufficient modifications to address the potential
problems of the Year 2000 software shortcomings on their systems.
UNCERTAINTIES ASSOCIATED WITH FORWARD LOOKING STATEMENTS
American Cellular has made in this Prospectus, and from time to time may
otherwise make, statements which constitute forward looking statements. These
statements include statements regarding the intent, belief, plans or current
expectations of the Company, its directors or its officers primarily with
respect to the Company's operations and financial performance. Investors are
cautioned that any such forward looking statements are not guarantees of
future performance and involve risks and uncertainties, and that actual
results may differ materially from those in the forward looking statements as
a result of various factors. Some of these factors are described under "Risk
Factors" and may include: (i) the Company's high degree of leverage and the
requirement for significant and sustained growth in the Company's cash flow to
meet its debt service requirements; (ii) the Company's limited operating
history, the Company's history of net losses and the expectation of future
losses; (iii) that the Company is a holding company and the Notes will be
structurally subordinated to all Indebtedness of the subsidiaries of the
Company; (iv) that the Company will be managed by a new team of senior
management; (v) competition from the other cellular operator in the Company's
clusters or from other technologies; (vi) that new Systems and Systems
recently acquired may not perform as expected; (vii) that the
telecommunications industry is subject to rapid and significant changes in
technology; (viii) that the Company relies upon the registered service mark
CELLULARONE to market the services of its non-wireline systems; (ix) that
there is potential for adverse regulatory change and the need for renewal of
cellular licenses; (x) fluctuations in market value of licenses;
(xi) equipment failure or natural disaster; (xii) concerns about RF emissions;
(xiii) the lack of a public market for the Notes and there will be
restrictions imposed on the resale of the Notes; (xiv) that the Indenture will
require the Company to offer to purchase all of the Notes issued and
outstanding upon any Change of Control and the Credit Facility contains a
similar provision; (xv) the costs associated with the unauthorized use of the
Company's network; (xvi) that the Indenture imposes significant operating and
financial restrictions on the Company; (xvii) the lack of certainty with
respect to how a court might decide a suit by an unpaid creditor on the basis
of fraudulent conveyance; and (xviii) the potential effect of Year 2000
computer issues.
FLUCTUATIONS IN QUARTERLY RESULTS
The Company's revenues in the fourth quarter are historically lower than the
third quarter due to the fact that fewer cellular calls are made in the
Company's markets during inclement weather. Losses generally increase in the
fourth quarter due to the lower revenues coupled with higher sales and
marketing costs incurred during the holiday selling season.
45
<PAGE>
BUSINESS
THE COMPANY
The Company is one of the largest independent rural cellular telephone
system operators in the United States. It owns and operates non-wireline FCC-
licensed cellular telephone systems primarily in rural areas of the Midwestern
and Eastern portions of the United States with approximately 5.1 million Net
Pops. The Company's licenses are grouped in four main clusters of smaller MSAs
and strategically located RSAs covering over 110,000 square miles. The Company
markets all of its cellular products and services under the name CELLULARONE,
one of the most recognized brand names in the cellular industry. In marketing
its products and services, the Company utilizes its distribution network of
over 90 retail locations, a direct sales force and a group of agents.
The Company has experienced strong growth since 1995 which has been achieved
through both selected acquisitions and internal growth. As of March 31, 1998,
the Company provided cellular service to approximately 275,000 subscribers,
representing a penetration rate of 5.4%, and had revenues and EBITDA of $51.5
million and $21.4 million, respectively. Additionally, the Company's
historical revenues and EBITDA have increased at a compound annual growth rate
for the past two calendar years of 109% and 165%, respectively.
SYSTEMS
American Cellular believes its predominantly rural cellular systems provide
strong growth opportunities due to lower penetration rates, higher subscriber
growth rates and a higher proportion of roaming revenue compared to cellular
systems located in large MSAs. The Company focuses on underdeveloped rural
cellular areas which have a significant number of potential customers with
demand for wireless communication. American Cellular believes these areas have
not yet been as fully developed as large MSAs, which were licensed earlier by
the FCC, and have the potential for increased cellular usage and superior
financial performance. In addition, American Cellular believes that in the
near term rural cellular areas will be subject to less competition from other
wireless providers (such as PCS) as compared to larger MSAs.
Through selective acquisitions and asset swaps, the Company has concentrated
its efforts on creating an integrated network of rural cellular systems in
contiguous service areas. The Company's cellular interests consist principally
of four large operating clusters of cellular systems:
Upper Midwest Cluster--a 1.8 million Net Pop cluster of 15 Systems
covering approximately 78,000 contiguous square miles in Minnesota,
Wisconsin and Michigan.
Mid-Atlantic Cluster--an 857,000 Net Pop cluster of five contiguous
Systems consisting of five RSAs in Ohio, Pennsylvania and West Virginia
covering approximately 10,000 contiguous square miles.
New York Cluster--a 1.1 million Net Pop cluster of two MSAs and two RSAs
covering more than 8,000 contiguous square miles in suburban New York
located between the New York City MSA of AT&T Wireless Services Inc. and
Southwestern Bell's Albany, NY MSA.
Kentucky Cluster--a 1.0 million Net Pop cluster of four RSAs adjacent to
Louisville and Lexington, Kentucky and one RSA in Tennessee which abuts
Knoxville, Tennessee. The 38 counties in Kentucky and the six counties in
Tennessee cover more than 15,000 square miles.
BUSINESS STRATEGY
American Cellular's primary business strategy is to focus on the development
of the Company's existing clusters and the selective acquisition of additional
rural cellular systems. The principal elements of this strategy include:
Develop Rural Market Clusters. American Cellular believes that its focus on
small- and medium-sized markets will provide it with several competitive
advantages. The majority of the Company's operations are in the early stages
of their growth cycle and therefore afford significant opportunities for
improvements in
46
<PAGE>
performance, particularly with respect to rates of penetration. The Company's
modestly populated markets exhibit a concentration of small businesses, long
commute times, and well-traveled roadways that have the potential to generate
a high level of cellular use. Additionally, the Company enjoys above-average
roaming revenues because the majority of the Company's markets are contiguous
with more densely populated areas. Finally, because the majority of the
Company's markets consist of a population density that the Company believes is
too low to make PCS services economically attractive, the Company is in
position to benefit from PCS roaming revenues while generally remaining
relatively insulated from direct PCS competition.
Market Through Local Promotions. The Company markets its services to
increase subscriber activations, to minimize churn and to promote its
nationally known CELLULARONE branded products and services. Many of its
marketing programs are tailored for individual markets and are designed to
distinguish the Company as the local market's highest quality cellular service
provider, stressing its local retail stores, customer service and commitment
to the community. A key element of the Company's market positioning is its use
of local retail stores and a direct sales force. A retail location
complemented by a direct sales force provides the Company with more control
over the sales process than if it were to rely exclusively on independent
agents. The Company believes that its over 90 retail locations enhance its
ability to provide quality customer service and generate customer loyalty, as
well as to provide convenient distribution locations. While American Cellular
plans to continue to develop its direct sales force and to add additional
retail locations to increase subscriber penetration, it also plans to augment
its sales network by taking advantage of cost-effective distribution channels,
including independent dealers and contract sales, to increase further market
penetration.
Introduce Flexible and Innovative Pricing and Billing Plans. The Company
currently offers a wide selection of pricing plans tailored to its current
high credit-quality customer base. In order to further expand its customer
base and increase its penetration, American Cellular intends to introduce
certain new pricing packages. These new packages will include prepaid plans
which decrease bad debt risk and also reduce the cost of subscriber
acquisitions through the elimination or significant reduction of equipment
subsidies to subscribers. Additionally, in order to increase cellular phone
use, American Cellular plans to support ongoing efforts of the industry to
provide "calling party pays" service whereby the cost to the cellular
subscriber is reduced as the initiating caller is charged for a call placed to
the cellular phone.
Continue Build Out of Advanced Network. American Cellular intends to
continue to expand and improve coverage, increase capacity and build out its
systems. American Cellular believes that expanding and improving coverage and
capacity in its systems will attract additional subscribers, increase usage by
existing subscribers, increase roaming activity, and further enhance the
efficiency of its networks. Additionally, the Company's advanced digital-ready
network allows the Company the flexibility to offer digital features and
analog coverage in the same cell. American Cellular intends to take advantage
of the digital capability of the network by introducing creative price plans
and premium service offerings (such as caller ID and message waiting
indicator), thereby enhancing the average revenues generated per subscriber as
well as fortifying the Company's competitive position.
Achieve Cost Savings Through Selective Centralization. While maintaining its
local marketing and sales focus, American Cellular intends to reduce overhead
expenses by opportunistically centralizing certain business functions.
Prepare for Future Competition. American Cellular believes that it is well
positioned to compete against present and future competitive wireless service
providers through its extensive footprint, distribution channels, customer
service capabilities, experienced management team and high-quality, digital-
ready network. The Company is one of two incumbent cellular providers in its
markets. American Cellular believes that the extensive capital expenditures
required to deploy the requisite infrastructure in order to offer PCS services
is more readily justifiable from an economic standpoint in larger, more
densely populated urban markets. As a result of these capital requirements for
PCS operators, American Cellular believes that its service areas will not
support widespread PCS competition, thus positioning American Cellular to
provide roaming services to PCS customers.
47
<PAGE>
Continue Selective Acquisition Strategy. American Cellular's strategy is to
continue to expand its current clusters through the selective acquisition of
small to mid-sized MSAs and strategic RSAs that it believes are undervalued,
underdeveloped or that possess traits indicative of potentially high cellular
usage and superior financial performance. Upon acquiring a System, American
Cellular's aim will be to make certain operational and organizational changes
reflective of its operating philosophy in order to increase the number and
quality of subscribers and enhance operating cash flow, while controlling
subscriber acquisition costs and promoting superior customer service.
CELLULAR MARKETS AND SYSTEMS
The following table summarizes certain information concerning the Company's
markets. All of the Company's licenses are non-wireline licenses with the
exception of the license for the Laredo, TX MSA.
<TABLE>
<CAPTION>
TOTAL DATE OF
MARKET POPS OWNERSHIP NET POPS ACQUISITION
------ --------- --------- --------- -----------
<S> <C> <C> <C> <C>
UPPER MIDWEST CLUSTER
Duluth, MN/Superior, WI MSA......... 240,234 100.0% 240,234 04/28/94
Eau Claire, WI MSA.................. 143,701 96.7% 139,001 04/28/94
Wausau, WI MSA...................... 121,727 95.1% 115,715 03/28/95
MN-2A RSA........................... 38,766 100.0% 38,766 07/07/95
MN-3 RSA............................ 59,528 100.0% 59,528 04/28/94
MN-4 RSA............................ 15,226 100.0% 15,226 08/10/95
MN-5 RSA............................ 207,107 100.0% 207,107 07/07/95
MN-6 RSA.4.......................... 220,067 100.0% 220,067 11/23/9
WI-1 RSA............................ 110,749 100.0% 110,749 04/28/94
WI-2 RSA............................ 85,645 100.0% 85,645 11/18/96
WI-3 RSA............................ 140,697 100.0% 140,697 11/23/94
WI-4 RSA............................ 118,993 100.0% 118,993 01/07/97
WI-5 RSA............................ 81,194 100.0% 81,194 05/29/97
WI-6A RSA........................... 32,939 100.0% 32,939 11/23/94
MI-1 RSA............................ 203,391 100.0% 203,391 03/07/95
--------- ---------
1,819,964 1,809,252
MID-ATLANTIC CLUSTER
OH-7 RSA............................ 257,290 100.0% 257,290 09/27/95
OH-10A RSA.95....................... 62,345 100.0% 62,345 09/29/
PA-9 RSA............................ 188,096 100.0% 188,096 02/02/96
WV-2 RSA............................ 79,567 100.0% 79,567 12/20/95
WV-3 RSA............................ 269,709 100.0% 269,709 07/23/96
--------- ---------
857,007 857,007
NEW YORK CLUSTER
Orange County, NY MSA............... 327,053 100.0% 327,053 10/17/96
Poughkeepsie, NY MSA................ 263,723 95.6% 251,997 04/23/96
NY-5 RSA............................ 382,180 100.0% 382,180 12/29/95
NY-6 RSA............................ 111,373 100.0% 111,373 04/23/96
--------- ---------
1,084,329 1,072,603
KENTUCKY CLUSTER
KY-4 RSA............................ 245,952 100.0% 245,952 01/07/97
KY-5 RSA............................ 158,204 100.0% 158,204 01/07/97
KY-6 RSA............................ 260,920 100.0% 260,920 01/07/97
KY-8 RSA............................ 119,840 100.0% 119,840 01/07/97
TN-4 RSA............................ 263,553 100.0% 263,553 01/15/98
--------- ---------
1,048,469 1,048,469
SOUTHWESTERN BELL JOINT VENTURE AND
OTHER INTERESTS
Laredo, TX MSA...................... 176,162 44.5% 78,392 11/30/95
IL-4 RSA............................ 216,119 44.5% 96,173 11/30/95
IL-6 RSA............................ 201,234 44.5% 89,550 11/30/95
Other Interests. n/a n/a 45,842 various
--------- ---------
593,515 309,957
--------- ---------
Total............................... 5,403,284 5,097,288
========= =========
</TABLE>
48
<PAGE>
The Company's Systems principally operate under the CELLULARONE brand name.
The Company believes that the diversity of competitors operating under various
names and the Company's use of the CELLULARONE brand name affords the Company
marketing, advertising and other operational advantages relative to those
competitors. These advantages include advertising and marketing the Company's
services as a single brand name on a regional basis, allowing the Company to
set regional roaming rates, being a single cellular service provider to
corporate accounts, allowing calls to be handed-off between cell sites that
cross market borders and reducing the number of dropped calls as subscribers
exit an individual license area.
Upper Midwest Cluster
The Upper Midwest Cluster consists of approximately 1.8 million Net Pops in
15 contiguous Systems and covers over 78,000 square miles. The Upper Midwest
Cluster includes three of the Company's original Systems acquired in April
1994 and has grown steadily to 15 Systems through the acquisition of three
Systems in November 1994, two Systems in March 1995, three Systems in July
1995, one System in August 1995, one System in November 1996, one System in
January 1997 and one System in May 1997.
The Mid-Atlantic Cluster
The Mid-Atlantic Cluster comprises approximately 857,000 Pops and includes
portions of southeastern Ohio as well as adjacent portions of Pennsylvania and
northern West Virginia south of Pittsburgh. The Mid-Atlantic Cluster was
established with the acquisition of two Systems in September 1995 and
currently includes five contiguous RSAs as a result of acquisitions in
December 1995, February 1996 and July 1996. In addition, the Mid-Atlantic
Cluster abuts Columbus, OH and three MSAs owned by AT&T including its
Pittsburgh, PA System, affording the opportunity for joint marketing and
promotions.
The New York Cluster
The Company's New York Cluster consists of approximately 1.1 million Net
Pops and over 8,000 square miles in suburban New York. The New York Cluster is
adjacent to AT&T's New York City MSA and is located between it and
Southwestern Bell's Albany, NY MSA. The New York Cluster was established with
the acquisition of the NY-5 RSA in December 1995 and currently includes two
MSAs and two RSAs as a result of acquisitions in April and October of 1996.
With the addition of the Orange County, NY MSA, the Company's New York Cluster
includes the entire Hudson Valley/Catskill region, thereby creating
significant marketing and promotional synergies and opportunities.
The Orange County, NY MSA is directly north of AT&T's New York City MSA and
abuts Westchester, Putnam and Rockland counties. Serving as a residential
community of metropolitan New York, Orange County includes the cities of
Newburgh, Middletown, Port Jervis and the affluent towns of Tuxedo and
Warwick. Major tourist attractions include The United States Military Academy
at West Point, Storm King State Park and Sterling Forest. The MSA contains
more than 40 miles of the New York State Thruway (I-87), approximately 50
miles of I-84 and 35 miles of Route 17.
The Kentucky Cluster
The Kentucky Cluster consists of four RSAs in Kentucky containing
approximately 785,000 Pops and over 12,000 square miles and one RSA in
Tennessee consisting of approximately 264,000 Pops and over 2,000 square
miles. Three of the Kentucky RSAs (KY-4, 5 and 6) form a contiguous cluster
encompassing all of Kentucky south of Louisville and Lexington and north of
the Nashville, TN MSA and other Tennessee markets. The 120,000 Pop KY-8 RSA
serves the northeastern suburbs of Lexington. The Tennessee RSA (TN-4) is
located south of the Kentucky RSAs and contains some of the most visited areas
in the country, including the towns of Gatlinburg and Pigeon Forge, the
Dollywood tourist attraction and the entrance to the Great Smoky Mountain
National Park.
49
<PAGE>
THE SOUTHWESTERN BELL JOINT VENTURE
The Company owns 44.5% of a joint venture with Southwestern Bell in which
the Company contributed its System serving the Laredo, TX MSA and Southwestern
Bell contributed its Systems serving the IL-4 RSA and IL-6 RSA (the
"Southwestern Joint Venture"). The Company owns 44.5% of the Systems serving
the combined 593,515 Pops, or 264,115 Net Pops. The Southwestern Joint Venture
was consummated on November 30, 1995.
Pursuant to the Southwestern Joint Venture, the Company receives guaranteed
preferential distributions in the first four years of the Southwestern Joint
Venture increasing from $3.3 million in the first year to $5.8 million in the
final year. The Company has the option to remain in the Southwestern Joint
Venture for four years or "put" its Joint Venture interest in the Southwestern
Joint Venture to Southwestern Bell at any time during the four-year period at
a price beginning at $28.5 million and increasing to approximately $39.0
million at the end of the four-year period. Southwestern Bell had the right to
purchase the Company's interest during the first year at approximately $56.0
million and has the right to purchase the Company's interest on the day prior
to Southwestern Joint Venture's fourth anniversary at 5% above the then "put"
price. Southwestern Bell has operating control of these properties during the
term of the Southwestern Joint Venture.
ACQUISITIONS AND DISPOSITIONS
During 1995, 1996, 1997 and January 1998, the Company consummated several
strategic acquisitions which expanded its Upper Midwest Cluster and
established the Mid-Atlantic Cluster, the New York Cluster and the Kentucky
Cluster. In addition, during July 1996, November 1996 and January 1997, the
Company disposed of its standalone wireline Systems in Alabama and its MI-2
RSA which were considered by management to be non-strategic.
Expansion of Upper Midwest Cluster
On March 7, 1995, the Company acquired from Buckhead Telephone Company the
assets of the System serving the MI-1 RSA (which represents 203,391 Pops) for
approximately $17.7 million in cash.
On March 28, 1995, the Company acquired a 50.02% general partnership
interest and a 0.58% limited partnership interest in Wausau Cellular Limited
Partnership, a Delaware limited partnership that wholly owns the System
serving the Wausau, WI MSA (115,715 Net Pops), for $5.4 million in cash.
On July 7, 1995, the Company consummated a transaction with Western Wireless
Corporation ("Western Wireless") pursuant to which the Company exchanged the
wireline System serving the Lubbock, TX MSA (229,051 Pops) for approximately
340,000 Net Pops, most of which are now part of the Upper Midwest Cluster. The
Net Pops acquired consist of the System serving the MN-5 RSA, the portion of
the System serving the MN-3 RSA that the Company did not own, a portion of the
MN-2 RSA (Beltrami County), approximately 87.0% of the System serving the
Alton/Granite City, IL MSA, an additional 10.0% of the System serving the Eau
Claire, WI MSA and an additional 14.5% of the System serving the Wausau, WI
MSA. In addition, Western Wireless agreed to pay the Company $3.0 million in
exchange for the Company's agreement not to compete with Western Wireless
within the Lubbock, TX MSA for a period of three years following the exchange.
Western Wireless retained ownership of certain cell sites and other capital
equipment.
On August 10, 1995, the Company acquired from Louise Hart 49.0% of the
System serving the MN-4 RSA (7,461 Net Pops), for approximately $75,000.
On November 18, 1996, the Company acquired from Wisconsin II Venture the
85,645 Pop WI-2 RSA for approximately $4.3 million in cash. Prior thereto, the
Company had interim operating authority for the WI-2 RSA.
In January 1997, the Company entered into two transactions with a subsidiary
of Bell South Corporation. The stand-alone wireline systems serving the
Florence, AL MSA (136,816 Pops) and AL-1B RSA (62,035 Pops)
50
<PAGE>
were sold for $24.4 million in cash, of which $2.0 million is attributable to
a two year covenant not to compete. The transactions resulted in a gain of
approximately $8.5 million. In addition, the Company acquired for $6.3 million
the WI-4 RSA (118,993 Pops). The WI-4 RSA abuts the Company's MI-1 RSA to the
northeast, its WI-3 RSA to the northwest and its Wausau, WI MSA to the west.
In May 1997, the Company acquired from United States Cellular Corporation
("USCC") three counties in the WI-5 RSA containing 81,194 Pops for
approximately $10.6 million in cash and the contribution of approximately
18,000 minority Pops. The WI-5 RSA abuts the Company's Eau Claire, WI MSA, its
WI-1 RSA and AT&T's Minneapolis, MN MSA.
The Mid-Atlantic Cluster Acquisitions
On September 27, 1995, the Company acquired from USCC substantially all of
the assets of the System serving the OH-7 RSA (257,290 Pops) for $39.8 million
in cash.
On December 20, 1995, the Company acquired from USCC substantially all of
the assets of the System serving the WV-2 RSA (79,567 Pops) for $7.8 million
in cash.
On February 2, 1996, the Company acquired from USCC substantially all of the
assets of the System serving the PA-9 RSA (188,096 Pops) for $26.1 million in
cash.
On July 23, 1996, the Company acquired substantially all of the assets of
the System serving the WV-3 RSA (269,709 Pops) from a subsidiary of Horizon
Cellular Telephone Company, L.P. ("Horizon") for $35.0 million in cash.
The New York Cluster Acquisitions
On December 29, 1995, the Company acquired from Cellular Upstate New York,
Inc. substantially all of the assets of the System serving the NY-5 RSA
(382,180 Pops) for approximately $65.9 million in cash.
On April 23, 1996, the Company acquired from subsidiaries of USCC the System
serving the NY-6 RSA (111,373 Pops) and 83.0% of the System serving the
Poughkeepsie, NY MSA (218,890 Net Pops). The Company acquired substantially
all of the assets serving the NY-6 RSA for approximately $19.8 million in cash
and 83.0% of the stock of the Dutchess County Cellular Telephone Company
serving the Poughkeepsie, NY MSA for approximately $38.9 million, with one
half paid in cash and the balance in the Poughkeepsie Note. The Poughkeepsie
Note was repaid in November 1996.
On October 17, 1996, the Company consummated an exchange transaction with
Vanguard Cellular Systems, Inc. The Company exchanged an aggregate of 520,528
Pops consisting of its OH-9 RSA, a portion of its OH-10 RSA (excluding Perry
and Hocking counties) and the Parkersburg, WV/Marietta, OH MSA for the Orange
County, NY MSA (327,053 Pops), 11.1% of the Company's majority-owned
Poughkeepsie, NY MSA (29,367 Pops), 12.2% of the Janesville, WI MSA (18,296
Pops) and approximately 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). During 1997 the Company acquired an additional 1.3%
of the Poughkeepsie, NY MSA (3,740 Pops) from minority holders.
Kentucky Cluster Acquisition
In January 1997, the Company acquired from a subsidiary of Horizon four RSAs
in Kentucky (approximately 785,000 Net Pops) for $96.4 million in cash and
1,948,052 PriCellular Class A Shares (valued at approximately $19.1 million).
On February 4, 1997 the Company repurchased and retired the 1,948,052
PriCellular Class A Shares from Horizon for $15.3 million.
51
<PAGE>
In January 1998, the Company acquired from Bachtel Liquidity, L.P., an
affiliate of Bachow & Associates, Inc., the TN-4 RSA which contains
approximately 264,000 Pops for approximately $73.0 million in cash (subject to
adjustments). The RSA, adjacent to three MSAs, including Knoxville, TN, is
located south of the Company's Kentucky Cluster.
Dispositions
During July 1996, the Company consummated the sale of its AL-4 RSA for $27.5
million in cash ($2.5 million of which is attributable to a two-year covenant
not to compete). In November 1995, the Company had acquired this stand-alone
RSA for total consideration of $20.0 million. During October, 1996 the Company
consummated the sale of its MI-2 RSA for approximately $6.5 million in cash.
Remaining Shares of Cellular Information Systems, Inc.
In April 1997, the Company acquired all of the outstanding shares of capital
stock of Cellular Information Systems, Inc. it did not previously own.
CELLULAR OPERATIONS
General
The Company has concentrated its recent efforts on creating an integrated
network of cellular systems in its operating clusters. The Company operates
four clusters of cellular systems as well as certain other markets and
minority interests. As of March 31, 1998, the Company had over 275,000
subscribers, or 5.4% penetration. Through the participation of its non-
wireline Systems in NACN and other special networking arrangements between the
Company and other non-wireline operators of cellular systems in the United
States, management believes the Company's subscribers are able to receive
quality coverage throughout the United States.
The Company believes that the majority of its Systems are in the early
stages of their growth cycle and afford significant opportunities for
improvements in performance, particularly with respect to rates of penetration
and churn. There can be no assurances, however, that American Cellular will be
able to maintain such improvements or achieve similar improvements with
respect to its other Systems. The Company believes that prior to the Company's
assumption of ownership many of these Systems had been significantly
undermanaged or underdeveloped. Some of the Systems had minimal signal
coverage, had never been actively marketed and had never developed a
subscriber base. Certain other markets had adequate signal coverage but the
sales and marketing activity had largely been dormant. The following table
sets forth certain information with respect to the performance of the
Company's Systems owned as of the dates indicated.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEARS ENDED DECEMBER 31,
------------------ --------------------------------------------
1998 1997 1997 1996 1995 1994 1993
-------- -------- -------- -------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ending subscribers (1).. 275,000 179,000 250,441 150,328 78,227 17,344 9,886
Ending penetration (2).. 5.4% 3.8% 5.2% 3.8% 2.2% .95% .53%
Ending net pops (in
millions).............. 5.1 4.8 4.8 3.9 3.6 1.8 1.8
Churn (3)............... 1.4% 1.6% 1.5% 1.6% 2.0% 2.7% 3.2%
Average monthly revenue
per subscriber (4)..... $ 60 $ 66 $ 72 $ 82 $ 107 $ 123 $ 156
Average marketing cost
per net subscriber
addition (5)........... $ 511 $ 439 $ 399 $ 371 $ 403 $ 497 $ 496
</TABLE>
- --------
(1) Each billable telephone number in service represents one subscriber, not
including test, demonstration or other telephone numbers for which payment
is not expected.
52
<PAGE>
(2) Represents the ratio of ending subscribers to the estimated total net
population of owned Systems.
(3) Represents the average monthly churn for the periods presented. Churn
equals the ratio of disconnected monthly subscribers to average monthly
subscribers.
(4) Represents the ratio of total monthly service revenues to average monthly
subscribers.
(5) Determined by dividing the amount of marketing costs by the net
subscribers added. Marketing cost represents all selling expenses and
losses incurred on equipment sales.
Subscribers and System Usage
The Company's cellular subscribers have increased to approximately 275,000
as of March 31, 1998 from approximately 250,000 as of December 31, 1997 and
approximately 150,000 as of December 31, 1996. The Company's subscribers fall
into 12 major categories: construction, professional/management, medical,
sales, real estate, agriculture, service industry, transportation, financial,
government, manufacturing and other, which includes low-usage subscribers.
Reductions in the cost of cellular services have led to an increase in
cellular telephone usage by general consumers for non-business purposes. In
addition, American Cellular believes that several categories of its
subscribers will develop requirements for specialized cellular applications,
such as wireless data technology. As a result, the Company believes that there
is an opportunity for significant growth in each of its existing service
areas. The Company will continue to seek to broaden its subscriber base for
basic cellular services as well as to increase its offering of customized
services. The sale of custom calling features typically results in increased
usage of cellular telephones by subscribers, thereby further enhancing
revenues.
Marketing
The Company markets all of its cellular products and services under the name
CELLULARONE, one of the most recognized brand names in the cellular industry
(see "--Service Marks"). The national advertising campaign conducted by the
Cellular One Group enhances the Company's advertising exposure at a fraction
of the cost of what could be achieved by the Company alone. The Company also
obtains substantial marketing benefits from the name recognition associated
with this widely used service mark, both with existing subscribers traveling
outside of the Company's service areas and with potential new subscribers
moving into the Company's service areas. In addition, travelers who subscribe
to CELLULARONE service in other markets may be more likely to use the
Company's Systems when they travel in the Company's service areas, primarily
due to the technical operation of the cellular telephone. Cellular telephones
of non-wireline subscribers are programmed to select the non-wireline carrier
(such as the Company) when roaming, unless the non-wireline carrier in the
roaming area is not yet operational or the subscriber either dials a special
code or has a cellular telephone equipped with an "A/B" (non-
wireline/wireline) switch and selects the wireline carrier.
Through its membership in NACN and other special networking arrangements,
the Company provides extended regional and national service to its subscribers
in other markets, thereby allowing them to make and receive calls while in
other cellular service areas without dialing special access codes. This
service distinguishes the Company's service and call delivery features from
those of some of its competitors. NACN is the largest wireless telephone
network system in the world, linking non-wireline cellular operators
throughout the United States and Canada. NACN connects key areas across North
America so that customers can use their cellular phones to place and receive
calls in these areas as easily as they do in their home areas. Through NACN,
customers receive calls automatically without the use of complicated roaming
codes as they "roam" in more than 7,000 cities, in the United States and
Canada. By dialing subscribers' cellular telephone numbers, a caller can reach
the Company's subscribers without knowing their location or having to dial
additional roaming access numbers. In addition, special services such as call
forwarding and call waiting automatically follow the subscribers as they
travel.
The Company's marketing strategy is designed to generate continued net
subscriber growth by focusing on subscribers who are likely to generate higher
than industry average monthly revenues and lower than industry average churn
rates, while simultaneously maintaining a low cost of adding net subscribers.
The Company principally uses in-house sales and marketing staff and its own
retail outlets.
53
<PAGE>
The Company has implemented its marketing strategy by training and
compensating its sales force in a manner designed to stress the importance of
customer service, high penetration levels and minimum acquisition costs per
subscriber. The Company believes that its internal sales force is better able
to select and screen new subscribers and select pricing plans that
realistically match subscriber means and needs than are independent agents. In
addition, the Company motivates its direct sales force to sell appropriate
rate plans to subscribers, thereby reducing churn, by linking payment of
commissions to subscriber retention. As a result, the Company's use of an
internal sales force keeps marketing costs lower than when independent agents
are used because commissions are lower and subscriber retention is higher.
The Company believes that it helps minimize its churn rate through an after-
sale telemarketing program implemented through its sales force and customer
service personnel. This program not only enhances customer loyalty, which
reduces churn, but also increases add-on sales and customer referrals. The
telemarketing program allows the sales staff to check customer satisfaction as
well as to offer additional calling features, such as voicemail, call waiting
and call forwarding.
The Company's sales force works principally out of its own retail stores in
which the Company offers a full line of cellular products and services. As of
December 31, 1997, the Company maintained approximately 95 retail locations.
Ranging from 250 square feet to 4,000 square feet, each store is fully
equipped to handle customer service and telephone maintenance and
installation. Some of these stores are also authorized warranty repair
centers. The Company's stores provide subscriber-friendly retail environments
(extended hours, large selection, an expert sales staff and convenient
locations) which make the sales process quick and easy for the subscriber.
Products and Services
In addition to providing high-quality cellular telephone service in each of
its markets, the Company also offers various custom-calling features such as
voicemail, call forwarding, call waiting, three-way conference calling and no
answer transfer. In 1998, the Company intends to upgrade its systems to
provide digital services in some of its markets such as caller I.D., message
waiting indicator, short messaging services and sleep mode for longer battery
life.
Several rate plans are presented to prospective customers so that they may
choose the plan that will best fit their expected calling needs. Unlike some
of its competitors, the Company designs rate plans on a market-by-market
basis. The Company's local general managers generally have the authority to
modify existing rate plans and initiate new rate plans depending upon market
and competitive conditions. These rate plans include a high-volume user plan,
a medium-volume user plan, a basic plan and an economy plan. Most rate plans
combine a fixed monthly access fee, a designated amount of free minutes, per-
minute usage charges and additional charges for custom-calling features in a
package which offers value to the customer while enhancing airtime use and
revenues for the Company. In general, rate plans which include a higher
monthly access fee typically include a lower usage rate per minute. An ongoing
review of equipment and service pricing is maintained to ensure the Company's
competitiveness.
Agreements between the Company and other cellular operators allow their
respective subscribers to place calls, or roam, in most cellular service areas
throughout the country. Roamers, subscribers placing calls outside their home
market, are typically charged a higher per minute rate than would be charged
for home users. Roaming revenues derived from this usage not only have higher
yields than home usage revenues, but have almost no associated marketing or
customer service costs, therefore, achieving higher margins than home service
revenues. The Company's markets, strategically surrounding or between major
metropolitan areas, encompass significant portions of heavily traveled
corridors which results in significant roaming revenues for the Company.
54
<PAGE>
Customer Service
Customer service is an essential element of the Company's marketing and
operating philosophy. The Company is committed to attracting new subscribers
and retaining existing subscribers by providing consistently high-quality
customer service. In each of its cellular service areas, the Company maintains
a local staff, including a market manager, customer service representatives,
technical and engineering staff, sales representatives and installation and
repair facilities. Each cellular service area handles its own customer-related
functions such as credit evaluation, customer activations, account adjustments
and rate plan changes. Local offices and installation and repair facilities
enable the Company to better service customers, schedule installations and
make repairs. Through the use of sophisticated monitoring equipment,
technicians at the customer service center are able to monitor the technical
performance of its cellular system.
In addition, the Company's customers are able to report cellular telephone
service or account problems to a local office representative. Management
believes its decentralized philosophy and emphasis on customer service in each
of its markets affords it a competitive advantage over its large competitors
who typically centralize customer service outside of the local market.
System Development and Expansion
The Company develops or builds out its cellular service areas by adding
channels to existing cell sites and by building new cell sites with an
emphasis on improving coverage for hand-held phones in heavily-trafficked
areas. Such development is done for the purpose of increasing capacity and
improving coverage in response to projected subscriber demand and competitive
factors. Projected subscriber demand is calculated for each cellular service
area on a cell-by-cell basis. These projections involve a traffic analysis of
usage by existing subscribers and an estimation of the number of additional
subscribers in each such area. In calculating projected subscriber demand, the
Company builds into its design assumptions a maximum call "blockage" rate of
2% (percentage of calls that are not connected on first attempt at peak usage
time during the day). After calculating projected subscriber demand, the
Company has historically met such demand through a combination of augmenting
channel capacity in existing cell sites and building new cell sites.
Cell site expansion is expected to enable the Company to continue to add
subscribers, enhance use of the Systems by existing subscribers, increase
roamer traffic due to the larger geographic area covered by the cellular
network and further enhance the overall quality of the network. The Company
believes that the increased cellular coverage will have a positive impact on
market penetration, subscriber usage and roaming revenue.
The Company also continues to evaluate expansion through acquisitions of
other cellular properties that will further enhance its network. In evaluating
acquisition targets, the Company considers, among other things, demographic
factors, including population size and density, traffic patterns, cell site
coverage and required capital expenditures.
Competitors and Adjoining Systems
The Company competes with various competitors in each of its clusters. The
Company believes that its integrated network of contiguous cellular systems
operating as CELLULARONE affords it significant advantages over many of its
cellular competitors. In the Upper Midwest Cluster, the Company competes
against six distinct operators, in the Mid-Atlantic Cluster, the Company
competes against four distinct operators, and in the Kentucky Cluster, the
Company competes against five distinct operators.
55
<PAGE>
The following chart lists the Company's cellular competitors in each of its
clusters and the major adjoining operators.
<TABLE>
<CAPTION>
COMPANY
CLUSTER COMPETITORS ADJOINING SYSTEMS
- -------------- ------------------------------ -------------------------------
<S> <C> <C>
Upper Midwest
Cluster Air Touch Communications, Inc. AT&T
United States Cellular Corp. BellSouth
CelluLink Western Wireless
Cellular 2000
CellCom
Century Telephone Enterprises
Mid-Atlantic
Cluster United States Cellular Corp. AT&T
360 Communications Airtouch Communications Inc.
Vanguard Cellular Systems, Inc.
Ameritech ("Vanguard")
Bell Atlantic Mobile
New York Clus-
ter Bell Atlantic Mobile Bell Atlantic Mobile
AT&T
Southwestern Bell
Vanguard
Kentucky Clus-
ter BellSouth Mobility GTE Corp.
Ramcell, Inc. United States Cellular Corp.
Bluegrass Cellular
United States Cellular Corp.
360 Communications
</TABLE>
TELECOMMUNICATIONS ACT OF 1996; OTHER REGULATORY DEVELOPMENTS
The Telecom Act is the first legislation enacted in over 60 years that
attempts comprehensive reform of telecommunications regulation, although the
legislation did not have as a principal focus the cellular industry in
particular or the wireless communications industry in general. The Telecom
Act's goal is to remove statutory, regulatory, and court-ordered barriers that
historically prohibited new entrants into many segments of the
telecommunications industry. Certain of the provisions of the Telecom Act have
been declared unconstitutional, including several provisions relating to
restrictions on Regional Bell Operating Companies ("RBOCs") that were deemed a
bill of attainder by the United States District Court in Wichita Falls, Texas.
That ruling has been appealed. The Company cannot predict the outcome of that
litigation or the eventual impact of the result of that litigation on the
Company.
To facilitate the entry of competitors, the Telecom Act imposes certain
requirements on local exchange carriers, including interconnection, universal
service, equal access, and facilitating local wireline telephone service. The
FCC has adopted regulations implementing these provisions, including rules on
telephone number portability pursuant to which subscribers will be able to
migrate their landline telephone numbers to a cellular carrier or other
Commercial Mobile Radio Service ("CMRS") or landline carrier, or from a
cellular carrier to another CMRS or landline carrier.
In August 1996, the FCC released its decision implementing the
interconnection portions of the Telecom Act. However, major portions of the
FCC's interconnection rules were reversed by the United States Court of
Appeals for the Eighth Circuit, which held that the rules interfered with
matters left to the jurisdiction of the states by the Telecom Act. The Eighth
Circuit's decision has been appealed to the United States Supreme Court, which
has decided to expedite its review of petitions for certiorari with regard to
the Eighth Circuit's decision. The Company cannot predict the eventual outcome
of the judicial review of the FCC's interconnection rules or the effect of the
eventual implementation of interconnection rules by the FCC. However, pursuant
to the
56
<PAGE>
provisions of the Telecom Act, the Company has renegotiated many of its
interconnection agreements with incumbent local exchange carriers and thereby
reduced the cost of interconnection with the local telephone facilities.
The FCC's interconnection decision concluded that CMRS providers are
entitled to reciprocal compensation arrangements with incumbent local exchange
carriers and prohibited local exchange carriers from charging CMRS providers
for terminating traffic initiated on the local exchange carrier's network.
While the FCC noted the potential for asserting jurisdiction over certain
aspects of CMRS interconnection with landline local exchange carriers, it has
so far determined to defer primarily to the states in implementing
interconnection policies pursuant to general guidelines established by the
FCC, some of which survive the Eighth Circuit decision.
The FCC declined to require cellular carriers to comply with certain
interconnection provisions of the Telecom Act applicable to local exchange
carriers. Prior to the passage of the Telecom Act, the FCC had proposed to
require CMRS providers to interconnect directly with other mobile service
providers but tentatively concluded that it would be premature to adopt such a
requirement. The FCC has since stated that it would revisit this issue in the
future.
The Telecom Act requires telecommunications carriers providing interstate
service to contribute to a federal Universal Service Support Fund established
by the FCC. The Universal Service Support Fund will support telephone service
in high-cost and low-income areas and support access to telecommunications
facilities by schools and libraries. States will also be implementing
requirements that carriers contribute universal service funding from
intrastate telecommunications revenues. The Company has revised its customer
billing to reflect additional costs related to these universal service fund
requirements. There can be no guarantee that the Company will be able to
continue to pass the costs of the fund requirements on to its customers in the
future.
The FCC has eliminated its PCS-cellular cross-ownership rule, but retained a
spectrum cap on aggregation of CMRS spectrum. A cellular licensee and its
affiliates may not hold an attributable interest in more than 45 MHz of
licensed cellular, broadband PCS, and specialized mobile radio ("SMR")
spectrum in a particular geographic area.
The FCC has revised its rules pertaining to cellular licensees' obligations
to allow resale of cellular service. The FCC requires a cellular carrier (and
certain other wireless carriers) to permit unrestricted resale of its service
(including to other FCC-licensed wireless carriers). This rule contains a
sunset provision that provides that the rule will lapse five years following
the FCC's grant of the last group of initial broadband PCS licenses.
Pursuant to an earlier amendment of the Communications Act of 1934, as
amended (the "Communications Act"), Congress preempted state or local
regulation of entry into, or rates charged by, any CMRS or private mobile
service carrier. States were allowed to petition the FCC for authorization to
continue their authority to regulate rates and entry by August 1994. While
eight states sought such authority, the FCC denied all such requests.
SERVICE MARKS
CELLULARONE 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, Inc., together with Cellular One Development, Inc., a
subsidiary of AT&T and Vanguard Cellular Systems, Inc. The Company uses the
CELLULARONE service mark to identify and promote its cellular telephone
service pursuant to licensing agreements with Cellular One Group (the
"Licensor"). Licensing and advertising fees are determined based upon the
population of the licensed areas. The licensing agreements require the Company
to provide high-quality cellular telephone service to its customers and to
maintain a certain minimum overall customer satisfaction rating in surveys
commissioned by the Licensor. The licensing agreements, which the Company has
entered into, are for original five-year terms expiring on various dates.
These agreements may be renewed at the Company's option for three additional
five-year terms.
57
<PAGE>
EMPLOYEES AND AGENTS
As of July 1, 1998, the Company had approximately 750 employees. In
addition, the Company has agreements with independent sales agents, including
car dealerships, electronics stores, paging services companies and independent
contractors. None of the Company's employees are represented by a labor
organization, and the Company's management considers its employee relations to
be good.
OVERVIEW OF CELLULAR TELEPHONE INDUSTRY
The cellular telephone industry is a regulated duopoly. The FCC has
designated 734 distinct markets in the United States, 306 MSAs and 428 RSAs.
Since it became operational in 1983, the cellular telephone industry has
experienced significant growth. For the year ended December 31, 1996, the
cellular industry reported total revenues of $23.6 billion, versus $19.1
billion and $14.0 billion for the years ended 1995 and 1994, respectively. The
"Dick Tracy" Wireless Communications Industry Report, published by Donaldson,
Lufkin & Jenrette, predicts continued rapid growth for the cellular industry
and forecasts in their fall 1997 issue that the penetration rate of cellular
telephones will be 58.0% of U.S. Pops at year-end 2006.
The following table sets forth information published by the Cellular
Telecommunication Industry Association ("CTIA") with respect to the number of
subscribers served by cellular, PCS and ESMR telephone systems in the United
States and the combined penetration rate of such operators as of the dates
indicated:
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
----------------------------------------------
1997 1996 1995 1994 1993 1992
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Subscribers (in thou-
sands)................... 51,500 44,706 33,786 24,134 16,009 11,033
Ending penetration (1).... 18.8% 16.9% 12.8% 9.1% 6.1% 4.1%
</TABLE>
- --------
(1) Determined by dividing the aggregate number of subscribers by estimated
population as determined by the Donnelley Market Information Service 1996
United States population estimates. Rates reflect combined penetration of
both wireline and non-wireline cellular operators.
Cellular telephone technology is based upon the division of a given market
area into a number of smaller geographic areas or "cells." Each cell has "base
stations" or "cell sites," which are physical locations equipped with
transmitter receivers and other equipment that communicate by radio signal
with cellular telephones located within range of the cell. Cells generally
have a high-quality operating range of one to ten miles. Each cell site
transmits to a mobile telephone switching office ("MTSO") which, in turn,
transmits to the local landline telephone network. As cellular telephone
systems are fully interconnected with the landline telephone network and long-
distance networks, subscribers can receive and originate both local and long-
distance calls from their cellular telephones on a worldwide basis.
When a cellular subscriber in a particular cell dials a number, the cellular
telephone sends the call by radio signal to the cell's transmitter-receiver,
which then sends it to the MTSO. The MTSO then completes the call by
connecting it with the landline telephone network or another cellular
telephone unit. Incoming calls are received by the MTSO, which instructs the
appropriate cell to complete the communications link by radio signal between
the cell's transmitter-receiver and the cellular telephone. Each conversation
on a cellular system occurs on a pair of radio talking paths, thus providing
full duplex telephone service. The relatively short-range transmissions
between cell sites and cellular telephones permit the two distinguishing
features of cellular telephone systems: frequency re-use, enabling the
simultaneous use of the same frequency in two or more adequately separated
cells, and call hand-off, occurring when the MTSO routes a mobile user to an
adjacent cell that can provide a higher quality signal without interrupting an
ongoing call.
Frequency re-use allows for the efficient use of the radio frequencies
allocated to each cellular operator. Each cell in a cellular telephone system
is assigned a specific set of frequencies for use between that cell's base
station and cellular telephones within the operations range of the cell, so
that the radio frequencies being used in one cell do not interfere with those
being used in adjacent cells. Due to the relatively low transmission power of
58
<PAGE>
the base stations and cellular telephones, two or more cells which are
sufficiently far apart can use the same frequencies within the same market
without interfering with one another.
A cellular telephone system's capacity can be increased in various ways.
Within certain limitations, increasing demand may be met by simply adding
available frequency capacity to cells as required, or by using directional
antennae to divide a cell into discrete multiple sectors or coverage areas,
thereby reducing the required distance between cells using the same frequency.
Furthermore, areas within a system may be served by more than one cell through
procedures which utilize available channels in adjacent cells. When all
possible channels are in use, further growth can be accomplished through a
process called "cell splitting." Cell splitting entails dividing a single cell
into a number of smaller cells served by lower-power transmitters, thereby
increasing the re-use factor and the number of calls that can be handled in a
given area. Although the Company has generally not experienced any material
capacity constraints in its systems, the Company plans to implement a program
of cell splitting to meet projected capacity demands for the next several
years. System capacity can also be expanded through the implementation of
digital cellular technology described below.
Call hand-off in a cellular telephone system is automatic and virtually
unnoticeable to the user. The MTSO and base stations continuously monitor the
signal strength of the call in progress. The signal strength of the
transmission between the cellular telephone and the base station declines as
the caller moves away from the base station in that cell. When the signal
strength of a call declines to a predetermined threshold level, the MTSO
automatically determines if the signal strength is greater in an adjacent cell
and, if so, hands off the call to that cell. If the cellular telephone user
leaves the service areas of the cellular telephone system, the call can often
be handed off to an adjacent system through intersystem networking
arrangements. The Company currently has several such networking arrangements
and will continue to work towards establishing intersystem networking with all
adjacent Systems.
Digital Cellular Technology
Some cellular operators have upgraded their cellular systems, especially in
the more populated markets, to support both analog and digital technology.
Over the next few years, it is expected that many other cellular systems will
upgrade to support both analog and digital technology. These upgrades are
being undertaken due in part to capacity constraints in many of the largest
cellular markets, such as New York, Los Angeles and Chicago. As carriers reach
limited capacity levels of analog only networks, certain calls may be unable
to be completed, especially during peak hours. The industry-wide migration
from analog to digital technology is expected to be a process that will take a
number of years to complete.
The FCC has not mandated a single national digital standard (as it did with
analog Advanced Mobile Phone System) and, as a result, three distinct
technologies have evolved as standards and are being deployed nationally.
1. CDMA-Code division multiple access is a spread-spectrum technology
that is predominantly being used by Sprint and Bell Atlantic.
2. GSM-Global system mobile is a digital standard that originated in
Europe and is being deployed by several 1.9 GHz license holders such as
Western Wireless and TDS Aerial Communications.
3. TDMA-Time division multiple access is the standard adopted and
certified by CTIA. It is the digital standard being deployed nationally by
AT&T. TDMA is the most widely supported and enhanced digital standard
utilized domestically today, with support from all of the large
infrastructure providers, such as Nortel, Lucent and Ericsson. TDMA encodes
three voice calls on a single 30 KHz channel effectively yielding a
spectral-efficient, three-fold increase in system capacity.
Digital technology increases system capacity while simultaneously providing
an architecture that supports delivery of revenue enhancing features and
services, commonly referred to as PCS (or simply Digital PCS). Digital PCS
features include extended (60+ hours) battery life on hand-held model phones,
improved call security, intelligent system selection/zone billing,
alphanumeric paging, Internet based electronic mail receipt,
59
<PAGE>
presentation of calling party identification, voice mail message waiting
information and enhanced data/facsimile transmission. Management does not
believe that its network will experience capacity constraints in the
foreseeable future that would require converting its network from analog to
digital technology. However, the Company has concluded a successful TDMA
digital trial in 1997 and is planning for a limited-cost, broad-scale TDMA
digital infrastructure upgrade in 1998 so as to position the Company to offer
the revenue enhancing digital PCS feature set to its subscribers.
Competition; New Technology
The Company currently competes with one other cellular licensee in each of
its cellular markets. Many of these licensees are larger, and have greater
financial resources, than the Company. In addition, the Company competes in
many of its markets with providers of other CMRS such as PCS, SMR and paging.
The Company also competes with local landline telephone companies for
telephone usage by customers. Although current policies of the FCC authorize
only two cellular system licensees in each market, the Company expects that it
will face competition from not only the other cellular licensee in each
cellular market in which the Company operates, but also from PCS and other
CMRS licensees. Competition for subscribers among CMRS providers is based
principally upon the services and enhancements offered, the technical quality
of the system, sound quality, reliability of connections, customer service,
system coverage, capacity and price.
The FCC requires all cellular system operators to provide service to
"resellers." A reseller provides cellular service to customers but does not
hold an FCC cellular license or own cellular facilities. Instead, the reseller
buys blocks of cellular telephone numbers from a licensed carrier and resells
service to the public through its own distribution methods. Thus, a reseller
may be both a customer of a cellular licensee's services and, also, a
competitor of that licensee. The Company does not know of any significant
resellers currently operating in competition with the Company's Systems.
Cellular telephones have remained the technology of choice for mobile
communications. Potential users of cellular systems may, however, find their
communications needs satisfied by other current and developing technologies,
particularly in the broadband PCS. PCS operators providing digital
communications technology may compete with cellular service with regard to
rates, enhanced privacy, and additional features such as electronic mail and
built-in paging. One-way paging or beeper services that feature voice message
and data display as well as tones, may be adequate for potential subscribers
who do not need to speak to the caller. In the future, cellular service may
also compete more directly with traditional landline telephone service
providers.
There are six potential broadband PCS providers in each PCS service area.
Licensing areas for broadband PCS are divided into 51 Major Trading Areas
("MTAs") and 493 smaller Basic Trading Areas ("BTAs") based on the geographic
divisions in the 1992 Rand McNally Commercial Atlas & Marketing Guide. Three
licensees per market hold 30 MHz of PCS spectrum, two licensed for each MTA
and one licensed for each BTA. The 30 MHz BTA licenses were awarded to small
business and rural telephone entities qualifying for participation in an
"Entrepreneurs' Block." Three 10 MHz frequency blocks were licensed in each
BTA, with one of these 10 MHz blocks per BTA licensed to an Entrepreneurs'
Block entity. The rules permit licensees to offer a broad range of two-way
voice, data and related communications services employing digital micro-
cellular technology. Cellular carriers are subject to a 45 MHz spectrum cap
for their combined cellular and PCS spectrum in areas where they offer both
services. After January 1, 2000, cellular licensees will be permitted to
acquire an additional five MHz for a total of 15 MHz of PCS spectrum in their
cellular service areas.
The FCC has also adopted rules for narrowband PCS services in the 900 MHz
frequency band and awarded national and regional licenses by auction.
Narrowband PCS services typically are advanced paging and messaging services.
In addition, the FCC allocated 30 MHz to unlicensed PCS, which will consist of
new cordless telephones, local area networks in offices and other kinds of
short-range communications. Unlicensed PCS operations are restricted to very
low power.
SMR and other land mobile radio systems, such as those historically used by
taxicabs, tow truck services, and other communications services that have the
technical capability to handle mobile telephone calls (including
60
<PAGE>
interconnection to the landline telephone network), may provide competition to
cellular and PCS services in certain markets. Beginning in February 1991, the
FCC granted waivers of certain of its SMR rules to permit several large
operators of SMR systems to construct and operate Enhanced Specialized Mobile
Radio ("ESMR") systems. These waivers allow SMR operators to use digital
technology to provide a wide-area mobile communications service that
substantially increases the number of customers that can be served. The
ESMR system incorporates characteristics of cellular technology, including
multiple low-power transmitters and interconnection with the landline
telephone network. ESMR service may compete with cellular service by providing
digital communication technology, lower rates, enhanced privacy and additional
features such as electronic mail and built-in paging. The FCC has and will be
auctioning SMR licenses in the 800 and 900 MHz frequency bands for the
provision of wide area SMR licensing. The new licenses were designed to
promote wide-area systems that would make SMR more competitive with other
wireless services, including cellular.
Continuing technological advances in the telecommunications industry make it
impossible to predict the extent of future competition. A consortium of
telecommunications providers known as American Mobile Satellite Corporation
has been licensed by the FCC to provide mobile satellite service. In addition,
the FCC has issued licenses for low-orbit satellite systems that would provide
voice and data mobile communications to subscribers throughout the world.
Other proposals for additional mobile satellite service and spectrum are
pending before the FCC. The FCC and international and foreign regulatory
authorities are considering additional aspects of mobile satellite systems and
services. The International Maritime Satellite Organization ("Inmarsat") has
been planning for several years an "Inmarsat-P" international global satellite
telephone and data service that is expected to commence service in 1999 or
2000.
Mobile satellite systems could augment or replace communications within land
based cellular systems. Similar technological advances may make available
alternatives to cellular service, creating additional sources of competition.
In addition, the FCC has auctioned off 25 MHz of spectrum for unspecified
fixed and mobile services, collectively known as the General Wireless
Communications Service ("WCS"). The FCC defined WCS as any fixed or mobile
service except broadcasting, radiolocation, and satellite service. Among the
services the FCC anticipates the WCS may be used for are voice, video and data
transmission, private microwave, broadcast auxiliary, and ground-to-air voice
and data. On March 25, 1998, the FCC completed the auction of 986 licenses for
the Local Multipoint Distribution Service ("LMDS") frequencies in the 27.5
through 31.3 GHz frequency bands. The FCC will permit flexible use for these
LMDS licenses. It is anticipated that LMDS licenses will be used to provide
video and data transmission and Internet access, although voice use is also
permitted. Frequencies in the 38 GHz band have also been licensed for similar
uses.
As a result of the above, the Company's cellular operations may face
increased competition from entities providing other communication technologies
and services. The Company cannot predict the success of such competing
technologies or their operational abilities. While some of these technologies
are currently operational, others are operational on only a limited basis or
are not yet operational. Broadband PCS operators will compete directly with
the Company and may have access to substantial capital resources, although
such resources have generally not been available to Entrepreneurs' Block
licensees. There can be no assurance that the Company will be able to provide
or that it will choose to pursue, depending on the economics thereof, such
services and features in addition to those already provided. The Company
believes that traditional tested cellular service is economically proven.
While the Company believes that competition from other technologies will
increase over both the short and long terms, it also believes that the
development of cellular technology and expansion of the Company's cellular
clusters is its best strategy. Nonetheless, there can be no assurance that one
or more of the technologies currently used by the Company will not become
obsolete sometime in the future.
61
<PAGE>
REGULATION
Regulation and Licensing of Cellular Telephone Systems
The FCC regulates the construction, operation and acquisition of cellular
systems in the United States pursuant to the Communications Act. FCC
regulations specify that two cellular radio licenses are available for any
given area within each of the 734 FCC-designated markets in the United States
(306 MSAs and 428 RSAs). Frequency block "B" was initially awarded to
incumbent landline local exchange carriers (the "Wireline" license) and
frequency block "A" was initially awarded to nonincumbents (the "Non-Wireline"
license). Apart from the different frequency blocks, there is no technical
difference between Wireline and Non-Wireline cellular systems and the
operational requirements imposed on Wireline and Non-Wireline licensees are
the same. The regulatory distinction between Wireline and Non-Wireline systems
concerns only an applicant's eligibility to apply for an initial
authorization. After initial authorization, a Non-Wireline company may
purchase interests in a Wireline system, subject to restrictions on common
ownership of Wireline and Non-Wireline systems in the same market and to any
necessary prior approval of the FCC. Likewise, a company affiliated with a
landline telephone service provider may purchase an interest in a Non-Wireline
system, subject to the same restrictions on common ownership and prior FCC
approval where necessary.
FCC licensing of all MSA markets and the FCC's initial lotteries of all of
the RSA markets have been completed. Additional auctions are to be held for
several RSA markets in which the initially selected applicant has been
disqualified.
For Systems below the top 90 MSA markets (including all RSA markets), the
issuance of a construction permit initiates an 18-month period during which
the permittee must construct at least one cell and begin providing service via
those facilities. A permittee that does not complete initial construction
within 18 months is subject to having its permit canceled. A small number of
RSA permittees forfeited their permits on this ground.
Following notice of completion of construction, a cellular operator obtains
an initial license. Cellular licenses are issued generally for a 10-year term
beginning on the date of the grant of the initial operating authority and are
renewable upon application to the FCC for periods of up to 10 years. The FCC
may revoke a license prior to the end of its term in extraordinary
circumstances (such as when serious violations of FCC rules have occurred).
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"
("CGSA"). The CGSA may be coincident with, or smaller than, the related FCC-
designated MSA or RSA. 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 construction permit. At the end of the
five-year period, however, any entity may apply to serve portions of the MSA
or RSA outside the licensee's CGSA. The FCC has granted a number of unserved
area applications for areas within both MSA and RSA markets, some filed by
incumbent operators and others filed by new entrants.
Near the conclusion of the license term (the years 2000 to 2008, in the case
of the Company's current licenses), licensees must file applications for
renewal of licenses to obtain authority to operate for up to an additional 10-
year term. Applications for license renewal may be denied if the FCC
determines that the grant of an application would not serve the public
interest. In addition, at license renewal time, other parties may file
competing applications for the authorization. In the event that qualified
competitors file applications for a licensee's market, the FCC may be required
to hold a hearing to determine whether the incumbent or the competitor will
receive the license. In 1993, the FCC adopted specific standards to apply to
cellular renewals, concluding that it will award a renewal expectancy to a
cellular licensee that meets certain standards of past performance. If the
existing licensee receives a renewal expectancy, it is very likely that the
existing licensee's cellular license will be renewed without a full
comparative hearing. To receive a renewal expectancy, a licensee must show
that it (i) has provided "substantial" service during its past license term;
and (ii) has substantially complied with applicable FCC rules and policies and
the Communications Act. "Substantial" service is defined as service which is
sound, favorable and substantially above a level of mediocre service that
might only minimally warrant renewal.
62
<PAGE>
Cellular radio service providers also must satisfy a variety of FCC
requirements relating to technical and reporting matters. One such requirement
is the coordination of proposed frequency usage with adjacent cellular users,
permittees and licensees in order to avoid interference between adjacent
Systems. In addition, the height and power of base station transmitting
facilities and the type of signals they emit must fall within specified
parameters. The FCC also regulates cellular service resale practices and the
terms under which certain ancillary services may be provided through cellular
facilities. Cellular systems are subject to certain Federal Aviation
Administration regulations respecting the location, lighting and construction
of cellular transmitter towers and antennae and may be subject to regulation
under the National Environmental Policy Act and the environmental regulations
of the FCC. State or local zoning and land use regulations may also apply. The
Company uses common carrier point to point microwave facilities to connect
cell sites and to link them to the main switching office. These facilities are
separately licensed by the FCC and are subject to regulation as to technical
parameters and service.
In July 1994, the FCC issued a notice proposing to require that all cellular
carriers provide interexchange carriers with equal access. Currently, only
AT&T's cellular carriers and the cellular affiliates of the RBOCs are required
to provide equal access. The FCC also proposed requiring all CMRS providers to
provide interconnection to other mobile service providers. In April 1995,
however, the FCC tentatively concluded that it would be premature to adopt
such a requirement, and to date has declined to do so. The FCC may in the
future attempt to impose equal access or other interconnection obligations on
CMRS providers if market conditions warrant.
Congress amended the Communications Act to preempt, as of August 10, 1994,
state or local regulation of the entry of, or the rates charged by, any
commercial mobile radio service, which includes cellular telephone service, or
any private mobile radio service.
Transfers and Assignments of Cellular Licenses
The Communications Act and FCC rules require the FCC's prior approval of the
assignment or transfer of control of a construction permit or license for a
cellular system. Subject to FCC approval, a license or permit granted to a
non-wireline entity may be transferred or assigned to a wireline entity and
vice versa. In most cases, noncontrolling interests in an entity that holds a
cellular license or cellular system generally may be bought or sold without
prior FCC approval. In the case of a sale proposed to occur before the
expiration of certain holding periods, the FCC may prohibit or impose
limitations on such a sale or require the seller to make certain
representations as a condition precedent to such a sale. For RSAs, the minimum
holding period generally expires upon completion of initial construction. The
FCC has permitted sales prior to completion of initial construction under
certain circumstances. Specifically, the seller must demonstrate that it did
not file its application for the purpose of speculating in cellular licenses.
Any acquisition by the Company of cellular interests may also require the
prior approval of state or local regulatory authorities having jurisdiction
over the cellular telephone industry.
In certain circumstances, the FCC's rules prohibit the alienation of
cellular interests. No ownership interest in an RSA application, or an entity
holding such an application, may be transferred or otherwise alienated prior
to the grant of a construction permit. For cellular unserved areas, no
substantial change in ownership may take place until after the FCC has granted
both a construction permit and a license and the licensee has provided service
to the public for at least one year. These restrictions prevent prospective
purchasers, including the Company, from entering into agreements for
assignment or transfer of unserved areas and RSA acquisitions prior to the
lapse of the applicable transfer restriction periods. These transfer
restrictions should not have a greater effect on the Company than on any other
prospective buyer.
Character and Citizenship Requirements
Applications for FCC authority may be denied and, in extreme cases, licenses
may be revoked if the FCC finds that an entity lacks the requisite "character"
qualifications to be a licensee. In making that 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
63
<PAGE>
or unfair competition, employment discrimination, misrepresentations to the
FCC or other government agencies, or serious violations of the Communications
Act or FCC regulations. The FCC also requires licensees to comply with
statutory restrictions on the direct or indirect ownership or control of radio
licenses by non-U.S. persons or entities. The FCC has found the Company to be
qualified to hold FCC licenses.
Other Restrictions
The Communications Act currently limits the interest of foreign governments
and non-U.S. corporations and citizens in radio licensees, which include
cellular licensees. This limitation has been relaxed with regard to certain
foreign investors pursuant to a World Trade Organization treaty and FCC
actions, implementing the treaty. The cellular industry is also subject to
other rules and policies of the FCC and state commissions.
PROPERTIES
The Company maintains its corporate headquarters in Schaumburg, Illinois.
The Company leases this space which is approximately 10,381 square feet. In
addition to its corporate headquarters, the Company's cellular operations
lease sales and administrative offices and lease and own locations for cell
site and switching equipment. The Company reviews these leases from time to
time and may, in the future, lease or acquire new facilities as needed. The
Company does not anticipate that it will encounter any material difficulties
in meeting its future needs for any leased space.
LEGAL PROCEEDINGS
The Company is not currently involved in any pending legal proceedings that
individually, or in the aggregate, are material to the Company.
64
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following sets forth certain biographical information, the present
occupation and business experience for the past five years of each person who
is a director or executive officer of the Company (none of whom were officers
or directors of PriCellular other than Brion Applegate, who was a director of
PriCellular until June 25, 1998). All such persons (other than Janice P.
Mercer) assumed their respective positions with American Cellular effective as
of June 25, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Brian McTernan 50 President and Director
John Fujii(1) 48 Chief Executive Officer and Director
James J. Walter, Jr. 47 Vice President of Finance,
Chief Financial Officer and Secretary
Janice P. Mercer 49 Executive Vice President--Operations
Brion Applegate(1,3) 44 Director
Glenn M. Creamer(1,3) 36 Director
Jeffrey M. Lane(2) 42 Director
Michael J. Marocco(3) 39 Director
Kevin J. Maroni(2) 35 Director
Mark A. Pelson(2) 36 Director
</TABLE>
- --------
(1) Member of the Executive Committee of the Board of Directors.
(2) Member of the Audit Committee of the Board of Directors.
(3)Member of the Compensation Committee of the Board of Directors.
Brian McTernan. Mr. McTernan has been a principal of MLC since 1986. From
1988 to 1994 he served as an officer for various subsidiaries of Crowley. From
1994 to 1995 he was the President of Mid-South. From 1994 to 1998 he was
President and Chief Operating Officer of ACME Paging, Inc.
John Fujii. Mr. Fujii has been a principal of MLC since 1986. From 1988 to
1994 he served as an officer for various subsidiaries of Crowley. From 1994 to
1995 he was the Vice President and Secretary of Mid-South. From 1994 to 1998
he was Vice President and Secretary of ACME Paging, Inc.
James J. Walter, Jr. Mr. Walter has served as Vice President and Controller
of MLC since 1989.
Janice P. Mercer. Ms. Mercer has been involved in the wireless
communications industry for the past 15 years. From 1988 to 1992, Ms. Mercer
served as General Manager at Crowley. From 1992 to 1993, Ms. Mercer served as
General Manager at McCaw and from 1993 to 1994, Ms. Mercer served as
General Manager at Mid-South. From 1995 until the time she joined the Company,
Ms. Mercer served as the Director of Consumer Marketing, Southwest Region, at
AT&T Wireless.
Brion B. Applegate. Mr. Applegate co-founded Spectrum in 1993. Prior to
forming Spectrum, he was a General Partner of Burr, Egan, Deleage & Co. from
1982 to 1993. Mr. Applegate is a director of Nassau Broadcasting Partners,
L.P., Apex Site Management, L.P., and Tut Systems, Inc.
Glenn M. Creamer. Mr. Creamer has been a Managing Director of Providence
Equity Partners since its inception in 1996. Mr. Creamer is also a general
partner of Providence Ventures L.P., which was formed in 1991. Mr. Creamer is
also a Vice President of Narragansett Capital, Inc., which he joined in 1988.
Mr. Creamer is a director of Carrier1 L.L.C., Celpage, Inc., Epoch Networks,
Inc., and Wireless One Network, L.P.
Jeffrey M. Lane. Mr. Lane has been a Managing Director of Triumph Capital
Group, Inc. since 1994. From 1990 to 1994 he was a Managing Director of
Pacific Corporate Group. Mr. Lane serves as a director of S&R Precision
Company LLC.
Michael J. Marocco. Mr. Marocco has been a General Partner of Sandler
Capital Management since 1989. Prior to joining Sandler Capital, he was a Vice
President of Investment Banking at Morgan Stanley specializing
65
<PAGE>
in media and communications companies. He serves as a director for numerous
companies involved in cable television, broadcasting, advertising and
interactive television.
Kevin J. Maroni. Mr. Maroni joined Spectrum at its inception in 1993. Prior
to joining Spectrum, he was Manager of Finance and Development at Time Warner
Telecommunications. Before joining Time Warner, Mr. Maroni was a consultant
and analyst with the Harvard Management Company.
Mark A. Pelson. Mr. Pelson is a Vice President of Providence Equity
Partners. Prior to 1996, Mr. Pelson was a co-founder and director of TeleCorp,
Inc., a wireless telecommunications company, and from 1989 to 1995 he served
in various management positions with AT&T, most recently as a general manager
of strategic planning and mergers and acquisitions. Mr. Pelson is a director
of Carrier1 L.L.C. and Madison River Telephone Company, Inc.
MANAGEMENT INCENTIVE PLAN
Each of Messrs. Fujii and McTernan is a party to the Stock Purchase
Agreement, pursuant to which each has purchased 1,250 shares of Class A Common
Stock of the Company for $125,000 and 16,250 shares of Series A Preferred
Stock of the Company for $1,625,000. See "Certain Relationships and Related
Transactions--Loans to Certain Officers."
The Company has reserved 21,739 shares of its Class B Common Stock for
issuance to certain of its employees. Messrs. Fujii and McTernan each
purchased 6,793.5 shares of such Class B Common Stock and Mr. Walter and Ms.
Mercer purchased 1,000 and 1,500 shares of such Class B Common Stock,
respectively, at a price in the case of each purchaser, of $10 per share. If
the Company proposes to sell more than 21,739 Class B Common Stock, Messrs.
Fujii and McTernan have the right to purchase their pro rata share of such
Class B Common Stock. Holders of Class B Common Stock have the same rights as
holders of Class A Common Stock, except that the Class B Common Stock is non-
voting. The Class B Common Stock vests in equal, annual installments over a
four-year period starting on the commencement date of employment. Unvested
shares of Class B Common Stock are subject to forfeiture upon the holder's
ceasing to be an employee of the Company (or, in the case of Messrs. Fujii and
McTernan, ceasing to be an officer or director of the Company). Shares of
Class B Common Stock vest upon a Change of Control (as defined in the
Stockholders Agreement) and the Company must make appropriate provision to
have any successor corporation assume the Company's obligations with respect
to the Class B Common Stock. The shares of Class B Common Stock are
convertible into shares of Class A Common Stock on a one-for-one basis, and
automatically convert when vested. Shares of Class B Common Stock vest and
convert into Class A Common Stock upon the employee's death, disability or
incapacitation. Upon termination of employment without cause or due to death
or disability, Messrs. Fujii, McTernan and Walter each have the right to put
their shares of Class A Common Stock, Class B Common Stock (to the extent
vested) and Series A Preferred Stock, if any, then owned by such terminated
employee at the fair market value for such shares (generally as determined by
an outside appraiser), provided that the Company will have the right to pay
certain amounts to such terminated employee by issuing shares of Series A
Preferred Stock.
COMPENSATION OF MANAGEMENT
The Company has agreed to pay Messrs. Fujii and McTernan each an annual
salary of $375,000, which may be adjusted upward by the Board of Directors.
NON-COMPETITION
Messrs. Fujii and McTernan have agreed that as long as they are employed by
the Company they will not engage in any wireless communication activities,
other than their existing activities, through the Company and
66
<PAGE>
passive investments, and will not engage in any other business, other than
their existing activities, that would substantially detract from the normal
working hours sufficient to carry out their obligations as officers and
directors of the Company.
COMPENSATION OF DIRECTORS
The Company plans to reimburse directors for out-of-pocket expenses and may
pay customary fees to non-employee directors for their services as directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Executive Committee comprised of
Messrs. Fujii, Applegate and Creamer. The Board of Directors has established
an Audit Committee comprised of Messrs. Maroni, Pelson and Lane and a
Compensation Committee comprised of Messrs. Applegate, Creamer and Marocco.
67
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Class A Common Stock as of June 30,
1998 by (i) each stockholder who is known by the Company to own beneficially
five percent or more of the Class A Common Stock, (ii) each director of the
Company, (iii) each executive officer, and (iv) all directors and executive
officers as a group. The number of shares beneficially owned by each
stockholder, director or officer is determined according to the rules of the
Commission, and the information is not necessarily indicative of beneficial
ownership for any other purpose. Under such rules, beneficial ownership
includes any shares as to which the individual or entity has sole or shared
voting power or investment power. As a consequence, several persons may be
deemed to be the "beneficial owners" of the same shares. This table does not
reflect ownership of Class A Preferred Stock or Class B Common Stock, neither
of which have voting rights.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT
NAME AND ADDRESS BENEFICIAL OWNERSHIP(1) OF CLASS
---------------- ----------------------- --------
<S> <C> <C>
Spectrum Equity Investors II, L.P. (2)....... 35,714 14.3%
Providence Equity Partners, L.P. (3)......... 35,714 14.3
Sandler Investment Partners, L.P. (4)........ 32,143 12.9
Tandem Wireless Investments, L.P. (5)........ 28,751 11.4
Triumph Partnerships (6)..................... 21,429 8.6
First Union Capital Partners, Inc. (7)....... 17,857 7.1
HarbourVest Partners V (8)................... 14,286 5.7
Trident Capital Management (9)............... 14,286 5.7
John Fujii (10, 16).......................... 1,250 *
Brian McTernan (10, 16)...................... 1,250 *
James J. Walter, Jr. (10, 17)................ 0 *
Janice P. Mercer (10, 17).................... 0 *
Brion Applegate (2, 11)...................... 35,714 14.3
Glenn M. Creamer (3, 12)..................... 35,714 14.3
Jeffrey M. Lane (6, 13)...................... 0 *
Michael J. Marocco (4, 14)................... 32,143 12.9
Kevin Maroni (2, 11)......................... 35,714 14.3
Mark A. Pelson (3, 15)....................... 0 *
All directors and executive officers as a
group (ten individuals)(16, 17)............. 127,500 51.0
</TABLE>
- --------
*Less than one percent.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
a "beneficial owner" of a security if he or she has or shares the power
to vote or direct the voting of such security or the power to dispose or
direct the disposition of such security. More than one person may be
deemed to be a beneficial owner of the same securities. The percentage
ownership of each stockholder is calculated based on 250,000 shares of
Class A Common Stock outstanding. Unless otherwise noted in the footnotes
to this table, each of the stockholders named in this table has sole
voting and investment power with respect to the Class A Common Stock
shown as beneficially owned.
(2) The address for Spectrum Equity Investors II, L.P. and Mr. Maroni is 125
High Street, Boston, MA 02110. The address for Mr. Applegate is 245
Lytton Avenue, Suite 175, Palo Alto, CA 94301.
(3) The address for Providence Equity Partners, L.P. and Messrs. Creamer and
Pelson is 50 Kennedy Plaza, 900 Fleet Center, Providence, RI 02903.
(4) Shares held by five limited partnerships, the general partner of which is
Sandler Investment Partners, L.P. The address for Sandler Investment
Partners, L.P. and Mr. Marocco is c/o MDM Corp., 767 Fifth Avenue, 45th
Floor, New York, NY 10153.
68
<PAGE>
(5) The address for Tandem Wireless Investments, L.P. is c/o Live Cycles
Holding Co., 29 South Main Street, Suite 216, West Hartford, Connecticut
06107.
(6) Shares held by two limited partnerships, Triumph Partners III, L.P. and
Triumph III Investors, L.P. (the "Triumph Partnerships"). The address for
the Triumph Partnerships and Mr. Lane is 100 California Street, Suite
756, San Francisco, CA 94111.
(7) The address for First Union Capital Partners, Inc. is 301 South College
Street, Charlotte, NC 28288.
(8) The address for HarbourVest Partners V is One Financial Center, 44th
Floor, Boston, MA 09111.
(9) Shares held by five entities affiliated with Trident Capital Management.
The address for Trident Capital Management is 2480 Sand Hill Road, Menlo
Park, CA 94025.
(10) The address for Messrs. Fujii, McTernan and Walter and Ms. Mercer is c/o
American Cellular Corporation, 1336 Basswood Street, Suite F,
Schaumburg, IL 60173.
(11) As a general partner of Spectrum Equity Accounts II, L.P., which is the
sole general partner of Spectrum Equity Investors II, L.P., each of Mr.
Applegate and Mr. Maroni may be deemed to beneficially own shares
beneficially owned by Spectrum Equity Investors II, L.P., but disclaim
any such beneficial ownership.
(12) Mr. Creamer is a member of Providence Equity Partners L.L.C., the
general partner of Providence Equity Partners, L.P., and may be deemed to
share voting and investment power with respect to such shares.
Mr. Creamer disclaims beneficial ownership with respect to the Class A
Common Shares held by Providence Equity Partners, L.P.
(13) Mr. Lane is a limited partner in one of the Triumph Partnerships and a
limited partner in the general partner of the other Triumph Partnership.
Mr. Lane disclaims beneficial ownership of any shares beneficially owned
by the Triumph Partnerships.
(14) As the sole stockholder of a corporation which is a general partner of
Sandler Investment Partners, L.P., Mr. Marocco may be deemed to
beneficially own shares beneficially owned by Sandler Investment
Partners, L.P., but disclaims any such beneficial ownership.
(15) Mr. Pelson is a Vice President of Providence Equity Partners. Mr. Pelson
disclaims beneficial ownership with respect to the Class A Common Shares
held by Providence Equity Partners, L.P.
(16) Messrs. Fujii and McTernan each own 6,793.5 shares of Class B Common
Stock. See "Management--Management Incentive Plan."
(17) Mr. James J. Walter and Ms. Janice P. Mercer own 1,000 and 1,500 shares,
respectively, of Class B Common Stock. See "Management--Management
Incentive Plan."
69
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
VOTING AGREEMENT
In connection with the execution of the Merger Agreement, AT&T Wireless
Services, Inc. ("AWS"), The Thomas H. Lee Company (through its affiliates),
and certain members of the Price family entered into a Voting Agreement with
American Cellular in which, among other things, these stockholders agreed to
vote their shares of PriCellular in favor of the Merger Agreement.
SPECTRUM LETTER
In connection with the execution of the Merger Agreement, Spectrum Equity
Investors, L.P. ("Spectrum") delivered a letter to PriCellular whereby
Spectrum agreed to be bound by certain provisions of the Voting Agreement.
AT&T CONSENT AND WAIVER
Concurrently with the execution of the Merger Agreement, AWS entered into a
Consent and Waiver agreement with PriCellular. Pursuant to the Consent and
Waiver agreement, AWS agreed to waive certain rights (including veto rights
with respect to any merger between PriCellular and any other corporation)
arising under a stockholders' agreement among PriCellular, AWS and the other
stockholders of PriCellular party thereto in connection with the Merger.
EQUITY INVESTOR AGREEMENTS
In connection with their initial investment in American Cellular and the
Equity Contribution, the Equity Investors and American Cellular entered into
the Stock Purchase Agreement, an Equity Investor Registration Rights Agreement
and the Stockholders Agreement.
On March 5, 1998, American Cellular and the Equity Investors entered into
the Stock Purchase Agreement whereby the Equity Investors purchased an
aggregate of 250,000 shares of Class A Common Stock of American Cellular for
$25 million. The Stock Purchase Agreement provided that, at the request of
American Cellular, the Equity Investors would purchase an aggregate of 325,000
shares of Series A Preferred Stock of American Cellular for $325 million. The
Equity Investors purchased such additional shares as part of the Merger
Financings.
In connection with the Stock Purchase Agreement, on March 5, 1998, American
Cellular and the Equity Investors entered into a registration rights agreement
(the "Equity Investor Registration Rights Agreement"). The Equity Investor
Registration Rights Agreement provides that the Equity Investors may demand
registration under the Securities Act of their Class A Common Stock under
certain circumstances. In addition, the Equity Investor Registration Rights
Agreement provides the Equity Investors with certain piggyback registration
rights. The Equity Investor Registration Rights Agreement has provisions
governing the registration statement filing process and provides that American
Cellular shall bear all expenses, other than underwriting discounts and
commissions, in connection with its obligations under the Equity Investor
Registration Rights Agreement.
Also in connection with the Stock Purchase Agreement, American Cellular and
the Equity Investors entered into a Stockholders Agreement on March 5, 1998
(the "Stockholders Agreement"). The Stockholders Agreement gives the Equity
Investors certain tag-along and drag-along rights in the event that a majority
of Class A Common Stock or Series A Preferred Stock is proposed to be sold to
a third party. All other transfers of stock of American Cellular are
restricted by the Stockholders Agreement. The Stockholders Agreement further
provides for certain individuals to be elected to American Cellular's Board of
Directors and requires the vote of each director designated by the Equity
Investors for the approval of certain actions.
LOANS TO CERTAIN OFFICERS
On the Merger Date, the Company loaned approximately $1,000,000 to each of
Messrs. Fujii and McTernan, which loan proceeds were used by each such
individual to purchase their remaining shares of Series A Preferred Stock as
described under "Management--Management Incentive Plan." These loans
effectively are interest-free to the individuals and are each secured by
15,750 shares of the Series A Preferred Stock owned by such individual. The
loans will become due and payable no later than March 9, 1999, subject in
certain circumstances to extension upon the satisfaction of certain
conditions.
70
<PAGE>
DESCRIPTION OF CREDIT FACILITY
In connection with the Merger, American Wireless and American Cellular
entered into the Credit Facility with Toronto Dominion (Texas), Inc. ("Toronto
Dominion"), an affiliate of TD Securities (USA) Inc., Merrill Lynch Capital
and certain other financial institutions (collectively, the "Lenders"),
pursuant to which the Lenders will provide credit facilities to American
Wireless.
The following is a summary of the terms and conditions of the Credit
Facility:
The Facilities. The Credit Facility provides for a senior secured reducing
revolving credit facility (the "Revolving Credit Facility"), which will
provide revolving loans (the "Revolving Credit Loans") in an aggregate
principal amount up to the Lenders' revolving credit commitment (the
"Revolving Credit Commitment"), which at closing was $150 million, and senior
secured term loan facilities in three tranches (the "Term Loan Facilities"),
under which term loans (the "Term Loans") in an aggregate principal amount of
$850 million were made at closing.
Use of Credit Facility Proceeds. The proceeds of the Credit Facility were
used together with other proceeds of the Merger Financings, to fund payment of
cash consideration in the Merger, repay PriCellular and Wireless indebtedness
(including the purchase of the Old Notes in the Debt Tender Offers), pay the
related fees and expenses and purchase the Pledged Securities. In addition,
the Revolving Credit Facility is available, subject to the conditions set
forth in the Credit Facility documentation, for general corporate purposes.
The Credit Facility provides that it may be increased by up to $250 million,
subject to the terms and conditions contained in the Credit Facility.
Availability of Loans. The Term Loans were available on the Merger Date and
the business day immediately following the Merger Date, and the Revolving
Credit Loans were available on the Merger Date in a principal amount not
exceeding $75 million and will be available thereafter on a revolving basis
until the maturity thereof. Up to $10 million of the Revolving Credit Facility
is available for the issuance of letters of credit.
Maturity of Loans. The Revolving Credit Commitment will be reduced quarterly
beginning March 31, 2001 and the Revolving Credit Facility will mature
approximately eight and one-half years after the Merger Date. The Term Loans
will consist of three tranches and will amortize over approximately eight and
one-half years for tranche A Term Loans ("Tranche A Loans"), approximately
nine years for tranche B Term Loans (the "Tranche B Loans") and approximately
nine and one-half years for tranche C Term Loans (the "Tranche C Loans").
Prepayments. Borrowings and commitments under the Credit Facility are
subject to mandatory prepayment and reduction in an amount equal to (a) the
net proceeds of certain asset dispositions (including insurance proceeds
resulting from casualty to certain assets), subject to certain exceptions and
to American Wireless' ability to reinvest such proceeds under certain
circumstances, (b) 75% of excess cash flow (reduced to 50% with respect to any
fiscal year if American Wireless' Total Leverage Ratio (defined as the ratio
of total debt on a consolidated basis, including, after the Parent Interest
Trigger Date (as defined in the Credit Facility), debt in respect of the Notes
to annualized operating cash flow) at the end of such fiscal year is less than
8.0:1.0), (c) 100% of the net proceeds of the issuance or incurrence of debt,
subject to certain exceptions set forth in the Credit Facility, and (d) 50% of
the net proceeds of any issuance of equity securities, subject to certain
exceptions set forth in the Credit Facility. Voluntary prepayment of the loans
will be permitted in whole or in part with prior notice and without premium or
penalty (other than funding losses), subject to limitations as to minimum
amounts.
Interest Rates. Borrowings under the Credit Facility will bear interest at a
rate per annum of, at American Wireless' option, either (a) a base rate
(defined as the higher of (i) Toronto Dominion's announced corporate base rate
and (ii) the federal funds rate, plus 0.50%) plus the Applicable Margin (as
defined) or (b) a LIBOR
71
<PAGE>
rate plus the Applicable Margin. The maximum Applicable Margin for the Tranche
A Loans and the Revolving Credit Loans will be 1.50% for base rate loans and
2.50% for LIBOR loans, for the Tranche B Loans will be 1.75% for base rate
loans and 2.75% for LIBOR loans, and for the Tranche C Loans will be 2.00% for
base rate loans and 3.00% for LIBOR loans. Based upon American Wireless' Total
Leverage Ratio, the Applicable Margin for Tranche A Loans and Revolving Credit
Loans may be reduced by up to 1.375%, and for Tranche B Loans and Tranche C
Loans may be reduced by 0.25%. The default rate under the Credit Facility will
be 2.00% above the otherwise applicable rate.
Fees and Expenses. The Credit Facility requires American Wireless to pay (a)
commitment fees to the Lenders in an amount equal to 0.50%, 0.375% or 0.25%
per annum on the unused commitment under the revolving credit facility,
depending upon American Wireless' Total Leverage Ratio, and (b) an annual
administrative agent's fee. Additionally, American Wireless paid various fees
and costs in connection with the Credit Facility, including a commitment fee
and an underwriting fee to Toronto Dominion and Merrill Lynch Capital.
Guarantees. American Cellular and each of its direct and indirect existing
and future subsidiaries (other than "Unrestricted Subsidiaries" (as defined in
the Credit Facility) and American Wireless) is required to guarantee American
Wireless' obligations under the Credit Facility.
Security. The obligations of American Wireless under the Credit Facility are
secured by substantially all of the assets of American Cellular and its direct
and indirect existing and future subsidiaries (other than Unrestricted
Subsidiaries), including the capital stock of these subsidiaries (including
Unrestricted Subsidiaries). Such obligations are also guaranteed by American
Wireless' direct and indirect existing and future subsidiaries (other than
Unrestricted Subsidiaries).
In addition, American Cellular pledged as security the equity interest in
American Wireless to the Lenders under the Credit Facility. The pledge of such
equity interest in American Wireless could impair the Company's ability to
obtain future financing on favorable terms, if at all. Further, in the event
American Wireless were to default on its obligations under the Credit Facility
and the Lenders were to foreclose upon such pledged equity interest in
American Wireless, the Company, as the holding company of American Wireless,
would likely be unable to service or repay its indebtedness, including the
Notes.
Representations and Warranties. The Credit Facility contains representations
and warranties customarily found in loan agreements for similar financings.
Affirmative Covenants. The Credit Facility contains affirmative covenants
customarily found in loan agreements for similar financings. American Wireless
is required to enter into interest rate hedging agreements with respect to
fifty percent of the total indebtedness of the Company and its Subsidiaries,
for a period of at least three years from the date of such agreements.
Negative Covenants. The Credit Facility contains customary restrictive
covenants, including covenants that limit (subject to certain exceptions) the
ability of American Cellular and its subsidiaries to: (a) incur indebtedness
or contingent obligations, issue guarantees or enter into operating leases;
(b) grant liens or negative pledges; (c) make investments or enter into joint
ventures; (c) make certain restricted payments; (d) make fundamental changes
in their business, corporate structure or capital structure; (e) sell assets
or receivables; (f) make capital expenditures; (g) enter into transactions
with affiliates; (h) amend documents relating to other existing indebtedness
and other material documents; or (i) prepay other indebtedness.
Financial Covenants. The Credit Facility contains financial covenants
relating to: (a) minimum interest coverage ratio; (b) minimum fixed charges
coverage ratio; (c) maximum ratio of total debt to annualized operating cash
flow; (d) maximum ratio of senior debt to annualized operating cash flow; and
(e) minimum pro forma debt service coverage ratio.
Events of Default. The Credit Facility provides that the occurrence of
certain events will constitute, subject in certain cases to notice and grace
periods, an event of default. The events of default in the Credit Facility
includes those customarily found in loan agreements for similar financings.
72
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued under an indenture (the "Indenture") dated
May 13, 1998 by and between the Company as issuer, and Chase Manhattan Bank
and Trust Company, National Association, as trustee (the "Trustee"). As a
result of the consummation of the Merger, the Company assumed by supplemental
indenture all of the obligations of American Cellular under the Indenture and
the Notes. For purposes of this section, the "Company" means American Cellular
Corporation without its subsidiaries.
The terms of the Notes include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (the
"Trust Indenture Act"). The Notes are subject to all such terms, and holders
of Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of certain provisions of the
Indenture, the Registration Rights Agreement and the Pledge and Escrow
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Indenture, the Registration Rights Agreement and the Pledge
and Escrow Agreement, including the definitions therein of certain terms used
below. Copies of the proposed forms of Indenture, Registration Rights
Agreement and Pledge and Escrow Agreement are attached hereto as exhibits. The
definitions of certain terms used in the following summary are set forth below
under the caption "--Certain Definitions."
The Notes are unsubordinated obligations of the Company ranking senior to
all subordinated Indebtedness of the Company and pari passu in right of
payment to all other existing and future Indebtedness of the Company. As of
March 31, 1998, on the pro forma basis, the Company would have had no Senior
Indebtedness outstanding other than the Notes offered hereby and the Company's
guarantee under the Credit Facility, and no subordinated Indebtedness. The
Company is a holding company and, therefore, the Notes are effectively
subordinated to all Indebtedness of the Company's Subsidiaries, which at March
31, 1998, on the pro forma basis, would have been $885.7 million (excluding
intercompany Indebtedness). See "Unaudited Pro Forma Financial Data."
The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
The Indenture does not contain provisions which would afford Holders of the
Notes protection in the event of a decline in the Company's credit quality
resulting from highly leveraged or other similar transactions involving the
Company.
Initially, the Trustee will act as Paying Agent and Registrar for the Notes.
Principal of, premium, if any, and interest on the Notes will be payable, and,
subject to the following provisions, the Notes may be presented for
registration of transfer or exchange, at the office or agency of the Company
maintained for such purpose, which office or agency shall be maintained in the
Borough of Manhattan of The City of New York. At the option of the Company,
payment of interest may be made by check mailed to the Holders of the Notes at
the addresses set forth upon the registry books of the Company. No service
charge will be made for any registration of transfer or exchange of Notes, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. Until otherwise
designated by the Company, the Company's office or agency will be the
corporate trust office of the Trustee presently located in New York, New York.
The Notes will mature on May 15, 2008. The Notes will bear interest at 10
1/2% per annum from May 13, 1998 or from the most recent Interest Payment Date
to which interest has been paid or provided for, payable semi-annually on May
15 and November 15 of each year (each, an "Interest Payment Date"), commencing
November 15, 1998 to the Persons in whose names such Notes are registered at
the close of business on the May 1 or November 1 preceding such Interest
Payment Date.
The Indenture does not contain provisions which would afford Holders of the
Notes protection in the event of a decline in the Company's credit quality
resulting from highly leveraged or other similar transactions involving the
Company.
73
<PAGE>
Settlement for the Notes will be made in same day funds. All payments of
principal and interest will be made by the Company in same day funds. The
Notes will trade in the Same-Day Funds Settlement System of The Depository
Trust Company (the "Depositary" or "DTC") until maturity, and secondary market
trading activity for the Notes will therefore settle in same day funds.
When issued, the Notes will be a new issue of securities with no established
trading market. No assurance can be given as to the liquidity of the trading
market for the Notes. See "Risk Factors--Lack of Public Market; Restrictions
on Resale."
RANKING
The Company conducts its operations through its Subsidiaries. Accordingly,
the Company's ability to meet its cash obligations is dependent upon the
ability of its Subsidiaries to make cash distributions to the Company. Under
the Credit Facility, the Company's Subsidiaries will be able to pay dividends
to the Company to make interest payments on the Notes unless a payment default
or any default under any financial maintenance covenant under the Credit
Facility shall have occurred and be continuing or would arise as a result
thereof. Dividends from the Company's Subsidiaries are expected to be the only
source for payment of interest on the Notes after the first six interest
payments (which will be satisfied from the Pledged Securities). Furthermore,
any right of the Company to receive the assets of any of its Subsidiaries upon
any such Subsidiary's liquidation (and the consequent right of the Holders of
the Notes to participate in the distribution of the proceeds of those assets)
effectively will be subordinated by operation of law to the claims of such
Subsidiary's creditors (including trade creditors) and holders of its
preferred stock, if any, except to the extent that the Company is itself
recognized as a creditor or preferred stockholder of such Subsidiary, in which
case the claims of the Company would still be subordinate to any Indebtedness
or preferred stock of such Subsidiary senior in right of payment to that held
by the Company. In the event of the liquidation, bankruptcy, reorganization,
insolvency, receivership or similar proceeding or any assignment for the
benefit of the creditors of the Company or a marshaling of assets or
liabilities of the Company, Holders of the Notes may receive ratably less than
other such creditors or interest holders. See "Description of Credit
Facility."
In addition, the Company pledged as security the equity interest in American
Wireless to the Lenders under the Credit Facility. The pledge of such equity
interest in American Wireless could impair the Company's ability to obtain
future financing on favorable terms, if at all. Further, in the event American
Wireless were to default on its obligations under the Credit Facility and the
Lenders were to foreclose upon such pledged equity interest in American
Wireless, the Company, as the holding company of American Wireless, would
likely be unable to service or repay its indebtedness, including the Notes.
See "Description of Credit Facility."
OPTIONAL REDEMPTION BY THE COMPANY
The Notes are subject to redemption at any time on or after May 15, 2003, at
the option of the Company, in whole or in part, on not less than 30 nor more
than 60 days' prior notice in amounts of $1,000 or an integral multiple
thereof at the following redemption prices (expressed as percentages of the
principal amount), if redeemed during the 12-month period beginning May 15 of
the years indicated below:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003.......................................................... 105.250%
2004.......................................................... 103.500%
2005.......................................................... 101.750%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due
on an interest payment date).
74
<PAGE>
In addition, at any time prior to May 15, 2001, the Company, at its option,
may use the net cash proceeds of one or more Public Equity Offerings or
Strategic Equity Offerings in a single transaction or a series of related
transactions to redeem up to an aggregate of 35% of the aggregate principal
amount of Notes originally issued under the Indenture at a redemption price
equal to 110.5% of the aggregate principal amount thereof, plus accrued and
unpaid interest thereon, if any, to the redemption date; provided that at
least 65% of the initial aggregate principal amount of Notes remains
outstanding immediately after the occurrence of such redemption. In order to
effect the foregoing redemption, the Company must mail a notice of redemption
no later than 30 days after the closing of the related Public Equity Offering
or Strategic Equity Offering and must consummate such redemption within 60
days of the closing of the Public Equity Offering or Strategic Equity
Offering.
Subject to the following, notice of any redemption will be sent, by first-
class mail, at least 30 days and not more than 60 days prior to the date fixed
for redemption to the Holder of each Note to be redeemed to such Holder's last
address as then shown upon the books of the Registrar. Any notice which
relates to a Note to be redeemed in part only must state the portion of the
principal amount to be redeemed and must state that on and after the date
fixed for redemption, upon surrender of such Note, a new Note or Notes in a
principal amount equal to the unredeemed portion thereof will be issued. On
and after the date fixed for redemption, interest will cease to accrue on the
portions of the Notes called for redemption.
In the case of a partial redemption, the Trustee shall select the Notes or
portions thereof for redemption on a pro rata basis or in such other manner as
it deems appropriate and fair. The Notes may be redeemed in part in multiples
of $1,000 only.
SINKING FUND
The Notes will not have the benefit of a sinking fund.
SECURITY
The Pledge and Escrow Agreement required the Company to place the net
proceeds realized from the sale of the Notes, together with the Additional
Escrow Amount, into the Initial Escrow and Pledge Account held by the Trustee
for the benefit of the holders of Notes and the Trustee (in its capacity as
such) under the Indenture. All amounts held in the Initial Escrow and Pledge
Account other than the amounts to be used to purchase the Pledged Securities
were released to the Company as a portion of financing necessary to consummate
the Merger.
In accordance with the Pledge and Escrow Agreement, upon the closing of the
Merger the Trustee purchased and currently holds in pledge for the benefit of
the Holders of the Notes the Pledged Securities in such amount and with such
maturity as will be sufficient upon receipt of scheduled interest and
principal payments of such securities, based on the report of an
internationally recognized firm of independent public accountants selected by
the Company, to provide for payment in full of the first six scheduled
interest payments (excluding Additional Interest) due on the Notes (unless
already paid). The Pledged Securities are held by the Trustee in the
Subsequent Collateral Investments Account (or other accounts). Pursuant to the
Pledge and Escrow Agreement, immediately prior to an Interest Payment Date on
the Notes, the Company may either deposit with the Trustee, from funds
otherwise available to the Company, cash sufficient to pay the interest
scheduled to be paid on such date, or the Company may direct the Trustee to
release from the Subsequent Collateral Investments Account (or other accounts)
proceeds sufficient to pay interest then due. In the event that the Company
exercises the former option, the Company may thereafter direct the Trustee to
release to the Company proceeds or Pledged Securities from the Subsequent
Collateral Investments Account (or other accounts) in like amount.
Interest earned on the Pledged Securities will be held in a cash collateral
account by the Trustee. In the event that collectively the funds held in the
cash collateral account and the Pledged Securities held in the Subsequent
Collateral Investments Account exceed the amount sufficient, based on the
report of an internationally recognized firm of independent public accountants
selected by the Company, to provide for payment in full of the first six
scheduled interest payments (excluding Additional Interest unless then due and
75
<PAGE>
payable) due on the Notes (or, in the event an interest payment or payments
have been made, an amount sufficient to provide for payment in full or any
interest payments remaining, up to and including the sixth scheduled interest
payment) the Trustee will be permitted to release to the Company at the
Company's request any such excess amount. The Notes are secured by a first
priority security interest in the Pledged Securities, in the Subsequent
Collateral Investments Account and the cash collateral account and,
accordingly, the Pledged Securities, the Escrow and Pledge Account and the
cash collateral account will also secure repayment of the principal amount of
the Notes to the extent of such security. The Pledge and Escrow Agreement
allows the Company to substitute Marketable U.S. Securities for the Government
Securities originally pledged as collateral; provided, however, that the
Marketable U.S. Securities so substituted must have a value (measured at the
date of substitution), in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, at least equal to
125.0% of the amount of all of the first six scheduled interest payments on
the Notes that are unpaid (or the pro rata portion of such interest payments
equal to the percentage of such interest payments to be secured by such
Marketable U.S. Securities) as of the date such Marketable U.S. Securities are
proposed to be substituted as security for the Company's obligation under the
Pledge and Escrow Agreement.
Under the Pledge and Escrow Agreement, assuming that the Company makes the
first six scheduled interest payments on the Notes in a timely manner, all of
the Pledged Securities will have been released from the Subsequent Collateral
Investments Account and thereafter the Notes will be unsecured.
CERTAIN COVENANTS
Repurchase of Notes at the Option of the Holder Upon a Change of
Control. The Indenture provides that, in the event that a Change of Control
has occurred, each Holder will have the right, at such Holder's option,
pursuant to an irrevocable and unconditional offer by the Company (the "Change
of Control Offer"), to require the Company to repurchase all or any part
(equal to $1,000 principal amount or an integral multiple thereof) of such
Holder's Notes, on a date (the "Change of Control Purchase Date") that is no
later than 45 Business Days after the occurrence of such Change of Control at
a cash price (the "Change of Control Purchase Price") equal to 101% of the
aggregate principal amount thereof, together with any accrued and unpaid
interest to the Change of Control Purchase Date. The Change of Control Offer
shall be made within 30 Business Days following a Change of Control and shall
remain open for 20 Business Days following its commencement (the "Change of
Control Offer Period"). Upon expiration of the Change of Control Offer Period,
the Company shall purchase all Notes properly tendered in response to the
Change of Control Offer.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Notes or portions thereof properly tendered pursuant to the
Change of Control Offer, (ii) deposit with the Paying Agent cash sufficient to
pay the Change of Control Purchase Price (together with accrued and unpaid
interest) of all Notes so tendered and (iii) deliver to the Trustee Notes so
accepted together with an Officers' Certificate listing the Notes or portions
thereof being purchased by the Company. The Paying Agent promptly will deliver
to the Holders of Notes so accepted payment in an amount equal to the Change
of Control Purchase Price (together with any accrued and unpaid interest), and
the Trustee will promptly authenticate and mail or deliver to such Holders a
new Note equal in principal amount to any unpurchased portion of the Note
surrendered. Any Notes not so accepted will be promptly mailed or delivered by
the Company to the Holder thereof. The Company will announce publicly the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Purchase Date.
The Change of Control purchase feature of the Notes may make more difficult
or discourage a takeover of the Company or Parent, and, thus, the removal of
incumbent management. The Change of Control purchase feature resulted from
negotiations between the Company and the Initial Purchasers and is not the
result of any intention on the part of the Company or its management to
discourage the acquisition of the Company.
The Credit Facility provides that certain change of control events with
respect to the Company and American Wireless would constitute a default
thereunder. Any future credit agreements or other agreements to which the
Company, American Wireless or any other Subsidiary becomes a party may contain
similar restrictions
76
<PAGE>
and provisions. In the event a Change of Control were to occur at a time when
the Company is prohibited from purchasing Notes or American Wireless is
prohibited from making a distribution or paying a dividend to the Company to
permit such purchase, the Company could seek the consent of its lenders or
American Wireless could obtain the consent of its lenders to such purchase of
Notes or to such distribution or dividend, respectively, or either company
could attempt to refinance the borrowings that contain such prohibition. If
the Company or American Wireless does not obtain such consents or repay such
borrowings, the Company will not be able to purchase the Notes under a Change
of Control Offer. In such case, the Company's failure to purchase tendered
Notes would constitute an Event of Default under the Indenture.
Any Change of Control Offer will be made in compliance with all applicable
laws, rules and regulations, including, if applicable, Regulation 14E under
the Exchange Act and the rules thereunder and all other applicable Federal and
state securities laws and the Company may modify a Change of Control Offer to
the extent necessary to effect such compliance.
Limitation on Incurrence of Additional Indebtedness. The Indenture provides
that after the Issue Date the Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, issue, create, incur,
assume, guarantee or otherwise directly or indirectly become liable for
(including as a result of an acquisition), or otherwise become responsible
for, contingently or otherwise (individually or collectively, to "Incur" or,
as appropriate, an "Incurrence"), any Indebtedness. Neither the accrual of
interest (including the issuance of "pay in kind" securities or similar
instruments in respect of such accrued interest) pursuant to the terms of
Indebtedness Incurred in compliance with this covenant, nor the accretion of
original issue discount, nor the mere extension of the maturity of any
Indebtedness shall be deemed to be an Incurrence of Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, the Company may Incur
Indebtedness and any Restricted Subsidiary may Incur Acquired Indebtedness if
the Company's Annualized Operating Cash Flow Ratio, after giving effect to the
Incurrence of such Indebtedness, would have been less than 8.5 to 1.0 at any
time prior to December 31, 2000 and 8.0 to 1.0 thereafter, and the application
of the proceeds therefrom.
In addition, the foregoing limitations will not apply to the Incurrence of
the following; provided that, except in the case of clauses (i), (vii), (viii)
and (xi) below, there exists no Default or Event of Default immediately prior
and subsequent thereto:
(i) Indebtedness of the Company or any of its Restricted Subsidiaries
under a Credit Facility in an aggregate principal amount at any one time
outstanding not to exceed $1.0 billion, reduced by (a) permanent reductions
in commitments in satisfaction of the Net Cash Proceeds application
requirement set forth in the "Limitation on Asset Sales and Sales of
Subsidiary Stock" covenant, (b) permanent reductions in amounts outstanding
pursuant to scheduled amortizations and mandatory prepayments in accordance
with the terms thereof (to the extent actually made), (c) the principal
amount of the Old Notes that at the relevant date of determination is
outstanding after consummation of the Merger and the transactions
consummated substantially contemporaneously therewith (other than Old Notes
which have been properly defeased) and (d) any Indebtedness outstanding
pursuant to clause (xiv);
(ii) Indebtedness of a Restricted Subsidiary under one or more bank
credit facilities provided such Indebtedness could be incurred by the
Company under the Annualized Operating Cash Flow Ratio provision set forth
in the second paragraph of this covenant;
(iii) Indebtedness of the Company evidenced by the Notes;
(iv) Indebtedness represented by the Old Notes or the Convertible Notes
that remain outstanding after consummation of the Merger and the
transactions consummated substantially contemporaneously therewith;
(v) Indebtedness between the Company and any Restricted Subsidiary of the
Company or between Restricted Subsidiaries of the Company, provided that,
in the case of Indebtedness of the Company, such obligations shall be
unsecured and subordinated in all respects to the Holders' rights pursuant
to the Notes and the Company's guarantee under the Credit Facility;
77
<PAGE>
(vi) Capitalized Lease Obligations and Purchase Money Indebtedness in an
aggregate amount or aggregate principal amount, as the case may be,
outstanding at any time not to exceed in the aggregate $20,000,000,
provided that in the case of Purchase Money Indebtedness, such Indebtedness
shall not constitute more than 100% of the cost (determined in accordance
with GAAP) to the Company or such Restricted Subsidiary of the property
purchased or leased with the proceeds thereof;
(vii) Indebtedness of the Company or any Restricted Subsidiary arising
from agreements providing for indemnification, adjustment of purchase price
or similar obligations, or from guarantees or letters of credit, surety
bonds or performance bonds securing any obligations of the Company or its
Restricted Subsidiaries pursuant to such agreements, in any case Incurred
in connection with the disposition of any business, assets or Restricted
Subsidiary of the Company to the extent none of the foregoing results in
the obligation to repay an obligation for money borrowed by any Person and
are limited in aggregate amount to no greater than 10% of the fair market
value of such business, assets or Restricted Subsidiary so disposed of;
(viii) any guarantee by any Restricted Subsidiary made in accordance with
the provisions of "--Limitation on Issuances of Guarantees of
Indebtedness;"
(ix) Indebtedness Incurred by the Company or any of its Restricted
Subsidiaries in connection with the acquisition of a new Restricted
Subsidiary, the majority of whose revenues for the most recent twelve
months for which audited or unaudited financial statements are available
are from a Related Business, or of property, businesses or assets which, or
Capital Stock of a Person all or substantially all of whose assets, are of
a type generally used in a Related Business; provided that such
Indebtedness was Incurred by the prior owner of such Restricted Subsidiary,
property, business, assets or Capital Stock prior to such acquisition by
the Company or one of its Restricted Subsidiaries and was not Incurred in
connection with, or in contemplation of, such acquisition by the Company or
one of its Restricted Subsidiaries; and provided, further, that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness Incurred pursuant to this
clause (ix), does not exceed $25.0 million at any one time outstanding;
(x) Indebtedness of the Company or any Restricted Subsidiary under
standby letters of credit or reimbursement obligations with respect thereto
issued in the ordinary course of business and consistent with industry
practices limited in aggregate amount to $5.0 million at any one time
outstanding;
(xi) Interest Rate Protection Obligations relating to (A) Indebtedness of
the Company or any Restricted Subsidiary (which Indebtedness is otherwise
permitted to be Incurred under this covenant) or (B) Indebtedness for which
a lender has provided a commitment in an amount reasonably anticipated to
be Incurred by the Company or any Restricted Subsidiary in the 12 months
after such Interest Rate Protection Obligations has been Incurred;
provided, however, that the notional principal amount of such Interest Rate
Protection Obligation does not exceed the principal amount of the
Indebtedness (including Indebtedness subject to commitments) to which such
Interest Rate Protection Obligations relate;
(xii) Indebtedness of the Company (other than Indebtedness permitted by
clauses (i) through (xi) or (xiv) hereof) not to exceed $75.0 million at
any one time outstanding;
(xiii) Refinancing Indebtedness Incurred to extend, renew, replace or
refund Indebtedness permitted under clauses (iii) or (iv) of this paragraph
(plus any reasonably determined prepayment premium necessary to accomplish
such refinancing and such reasonable fees and expenses incurred in
connection therewith); and
(xiv) Refinancing Indebtedness Incurred by the Company to extend, renew,
replace or refund Indebtedness permitted under clause (i) of this paragraph
(plus any reasonably determined prepayment premium necessary to accomplish
such refinancing and such reasonable fees and expenses incurred in
connection therewith).
Limitation on Restricted Payments. The Indenture provides that after the
Issue Date the Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if,
78
<PAGE>
immediately prior or after giving effect thereto (a) a Default or an Event of
Default would exist, (b) the Company would not be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash
Flow Ratio provision set forth in the second paragraph of the "Limitation on
Incurrence of Additional Indebtedness" covenant, or (c) the aggregate amount
of all Restricted Payments made by the Company and its Restricted
Subsidiaries, including such proposed Restricted Payment (if not made in cash,
then the fair market value of any property used therefor) from and after the
Issue Date and on or prior to the date of such Restricted Payment, shall
exceed the sum of (i) the amount determined by subtracting (x) 2.0 times the
aggregate Consolidated Interest Expense of the Company for the period (taken
as one accounting period) from the Issue Date to the last day of the last full
fiscal quarter prior to the date of the proposed Restricted Payment (the
"Computation Period") from (y) Operating Cash Flow of the Company for the
Computation Period, plus (ii) the aggregate Net Proceeds received by the
Company from the sale (other than to a Subsidiary of the Company) of its
Qualified Capital Stock after the Issue Date and on or prior to the date of
such Restricted Payment (other than any such Net Proceeds received by the
Company in connection with the financing of the Merger) plus (iii) to the
extent not otherwise included in clauses (i) or (ii), above, an amount equal
to the net reduction in Investments in Unrestricted Subsidiaries resulting
from payments of dividends, repayment of loans or advances, or other transfers
of assets, in each case to the Company or any Wholly Owned Restricted
Subsidiary of the Company from Unrestricted Subsidiaries, or from
redesignations of Unrestricted Subsidiaries as Restricted Subsidiaries (valued
in each case as provided in the definition of "Investments"), not to exceed,
in the case of any Unrestricted Subsidiary, the amount of Investments
previously made by the Company and any Restricted Subsidiary in such
Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in clause (b) or (c)
of the immediately preceding paragraph will not prohibit (and the provision
set forth in clause (a) of the immediately preceding paragraph will not
prohibit the payment described in clause (ii)) (i) the use of an aggregate of
$2.5 million to be used for Restricted Payments not otherwise permitted by
this "Limitation on Restricted Payments" covenant (provided that only $1.0
million of such amount may be used for Restricted Payments prior to one year
after the Issue Date and such $1.0 million amount prior to one year after the
Issue Date may not be used to make (a) dividends or other distributions on
shares of Capital Stock of the Company or any of its Subsidiaries or (b) pay
management or other similar fees to equity investors (or their Affiliates) in
the Company), (ii) the payment of any dividend within 60 days after the date
of its declaration if such dividend could have been made on the date of its
declaration in compliance with the foregoing provisions and (iii) the
redemption, defeasance, repurchase or other acquisition or retirement of any
Indebtedness or Capital Stock of the Company or its Restricted Subsidiaries
either in exchange for or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of Qualified
Capital Stock (in the case of any redemption, defeasance, repurchase or other
acquisition or retirement of any Junior Indebtedness or Capital Stock of the
Company or its Restricted Subsidiaries) or Junior Indebtedness (in the case of
any redemption, defeasance, repurchase or other acquisition or retirement of
any Indebtedness of the Company or its Restricted Subsidiaries) of the
Company, (iv) the payment of management or other similar fees to equity
investors (or their Affiliates) in the Company in an amount not to exceed $1.0
million in the aggregate in any fiscal year, (v) the purchase, redemption or
other acquisition or retirement for value of Capital Stock of the Company from
employees, former employees, directors, former directors, consultants and
former consultants of the Company or any of its Subsidiaries pursuant to the
terms of the agreements pursuant to which such Capital Stock was acquired in
an amount not to exceed $2.5 million in the aggregate in any calendar year,
(vi) repurchases of Capital Stock of the Company deemed to occur upon exercise
of stock options if such Capital Stock represents a portion of the exercise
price of such options and (vii) acquisitions or repurchases or other payments
in respect of PriCellular Class A Shares, PriCellular Class B Shares,
PriCellular Series A Preferred Stock or the Convertible Notes, in each case of
PriCellular or options or warrants to purchase any of the foregoing pursuant
to the Merger Agreement.
In determining the aggregate amount expended for Restricted Payments in
accordance with clause (c) of the first paragraph of this description of the
"Limitation on Restricted Payments" covenant, 100% of the amounts expended
under clauses (i) through (v) of the immediately preceding paragraph shall be
deducted.
79
<PAGE>
Limitation on Restricting Subsidiary Dividends. The Indenture provides that
the Company will not, and will not permit any of its Restricted Subsidiaries
to, directly or indirectly, create, assume or suffer to exist any consensual
encumbrance or restriction on the ability of any Restricted Subsidiary of the
Company to pay dividends or make other distributions on the Capital Stock of
any Restricted Subsidiary of the Company or pay or satisfy any obligation to
the Company or any of its Restricted Subsidiaries or otherwise transfer assets
or make or pay loans or advances to the Company or any of its Restricted
Subsidiaries, except encumbrances and restrictions existing under (i) the
Indenture and the Notes, (ii) the Credit Facility as in effect on the Merger
Date or thereafter (provided that any such encumbrance or restriction does not
restrict dividends by any Restricted Subsidiary to the Company or any other
Restricted Subsidiary in an amount equal to the interest payments on the Notes
then due, except if a payment default or any default under any financial
maintenance covenant under the Credit Facility shall have occurred and be
continuing or would arise therefrom; and provided, further, that any such
encumbrances or restrictions incurred under a Credit Facility after the Merger
Date shall not result in such encumbrances or restrictions being less
favorable in the aggregate in any material respect to the holders of the Notes
than the encumbrances or restrictions incurred under the Credit Facility on
the Merger Date, as determined in good faith by the Board of Directors of the
Company), (iii) any applicable law or any governmental or administrative
regulation or order, (iv) Refinancing Indebtedness permitted under the
Indenture, provided that the restrictions contained in the instruments
governing such Refinancing Indebtedness are no more restrictive in the
aggregate than those contained in the instruments governing the Indebtedness
being refinanced immediately prior to such refinancing, (v) restrictions with
respect solely to a Restricted Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of
all or substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided such restrictions apply solely to the Capital Stock or
assets being sold of such Restricted Subsidiary, (vi) restrictions contained
in any agreement relating to a Person or real or tangible personal property
acquired after the Issue Date which are not applicable to any Person or
property, other than the Person or property so acquired and which were not put
in place in connection with, or in contemplation of, such acquisition, (vii)
any agreement (other than those referred to in clause (vi)) of a Person
acquired by the Company or a Restricted Subsidiary of the Company, which
restrictions existed at the time of acquisition or (viii) encumbrances or
restrictions contained in the documentation governing a Permitted Joint
Venture permitted pursuant to clause (ix) of the definition of "Permitted
Investment." Notwithstanding the foregoing, neither (a) customary provisions
restricting subletting or assignment of any lease entered into the ordinary
course of business, consistent with past practices nor (b) Liens on assets
securing Senior Indebtedness, shall in and of themselves be considered a
restriction on the ability of the applicable Restricted Subsidiary to transfer
such agreement or assets, as the case may be.
Limitation on Transactions with Related Persons. The Indenture provides
that, after the Issue Date, the Company will not, and will not permit any of
its Restricted Subsidiaries or Unrestricted Subsidiaries to, enter into any
contract, agreement, arrangement or transaction with any Related Person (each
a "Related Person Transaction"), or any series of Related Person Transactions,
except for transactions (a) entered into pursuant to clause (iv) of the
covenant "Limitation on Restricted Payments" and (b) made in good faith, the
terms of which are (i) fair and reasonable to the Company or such Subsidiary,
as the case may be, and (ii) are at least as favorable as the terms which
could be obtained by the Company or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's length basis with Persons who are not
Related Persons.
Without limiting the foregoing, (a) with respect to any Related Person
Transaction or series of Related Person Transactions with an aggregate value
in excess of $1,000,000, the Company delivers an officers' certificate to the
Trustee certifying that such Related Person Transaction or series of Related
Person Transactions satisfies clauses (i) and (ii) in the preceding paragraph,
and (b) any Related Person Transaction or series of Related Person
Transactions with an aggregate value in excess of $5,000,000 must either first
be approved by a majority of the Board of Directors of the Company who are
disinterested in the subject matter of the transaction pursuant to a Board
Resolution or the Company must first obtain a favorable written opinion from
an independent financial advisor of national reputation as to the fairness
from a financial point of view of such transaction to the Company or such
Subsidiary, as the case may be.
80
<PAGE>
Notwithstanding the foregoing, the following shall not constitute Related
Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of the Company or any of its Restricted
Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons as
directors, officers or employees, (ii) any contract, agreement, arrangement,
or transaction solely between or among the Company and any of its Wholly Owned
Restricted Subsidiaries or between or among Wholly Owned Restricted
Subsidiaries of the Company, (iii) any Restricted Payment of the type
described by clauses (i) and (ii) of the definition thereof made to all
stockholders on a pro rata basis and not prohibited by the "Limitation on
Restricted Payments" covenant, (iv) any loan or advance by the Company or a
Restricted Subsidiary to employees of the Company or a Restricted Subsidiary
(i) prior to one year from the Issue Date, in an aggregate amount at any one
time outstanding not to exceed $2,000,000, and (ii) thereafter in the ordinary
course of business in an aggregate amount at any one time outstanding not to
exceed $300,000, (v) any payment pursuant to a tax-sharing agreement between
the Company and any other Person with which the Company is required or
permitted to file a consolidated tax return or with which the Company is or
could be part of a consolidated group for tax purposes, which payments are not
in excess of the tax liabilities attributable solely to the Company and its
Restricted Subsidiaries (as a consolidated group) and (vi) any transaction
pursuant to an agreement in existence on the date of the Indenture or on the
Merger Date or any amendment thereto (so long as any such amendment is not
disadvantageous to the Holders in any material respect).
Limitation on Issuances of Guarantees of Indebtedness. (a) The Company will
not cause or permit any Restricted Subsidiary (which is not a Guarantor),
directly or indirectly, to guarantee, assume or in any other manner become
liable with respect to any Indebtedness of the Company (other than under the
Credit Facility) unless such Restricted Subsidiary simultaneously executes and
delivers a supplemental indenture to the Indenture providing for a Guarantee
of the Notes on the same terms as the guarantee of such Indebtedness except
that (A) such guarantee need not be secured unless required pursuant to "--
Limitation on Liens" and (B) if such Indebtedness is by its terms expressly
subordinated in right of payment to the Notes, any such assumption, guarantee
or other liability of such Restricted Subsidiary with respect to such
Indebtedness shall be subordinated to such Restricted Subsidiary's Guarantee
of the Notes at least to the same extent as such Indebtedness is subordinated
to the Notes; provided, however, that the foregoing shall not apply to
Indebtedness of any Restricted Subsidiary that would otherwise be covered
solely by reason of the Company's guarantee of such Indebtedness.
(b) Notwithstanding the foregoing, any Guarantee by a Restricted Subsidiary
of the Notes shall provide by its terms that it (and all Liens securing the
same) shall be automatically and unconditionally released and discharged upon
any sale, exchange or transfer, to any Person not an Affiliate of the Company,
of all of the Company's Capital Stock in, or all or substantially all the
assets of, such Restricted Subsidiary, which transaction is in compliance with
the terms of the Indenture and such Restricted Subsidiary is released from all
guarantees, if any, by it of other Indebtedness of the Company or any
Restricted Subsidiaries and (ii) the release by the holders of the
Indebtedness of the Company described in clause (a) above of their security
interest or their guarantee by such Restricted Subsidiary (including any
deemed release upon payment in full of all obligations under such
Indebtedness), at such time as (A) no other Indebtedness of the Company has
been secured or guaranteed by such Restricted Subsidiary, as the case may be,
or (B) the holders of all such other Indebtedness which is secured or
guaranteed by such Restricted Subsidiary also release their security interest
in or guarantee by such Restricted Subsidiary (including any deemed release
upon payment in full of all obligations under such Indebtedness).
Limitation on Asset Sales and Sales of Subsidiary Stock. The Indenture
provides that after the Issue Date the Company will not, and will not permit
any of its Restricted Subsidiaries to, in one or a series of related
transactions, convey, sell, transfer, assign or otherwise dispose of, directly
or indirectly, any of its property, businesses or assets, including by merger
or consolidation, and including any sale or other transfer or issuance of any
Capital Stock of any Restricted Subsidiary of the Company, whether by the
Company or a Restricted Subsidiary (an "Asset Sale"), unless (1)(a) within one
year after the date of such Asset Sale, an amount equal to the Net Cash
Proceeds therefrom (the "Asset Sale Offer Amount") are applied to the optional
redemption of the Notes in accordance with the terms of the Indenture and
other Indebtedness of the Company ranking on a parity with the Notes from time
to time outstanding with similar provisions requiring the Company to make an
81
<PAGE>
offer to purchase or to redeem such Indebtedness with the proceeds from asset
sales, pro rata in proportion to the respective principal amounts (or accreted
values in the case of Indebtedness issued with an original issue discount) of
the Notes and such other Indebtedness then outstanding or to the repurchase of
the Notes and such other Indebtedness pursuant to an irrevocable,
unconditional offer (the "Asset Sale Offer") to repurchase such Indebtedness
at a purchase price (the "Asset Sale Offer Price") of 100% of the principal
amount thereof in the case of the Notes or 100% of the principal amount (or
accreted value in the case of Indebtedness issued with an original issue
discount) of such Indebtedness, plus, in each case, accrued interest to the
date of payment, made within one year of such Asset Sale, or (b) within one
year of such Asset Sale, the Asset Sale Offer Amount is (i) invested (or
committed, pursuant to a binding commitment subject only to reasonable,
customary closing conditions, to be invested, and in fact is so invested,
within an additional 90 days) in tangible assets and property (other than
notes, obligations or securities), which in the good faith reasonable judgment
of the Board of Directors of the Company are of a type used in a Related
Business, or Capital Stock of a Person (which, if such Person becomes a
Subsidiary of the Company by virtue of such Asset Sale, shall initially be
designated a Restricted Subsidiary) all or substantially all of whose assets
and property (in the good faith reasonable judgment of the Board of Directors
of the Company) are of a type used in a Related Business (provided that, with
respect to such Capital Stock, all of the requirements of the last proviso of
clause (v) of the following paragraph shall have been satisfied) or (ii) used
to permanently retire Senior Indebtedness or Indebtedness of any Restricted
Subsidiary, (2) with respect to any transaction or related series of
transactions of securities, property or assets with an aggregate fair market
value in excess of $2,500,000, at least 75% of the value of consideration for
the assets disposed of in such Asset Sale (excluding (a) Senior Indebtedness
(and any Refinancing Indebtedness issued to refinance any such Indebtedness)
assumed by a transferee which assumption permanently reduces the amount of
Indebtedness outstanding on the Issue Date and permitted to have been Incurred
pursuant to the covenant "Limitation on Incurrence of Additional Indebtedness"
(including that in the case of a revolver or similar arrangement that makes
credit available, such commitment is permanently reduced by such amount),
(b) Purchase Money Indebtedness secured exclusively by the assets subject to
such Asset Sale which is assumed by a transferee and (c) marketable securities
that are promptly converted into cash or Cash Equivalents) consists of cash or
Cash Equivalents, provided that any cash or Cash Equivalents received within
12 months following any such Asset Sale upon conversion of any property or
assets (other than in the form of cash or Cash Equivalents) received in
consideration of such Asset Sale shall be applied promptly in the manner
required of Net Cash Proceeds of any such Asset Sale as set forth above, (3)
no Default or Event of Default shall occur or be continuing after giving
effect to, on a pro forma basis, such Asset Sale, and (4) the Board of
Directors of the Company determines in good faith that the Company or such
Restricted Subsidiary, as applicable, would receive fair market value in
consideration of such Asset Sale. The Indenture provides that an Asset Sale
Offer may be deferred until the accumulated Net Cash Proceeds from Asset Sales
not applied to the uses set forth in (1)(b) above exceeds $5,000,000 and that
each Asset Sale Offer shall remain open for 20 Business Days following its
commencement and no longer, except as otherwise required by applicable law
(the "Asset Sale Offer Period"). Upon expiration of the Asset Sale Offer
Period, the Company shall apply the Asset Sale Offer Amount, plus an amount
equal to accrued interest to the purchase of all Indebtedness properly
tendered (on a pro rata basis as described above if the Asset Sale Offer
Amount is insufficient to purchase all Indebtedness so tendered) at the Asset
Sale Offer Price (together with accrued interest).
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Restricted Subsidiaries may, in the ordinary
course of business, convey, sell, lease, transfer, assign or otherwise
dispose of assets acquired and held for resale in the ordinary course of
business;
(ii) the Company and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets pursuant to and in
accordance with the "Limitation on Mergers, Sales or Consolidations;"
(iii) the Company and its Restricted Subsidiaries may sell or dispose of
damaged, worn out or other obsolete property in the ordinary course of
business so long as such property is no longer necessary for the proper
conduct of the business of the Company or such Restricted Subsidiary, as
applicable;
82
<PAGE>
(iv) the Company and its Restricted Subsidiaries may convey, sell, lease,
transfer, assign or otherwise dispose of assets to the Company or any of
its Wholly Owned Restricted Subsidiaries; and
(v) the Company and its Restricted Subsidiaries may, in the ordinary
course of business (or, if otherwise than in the ordinary course of
business, upon receipt of a favorable written opinion by an independent
financial advisor of national reputation as to the fairness from a
financial point of view to the Company or such Restricted Subsidiary of the
proposed transaction), exchange all or a portion of its property,
businesses or assets for property, businesses or assets which, or Capital
Stock of a Person all or substantially all of whose assets, are of a type
used in a Related Business (provided that such Person shall initially be
designated a Restricted Subsidiary if such Person becomes a Subsidiary of
the Company by virtue of such Asset Sale), or a combination of any such
property, businesses or assets, or Capital Stock of such a Person and cash
or Cash Equivalents; provided that (i) there shall not exist immediately
prior or subsequent thereto a Default or an Event of Default, (ii) a
majority of the independent directors of the Board of Directors of the
Company shall have approved a resolution of the Board of Directors that
such exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or Cash Equivalents received pursuant to
any such exchange shall be applied in the manner applicable to Net Cash
Proceeds from an Asset Sale as set forth pursuant to the provisions of the
immediately preceding paragraph of this covenant; and provided, further,
that any Capital Stock of a Person received in an Asset Sale pursuant to
this clause (v) shall be owned directly by the Company or a Restricted
Subsidiary and, when combined with the Capital Stock of such Person already
owned by the Company and its Restricted Subsidiaries, shall constitute a
majority of the voting power and Capital Stock of such Person.
Restricted Payments that are made in compliance with, and are counted
against amounts available to be made as Restricted Payments pursuant to clause
(c) of, the "Limitation on Restricted Payments" covenant, without giving
effect to clause (i) of the second paragraph thereof, shall not be deemed to
be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all applicable laws,
rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws.
Limitation on Liens. The Indenture provides that the Company will not and
will not permit any Restricted Subsidiary, directly or indirectly, to Incur or
suffer to exist any Lien (other than Permitted Liens) upon any of its property
or assets, whether now owned or hereafter acquired.
Limitation on Merger, Sale or Consolidation. The Indenture provides that the
Company will not consolidate with or merge with or into another Person other
than in connection with the Merger, or sell, lease, convey, transfer or
otherwise dispose of all or substantially all of its assets (computed on a
consolidated basis), whether in a single transaction or a series of related
transactions, to another Person or group of affiliated Persons, unless (i)
either (a) the Company is the continuing entity or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of
the United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company in
connection with the Notes and the Indenture; (ii) no Default or Event of
Default shall exist or shall occur immediately after giving effect on a pro
forma basis to such transaction; (iii) immediately after giving effect to such
transaction on a pro forma basis, the consolidated resulting surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash
Flow Ratio provision set forth in the second paragraph of the "Limitation on
Incurrence of Additional Indebtedness" covenant; and (iv) the Company shall
have delivered to the Trustee an Officers' Certificate confirming compliance
with the requirements of this covenant.
Upon any consolidation or merger or any transfer (other than a lease) of all
or substantially all of the assets of the Company (other than a transfer that
results in the transfer of assets constituting or accounting for less than 95%
of the consolidated assets (as of the last balance sheet available to the
Company), revenues, or Operating Cash Flow of the Company (as of the last
twelve month period for which financial statements are available to the
Company)) in accordance with the foregoing, the successor corporation formed
by such consolidation or into
83
<PAGE>
which the Company is merged or to which such transfer is made, shall succeed
to, and be substituted for, and may exercise every right and power of, the
Company under the Indenture with the same effect as if such successor
corporation had been named therein as the Company, and the Company shall be
released from the obligations under the Notes and the Indenture.
Limitation on Lines of Business. The Indenture provides that neither the
Company nor any of its Restricted Subsidiaries shall directly or indirectly
engage in any line or lines of business activity other than that which, in the
reasonable, good faith judgment of the Board of Directors of the Company, is a
Related Business.
Restriction on Sale and Issuance of Subsidiary Stock. The Indenture provides
that the Company will not sell, and will not permit any of its Restricted
Subsidiaries to issue or sell, any shares of Capital Stock of any Restricted
Subsidiary of the Company to any Person other than the Company or a Wholly
Owned Restricted Subsidiary of the Company, except for shares of common stock
with no preferences or special rights or privileges and with no redemption or
prepayment provisions ("Special Rights"); provided that, in the case of a
Restricted Subsidiary that is a partnership or joint venture partnership (a
"Restricted Partnership") the Company or any of its Restricted Subsidiaries
may sell or such Restricted Partnership may issue or sell Capital Stock of
such Restricted Partnership with Special Rights no more favorable than those
held by the Company or such Restricted Subsidiary in such Restricted
Partnership.
Provision of Financial Statements. After the earlier to occur of the
consummation of the Exchange Offer and the 120th calendar day following the
Merger Date, whether or not the Company is subject to Section 13(a) or 15(d)
of the Exchange Act, the Company will, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly reports
and other documents which the Company would have been required to file with
the Commission pursuant to Section 13(a) or 15(d) if the Company were so
subject, such documents to be filed with the Commission on or prior to the
date (the "Required Filing Date") by which the Company would have been
required so to file such documents if the Company were so subject. The Company
will also in any event (x) within 15 days of each Required Filing Date (i)
transmit by mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act if the Company were subject to
either of such Sections and (y) if filing such documents by the Company with
the Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective purchaser of Notes at the
Company's cost. The Indenture also provides that, so long as any of the Notes
remain outstanding, the Company will make available to any prospective
purchaser of Notes or beneficial owner of Notes in connection with any sale
thereof the information required by Rule 144A(d)(4) under the Securities Act,
until such time as the Company has either exchanged the Notes for securities
identical in all material respects which have been registered under the
Securities Act or until such time as the holders thereof have disposed of such
Notes pursuant to an effective registration statement under the Securities
Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture defines an Event of Default as (i) the failure by the Company
to pay any installment of interest on the Notes as and when the same becomes
due and payable and, (x) with respect to the first six Interest Payment Dates,
the continuance of any such failure for 10 days and (y) with respect to any
installment of interest after the first six Interest Payment Dates, the
continuance of such failure for 30 days, (ii) the failure by the Company to
pay all or any part of the principal, or premium, if any, on the Notes when
and as the same becomes due and payable at maturity, redemption, by
acceleration or otherwise, including, without limitation, payment of the
Change of Control Purchase Price or the Asset Sale Offer Price, (iii) the
failure by the Company to observe or perform any other covenant or agreement
contained in the Notes or the Indenture and, subject to certain exceptions,
the continuance of such failure for a period of 30 days after written notice
is given to the Company by the Trustee or to the Company and the Trustee by
the Holders of at least 25% in aggregate principal amount of the Notes
outstanding, (iv) certain events of bankruptcy, insolvency or reorganization
in respect of the
84
<PAGE>
Company or, after delivery of the notice specified in the next following
paragraph, any of its Significant Restricted Subsidiaries, (v) one or more
defaults in any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company
or any of its Restricted Subsidiaries), whether such Indebtedness or guarantee
now exists or is created after the Issue Date, which default results from the
failure to pay Indebtedness at its final maturity date or results in the
acceleration of such Indebtedness prior to its express maturity and, in each
case, the principal amount of any such Indebtedness, together with the
principal amount of any other such Indebtedness which was not paid at its
final maturity date or the maturity of which has been so accelerated,
aggregates $10,000,000 or more, and (vi) final unsatisfied judgments not
covered by insurance aggregating in excess of $10,000,000, at any one time
rendered against the Company or any of its Restricted Subsidiaries and not
stayed, bonded or discharged within 60 days. The Indenture provides that, if a
Default occurs and is continuing, the Trustee must, within 90 days after the
occurrence of such Default, give to the Holders notice of such Default.
If an Event of Default occurs and is continuing (other than an Event of
Default specified in clause (iv) above) relating to the Company or any
Restricted Subsidiary, then in every such case, unless the principal of all of
the Notes shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of the Notes then outstanding, by
notice in writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all principal and accrued interest thereon
to be due and payable immediately. If an Event of Default specified in clause
(iv) above relating to the Company occurs, all principal and accrued interest
thereon will be immediately due and payable on all outstanding Notes without
any declaration or other act on the part of Trustee or the Holders. The
Holders of a majority in aggregate principal amount of Notes generally are
authorized to rescind such acceleration if all existing Events of Default,
other than the non-payment of the principal of, premium, if any, and interest
on the Notes which have become due solely by such acceleration, have been
cured or waived.
The Holders of a majority in aggregate principal amount of the Notes at the
time outstanding may waive on behalf of all the Holders any Default, except a
Default in the payment of principal of or interest on any Note not yet cured,
or a Default with respect to any covenant or provision which cannot be
modified or amended without the consent of the Holder of each outstanding Note
affected. Subject to the provisions of the Indenture relating to the duties of
the Trustee, the Trustee will be under no obligation to exercise any of its
rights or powers under the Indenture at the request, order or direction of any
of the Holders, unless such Holders have offered to the Trustee reasonable
security or indemnity. Subject to all provisions of the Indenture and
applicable law, the Holders of a majority in aggregate principal amount of the
Notes at the time outstanding will have the right to direct the time, method
and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Company may, at its option and at any time,
elect to have its obligations discharged with respect to the outstanding Notes
("Legal Defeasance"). Such Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire indebtedness represented, and
the Indenture shall cease to be of further effect as to all outstanding Notes,
except as to (i) rights of Holders to receive payments in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due from the trust funds; (ii) the Company's obligations with respect to
such Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes, and the maintenance of an office
or agency for payment and money for security payments held in trust; (iii) the
rights, powers, trust, duties, and immunities of the Trustee, and the
Company's obligations in connection therewith; and (iv) the Legal Defeasance
provisions of the Indenture. In addition, the Company may, at its option and
at any time, elect to have the obligations of the Company released with
respect to certain covenants that are described in the Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Notes. In the
event Covenant Defeasance occurs, certain events (not including non-payment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default" will no longer constitute an Event of Default with
respect to the Notes.
85
<PAGE>
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit
of the Holders, U.S. Legal Tender, non-callable government securities or a
combination thereof, in such amounts as will be sufficient, in the opinion of
a nationally recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on such Notes on the stated date
for payment thereof or on the redemption date of such principal or installment
of principal of, premium, if any, or interest on such Notes, and the holders
of Notes must have a valid, perfected, exclusive security interest in such
trust; (ii) in the case of Legal Defeasance, the Company shall have delivered
to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that (A) the Company has received from,
or there has been published by the Internal Revenue Service, a ruling or (B)
since the date of the Indenture, there has been a change in the applicable
Federal income tax law, in each case to the effect that, and based thereon
such opinion of counsel shall confirm that, the holders of such Notes will not
recognize income, gain or loss for Federal income tax purposes as a result of
such Legal Defeasance, and will be subject to Federal income tax in the same
amount, in the same manner and at the same times as would have been the case
if such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Trustee an opinion of
counsel in the United States reasonably acceptable to such Trustee confirming
that the holders of such Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will
be subject to federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such Covenant Defeasance had
not occurred; (iv) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit or insofar as Events of Default from
bankruptcy or insolvency events are concerned, at any time in the period
ending on the 91st day after the date of deposit; (v) such Legal Defeasance or
Covenant Defeasance shall not result in a breach or violation of, or
constitute a default under the Indenture or any other material agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Company shall
have delivered to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders
of such Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding any other creditors of the
Company or others; and (vii) the Company shall have delivered to the Trustee
an Officers' Certificate stating that all conditions precedent provided for or
relating to the Legal Defeasance or the Covenant Defeasance have been complied
with.
AMENDMENTS AND SUPPLEMENTS
The Indenture contains provisions permitting the Company and the Trustee to
enter into a supplemental indenture for certain limited purposes without the
consent of the Holders. With the consent of the Holders of not less than a
majority in aggregate principal amount of the Notes at the time outstanding,
the Company and the Trustee are permitted to amend or supplement the Indenture
or any supplemental indenture or modify the rights of the Holders; provided
that no such modification may, without the consent of each Holder affected
thereby: (i) change the Stated Maturity of or the Change of Control Purchase
Date or the Asset Sale Offer Period on any Note, or reduce the principal
amount thereof or the rate (or extend the time for payment) of interest
thereon or any premium payable upon the redemption thereof, or change the
place of payment where, or the coin or currency in which, any Note or any
premium or the interest thereon is payable, or impair the right to institute
suit for the enforcement of any such payment on or after the Stated Maturity
thereof (or, in the case of redemption, on or after the Redemption Date), or
reduce the Change of Control Purchase Price or the Asset Sale Offer Price or
alter the redemption provisions or the provisions of the "Repurchase of Notes
at the Option of the Holder Upon a Change of Control" covenant in a manner
adverse to the Holders, or (ii) reduce the percentage in principal amount of
the outstanding Notes, the consent of whose Holders is required for any such
amendment, supplemental indenture or waiver provided for in the Indenture, or
(iii) modify any of the waiver provisions, except to increase any required
percentage or to provide that certain other provisions of the Indenture cannot
be modified or waived without the consent of the Holder of each outstanding
Note affected thereby.
On July 31, 1998, the Company and the Trustee entered into a First
Supplemental Indenture which modified the definition of the term "Excluded
Group" in the Indenture to clarify that a Change of Control would not
86
<PAGE>
result under the Indenture from an amendment to the Stockholders Agreement
that was in effect on the Issue Date of the Private Notes (by virtue of the
definition of "group" under the Exchange Act), unless such amendment would
otherwise constitute a Change of Control. Through such modification, the
Company made this definition consistent with the similar covenant contained in
the Credit Facility. The Company believes this modification was a clarifying
change that is not adverse to the Holders of the Notes. See "Certain
Relationships and Related Transactions--Equity Investor Agreements" for a
description of certain provisions of the Stockholders Agreement.
NO PERSONAL LIABILITY OF PARTNERS, STOCKHOLDERS, OFFICERS, DIRECTORS
The Indenture provides that no direct or indirect stockholder, employee,
officer or director, as such, past, present or future of the Company or any
successor entity shall have any personal liability in respect of the
obligations of the Company under the Indenture or the Notes by reason of his
or its status as such stockholder, employee, officer or director.
CERTAIN DEFINITIONS
Set forth below is a summary of certain defined terms contained in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided.
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Restricted Subsidiary or (ii) assumed in connection
with the acquisition of assets from such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be Incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Restricted Subsidiary, as the case may be.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of
this definition, the term "control" means (a) the power to direct the
management and policies of a Person, directly or through one or more
intermediaries, whether through the ownership of voting securities, by
contract, or otherwise, or (b) without limiting the foregoing, the beneficial
ownership of 10% or more of the voting power of the voting common equity of
such Person (on a fully diluted basis) or of warrants or other rights to
acquire such equity (whether or not presently exercisable).
"Annualized Operating Cash Flow" on any date means, with respect to any
Person, the Operating Cash Flow for the Reference Period multiplied by two.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction Date")
means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the
Transaction Date (after giving pro forma effect to the Incurrence of such
Indebtedness) (and without duplication of any Indebtedness that may be the
obligation of such Person and/or one or more of its Subsidiaries) divided by
(ii) the aggregate amount of Annualized Operating Cash Flow of such Person
(determined on a pro forma basis after giving effect to all acquisitions or
dispositions of businesses made by such Person and its Subsidiaries from the
beginning of the Reference Period through the Transaction Date as if such
acquisition or disposition had occurred at the beginning of such Reference
Period); provided that, for purposes of such computation, in calculating
Annualized Operating Cash Flow and consolidated Indebtedness, (a) the
transaction giving rise to the need to calculate the Annualized Operating Cash
Flow Ratio will be assumed to have occurred (on a pro forma basis) on the
first day of the Reference Period; (b) the incurrence of any Indebtedness
during the Reference Period or subsequent thereto and on or prior to the
Transaction Date (and the application of the proceeds therefrom to the extent
used to retire Indebtedness or to acquire businesses) will be assumed to have
87
<PAGE>
occurred (on a pro forma basis) on the first day of such Reference Period; (c)
Consolidated Interest Expense attributable to any Indebtedness (whether
existing or being incurred) bearing a floating interest rate shall be computed
as if the rate in effect on the Transaction Date had been the applicable rate
for the entire period; and (d) all members of the consolidated group of such
Person on the Transaction Date that were acquired during the Reference Period
shall be deemed to be members of the consolidated group of such Person for the
entire Reference Period. When the foregoing definition is used in connection
with the Company and its Restricted Subsidiaries, references to a Person and
its Subsidiaries in the foregoing definition shall be deemed to refer to the
Company and its Restricted Subsidiaries.
"Capitalized Lease Obligations" means obligations under a lease that are
required to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of Indebtedness represented by such obligations shall be
the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock of such
Person and shares, interests, participations or other ownership interests
(however designated) of any Person and any rights (other than debt securities
convertible into capital stock), warrants and options to purchase any of the
foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each
general and limited partnership interest of such Person if such Person is a
partnership.
"Cash Equivalents" means (i) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case
maturing within one year after the date of acquisition and (iii) investments
in money market funds substantially all of whose assets comprise securities of
the types described in clauses (i) and (ii) above.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than an Excluded
Person or Excluded Group, is or becomes the "beneficial owner" (as such term
is used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly or
indirectly, of Voting Stock representing more than 50% of the voting power of
the Voting Stock of the transferee, (ii) any "person" or "group" (as such
terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act,
whether or not applicable), other than an Excluded Person or Excluded Group,
is or becomes the "beneficial owner" (as such term is used in Rule 13d-3
promulgated pursuant to the Exchange Act), directly or indirectly, of Voting
Stock representing more than 50% of the voting power of the Voting Stock of
the Company then outstanding normally entitled to vote in elections of
directors, or (iii) during any period of 12 consecutive months after the Issue
Date, individuals who at the beginning of any such 12-month period constituted
the Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the Excluded
Persons or any Excluded Group or the stockholders of the Company was approved
by a vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute at
least a majority of the Board of Directors of the Company then in office.
"Closing Price" on any Trading Day with respect to the per share price of
any shares of Capital Stock means the last reported sale price regular way or,
in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading
88
<PAGE>
on any national securities exchange, on the Nasdaq National Market or, if such
shares are not listed or admitted to trading on any national securities
exchange or quoted on Nasdaq National Market but the Company is a Foreign
Company (as defined in Rule 3b-4(b) under the Exchange Act) and the principal
securities exchange on which such shares are listed or admitted to trading is
a Designated Offshore Securities Market (as defined in Rule 902(a) under the
Securities Act), the average of the reported closing bid and asked prices
regular way on such principal exchange, or, if such shares are not listed or
admitted to trading on any national securities exchange or quoted on Nasdaq
National Market and the Company and principal securities exchange do not meet
such requirements, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member
firm is selected from time to time by the Company for that purpose and is
reasonably acceptable to the Trustee.
"Consolidated Interest Expense" of any Person means, for any period, the
aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued,
or scheduled to be paid or accrued (including, in accordance with the
following sentence, interest attributable to the Capitalized Lease
Obligations) of such Person and its consolidated Subsidiaries during such
period, including (i) original issue discount and non-cash interest payments
or accruals on any Indebtedness, (ii) the interest portion of all deferred
payment obligations, and (iii) all commissions, discounts and other fees and
charges owed with respect to bankers' acceptances and letters of credit
financings and currency and Interest Swap and Hedging Obligations, in each
case to the extent attributable to such period and (b) the amount of cash
dividends accrued or payable by such Person or any of its consolidated
Restricted Subsidiaries in respect of preferred stock (other than by
Restricted Subsidiaries of such Person to such Person or such Person's Wholly
Owned Subsidiaries). For purposes of this definition, (x) interest on a
Capitalized Lease Obligation shall be deemed to accrue at an interest rate
reasonably determined by the Company to be the rate of interest implicit in
such Capitalized Lease Obligation in accordance with GAAP and (y) interest
expense attributable to any Indebtedness represented by the guaranty by such
Person or a Subsidiary of such Person of an obligation of another Person shall
be deemed to be the interest expense attributable to the Indebtedness
guaranteed. When the foregoing definition is used in connection with the
Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the
Company and its Restricted Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net income
(or loss) of such Person and its consolidated Subsidiaries for such period,
determined (on a consolidated basis) in accordance with GAAP, adjusted to
exclude (only to the extent included in computing such net income (or loss)
and without duplication) (i) all extraordinary gains or losses and all gains
and losses from the sales or other dispositions of assets out of the ordinary
course of business (net of taxes, fees and expenses relating to the
transaction giving rise thereto) for such period, (ii) the net income, if
positive, of any Person, that is not a Subsidiary in which such Person or any
of its Subsidiaries has an interest, except to the extent of the amount of
dividends or distributions actually paid to such Person or a Subsidiary of
such Person that both (x) are actually paid in cash to such Person or a
Subsidiary of such Person during such period and (y) when taken together with
all other dividends and distributions paid during such period in cash to such
Person or a Subsidiary of such Person, are not in excess of such Person's pro
rata share of such other Person's aggregate net income earned during such
period, (iii) except as provided in the definition of "Annualized Operating
Cash Flow Ratio," the net income (or loss) of any Subsidiary acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition, (iv) for purposes of the "Limitation on Restricted Payments"
covenant, the net income, if positive, of any Subsidiary of such Person to the
extent that the declaration or payment of dividends or similar distributions
is not at the time permitted by operation of the terms of its charter or any
agreement or instrument applicable to such Subsidiary, and (v) the cumulative
effect of a change in accounting principles. When the foregoing definition is
used in connection with the Company and its Restricted Subsidiaries,
references to a Person and its Subsidiaries in the foregoing definition shall
be deemed to refer to the Company and its Restricted Subsidiaries.
"Convertible Notes" means the 10% Senior Subordinated Convertible Discount
Notes due 2004 of PriCellular.
89
<PAGE>
"Credit Facility" means, that certain Credit Facility entered into among a
Restricted Subsidiary of the Company, Merrill Lynch Capital Corporation,
Toronto Dominion (Texas), Inc., and the other financial institutions a party
thereto, as such agreement in whole or in part, may be, in one or more
agreements with one or more bank lending groups, amended, renewed, extended,
substituted, refinanced, restructured, replaced, supplemented or otherwise
modified, in whole or in part, from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing) to which the Company or any Restricted Subsidiary is a party
including to increase the commitments thereunder or to add or eliminate
borrowers or guarantors thereunder.
"Default" means any event or condition that is, or after notice or passage
of time or both would be, an Event of Default.
"Disqualified Capital Stock" means, with respect to any Person, Capital
Stock of such Person that, by its terms or by the terms of any security into
which it is convertible, exercisable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be
redeemed or repurchased (including at the option of the holder thereof) by
such Person or any of its Subsidiaries, in whole or in part, on or prior to
the Stated Maturity of the Notes; provided that (a) Capital Stock will not be
deemed to be Disqualified Capital Stock if it may only be so redeemed or
repurchased solely in consideration of Qualified Capital Stock of the Company
and (b) any Capital Stock that would not constitute Disqualified Capital Stock
but for provisions thereof giving holders thereof the right to require such
Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control" occurring prior to the Stated Maturity of
the Notes shall not constitute Disqualified Capital Stock if the "asset sale"
or "change of control" provisions applicable to such Capital Stock are no more
favorable to the holders of such Capital Stock than the provisions contained
in "Limitation on Asset Sales and Sales of Subsidiary Stock" and "Repurchase
of Notes at the Option of the Holder upon a Change of Control" covenants and
such Capital Stock specifically provides that such Person will not repurchase
or redeem any such Capital Stock pursuant to such provision prior to the
Company's repurchase of such Notes as are required to be repurchased pursuant
to the "Limitation on Asset Sales and Sales of Subsidiary Stock" and
"Repurchase of Notes at the Option of the Holder Upon a Change of Control"
covenants.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent
in foreign currency, whose debt is rated "A-3" or higher, "A--" or higher or
"A-" or higher according to Moody's Investors Service, Inc., Standard & Poor's
Ratings Group or Duff & Phelps Credit Rating Co. (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)) respectively, at the time
as of which any investment or rollover therein is made.
"Excluded Group" means a "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that either the voting power of the Capital Stock of the Company
"beneficially owned" (as such term is used in Rule 13d-3 promulgated under the
Exchange Act) by such Excluded Persons (without attribution to such Excluded
Persons of the ownership by other members of the "group") represents a
majority of the voting power of the Capital Stock "beneficially owned" by such
group, or , with respect to clause (ii) of the definition of "Change of
Control," such group is deemed to be a "person" (as such term is used in
Section 13(d) of the Exchange Act) solely by virtue of the stockholders
agreement, as in effect on the Issue Date and as the same may be from time to
time amended or supplemented, and no Person or group, other than one or more
of the Excluded Persons, shall have the right to designate or shall have
designated a majority of the board of directors of the Company.
"Excluded Person" means Spectrum Equity Investors, Providence Equity
Partners and MLC Industries, Inc., and any Affiliate of any of the foregoing
that is directly or indirectly controlling or controlled by, or under direct
or indirect common control with, any of the foregoing.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
90
<PAGE>
pronouncements of the Financial Accounting Standards Board ("FASB") or, if
FASB ceases to exist, any successor thereto; provided, however, that for
purposes of determining compliance with covenants in the Indenture, "GAAP"
means such generally accepted accounting principles as in effect as of the
Issue Date.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and which have a remaining weighted average life to maturity of not
more than one year from the date of Investment therein.
"Guarantee" means the guarantee by a Guarantor of the Company's Indenture
Obligations.
"Guarantor" means any Restricted Subsidiary of the Company which becomes a
guarantor of the Company's Indenture Obligations.
"Holder" means a Person in whose name a Note is registered. The Holder of a
Note will be treated as the owner of such Note for all purposes.
"Indebtedness" of any Person means, without duplication, (a) all liabilities
and obligations, contingent or otherwise, of such Person, (i) in respect of
borrowed money (whether or not the recourse of the lender is to the whole of
the assets of such Person or only to a portion thereof), (ii) evidenced by
bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due
date or to financial institutions, which obligations are not being contested
in good faith and for which appropriate reserves have been established) those
incurred in the ordinary course of its business that would constitute
ordinarily a trade payable to trade creditors, (iv) evidenced by bankers'
acceptances or similar instruments issued or accepted by banks, (v) for the
payment of money relating to a Capitalized Lease Obligation, or (vi) evidenced
by a letter of credit or a reimbursement obligation of such Person with
respect to any letter of credit; (b) all obligations of such Person under
Interest Rate Protection Agreements; (c) all liabilities of others of the kind
described in the preceding clauses (a) or (b) that such Person has guaranteed
or that is otherwise its legal liability or which are secured by any assets or
property of such Person and all obligations to purchase, redeem or acquire any
Capital Stock; (d) all Disqualified Capital Stock of such Person and all
Preferred Stock of such Person's Restricted Subsidiaries and (e) any and all
deferrals, renewals, extensions, refinancing and refundings (whether direct or
indirect) of, or amendments, modifications or supplements to, any liability of
the kind described in any of the preceding clauses (a), (b), (c) or (d) this
clause (e), whether or not between or among the same parties; provided that
the outstanding principal amount at any date of any Indebtedness issued with
original issue discount is the face amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such date.
"Initial Escrow and Pledge Account" means an account established with the
Trustee pursuant to the terms of the Pledge and Escrow Agreement for the
deposit of the net proceeds realized from the sale of the Notes, together with
the Additional Escrow Amount; and after the Merger such account holds the
Pledged Securities purchased by the Company with a portion of the net proceeds
from the Offering.
"Interest Rate Protection Agreements" means, with respect to any Person, the
Obligations of such Person under (a) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements designed to protect such Person against
fluctuations in interest rates. For purposes of the Indenture, the amount of
such obligations shall be the amount determined in respect thereof as of the
end of the then most recently ended fiscal quarter of such Person, based on
the assumption that such obligation had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
obligation provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligations shall be the net amount so determined, plus any premium due upon
default by such Person.
91
<PAGE>
"Investment" by any Person in any other Person means (without duplication)
(a) the acquisition (whether by purchase, merger, consolidation or otherwise)
by such Person (whether for cash, property, services, securities or otherwise)
of capital stock, bonds, notes, debentures, partnership or other ownership
interests or other securities of such other Person or any agreement to make
any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including
the purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) or any commitment to make any such advance, loan or extension; (c) the
entering into by such Person of any guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of such other
Person; (d) the making of any capital contribution by such Person to such
other Person and (e) the designation by the Board of Directors of the Company
of any Person to be an Unrestricted Subsidiary. For purposes of the
"Limitation on Restricted Payments" covenant, (i) "Investment" shall include
and be valued at the fair market value of the net assets of any Restricted
Subsidiary at the time that such Restricted Subsidiary is designated an
Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by the Company or any of its
Restricted Subsidiaries at the time any such Investment is made; provided
that, for purposes of this sentence, the fair market value of net assets in
excess of $5,000,000 shall be as determined by an independent appraiser of
national reputation.
"Issue Date" means May 13, 1998.
"Company" means American Cellular Corporation, a corporation incorporated
under the laws of Delaware, until a successor Person shall have become such
pursuant to the applicable provisions of the Indenture, and thereafter
"Company" shall mean such successor Person.
"Junior Indebtedness" means Indebtedness of the Company that (i) requires no
payment of principal prior to or on the date on which all principal of and
interest on the Notes is paid in full and (ii) is subordinate and junior in
right of payment to the Notes in all respects.
"Lien" means any mortgage, lien, pledge, charge, security interest, or other
encumbrance of any kind, whether or not filed, recorded or otherwise perfected
under applicable law (including any conditional sale or other title retention
agreement and any lease deemed to constitute a security interest and any
option or other agreement to give any security interest).
"Marketable U.S. Securities" means: (i) Government Securities; (ii) any time
deposit account, money market deposit and certificate of deposit maturing not
more than 270 days after the date of acquisition issued by, or time deposit
of, an Eligible Institution; (iii) commercial paper maturing not more than 270
days after the date of acquisition issued by a corporation (other than an
Affiliate of the Company) with a rating, at the time as of which any
investment therein is made, of "P-1" or higher according to Moody's Investors
Service, Inc., "A-1" or higher according to Standard & Poor's Ratings Group or
"A-1" or higher according to Duff & Phelps Credit Rating Co. (or such similar
equivalent rating by at least one "nationally recognized statistical rating
organization" (as defined in Rule 436 under the Securities Act)); (iv) any
banker's acceptances or money market deposit accounts issued or offered by an
Eligible Institution; (v) repurchase obligations with a term of not more than
7 days for Government Securities entered into with an Eligible Institution;
and (vi) any fund investing exclusively in investment of the types described
in clauses (i) through (v) above.
"Maturity Date" means, when used with respect to any Note, the date
specified on such Note as the fixed date on which the final installment of
principal of such Note is due and payable (in the absence of any acceleration
thereof pursuant to the provisions of the Indenture regarding acceleration of
Indebtedness or any Change of Control Offer, Proceeds Purchase Offer or Asset
Sale Offer).
"Net Cash Proceeds" means the aggregate amount of cash and Cash Equivalents
received by the Company and its Restricted Subsidiaries in respect of an Asset
Sale (including upon the conversion to cash and Cash
92
<PAGE>
Equivalents of (A) any note or installment receivable at any time, or (B) any
other property as and when any cash and Cash Equivalents are received in
respect of any property received in an Asset Sale but only to the extent such
cash and Cash Equivalents are received within one year after such Asset Sale),
less the sum of (i) all reasonable out-of-pocket fees, commissions and other
expenses incurred in connection with such Asset Sale, including the amount
(estimated in good faith by the Board of Directors of the Company) of income,
franchise, sales and other applicable taxes required to be paid by the Company
or any Restricted Subsidiary of the Company in connection with such Asset Sale
and (ii) the aggregate amount of cash so received which is used to retire any
existing Senior Indebtedness of the Company or Indebtedness of its Restricted
Subsidiaries, as the case may be, which is required to be repaid in connection
with such Asset Sale or is secured by a Lien on the property or assets of the
Company or any of its Restricted Subsidiaries, as the case may be.
"Net Proceeds" means the aggregate net proceeds (including the fair market
value of non-cash proceeds constituting equipment or other assets of a type
generally used in a Related Business an amount reasonably determined by the
Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Obligation" means any principal, premium, interest (including interest
accruing subsequent to a bankruptcy or other similar proceeding whether or not
such interest is an allowed claim enforceable against the Company in a
bankruptcy case under federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
pursuant to the terms of the documentation governing any Indebtedness.
"Old Notes" means the 10 3/4% Senior Notes due 2004 of PriCellular Wireless
Corporation ("Wireless"), the 12 1/4% Senior Subordinated Notes due 2003 of
Wireless and the 14% Senior Subordinated Discount Notes due 2001 of Wireless.
"Operating Cash Flow" of any Person means (a), with respect to any period,
the Consolidated Net Income of such Person for such period, plus (b) the sum,
without duplication (and only to the extent such amounts are deducted from net
revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of
such Person and its consolidated Subsidiaries and (iii) Consolidated Interest
Expense of such Person for such period, determined, in each case, on a
consolidated basis for such Person and its consolidated Subsidiaries in
accordance with GAAP, less (c) the amount of all cash payments made during
such period by such Person and its Subsidiaries to the extent such payments
relate to non-cash charges that were added back in determining Operating Cash
Flow for such period or for any prior period. When the foregoing definition is
used in connection with the Company and its Restricted Subsidiaries,
references to a Person and its Subsidiaries in the foregoing definition shall
be deemed to refer to the Company and its Restricted Subsidiaries.
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in the Company or a Restricted Subsidiary; (iii) Investments in a
Person substantially all of whose assets are of a type generally used in a
Related Business (an "Acquired Person") if, as a result of such Investments,
(A) the Acquired Person immediately thereupon becomes a Restricted Subsidiary
or (B) the Acquired Person immediately thereupon either (1) is merged or
consolidated with or into the Company or any of its Restricted Subsidiaries
and the surviving Person is the Company or a Restricted Subsidiary or (2)
transfers or conveys all or substantially all of its assets to, or is
liquidated into, the Company or any of its Restricted Subsidiaries; (iv)
Investments in accounts and notes receivable acquired in the ordinary course
of business; (v) any securities received in connection with an Asset Sale and
any investment with the Net Cash Proceeds from any Asset Sale in Capital Stock
of a Person, all or substantially all of whose assets are of a type used in a
Related Business, that complies with the "Limitation on Asset Sales and Sales
of Subsidiary Stock" covenant; (vi) any guarantee issued by a Restricted
Subsidiary incurred in compliance with the Indenture; (vii) advances and
prepayments for asset purchases in the ordinary course of business in a
Related Business of the Company or a Restricted Subsidiary; (viii) loans made
to certain officers upon the Merger Date, the term of which will not exceed
one year and the aggregate
93
<PAGE>
outstanding balance of which will not exceed $2.0 million; (ix) customary
loans or advances made in the ordinary course of business to officers,
directors or employees of the Company or any of its Restricted Subsidiaries
for travel, entertainment, and moving and other relocation expenses; (x)
Investments in Permitted Joint Ventures which in the aggregate at any one time
outstanding do not exceed $15.0 million and (xi) Investments which in the
aggregate at any one time outstanding do not exceed $5.0 million; provided
however, such Investments may be increased to $10.0 million in the aggregate
provided that American Wireless' Annualized Operating Cash Flow Ratio, after
giving effect to such Investments, would have been less than 6.25 to 1.00.
"Permitted Joint Venture" means, as applied to any Person, any other Person
(a) engaged in a Related Business, (b) over which such Person is responsible
(either directly or through a services agreement) for day-to-day operations or
otherwise has operational and managerial control or (c) of which more than
forty percent (40%) of the outstanding Voting Stock (other than directors'
qualifying shares) in the case of a corporation, or more than forty percent
(40%) of the outstanding ownership interests, in the case of an entity other
than a corporation, is at the time owned directly or indirectly by such
Person.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges
not yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen
or other like Liens arising by operation of law in the ordinary course of
business, provided that (i) the underlying obligations are not overdue for a
period of more than 30 days, and (ii) such Liens are being contested in good
faith and by appropriate proceedings and adequate reserves with respect
thereto are maintained on the books of the Company in accordance with GAAP;
(d) Liens securing the performance of bids, trade contracts (other than
borrowed money), leases, statutory obligations, surety and appeal bonds,
performance bonds and other obligations of a like nature incurred in the
ordinary course of business; (e) easements, rights-of-way, zoning, similar
restrictions and other similar encumbrances or title defects which, singly or
in the aggregate, do not in any case materially detract from the value of the
property, subject thereto (as such property is used by the Company or any of
its Restricted Subsidiaries) or interfere with the ordinary conduct of the
business of the Company or any of its Restricted Subsidiaries; (f) Liens
arising by operation of law in connection with judgments, only to the extent,
for an amount and for a period not resulting in an Event of Default with
respect thereto; (g) pledges or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other types of social security legislation; (h) Liens in favor of the Trustee
arising under the Indenture; (i) Liens securing the Credit Facility; (j) Liens
securing Indebtedness of a Person existing at the time such Person becomes a
Restricted Subsidiary or is merged with or into the Company or a Restricted
Subsidiary, provided that such Liens were in existence prior to the date of
such acquisition, merger or consolidation, were not incurred in anticipation
thereof, and do not extend to any other assets; (k) Liens arising from
Purchase Money Indebtedness permitted under the Indenture; (l) Liens securing
Refinancing Indebtedness Incurred to refinance any Indebtedness that was
previously so secured in a manner no more adverse to the Holders of the Notes
than the terms of the Liens securing such refinanced Indebtedness; (m) Liens
securing Indebtedness (including Capitalized Lease Obligations) permitted by
clause (vi) of the second paragraph of the "Limitation on Incurrence of
Additional Indebtedness" covenant; and (n) Liens in favor of the Company or a
Wholly Owned Restricted Subsidiary.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality
or other entity.
"Pledge and Escrow Agreement" means the Pledge Escrow and Assignment
Agreements, dated as of the date of the Indenture, among the Company, the
Trustee and the collateral agents named therein.
"Pledged Securities" means the securities purchased by the Company with a
portion of the net proceeds from the Offering to be deposited in the Escrow
and Pledge Account.
94
<PAGE>
"Public Equity Offering" means an offer and sale of common stock (which is
Qualified Capital Stock) of the Company, with aggregate proceeds of at least
$50 million pursuant to a registration statement that has been declared
effective by the Commission pursuant to the Securities Act (other than a
registration statement on Form S-8, S-4 or otherwise relating to equity
securities issuable under any employee benefit plan of such corporate entity).
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property
or assets for the business of the Company or its Restricted Subsidiaries,
provided that the recourse of the lenders with respect to such Indebtedness is
limited solely to the property or assets so purchased without further recourse
to either the Company or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is not
Disqualified Capital Stock.
"Reference Period" with regard to any Person means the last two full fiscal
quarters of such Person for which financial information (which the Company
shall use its best efforts to compile in a timely manner) in respect thereof
is available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Notes or the
Indenture.
"Refinancing Indebtedness" means any Indebtedness of the Company or any of
its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Company or such Restricted Subsidiary (other than
intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Refinancing Indebtedness does not
exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses
incurred in connection therewith); (ii) such Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life equal to or greater than the Weighted Average Life of, the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded; (iii) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of payment to the
Notes, such Refinancing Indebtedness has a final maturity date later than the
final maturity date of, and is subordinated in right of payment to, the Notes
on terms at least as favorable to the holders of Notes as those contained in
the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and (iv) such Indebtedness is
incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
"Related Business" means any business related to, or complementary to, the
ownership, development, operation or acquisition of wireless communications
systems as determined by the Board of Directors of the Company.
"Related Person" means, with respect to any Person, (i) any Affiliate of
such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any
trust in which any Person described in clause (i) above, has a beneficial
interest.
"Restricted Payment" means, with respect to any Person, (i) any dividend or
other distribution on shares of Capital Stock of such Person or any Subsidiary
of such Person, (ii) any payment on account of the purchase, redemption or
other acquisition or retirement for value, or any payment in respect of any
amendment (in anticipation of or in connection with any such retirement,
acquisition or defeasance) in whole or in part, of any shares of Capital Stock
of such Person or any Subsidiary of such Person held by Persons other than
such Person or any of its Restricted Subsidiaries, (iii) any defeasance,
redemption, repurchase or other acquisition or retirement for value, or any
payment in respect of any amendment (in anticipation of or in connection with
any such retirement, acquisition or defeasance) in whole or in part, of any
Indebtedness of the Company (other than the scheduled repayment thereof at
maturity and any mandatory redemption or mandatory repurchase thereof pursuant
to the terms thereof) by such Person or a Subsidiary of such Person that is
subordinate in right of
95
<PAGE>
payment to the Notes (other than in exchange for Refinancing Indebtedness
permitted to be Incurred under the Indenture and except for any such
defeasance, redemption, repurchase, other acquisition or payment in respect of
Indebtedness held by any Restricted Subsidiary) and (iv) any Investment (other
than a Permitted Investment); provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution or other payment on
shares of Capital Stock of the Company or any Restricted Subsidiary solely in
shares of Qualified Capital Stock, (ii) any dividend, distribution or other
payment to the Company, or any dividend to any of its Restricted Subsidiaries,
by any of its Subsidiaries, (iii) any dividend, distribution or other payment
by any Restricted Subsidiary on shares of its Capital Stock that is paid pro
rata to all holders of such Capital Stock and (iv) the purchase, redemption or
other acquisition or retirement for value of shares of Capital Stock of any
Restricted Subsidiary held by Persons other than the Company or any of its
Restricted Subsidiaries.
"Restricted Subsidiary" means any Subsidiary of the Company which at the
time of determination is not an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately before and after giving effect to
such designation, there would exist no Default or Event of Default and the
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test of the "Limitation on Incurrence of Additional
Indebtedness" covenant, on a pro forma basis taking into account such
designation.
"Senior Indebtedness" means all Indebtedness of the Company (including, with
respect to the Credit Facility, all Obligations thereunder), including
interest thereon, whether outstanding on the Issue Date or thereafter issued,
other than (a) Indebtedness that is expressly subordinated or junior in right
of payment to any Indebtedness of the Company, (b) Indebtedness represented by
Disqualified Capital Stock, (c) any liability for federal, state, local or
other taxes owed or owing by the Company, (d) Indebtedness of the Company to
any Subsidiary of the Company or any Affiliate of the Company, (e) trade
payables and (f) Indebtedness incurred in violation of the Indenture.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of
the net book value of the assets of the Company and its Restricted
Subsidiaries on a consolidated basis.
"Stated Maturity" means the date fixed for the payment of any principal or
premium pursuant to the Indenture and the Notes, including the Maturity Date,
upon redemption, acceleration, Asset Sale Offer, Proceeds Purchase Offer,
Change of Control Offer or otherwise.
"Strategic Equity Investor" means any Person which is (or a controlled
Affiliate of any Person which is) engaged in the ownership, development,
operation or acquisition of communications systems and which, as of the last
available annual or quarterly financial statements, has Total Common Equity of
at least $1.0 billion.
"Strategic Equity Offering" means an offer or sale of Common Stock or
Preferred Stock (other than Disqualified Capital Stock) of the Company, with
aggregate proceeds of at least $50.0 million to a Strategic Equity Investor
other than in connection with or after the occurrence of a Change of Control.
"Subsidiary" with respect to any Person, means (i) a corporation at least
50% of whose Capital Stock with voting power, under ordinary circumstances, to
elect directors is at the time, directly or indirectly, owned by such Person,
by such Person and one or more Subsidiaries of such Person or by one or more
Subsidiaries of such Person, or (ii) a partnership in which such Person or a
Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more
Subsidiaries of such Person, or such Person and one or more Subsidiaries of
such Person, directly or indirectly, at the date of determination thereof has
(x) at least a fifty percent ownership interest or (y) the power to elect or
direct the election of the directors or other governing body of such Person.
"Total Common Equity" of any Person means, as of any date of determination,
the product of (i) the aggregate number of outstanding primary shares of
Common Stock of such Person on such day (which shall not include any options
or warrants on, or securities convertible or exchangeable into, shares of
Common Stock of such Person) and (ii) the average Closing Price of such Common
Stock over the 20 consecutive Trading Days
96
<PAGE>
immediately preceding such day. If no such Closing Price exists with respect
to shares of any such class, the value of such shares for purposes of clause
(ii) of the preceding sentence shall be determined by the Board of Directors
of the Company in good faith and evidenced by a resolution of the Board of
Directors filed with the Trustee.
"Trading Day," with respect to a securities exchange or automated quotation
system, means a day on which such exchange or system is open for a full day of
trading.
"Unrestricted Subsidiary" means any Subsidiary of the Company that, at the
time of determination, shall be an Unrestricted Subsidiary (as designated by
the Board of Directors of the Company, as provided below). The Board of
Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary at or prior to the
time it is so formed or acquired) to be an Unrestricted Subsidiary if (a) no
Default or Event of Default is existing or will occur as a consequence
thereof, (b) such Subsidiary does not own any Capital Stock of, or own or hold
any Lien on any property or asset of, the Company or any Restricted Subsidiary
that is not a Subsidiary of the Subsidiary to be so designated and (c) such
Subsidiary and each of its Subsidiaries has not at the time of designation,
and does not thereafter, create, incur, issue, assume, guarantee, or otherwise
become directly or indirectly liable with respect to any Indebtedness pursuant
to which the lender has recourse to any property or assets of the Company or
any of its Restricted Subsidiaries (except that such Subsidiary and its
Subsidiaries may guarantee the Notes); provided that either (A) the Subsidiary
to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant. Each such
designation shall be evidenced by filing with the Trustee a certified copy of
the resolution giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing conditions.
"Voting Stock" means Capital Stock of the Company having generally the right
to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters
of the Company.
"Weighted Average Life" means, when applied to any Indebtedness at any date,
the number of years obtained by dividing (i) the sum of the products obtained
by multiplying (a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i) a
Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for such purpose) is owned directly by such Person or through one or more
other Wholly Owned Subsidiaries of such Person, or (ii) any entity other than
a corporation in which such Person, directly or indirectly, owns not less than
99% of the Capital Stock of such entity.
97
<PAGE>
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Latham & Watkins, counsel to the Company, the following
are the material federal tax income consequences expected to result to Holders
whose Private Notes are exchanged for Exchange Notes in the Exchange Offer.
This discussion is based upon current provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), applicable Treasury regulations, judicial
authority and administrative rulings and practice. There can be no assurance
that the Internal Revenue Service (the "Service") will not take a contrary
view, and no ruling from the Service has been or will be sought with respect
to the Exchange Offer. Legislative, judicial or administrative changes or
interpretations may be forthcoming that could alter or modify the statements
and conclusions set forth herein. Any such changes or interpretations may or
may not be retroactive and could affect the tax consequences to Holders.
Certain Holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) may be subject to special
rules not discussed below.
EACH HOLDER OF PRIVATE NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE
PARTICULAR TAX CONSEQUENCES OF EXCHANGING PRIVATE NOTES FOR EXCHANGE NOTES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN LAWS.
The exchange of Private Notes for Exchange Notes will be treated as "non-
event" for federal income tax purposes because the Exchange Notes will not be
considered to differ materially in kind or extent from the Private Notes. As a
result, no material federal income tax consequences will result to Holders
exchanging Private Notes for Exchange Notes.
98
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a Prospectus in
connection with any resale of such Exchange Notes. This Prospectus, as it may
be amended or supplemented from time to time, may be used by a broker-dealer
in connection with the resale of Exchange Notes received in exchange for
Private Notes where such Private Notes were acquired as a result of market-
making activities or other trading activities. The Company has agreed that for
a period of up to 180 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer that
requests such document in the Letter of Transmittal for use in connection with
any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes by
broker-dealers or any other persons. Exchange Notes received by broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the Exchange Notes or a
combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were
received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes
may be deemed to be an "underwriter" within the meaning of the Securities Act
and any profit on any such resale of Exchange Notes and any commissions or
concessions received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a Prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the Holders of Private Notes (including any broker-dealers), and
certain parties related to such Holders, against certain liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Exchange Notes offered hereby will
be passed upon for the Company by Latham & Watkins, San Francisco, California.
EXPERTS
The consolidated financial statements of PriCellular Corporation at December
31, 1997 and 1996, and for each of the three years in the period ended
December 31, 1997, appearing in this Prospectus and Registration Statement
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their report thereon appearing elsewhere herein, and are included in reliance
upon such report given upon the authority of such firm as experts in
accounting and auditing.
The financial statements of American Cellular Corporation at March 31, 1998,
and for the period February 26, 1998 to March 31, 1998, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
99
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (the "Registration Statement," which term shall include all amendments,
exhibits, annexes and schedules thereto) under the Securities Act with respect
to the Exchange Notes offered hereby. As permitted by the rules and
regulations of the Commission, this Prospectus omits certain information,
exhibits and undertakings contained in the Registration Statement. For further
information with respect to the Company and the Exchange Notes offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto and the financial statements, notes and schedules filed as a part
thereof. Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or document filed as an exhibit
to the Registration Statement, each such statement being qualified in all
respects by such reference.
The Company will become subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (the "Exchange Act") and, in accordance therewith, will
file reports, proxy statements and other information with the Commission. All
such information may be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the following Regional Offices
of the Commission: Chicago Regional Office, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048. Copies of such material may also
be obtained at prescribed rates from the Public Reference Section of the
Commission at its principal office at 450 Fifth Street, N.W., Judiciary Plaza,
Washington, D.C. 20549. The Commission also maintains a web site
electronically with the Commission (http://www.sec.gov).
The Company has agreed to furnish to the Trustee and to registered Holders
of the Notes, without cost to the Trustee or such registered Holders, copies
of all reports and other information that would be required to be filed by the
Company with the Commission under the Exchange Act, whether or not the Company
is then required to file reports with the Commission. As a result of this
Exchange Offer, the Company will become subject to the periodic reporting and
other informational requirements of the Exchange Act. In the event that the
Company ceases to be subject to the informational requirements of the Exchange
Act, the Company has agreed that, so long as any Notes remain outstanding, it
will file with the Commission (but only if the Commission at such time is
accepting such voluntary filings) and distribute to Holders of the Private
Notes or the Exchange Notes, as applicable, copies of the financial
information that would have been contained in such annual reports and
quarterly reports, including a "Management's Discussion and Analysis of
Financial Condition and Results of Operations," that would have been required
to be filed with the Commission pursuant to the Exchange Act. The Company will
also furnish such other reports as it may determine or as may be required by
law.
100
<PAGE>
HISTORICAL FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
AMERICAN CELLULAR CORPORATION
Report of Independent Auditors............................................ F-2
Balance Sheet--March 31, 1998............................................. F-3
Statement of Operations--February 26, 1998 to March 31, 1998.............. F-4
Statement of Stockholders' Equity--February 26, 1998 to March 31, 1998.... F-5
Statement of Cash Flows--February 26, 1998 to March 31, 1998.............. F-6
Notes to Financial Statements............................................. F-7
PRICELLULAR CORPORATION
Condensed Consolidated Balance Sheet--March 31, 1998 (unaudited).......... F-9
Condensed Consolidated Statements of Operations--Three Months Ended March
31, 1998 and 1997 (unaudited)............................................ F-10
Condensed Consolidated Statements of Cash Flow--March 31, 1998 and 1997
(unaudited).............................................................. F-11
Notes to Condensed Consolidated Financial Statements (unaudited).......... F-12
Report of Independent Auditors............................................ F-14
Consolidated Balance Sheets--December 31, 1997 and 1996................... F-15
Consolidated Statements of Operations--Years Ended December 31, 1997, 1996
and 1995................................................................. F-16
Consolidated Statements of Stockholders' Equity--Years Ended December 31,
1997, 1996, 1995 and 1994................................................ F-17
Consolidated Statements of Cash Flows--Years Ended December 31, 1997, 1996
and 1995................................................................. F-18
Notes to Consolidated Financial Statements................................ F-20
Financial Statement Schedules
Schedule I--Condensed Financial Information of Registrant............... F-33
Schedule II--Valuation and Qualifying Accounts.......................... F-37
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
American Cellular Corporation
We have audited the balance sheet of American Cellular Corporation as of
March 31, 1998, and the related statements of operations, stockholders' equity
and cash flows for the period February 26, 1998 (Date of Formation) to March
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 financial statements referred to above present fairly,
in all material respects, the financial position of American Cellular
Corporation at March 31, 1998, and the results of its operations and its cash
flows for the period February 26, 1998 (Date of Formation) to March 31, 1998,
in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
New York, New York
July 28, 1998
F-2
<PAGE>
AMERICAN CELLULAR CORPORATION
BALANCE SHEET
<TABLE>
<CAPTION>
MARCH 31,
1998
-----------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................... $25,233,000
-----------
Total current assets................................................ 25,233,000
-----------
Total assets........................................................ $25,233,000
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Income taxes payable.............................................. $ 13,000
Due to stockholder................................................ 200,000
-----------
Total current liabilities........................................... 213,000
Commitments and contingent liabilities
Series A cumulative redeemable preferred stock, $0.01 par value,
plus accreted dividends; authorized 5,000,000 shares; no shares
issued and outstanding............................................. --
Stockholders' equity:
Common Stock, $0.01 par:
Class A: Authorized 475,000 shares; issued and outstanding
250,000 shares................................................. 3,000
Class B: Authorized 25,000 shares; no shares issued and
outstanding ................................................... --
Additional paid-in capital........................................ 24,997,000
Retained earnings................................................. 20,000
-----------
Total stockholders' equity.......................................... 25,020,000
-----------
Total liabilities and stockholders' equity.......................... $25,233,000
===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
AMERICAN CELLULAR CORPORATION
STATEMENT OF OPERATIONS
FEBRUARY 26, 1998 (DATE OF FORMATION) TO MARCH 31, 1998
<TABLE>
<S> <C>
Interest income........................................................ $33,000
-------
Income before income taxes............................................. 33,000
Provision for income taxes:
Federal.............................................................. 11,000
State and local...................................................... 2,000
-------
13,000
-------
Net income............................................................. $20,000
=======
</TABLE>
See notes to financial statements.
F-4
<PAGE>
AMERICAN CELLULAR CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
FEBRUARY 26, 1998 (DATE OF FORMATION) TO MARCH 31, 1998
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL
-------------- ------------- PAID-IN RETAINED
COMMON STOCK COMMON STOCK CAPITAL EARNINGS
-------------- ------------- ----------- --------
SHARES AMOUNT SHARES AMOUNT
------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Initial capital
contributions............... 250,000 $3,000 -- $ -- $24,997,000 $ --
Net income for the period
from February 26, 1998 (Date
of Formation) to
March 31, 1998.............. -- -- -- -- -- 20,000
------- ------ --- ----- ----------- -------
Balance, March 31, 1998...... 250,000 $3,000 -- $ -- $24,997,000 $20,000
======= ====== === ===== =========== =======
</TABLE>
See notes to financial statements.
F-5
<PAGE>
AMERICAN CELLULAR CORPORATION
STATEMENT OF CASH FLOWS
FEBRUARY 26, 1998 (DATE OF FORMATION) TO MARCH 31, 1998
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income......................................................... $ 20,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Income taxes payable............................................ 13,000
-----------
Net cash provided by operating activities.......................... 33,000
-----------
INVESTING ACTIVITIES
-----------
Net cash used in investing activities.............................. --
-----------
FINANCING ACTIVITIES
Proceeds from sale of common stock................................. 25,000,000
Due to stockholder................................................. 200,000
-----------
Net cash provided by financing activities.......................... 25,200,000
-----------
Increase in cash and cash equivalents.............................. 25,233,000
Cash and cash equivalents at beginning of period................... --
-----------
Cash and cash equivalents at end of period......................... $25,233,000
===========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
AMERICAN CELLULAR CORPORATION
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
1. ORGANIZATION
American Cellular Corporation (the "Company"), was incorporated on February
26, 1998 to acquire the stock of PriCellular Corporation ("PriCellular") and
to engage in the ownership and operation of cellular telephone systems. The
Company's principal activities have been organizing the Company and obtaining
financing.
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.
CASH EQUIVALENTS
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
3. MERGER
On March 6, 1998, the Company and PriCellular entered into an Agreement and
Plan of Merger (the "Merger Agreement"). Pursuant to the Merger Agreement and
subject to the terms and conditions set forth therein, the Company merged with
and into PriCellular, with the Company as the surviving corporation of the
merger (the "Merger"). The Merger was consumated on June 25, 1998 and each
issued and outstanding share of Class A common stock, par value $0.01 per
share, of PriCellular (the "Class A Shares") and Class B common stock, par
value $0.01 per share, of PriCellular was paid $14.00 in cash, without
interest (the "Merger Consideration"), and each issued and outstanding share
of Series A Preferred Stock of PriCellular was converted into the right to
receive the product of the Merger Consideration and the number of Class A
Shares into which each such share of Series A Preferred Stock was convertible
at such time.
In connection with the Merger, the Company made debt tender offers to
acquire all of the outstanding debt of PriCellular Wireless Corporation. The
amount of the tender offer payments aggregated approximately $69.4 million.
4. FINANCING
In connection with the Merger, the Company entered into a $1 billion credit
facility (the "Credit Facility") with several financial institutions. The
Credit Facility, provides for a senior secured revolving credit facility (the
"Revolving Credit Facility") of up to $150 million, and senior secured term
loan facilities in three tranches (the "Term Loan Facilities"), which provide
term loans in the aggregate principal amount of $850 million.
F-7
<PAGE>
AMERICAN CELLULAR CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. FINANCING (CONTINUED)
The Revolving Credit Facility commitment will be reduced quarterly beginning
in the third year after the closing and the Revolving Credit Facility will
mature eight and one-half years after the closing of the Merger (the "Merger
Date"). The Term Loan Facilities consist of three tranches and will amortize
over eight and one-half years for Tranche A Term Loans, nine years for Tranche
B Term Loans and nine and one-half years for Tranche C Term Loans.
Borrowings and commitments under the Credit Facility are subject to
mandatory prepayment and reduction in an amount equal to (a) the net proceeds
of asset dispositions, (b) 75% of excess cash flow, as defined, (c) 100% of
the net proceeds from the issuance or incurrence of debt and (d) 50% of the
net proceeds from the issuance of equity securities.
Borrowings under the Credit Facility bear interest, at the Company's option,
at either (a) a base rate (as defined) plus an additional margin or (b) LIBOR
rate plus an additional margin. The margin for the Tranche A Loans and the
Revolving Credit Loans can be a maximum of 1.5% for borrowings under the base
rate loans and 2.5% for borrowings under the LIBOR loans, 1.75% for borrowings
under the base rate and 2.75% for borrowings under the LIBOR loans for the
Tranche B Loans, and 2% for borrowings under the base rate loans and 3% for
borrowings under LIBOR loans for the Tranche C Loans. Based upon the Company's
leverage ratio, the margin for Tranche A Loans and the Revolving Credit Loans
may be reduced by up to 1.375% and for the Tranche B Loans and Tranche C Loans
may be reduced by .025%.
In May 1998, the Company issued $285 million aggregate principal amount of
10 1/2% Senior Notes due May 15, 2008 (the "10 1/2% Notes") to finance the
acquisition of PriCellular. The 10 1/2% Notes were issued at a price of 99.4%
or $282.8 million. The original issue discount on the 10 1/2% Notes accretes,
compounded semiannually. Interest is payable on May 15th and November 15th of
each year.
The 10 1/2% Notes may be redeemed at the Company's option, in whole or in
part, at anytime on or after May 15, 2003 at 105.25% the first year, 103.5%
the second year, 101.75% the third year and 100% thereafter, plus accrued and
unpaid interest to the date of redemption. The indenture governing the 10 1/2%
Notes contains restrictions relating to, among other things: (i) incurrence of
additional indebtedness; (ii) dividend and other payment restrictions; and
(iii) merger, consolidation and sales of assets.
5. REDEEMABLE PREFERRED STOCK
The Company authorized and issued Series A Preferred Stock (the "Series A
Preferred Stock"). Dividends on the Series A Preferred Stock will accrue at
12% per annum and are payable quarterly in arrears. Dividends, whether or not
earned or declared, will accrue without interest until declared and paid. The
Series A Preferred Stock may be redeemed, at the Company's option, in whole or
in part, until September 30, 2008 at which time the Series A Preferred Stock
is subject to mandatory redemption as follows: (i) on September 30, 2008, one-
third of the outstanding shares of the Series A Preferred Stock; (ii) on
September 30, 2009, one-half of the then outstanding shares of the Series A
Preferred Stock and (iii) on September 30, 2010, all of the remaining shares
of the Series A Preferred Stock.
F-8
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Dollars in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
MARCH 31,
1998
---------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................... $ 60,884
Accounts receivable (less allowance of $1,636)...................... 22,981
Inventory........................................................... 1,553
Other current assets................................................ 1,468
--------
Total current assets.................................................. 86,886
Fixed assets--at cost:
Cellular facilities, equipment and other............................ 147,337
Less accumulated depreciation....................................... (34,147)
--------
Net fixed assets...................................................... 113,190
Investment in cellular operations..................................... 37,007
Cellular licenses (less accumulated amortization of $26,779).......... 560,706
Deferred financing costs (less accumulated amortization of $5,839).... 13,939
Other assets.......................................................... 1,242
--------
Total assets.......................................................... $812,970
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............................... $ 44,938
Other current liabilities........................................... 1,313
--------
Total current liabilities............................................. 46,251
Long-term debt........................................................ 635,016
Deferred taxes........................................................ 3,797
Other long-term liabilities........................................... 1,055
Stockholders' equity:
Preferred Stock, $0.01 par:
Series A, cumulative convertible: authorized 10,000,000 shares;
issued and outstanding 96,000 shares............................... 1
Common Stock, $0.01 par:
Class A: Authorized 100,000,000 shares; issued and outstanding
21,987,847 shares................................................ 220
Class B: Authorized 50,000,000 shares; issued and outstanding
12,970,994 shares................................................ 129
Additional paid-in capital.......................................... 180,704
Accumulated deficit................................................. (54,203)
--------
Total stockholders' equity............................................ 126,851
--------
Total liabilities and stockholders' equity............................ $812,970
========
</TABLE>
See notes to condensed consolidated financial statements.
F-9
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
1998 1997
----------- -----------
<S> <C> <C>
REVENUES
Cellular service..................................... $ 48,000 $ 32,679
Equipment sales...................................... 1,341 1,140
Other................................................ 2,162 1,747
----------- -----------
51,503 35,566
COSTS AND EXPENSES
Cost of cellular service............................. 13,460 9,274
Cost of equipment sold............................... 2,630 2,467
Selling, general and administrative.................. 14,779 11,278
Non-recurring charges................................ 2,389 --
Depreciation and amortization........................ 8,532 6,724
----------- -----------
41,790 29,743
----------- -----------
Operating income (loss).............................. 9,713 5,823
OTHER INCOME (EXPENSE)
Gain on sale of investment in cellular operations.... -- 8,451
Interest expense, net................................ (17,854) (14,696)
Other income, net.................................... 812 812
----------- -----------
(17,042) (5,433)
----------- -----------
Net income (loss).................................... $ (7,329) $ 390
=========== ===========
Net income (loss) after adjustment for accrued
preferred stock dividend............................ $ (9,028) $ (1,209)
=========== ===========
Basic and diluted earnings (loss) per common share... $ (.26) $ (.03)
=========== ===========
Weighted average number of common shares used in
computation of net income (loss) per common share... 34,959,000 39,058,000
</TABLE>
See notes to condensed consolidated financial statements.
F-10
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(Dollars in Thousands)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31
------------------
1998 1997
-------- --------
<S> <C> <C>
Net cash provided by operating activities................. $ 12,703 $ 5,911
INVESTING ACTIVITIES
Purchase of cellular equipment............................ (11,459) (6,494)
Proceeds from sale of cellular operations................. -- 24,396
Acquisition of cellular operations........................ (481) (12,754)
Investment in cellular operations......................... -- (2,523)
Refund of escrow and deposit for Personal Communications
Service auction.......................................... -- 7,000
-------- --------
Net cash provided by (used in) investing activities....... (11,940) 9,625
-------- --------
FINANCING ACTIVITIES
Costs incurred in connection with the issuance of
preferred and common stock............................... -- (205)
Payments for deferred financing costs..................... (1,236) (292)
Proceeds from exercise of stock option.................... -- 15
Purchase and retirement of common stock................... -- (15,440)
-------- --------
Net cash used in financing activities..................... (1,236) (15,922)
-------- --------
Decrease in cash and cash equivalents..................... (473) (386)
Cash and cash equivalents at beginning of period.......... 61,357 100,364
-------- --------
Cash and cash equivalents at end of period................ $ 60,884 $ 99,978
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest................................................. $ 96 $ --
Income taxes............................................. 78 1,307
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Common stock issued in connection with acquisition of
cellular operation....................................... -- 19,125
Utilization of cash committed for the acquisition of
cellular operations...................................... 13,000 91,400
Debt issued in connection with acquisition of cellular
licenses................................................. 60,000 19,429
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES
Conversion of Class B Common Stock to Class A Common
Stock.................................................... 2 3
</TABLE>
See notes to condensed consolidated financial statements.
F-11
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
1. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of
PriCellular Corporation and its subsidiaries (the "Company"). All significant
intercompany items and transactions have been eliminated.
The condensed consolidated financial statements have been prepared by the
Company without audit, in accordance with rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
statements reflect all adjustments necessary for a fair representation of the
results for the interim period. The results of operations for the interim
period are not necessarily indicative of the results for a full year. These
condensed consolidated financial statements should be read in conjunction with
the audited financial statements and notes thereto included herein.
2. NET INCOME (LOSS) PER SHARE
All income (loss) per share amounts for all periods have been presented and,
where appropriate restated to conform to Financial Accounting Standards Board
Statement No. 128 issued in 1997. For the periods ending March 31, 1998 and
1997, 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
12 3/4% Senior 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.
3. SALE OF THE COMPANY
On March 6, 1998 the Company and American Cellular Corporation ("ACC")
entered into an Agreement and Plan of Merger ("Merger Agreement") pursuant to
which ACC will merge into the Company, with ACC to be the surviving
corporation. At the effective time each issued and outstanding share of Class
A and Class B common stock and the outstanding Series A Convertible Preferred
stock will be redeemed at $14.00 per share payable in cash.
In connection with the Merger Agreement, the Principal Shareholders of the
Company entered into a voting agreement with ACC. Pursuant to the agreement,
the Principal Shareholders, the beneficial owners of approximately 39% of the
outstanding common stock and preferred stock of the Company (or 57% of the
fully diluted voting power of the Company), agreed to vote their shares in
favor of the adoption of the Merger Agreement. The transaction is subject to,
among other things, regulatory approvals.
As a result of this transaction, the Company has incurred approximately $2.4
million in fees and expenses which amounts are shown as non-recurring charges
on the Condensed Consolidated Statement of Operations.
4. ACQUISITION OF CELLULAR OPERATION
On January 15, 1998, Kyle Cellular, a wholly owned subsidiary of the
Company, acquired the TN-4 RSA with approximately 264,000 Pops from Bachtel
Liquidity, L.P., an affiliate of Bachow & Associates, Inc. for approximately
$73.0 million in cash. The RSA, adjacent to three MSAs including Knoxville TN,
is located south of the Company's Kentucky Cluster and features such tourist
attractions as the towns of Gatlinburg and Pigeon Forge, Dollywood and the
entrance to the Great Smoky Mountains National Park. Of the total purchase
price, $13.0 million was funded through cash committed for the acquisition at
December 31, 1997 with the balance provided by a $60.0 million Senior Secured
Reducing Revolver due in the year 2005.
F-12
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. ACQUISITION OF CELLULAR OPERATION (CONTINUED)
The above acquisition is accounted for on the purchase method and is
included in the results of operations from the date of acquisition.
Pro forma consolidated results of operations for the period ended March 31,
1997, assuming the acquisition was consummated as of January 1, 1997, is as
follows:
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
<S> <C>
Revenue....................................................... $39,065
=======
Net loss...................................................... $(1,218)
=======
Net loss per common share..................................... $ (.03)
=======
</TABLE>
5. LONG-TERM DEBT
In January 1998, the Company, through its wholly owned subsidiary Kyle
Cellular, entered into a $60.0 million Senior Secured Reducing Revolver (the
"Borrowing") with J.P. Morgan Securities Inc. The Borrowing matures eight
years from the closing date with repayment commencing in the year 2001 and
final payment in the year 2005 with payments ranging from 10.0% to 25.0% of
the then outstanding balance. Interest is currently charged at the LIBOR rate
plus a premium ranging from 1.500% to 2.2500% depending on the ratio of debt
to cash flow as defined. The Borrowing requires the attainment of certain
financial ratios in order to maintain the permitted level of indebtedness.
Violation of such ratios requires the permanent prepayment of an amount to
cure the deficiency. The Borrowing is secured by the assets of Kyle Cellular.
Pursuant to the agreement the Company entered into an interest rate swap
which effectively converts a portion of the interest on the outstanding
indebtedness from a variable rate basis to a fixed rate basis. The notional
amount required to be hedged is 50% of the aggregate outstanding principal
amount. For the period commencing January 21, 1998 and ending July 21, 1998
the Company has "locked in" an effective annual rate of 7.64% on the total
outstanding indebtedness of $60.0 million.
F-13
<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 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1997. Our audits also
included the financial statement schedules listed in the Index. These
financial statements and schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedules 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 1996, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
ERNST & YOUNG LLP
New York, New York
January 22, 1998, except for the third
paragraph of Note 13 as to which
the date is March 10, 1998
F-14
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 61,357 $100,364
Accounts receivable (less allowance of $1,686 in 1997 and
$1,767 in 1996).......................................... 19,465 13,429
Inventory................................................. 2,232 2,096
Other current assets...................................... 1,797 3,484
-------- --------
Total current assets....................................... 84,851 119,373
Fixed assets--at cost:
Cellular facilities and equipment......................... 123,935 71,813
Furniture and equipment................................... 10,221 5,142
Deposits on cellular equipment............................ -- 10,100
-------- --------
134,156 87,055
Less accumulated depreciation............................. (29,302) (13,728)
-------- --------
Net fixed assets........................................... 104,854 73,327
Investment in cellular operations.......................... 37,017 39,641
Cellular licenses (less accumulated amortization of $23,119
in 1997 and $10,415 in 1996).............................. 493,315 377,808
Cellular license held for sale............................. -- 13,721
Deferred financing costs (less accumulated amortization of
$5,191 in 1997 and $2,761 in 1996)........................ 13,352 15,266
Cash committed for the acquisition of cellular operations.. 13,000 91,400
Other assets............................................... 1,267 5,280
-------- --------
Total assets............................................... $747,656 $735,816
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses..................... $ 33,966 $ 22,317
Deferred revenue.......................................... 4,242 2,531
Other current liabilities................................. 2,125 4,776
-------- --------
Total current liabilities.................................. 40,333 29,624
Long-term debt............................................. 568,323 524,517
Deferred taxes............................................. 3,797 --
Other long-term liabilities................................ 1,023 1,756
Commitments and contingent liabilities
Stockholders' equity:
Preferred Stock, $0.01 par:
Series A, cumulative convertible: authorized 10,000,000
shares; issued and outstanding 96,000 shares............ 1 1
Common Stock, $0.01 par:
Class A: Authorized 100,000,000 shares; issued and
outstanding 21,824,566 shares (1997) and 18,902,101
shares (1996)........................................... 218 189
Class B: Authorized 50,000,000 shares (1997) and
20,000,000 shares (1996); issued and outstanding
13,134,275 shares (1997) and 19,510,736 shares (1996)... 131 195
Additional paid-in capital................................ 180,704 212,777
Accumulated deficit....................................... (46,874) (33,243)
-------- --------
Total stockholders' equity................................. 134,180 179,919
-------- --------
Total liabilities and stockholders' equity................. $747,656 $735,816
======== ========
</TABLE>
See notes to consolidated financial statements.
F-15
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Cellular service........................ $ 168,394 $ 105,188 $ 38,757
Equipment sales......................... 5,364 3,430 1,717
Other................................... 7,242 3,998 1,030
----------- ----------- -----------
181,000 112,616 41,504
COSTS AND EXPENSES
Cost of cellular service................ 48,691 29,571 10,694
Cost of equipment sold.................. 12,841 10,073 4,951
Selling, general and administrative..... 53,485 34,502 16,512
Depreciation and amortization........... 28,759 19,537 10,337
----------- ----------- -----------
143,776 93,683 42,494
----------- ----------- -----------
Operating income (loss)................. 37,224 18,933 (990)
OTHER INCOME (EXPENSE)
Gain (loss) on sale of investments in
cellular operations.................... 8,423 (1,401) 11,598
Interest expense........................ (67,392) (47,076) (22,953)
Interest income......................... 4,864 4,875 4,114
Other income, net....................... 3,250 1,626 520
----------- ----------- -----------
(50,855) (41,976) (6,721)
----------- ----------- -----------
Net income (loss)....................... $ (13,631) $ (23,043) $ (7,711)
=========== =========== ===========
Net income (loss) after adjustment for
accrued preferred stock dividend....... $ (20,171) $ (29,221) $ (7,711)
=========== =========== ===========
Basic and diluted earnings (loss) per
common share........................... $ (0.55) $ (0.76) $ (0.24)
=========== =========== ===========
Weighted average number of common shares
used in computation of basic and
diluted earnings (loss) per share...... 36,751,000 38,493,000 32,214,000
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-16
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A CLASS A CLASS B
------------- -------------- --------------
PREFERRED
STOCK COMMON STOCK COMMON STOCK ADDITIONAL
------------- -------------- -------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
------ ------ ------ ------ ------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance--December 31,
1994................... 5,000 $ 50 14,626 $146 $ 80,529 $ (2,489) $ 78,236
Additional shares issued
in connection with the
initial public
offering............... 375 4 2,563 2,567
Purchase and retirement
of treasury stock...... (127) (1) (769) (770)
Shares issued in
connection with
exercise of Harvard and
Spectrum options....... 828 8 4,992 5,000
Common stock issued for
cash................... 2,000 20 24,046 24,066
Conversion of Class B
common stock to Class A
common stock........... 810 8 (810) (8) --
Shares issued in
connection with
acquisition of
Parkersburg,
WV/Marietta, OH MSA
cellular system........ 797 8 9,751 9,759
Shares issued in
connection with
acquisition of AL-4 RSA
cellular system........ 1,175 12 14,970 14,982
Preferred stock issued
for cash............... 96 $ 1 79,598 79,599
Net loss for the year
ended December 31,
1995................... (7,711) (7,711)
--- --- ------ ---- ------ ---- -------- -------- --------
Balance--December 31,
1995................... 96 1 10,858 109 13,816 138 215,680 (10,200) 205,728
Purchase and retirement
of common stock........ (150) (1) (1,449) (1,450)
Conversion of Class B
common stock to Class A
common stock........... 1,688 17 (1,688) (17) --
Shares issued as a
result of common stock
splits................. 6,498 64 7,383 74 (138) --
Costs incurred in
connection with common
and preferred stock
offerings.............. (1,364) (1,364)
Exercise of employee
stock options.......... 8 -- 48 48
Net loss for the year
ended December 31,
1996................... (23,043) (23,043)
--- --- ------ ---- ------ ---- -------- -------- --------
Balance--December 31,
1996................... 96 1 18,902 189 19,511 195 212,777 (33,243) 179,919
Purchase and retirement
of common stock........ (2,157) (21) (3,995) (40) (53,800) (53,861)
Conversion of Class B
common stock to Class A
common stock........... 2,382 24 (2,382) (24)
Costs incurred in
connection with common
and preferred stock
offerings.............. (206) (206)
Shares issued in
connection with the
Kentucky Cluster
acquisition............ 1,948 19 19,106 19,125
Exercise of employee
stock options.......... 750 7 2,827 2,834
Net loss for the year
ended December 31,
1997................... (13,631) (13,631)
--- --- ------ ---- ------ ---- -------- -------- --------
Balance--December 31,
1997................... 96 $ 1 21,825 $218 13,134 $131 $180,704 $(46,874) $134,180
=== === ====== ==== ====== ==== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-17
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1996 1995
-------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)............................. $(13,631) $ (23,043) $ (7,711)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization............... 28,759 19,537 10,337
Interest on Senior Subordinated and
Convertible Discount Notes................. 46,236 43,174 22,212
Depreciation and amortization............... (8,423) 1,401 (11,598)
Loss from equity investments, net of
distributions.............................. -- -- (275)
Amortization of covenant not to compete..... (3,250) (1,625) (500)
Provision for losses on accounts
receivable................................. 2,331 2,079 936
Proceeds from covenant not to compete....... 2,000 2,500 3,000
Changes in operating assets and liabilities:
Accounts receivable....................... (7,543) (9,098) (4,529)
Inventory................................. 103 (369) (891)
Other current assets...................... (737) (347) (193)
Other assets.............................. (410) (210) --
Accounts payable and accrued expenses..... 2,804 4,457 94
Deferred revenue.......................... 600 1,151 600
Income taxes payable...................... -- (448) (2,553)
Other current liabilities................. -- (250) (4,490)
Other long-term liabilities............... 187 410 (388)
Other, net................................ -- 52 59
-------- --------- ---------
Net cash provided by operating activities..... 49,026 39,371 4,110
-------- --------- ---------
INVESTING ACTIVITIES
Redemption of short-term investments.......... -- -- 991
Purchase of cellular equipment................ (25,717) (29,470) (6,794)
Amounts refunded from (deposited in) escrow to
acquire cellular properties (net)............ 7,337 (5,000) --
Deposit required for Personal Communications
Service auction (net)........................ -- 1,640 (4,140)
Distributions to affiliate.................... -- -- (36)
Proceeds from sale of cellular operations, net
of cash...................................... 22,396 31,500 19,478
Proceeds from sale of investment in cellular
operations................................... 1,255 2,813 --
Acquisition of cellular operations, net of
cash......................................... (26,032) (110,977) (213,686)
Investment in cellular operations............. (2,523) (75) (166)
Cash committed for the acquisition of cellular
operations................................... (13,000) (91,400) --
-------- --------- ---------
Net cash used in investing activities......... (36,284) (200,969) (204,353)
-------- --------- ---------
</TABLE>
F-18
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
------- -------- --------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Purchase and retirement of common stock........... (53,860) (1,450) (770)
Proceeds from sale of common stock................ -- -- 31,633
Proceeds from exercise of stock options........... 2,834 48 --
Proceeds from sale of preferred stock............. -- -- 79,599
Repayments of notes payable and due to stockhold-
ers.............................................. -- (23,104) (3,499)
Payments for deferred financing costs............. (516) (5,612) (7,601)
Proceeds from issuance of long-term debt.......... -- 170,000 178,914
Costs incurred in connection with common and pre-
ferred stock offerings........................... (207) (1,364) --
------- -------- --------
Net cash provided by (used in) financing activi-
ties............................................. (51,749) 138,518 278,276
------- -------- --------
Increase (decrease) in cash and cash equivalents.. (39,007) (23,080) 78,033
Cash and cash equivalents at beginning of year.... 100,364 123,444 45,411
------- -------- --------
Cash and cash equivalents at end of year.......... $61,357 $100,364 $123,444
======= ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest......................................... $18,275 $ 1,110 $ 874
Income taxes..................................... 424 448 2,803
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Shares (1997) and (1995) and debt (1996) issued in
connection with the acquisition of cellular
systems.......................................... 19,125 19,429 24,741
Conversion of Class B common stock to Class A com-
mon stock........................................ -- -- 8
Contribution of net assets into joint venture..... -- -- 35,516
</TABLE>
See notes to consolidated financial statements.
F-19
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. ORGANIZATION
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.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. All significant intercompany balances and transactions
have been eliminated in the consolidated financial statements.
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.
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.
OTHER CURRENT ASSETS
In August 1996, the Company filed applications to participate in the auction
for 10 MHz broadband Personal Communications Service ("PCS") licenses
conducted by the Federal Communications Commission (the "FCC") and deposited
$2.5 million with the FCC. In January 1997, $2.3 million of the deposit was
returned with an additional $653,000 being paid to the FCC. For 1996, the
deposit with the FCC is included in other current assets and for 1997 such
amount is included in Cellular licenses.
INVESTMENTS IN CELLULAR OPERATIONS
Investments in cellular operations in which the Company's interest is 20% or
more are accounted for under the equity method. Interest in investments that
are less than 20% are accounted for under the cost method.
On November 30, 1995 the Company entered into a Joint Venture with SBC
Communications, Inc. ("SBC"), formerly Southwestern Bell, in which the Company
contributed its system serving the Laredo, TX MSA (approximately 176,000 Pops)
and SBC contributed cellular properties in the Illinois-4 and -6 RSAs. The
Company owns 44.5% of the combined 594,000 Pops or approximately 264,000 Net
Pops. Under the terms of the Joint Venture agreement, the Company receives
preferential distributions in the first four years of the Joint Venture rising
from $3.3 million in the first year to $5.8 million in the final year. Such
preferential distributions are guaranteed by SBC. The Company also has an
option to put its Joint Venture interest to SBC at prices
F-20
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
beginning at $28.5 million and escalating to $39.0 million at the end of the
four year period. SBC has operating control of the properties and has certain
rights to purchase the Company's interests on the day prior to the fourth
anniversary. The Company's guaranteed preferential distribution from the Joint
Venture for 1997, 1996 and the month of December 1995 amounted to $4.3
million, $3.4 million and $275,000, respectively, which are included in other
revenue.
CELLULAR LICENSES
The Company primarily uses a 40 year life to amortize cellular licenses
acquired. Amortization expense for the years ended December 31, 1997, 1996 and
1995 was $12.7 million, $9.5 million and $4.3 million, respectively.
The Company periodically reviews the carrying value of 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
licenses to the estimated market value of the cellular systems, 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, 1997.
INCOME RECOGNITION
Revenues are recognized during the period service is provided or when
equipment is delivered.
EXPENSE RECOGNITION
Marketing costs relating to new subscribers are expensed in the period that
they are incurred. Advertising expense amounted to $3.7 million, $2.3 million
and $1.5 million for the years ended December 31, 1997, 1996 and 1995,
respectively.
FIXED ASSETS
Fixed assets are recorded at cost. Depreciation is computed using the
straight-line method over the estimated useful life of the asset of three to
seven years.
DEFERRED FINANCING COSTS
Deferred financing costs primarily represent underwriting discounts 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 are included in interest expense.
COMMON STOCK SPLITS
On July 17, 1995, 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 August 4, 1995, March 11, 1996 and October
21, 1996, respectively. All footnote disclosures and applicable per share data
have been retroactively restated to reflect these splits.
F-21
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to employees
with an exercise price equal to the fair value of the shares at the date of
grant. The Company accounts for stock option grants in accordance with APB
Opinion No. 25, Accounting for Stock Issued to Employees ("APB 25") and,
accordingly, as option grants are at fair market value, recognizes no
compensation expense for these grants (see Note 9--Commitments and
Contingencies).
NET INCOME (LOSS) PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
Earnings per Share. Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities. All earnings
(loss) per share amounts for all periods have been presented and, where
appropriate, restated to conform to Statement 128 requirements. In computing
dilutive earnings (loss) per share for the years ended December 31, 1997, 1996
and 1995, 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 12 3/4% Senior 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.
RECLASSIFICATION
Certain items have been reclassified in the consolidated balance sheets and
the consolidated statements of cash flows to conform to the current
presentation.
3. ACQUISITION OF CELLULAR OPERATIONS
All acquisitions were accounted for utilizing the purchase method of
accounting. The allocation of purchase price for certain acquisitions
described below is subject to adjustments.
During the year ended December 31, 1997, the Company established its fourth
operating cluster by consummating the acquisition of four RSAs in Kentucky
from a subsidiary of Horizon Cellular Telephone Company, L.P. ("Horizon"). The
785,000 Pop cluster was acquired for approximately $96.4 million in cash and
1,948,052 shares of the Company's Class A common stock. On February 4, 1997,
the Company repurchased and retired the 1,948,052 shares from Horizon for
$15.3 million. In addition, the Company strengthened its Upper Midwest cluster
through the acquisition of the WI-4 RSA, consisting of approximately 119,000
Pops on January 7, 1997 from a subsidiary of BellSouth Corporation for
approximately $6.3 million in cash, and the acquisition of three counties in
the WI-5 RSA consisting of approximately 81,000 Pops on May 29, 1997 from
United States Cellular Corporation for approximately $10.6 million in cash and
the contribution of approximately 18,000 minority Pops.
F-22
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITION OF CELLULAR OPERATIONS (CONTINUED)
The following acquisitions were completed during 1997 and 1996:
<TABLE>
<CAPTION>
ACQUISITION PURCHASE NET POPS
SYSTEM MARKET DATE PRICE ACQUIRED
- ------ ------ ----------- -------- ---------
<S> <C> <C> <C> <C>
1997
Kentucky Cluster KY-4, KY-5, KY-6 and
KY-8 RSAs January 7, 1997 $115,500,000(A) 785,000
---------
785,000
Upper Midwest Cluster WI-4 RSA January 7, 1997 6,300,000 119,000
WI-5 RSA May 29, 1997 10,600,000 81,000
---------
200,000
---------
TOTAL FOR 1997 985,000
=========
1996
Upper Midwest Cluster WI-2 RSA November 18, 1996 4,300,000 85,645
---------
85,645
Mid-Atlantic Cluster PA-9 RSA February 2, 1996 26,100,000 188,096
WV-3 RSA July 23, 1996 35,000,000 269,709
---------
457,805
---------
New York Cluster NY-6 RSA April 23, 1996 19,800,000(B) 111,373
Poughkeepsie, NY MSA April 23, 1996 38,900,000(B)(C) 218,890
Orange County, NY MSA October 17, 1996 (C) 327,053
---------
657,316
---------
Various Various October 17, 1996 (C) 70,740
---------
TOTAL FOR 1996 1,271,506
=========
</TABLE>
- --------
(A) The Company acquired from a subsidiary of 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.
(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, see
Note 4--Long-Term Debt.)
(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).
F-23
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. ACQUISITION OF CELLULAR OPERATIONS (CONTINUED)
The pro forma unaudited condensed consolidated results of operations for the
years ended December 31, 1996 and 1995, assuming the transactions were
consummated as of January 1, 1995, are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenue......................................... $135,248,000 $ 82,109,000
============ ============
Net loss........................................ $(32,536,000) $(53,038,000)
============ ============
Basic and diluted loss per common share......... $ (.89) $ (1.65)
============ ============
</TABLE>
No pro forma effect was given for 1997, 1996 and 1995 for the WI-4 or WI-5
acquisitions as their results are not significant nor is the pro forma effect
presented for one week in 1997 for the Kentucky Cluster acquisition as this is
also not significant.
4. LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1997 1996
------------ ------------
<S> <C> <C>
14% Senior Subordinated Discount Notes due 2001.. $165,000,000 $146,783,000
10 3/4% Senior Subordinated Convertible Discount
Notes due 2004.................................. 45,623,000 41,087,000
12 1/4% Senior Subordinated Discount Notes due
2003............................................ 187,700,000 166,647,000
10 3/4% Senior Notes due 2004.................... 170,000,000 170,000,000
------------ ------------
$568,323,000 $524,517,000
============ ============
</TABLE>
On November 23, 1994, Wireless issued approximately $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%, compounded semiannually, to an aggregate principal amount of
approximately $165.0 million. Interest is now accruing at the rate of 14% per
annum, payable semiannually in cash beginning May 15, 1998.
On August 21, 1995, the Company issued approximately $60.0 million aggregate
principal amount of 10 3/4% Senior Subordinated Convertible Discount Notes due
2004 (the "10 3/4% Notes"). The 10 3/4% Notes were issued at a price of
59.345% or $35.6 million. The original issue discount on the 10 3/4% Notes
accretes at a rate of 10 3/4%, compounded semiannually, to an aggregate
principal amount of approximately $60.0 million by August 15, 2000. Interest
will thereafter accrue at 10 3/4% per annum, payable semiannually, in cash
beginning February 15, 2001. The 10 3/4% Notes are convertible into the
Company's Class A common stock at a conversion price of $9.94 per share. The
Company can force conversion of the 10 3/4% Notes under certain circumstances
if the Company's Class A common stock trades at $13.91 per share for ten out
of fifteen consecutive trading days.
On September 27, 1995, Wireless issued approximately $205.0 million
aggregate principal amount of 12 1/4% Senior Subordinated Discount Notes due
2003 (the "12 1/4% 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 1/4% Notes were issued at a price of
69.906% or $143.3 million. The
F-24
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. LONG-TERM DEBT (CONTINUED)
original issue discount on the 12 1/4% Notes accretes at a rate of 12 1/4%
compounded semiannually to an aggregate principal amount of approximately
$205.0 million by October 1, 1998. Interest will thereafter accrue at 12 1/4%
per annum payable semiannually in cash beginning April 1, 1999.
On November 6, 1996, Wireless issued $170.0 million principal amount of 10
3/4% 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.
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 December 31, 1997 approximated $177.8 million.
The maturities of the Company's long-term debt for each of the five years
subsequent to December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................ $ --
1999............................................................ --
2000............................................................ --
2001............................................................ 165,000,000
2002............................................................ --
Thereafter...................................................... 403,323,000
------------
Total........................................................... $568,323,000
============
</TABLE>
5. INCOME TAXES
The significant components of the Company's deferred tax liabilities and
assets are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1997 1996
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation................................... $ (9,652,000) $ (4,340,000)
Amortization................................... (11,407,000) (5,957,000)
License basis difference....................... (3,797,000) --
Other.......................................... (4,385,000) --
Deferred tax assets:
Net operating loss carryforwards............... 6,915,000 3,715,000
Amortization of original issue discount........ 33,726,000 19,745,000
State and local deferred taxes................. 2,280,000 2,017,000
Accruals....................................... 2,049,000 2,658,000
Other.......................................... 2,504,000 1,805,000
------------ ------------
Net deferred tax assets......................... 18,233,000 19,643,000
Valuation allowance............................. (22,030,000) (19,643,000)
------------ ------------
Net deferred tax liability...................... $ (3,797,000) $ --
============ ============
</TABLE>
F-25
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. INCOME TAXES (CONTINUED)
At December 31, 1997, the Company had tax net operating loss carryforwards
("NOLs") of approximately $20.3 million, which are available to offset future
taxable income. NOLs begin expiring in the year 2007 through 2012 as follows:
2007--$1.3 million, 2009--$2.9 million, 2010--$1.7 million, 2011--$5.6 million
and 2012--$8.8 million.
As a result of the acquisition of certain markets wherein the book and tax
basis of the Cellular licenses are different, the Company recorded a deferred
tax liability and an increase to the book basis of the licenses related to
these acquisitions.
6. COMMON STOCK
On December 22, 1994, the Company closed on its Initial Public Offering
("IPO") of 7,812,500 shares of Class A common stock resulting in proceeds of
$34.7 million after deducting expenses related to the offering. Concurrent
with the closing of the IPO, certain stockholders converted their Series A and
B Convertible Preferred Stock into an aggregate of 10,157,955 shares of Class
B common stock.
In connection with the overallotment agreement with the underwriters of the
IPO, during January 1995, the Company sold an additional 585,938 shares of
Class A common stock, which resulted in net proceeds of approximately $2.6
million.
During 1995, the Company's Board of Directors authorized the Company to
purchase up to 750,000 shares of its Class A common stock in the open market
or in private transactions from time to time. During 1995, 1996 and 1997, the
Company purchased and retired 127,250 shares, not effected for the 1996
splits, 149,600 shares and 10,000 shares at prices ranging from $5.40 to $8.30
per share, $9.00 to $12.00 per share and $10.37 per share, respectively. To
date, the Company has repurchased and retired approximately 287,000 shares of
its Class A common stock.
On July 14, 1995, Harvard Private Capital Group, Inc. and Spectrum Equity
Investors L.P. exercised an option to purchase a total of 1,293,461 shares of
the Company's Class A common stock. The proceeds to the Company totaled $5.0
million.
During October 1995, the Company filed a $200.0 million shelf registration
with the SEC, to be used for acquisition purposes only. The shelf registration
covers $100.0 million of debt securities (including convertible debt
securities), $75.0 million of preferred stock (including convertible preferred
stock) and $25.0 million of Class A common stock to be issued upon approval of
the Board of Directors.
On November 22, 1995, the Company sold 3,125,000 shares of Class A common
stock to an institutional investor, realizing net proceeds of $24.1 million.
In January 1996, Price Communications, an affiliate of the Company, acquired
warrants which are now convertible directly into 1,820,000 shares of Class B
common stock from former executives of an acquired company. The effective
exercise price is $5.02 per share of Class B common stock and escalates to
$6.32.
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
F-26
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. COMMON STOCK (CONTINUED)
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 are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1996
---------- ----------
<S> <C> <C>
Options issued to employees............................ 1,477,000 2,048,000
Options reserved for issuance.......................... 401,000 588,000
Warrants............................................... 1,820,000 1,876,000
Shares reserved for convertible securities............. 32,856,000 39,239,000
---------- ----------
36,554,000 43,751,000
========== ==========
</TABLE>
7. PREFERRED STOCK
During December 1995, the Company issued 96,000 shares of 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 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 Company can effectively force the conversion of the cumulative convertible
shares at such time as the Company's Class A common stock trades at or above
$14.72 per share for 10 out of 15 trading days. 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.
F-27
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. SALE OF CELLULAR OPERATIONS
The Company made the following dispositions of cellular properties and
interests:
<TABLE>
<CAPTION>
DATE DESCRIPTION SALES PRICE GAIN (LOSS)
---- ----------- ----------- -----------
<S> <C> <C> <C>
1997
January Florence, AL MSA and AL-1B RSA, sale of license $22,396,000 $ 8,451,000
April Sale of Minority Pops 1,255,000 (28,000)
-----------
$ 8,423,000
===========
1996
July AL-4 RSA, sale of license $25,000,000 $(1,640,000)
September Sale of Minority Pops 2,813,000 1,817,000
November MI-2 RSA, sale of license 6,500,000 (1,578,000)
-----------
$(1,401,000)
===========
1995
January Abilene, TX MSA, sale of assets $15,928,000 $11,598,000
March MN-6 MSA, sale of a portion of the license
representing 31,000 Pops 3,550,000 --
-----------
$11,598,000
===========
</TABLE>
9. COMMITMENTS AND CONTINGENCIES
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 and, accordingly, no
compensation expense is recognized. 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 elected to follow APB
25 and related interpretations in accounting for its employee stock options
because, as discussed below, the alternative fair value accounting provided
for under FASB No. 123, Accounting for Stock-Based Compensation, requires use
of option valuation models that were not developed for use in valuing employee
stock options and are highly subjective.
Pro forma information regarding net income (loss) and basic and diluted
earnings (loss) per common share is required by Statement No. 123, and has
been determined as if the Company has accounted for its employee stock options
under the fair value method of that statement.
The fair value for these options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average
assumptions for 1995, 1996 and 1997 risk free interest rate of 6.25%; dividend
yield 0%; .480 for 1995 and 1996 and .323 for 1997 volatility factors of the
expected market price of the Company's Class A common stock; and a weighted-
average expected life of option of four years.
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
F-28
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
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):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
Net income (loss):
As reported............................................ $(20,171) $(23,043)
Pro forma.............................................. $(21,318) $(23,818)
Basic and diluted earnings (loss) per common share:
As reported............................................ $ (0.55) $ (0.76)
Pro forma.............................................. $ (0.58) $ (0.78)
</TABLE>
Since compensation expense associated with option grants is recognized over
the vesting period, the initial impact of applying FAS 123 on pro forma net
income (loss) is not representative of the potential impact on pro forma net
income (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 PRICE PER
OPTIONS SHARE
------------ ----------------
<S> <C> <C>
Balance at December 31, 1994................... 1,040,039 $3.71
Options granted................................ 770,117 $4.54 to $8.72
Options returned for future issuance........... (41,016) $4.54 to $4.67
---------
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................... 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-29
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS
OPTIONS OUTSTANDING EXERCISABLE
----------------------------------- -----------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
RANGE OF OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICES 1997 LIFE PRICE 1997 PRICE
-------- -------------- ----------- -------- -------------- --------
<S> <C> <C> <C> <C> <C>
$ 3.71 to
$ 4.67 848,957 7 years $ 4.29 676,821 $ 4.20
$ 8.72 to
$ 8.88 314,899 8.8 years $ 8.83 64,965 $ 8.72
$10.80 to
$11.40 313,125 8.6 years $10.88 104,271 $10.88
</TABLE>
LEASE COMMITMENTS
Total rent expense amounted to approximately $3,416,000, $2,378,000 and
$877,000 for the years ended December 31, 1997, 1996 and 1995, respectively,
of which $47,000, $137,000 and $60,000 was paid to an affiliate during 1997,
1996 and 1995, respectively. At December 31, 1997, the Company is committed
under the following noncancellable operating leases:
<TABLE>
<CAPTION>
YEAR
----
<S> <C>
1998........................................................... $ 3,513,000
1999........................................................... 3,040,000
2000........................................................... 2,382,000
2001........................................................... 1,708,000
2002........................................................... 1,063,000
Thereafter..................................................... 2,946,000
-----------
$14,652,000
===========
</TABLE>
10. RELATED PARTY TRANSACTIONS
The Company and AT&T Wireless Services Inc. are parties to an operating
agreement dated April 28, 1994, which provides for, among other services,
switch sharing agreements with AT&T's adjacent systems, assistance in
obtaining cellular system service and equipment discounts, assistance in
evaluating potential acquisitions and in securing financing.
11. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments:
Cash and cash equivalents: The carrying amounts reported in the
consolidated balance sheets approximate fair value.
Long-term debt: The fair value of the Senior Subordinated Notes and
Senior Subordinated Discount Notes is based on the quoted market price. The
carrying amount of the Senior Convertible Discount Notes approximates their
fair value.
F-30
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying amounts and fair values of the Company's financial instruments
at December 31, 1997 are as follows:
<TABLE>
<CAPTION>
CARRYING FAIR
AMOUNT VALUE
------------ ------------
<S> <C> <C>
Cash and cash equivalents....................... $ 61,357,000 $ 61,357,000
Long-term debt:
14% Senior Subordinated Discount Notes........ 165,000,000 182,738,000
10 3/4% Senior Convertible Discount Notes..... 45,623,000 45,623,000
12 1/4% Senior Subordinated Discount Notes.... 187,700,000 193,801,000
10 3/4% Senior Notes.......................... 170,000,000 187,000,000
</TABLE>
12. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accounts payable and accrued expenses consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
Accounts payable.................................. $ 9,404,000 $ 4,592,000
Interest payable.................................. 5,920,000 2,792,000
Accrued operating expenses........................ 12,467,000 3,819,000
Income and other taxes payable.................... 1,847,000 2,597,000
Other............................................. 4,328,000 8,517,000
----------- -----------
$33,966,000 $22,317,000
=========== ===========
Other current liabilities consist of the following:
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
----------- -----------
<S> <C> <C>
Amount due for untendered CIS shares.............. $ -- $ 2,523,000
Unearned covenant not to compete.................. 2,125,000 2,250,000
Other............................................. -- 3,000
----------- -----------
$ 2,125,000 $ 4,776,000
=========== ===========
</TABLE>
13. SUBSEQUENT EVENTS
TENNESSEE ACQUISITION
In January 1998, Kyle Cellular, a wholly owned subsidiary of the Company,
acquired, subject to FCC approval, the TN-4 RSA with approximately 264,000
Pops from Bachtel Liquidity, L.P., an affiliate of Bachow & Associates, Inc.
for approximately $73.0 million in cash. The RSA, adjacent to three MSAs
including Knoxville, TN, is located south of the Company's Kentucky Cluster
and features such tourist attractions as the towns of Gatlinburg and Pigeon
Forge, Dollywood and the entrance to the Great Smoky Mountains National Park.
$13.0 million will be funded through available cash with the balance being
provided by a $60.0 million Senior Secured Reducing Revolver (the "Borrowing")
with J.P. Morgan Securities Inc. The Borrowing matures eight years from the
closing date with repayment 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
F-31
<PAGE>
PRICELLULAR CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. SUBSEQUENT EVENTS (CONTINUED)
of certain financial ratios in order to maintain the permitted indebtedness.
Violation of such ratios requires the permanent prepayment of an amount to
cure the deficiency. The Borrowing is secured by the assets of Kyle Cellular.
Pursuant to the agreement the Company is required to enter into an interest
rate swap which effectively converts a portion of the interest on the
outstanding indebtedness from a variable rate basis to a fixed rate. The
notional amount required to be hedged is 50% of the aggregate outstanding
principal amount.
MERGER AGREEMENT
On June 25, 1998, American Cellular acquired all of the operations of
PriCellular Corporation, a Delaware corporation pursuant to an Agreement and
Plan of Merger (the "Merger Agreement"). At the effective time, as defined in
the Merger Agreement, each issued and outstanding share of Class A common
stock, par value $0.01 per share, of the Company (the "Class A Shares") and
Class B common stock, par value $0.01 per share, of the Company had the right
to receive $14.00 in cash, without interest (the "Merger Consideration"), and
each issued and outstanding share of Series A Preferred Stock of the Company
had the right to receive the product of the Merger Consideration 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. The
Merger Agreement permits the Company, under certain circumstances, to respond
to unsolicited third party acquisition proposals and, upon payment of certain
fees to ACC, to terminate the Merger Agreement.
In connection with the execution of the Merger Agreement, the Principal
Stockholders of the Company entered into a Voting Agreement with ACC. Pursuant
to the agreement, the Principal Stockholders, the beneficial owners of
approximately 39% of the outstanding Common Stock and Preferred Stock of the
Company (or 57% of the fully diluted voting power of the Company), agreed to
vote their shares in favor of the approval and adoption of the Merger
Agreement. The Voting Agreement terminates upon termination of the Merger
Agreement. The transaction is subject to, among other things, regulatory
approvals.
F-32
<PAGE>
PRICELLULAR CORPORATION
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................... $ 1,795 $ 33,032
Other current assets........................................ 1,088 7,650
-------- --------
Total current assets......................................... 2,883 40,682
Investment in and advances to subsidiaries................... 177,779 180,012
Other assets................................................. 1,071 1,235
-------- --------
Total assets................................................. $181,733 $221,929
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current
liabilities................................................ $ 1,930 $ 923
Long-term debt.............................................. 45,623 41,087
Stockholders' equity........................................ 134,180 179,919
-------- --------
Total liabilities and stockholders' equity................... $181,733 $221,929
======== ========
</TABLE>
See accompanying notes.
F-33
<PAGE>
PRICELLULAR CORPORATION
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
CONDENSED STATEMENTS OF OPERATIONS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
REVENUE
Other............................................ $ -- $ 237 $ --
COSTS AND EXPENSES
General and administrative....................... 558 384 293
-------- -------- -------
Operating loss................................... (558) (147) (293)
OTHER INCOME (EXPENSE)
Interest expense, net............................ (3,714) (644) (324)
-------- -------- -------
Loss before equity in net income (loss) of
subsidiaries.................................... (4,272) (791) (617)
Equity in net income (loss) of subsidiaries...... (9,359) (22,252) (7,094)
-------- -------- -------
Net income (loss)................................ $(13,631) $(23,043) $(7,711)
======== ======== =======
</TABLE>
See accompanying notes.
F-34
<PAGE>
PRICELLULAR CORPORATION
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
NET CASH PROVIDED BY OPERATING ACTIVITIES........ $ 1,434 $ 2,762 $ 721
Investing activities:
Repayments from and (advances to)
subsidiaries.................................. 4,062 (65,380) (31,149)
Amounts deposited in escrow to bid in PCS
auction, net.................................. 2,500 1,640 (4,140)
Dividend received from subsidiary.............. 12,000 -- --
Junior Subordinated Note receivable from
subsidiary.................................... -- -- (20,000)
-------- -------- --------
Net cash provided by (used in) investing
activities...................................... 18,562 (63,740) (55,289)
-------- -------- --------
Financing activities:
Proceeds from sale of common stock............. -- -- 31,633
Proceeds from issuance of Senior Subordinated
Convertible Discount Notes.................... -- -- 35,607
Proceeds from issuance of preferred stock...... -- -- 79,599
Payments for deferred financing costs.......... -- -- (1,455)
Exercise of employee stock options............. 2,834 48 --
Purchase and retirement of common stock........ (53,860) (1,450) (770)
Costs incurred in connection with common and
preferred stock offerings..................... (207) (1,364) --
-------- -------- --------
Net cash (used in) provided by financing
activities...................................... (51,233) (2,766) 144,614
-------- -------- --------
(Decrease) increase in cash and cash
equivalents..................................... (31,237) (63,744) 90,046
Cash and cash equivalents at beginning of year... 33,032 96,776 6,730
-------- -------- --------
Cash and cash equivalents at end of year......... $ 1,795 $ 33,032 $ 96,776
======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING
ACTIVITIES
Conversion of Class B common stock to Class A
common stock.................................... 24 17 8
Shares issued in connection with the acquisition
of cellular systems............................. 19,125 -- 24,741
</TABLE>
See accompanying notes.
F-35
<PAGE>
PRICELLULAR CORPORATION
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT--(CONTINUED)
NOTES TO CONDENSED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. BASIS OF PRESENTATION
In the parent company-only financial statements, the Company's investment in
subsidiaries is stated at cost plus equity in undistributed earnings of
subsidiaries since the date of acquisition. The Company's share of net income
or (loss) of its unconsolidated subsidiaries is included in consolidated
income or (loss) using the equity method. The parent company-only financial
statements should be read in conjunction with the Company's consolidated
financial statements.
2. LONG-TERM DEBT
On August 21, 1995, the Company issued approximately $60.0 million aggregate
principal amount of 10 3/4% Senior Subordinated Convertible Discount Notes due
2004. The notes were issued at a price of 59.345% or $35.6 million. The
original issue discount on the notes accretes at a rate of 10%, compounded
semiannually, to an aggregate principal amount of approximately $60.0 million
by August 15, 2000. Interest will thereafter accrue at 10% per annum, payable
semiannually beginning February 15, 2001. The notes are convertible into the
Company's Class A common stock at a conversion price of $9.94. The Company can
force conversion of the notes under certain circumstances if the Company's
Class A common stock trades at $13.91 per share for ten out of fifteen
consecutive trading days.
There are no maturities of long-term debt until 2004 at which time the
entire note becomes due.
3. OTHER
On September 30, 1996, the Company forgave the Junior Subordinated Note due
from its subsidiary, PriCellular Wireless Corporation, which amounted to $21.6
million.
F-36
<PAGE>
PRICELLULAR CORPORATION
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COST AND OTHER AT END
DESCRIPTION OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
----------- ---------- ---------- ---------- ---------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31,
1995
Allowance for doubtful
accounts................ $ 735 $ 936 $1,982(A) $(1,577) $ 2,076
======= ======= ====== ======= =======
Valuation allowance for
deferred income taxes... $ 1,538 $ 7,151 $ -- $ -- $ 8,689
======= ======= ====== ======= =======
YEAR ENDED DECEMBER 31,
1996
Allowance for doubtful
accounts................ $ 2,076 $ 2,079 $ 58(A) $(2,446) $ 1,767
======= ======= ====== ======= =======
Valuation allowance for
deferred income taxes... $ 8,689 $10,954 $ -- $ -- $19,643
======= ======= ====== ======= =======
YEAR ENDED DECEMBER 31,
1997
Allowance for doubtful
accounts................ $ 1,767 $ 2,331 $ 513(A) $(2,925) $ 1,686
======= ======= ====== ======= =======
Valuation allowance for
deferred income taxes... $19,643 $ 2,387 $ -- $ -- $22,030
======= ======= ====== ======= =======
</TABLE>
- --------
(A)Results principally from the acquisition of cellular systems.
F-37
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE NOTES
IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE
SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY OR COMPANY SINCE THE DATE HEREOF.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain Terms............................................................ 4
Prospectus Summary....................................................... 5
Risk Factors............................................................. 16
The Exchange Offer....................................................... 24
The Merger............................................................... 32
Use of Proceeds.......................................................... 33
Capitalization........................................................... 34
Unaudited Pro Forma Financial Information................................ 35
Selected Financial Data.................................................. 41
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 42
Business................................................................. 46
Management............................................................... 65
Principal Stockholders................................................... 68
Certain Relationships and Related Transactions........................... 70
Description of Credit Facility........................................... 71
Description of Exchange Notes............................................ 73
Material Federal Income Tax Considerations............................... 98
Plan of Distribution..................................................... 99
Legal Matters............................................................ 99
Experts.................................................................. 99
Available Information.................................................... 100
Index to Financial Statements............................................ F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
OFFER TO EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2008
OF
AMERICAN CELLULAR
CORPORATION
----------------
PROSPECTUS
----------------
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Delaware corporation and its Certificate of Incorporation
provide for indemnification of its directors, officers, employees and agents
to the fullest extent permitted by the Delaware General Corporation Law (the
"DGCL"), as the same exists or may hereafter be amended. Section 145 of the
DGCL provides in relevant part that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of
the corporation) by reason of the fact that 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 actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such person's conduct
was unlawful.
In addition, Section 145 of the DGCL provides that a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of
the corporation to procure a judgment in its favor by reason of the fact that
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 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) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit if such person acted in good faith and in a manner such person reasonably
believed to be in or not opposed to the best interests of the corporation and
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Delaware Court of Chancery
or the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Delaware Court of Chancery or such other
court shall deem proper. Delaware law further provides that nothing in the
above-described provisions shall be deemed exclusive of any other rights to
indemnification or advancement of expenses to which any person may be entitled
under any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise.
Section 102(b)(7) of the DGCL eliminates the liability of a corporation's
directors to a corporation or its stockholders, except for liabilities related
to a breach of duty of loyalty, actions not in good faith, and certain other
liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement, dated May 6, 1998, among American Cellular
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, TD
Securities (USA), Inc. and Wasserstein Perella Securities, Inc.
relating to the 10 1/2% Senior Notes of American Cellular Corporation
due 2008.
2.1 Agreement and Plan of Merger, dated as of March 6, 1998, between
PriCellular Corporation and American Cellular Corporation, as amended
by Amendment No. 1 thereto, dated May 27, 1998.(1)
3.1 Certificate of Incorporation, dated February 26, 1998.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3.2 Certificate of Amendment of Certificate of Incorporation, dated March
3, 1998.
3.3 Certificate of Amendment to Certificate of Incorporation, dated April
21, 1998.
3.4 Certificate of Designation of Series A Preferred Stock, dated April
21, 1998.
3.5 Restated Certificate of Incorporation.*
3.6 Bylaws.
3.7 Amended Bylaws.*
4.1 Indenture, dated as of May 13, 1998, between American Cellular
Corporation and Chase Manhattan Bank and Trust Company, National
Association, as trustee, relating to $285,000,000 aggregate principal
amount of 10 1/2% Senior Notes due 2008.
4.2 Supplemental Indenture, dated as of July 31, 1998, by and between
American Cellular Corporation and Chase Manhattan Bank and Trust
Company, National Association.*
4.3 Registration Rights Agreement, dated as of May 13, 1998, among
American Cellular Corporation and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, TD Securities (USA), Inc. and Wasserstein Perella
Securities, Inc.
4.4 Specimen Certificate of 10 1/2% Senior Notes due 2008 (the "Private
Notes") (included in Exhibit 4.1 hereto).
4.5 Specimen Certificate of 10 1/2% Senior Notes due 2008 (the "Exchange
Notes") (included in Exhibit 4.1 hereto).
5.1 Opinion of Latham & Watkins regarding the validity of the Exchange
Notes.
8.1 Opinion of Latham & Watkins regarding tax matters.
9.1 Voting Agreement, dated as of March 6, 1998, among American Cellular
Corporation, PriCellular Corporation, and the stockholders named
therein.(1)
10.1 Contribution Agreement by and among Texas/Illinois Cellular Limited
Partnership, a Delaware limited partnership, Southwestern Bell Mobile
Systems, Inc., a Delaware and Virginia corporation, PriCellular
Corporation, Cellular Information Systems of Laredo, Inc., a Texas
corporation, dated as of April 10, 1995.(2)
10.2 Asset Acquisition Agreement dated as of October 15, 1996 among
PriCellular, Cellular Information Systems of Florence, Inc. and
Horizon Cellular Telephone Company of Central Kentucky, L.P.(3)
10.3 Stockholders' Agreement dated as of April 28, 1995 by and among
PriCellular Corporation and the parties named therein.(4)
10.4 Voting Agreement dated as of December 28, 1995 by and among
PriCellular Corporation and the parties names therein.(5)
10.5 Operating Agreement dated as of April 28, 1994 by and between
PriCellular Corporation and McCaw.(4)
10.6 Warrant Agreement between PriCellular Corporation and Price
Communications Corporation.(3)
10.7 Spectrum Letter dated March 6, 1998.(6)
10.8 Consent and Waiver dated as of March 6, 1998 between PriCellular
Corporation and AT&T Wireless Services, Inc.(6)
10.9 Stock Purchase Agreement, dated as of March 5, 1998, by and among
American Cellular Corporation and each of the parties listed on
Exhibit A thereto, as amended as of March 31, 1998.
10.10 Stockholders Agreement, dated as of March 5, 1998, by and among
American Cellular Corporation and each of the parties listed on
Exhibit A thereto.
10.11 Registration Rights Agreement dated as of March 5, 1998 by and among
American Cellular Corporation and each of the parties listed on
Exhibit A to such agreement.
10.12 Executive Agreement between American Cellular Corporation and Brian
McTernan, dated as of June 22, 1998.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.13 Executive Agreement between American Cellular Corporation and John
Fujii, dated as of June 22, 1998.
10.14 Subscription Agreement between American Cellular Corporation and James
J. Walter, Jr., dated as of June 25, 1998.
10.15 Subscription Agreement between American Cellular Corporation and
Janice P. Mercer, dated as of June 25, 1998.
10.16 Asset Purchase Agreement dated as of October 31, 1997 by and among
PriCellular Corporation, Kyle Cellular Corporation and Tennessee 04
Partners, L.P., as amended by Amendment No. 1 thereto dated as of
March 27, 1998.
10.17 Credit Agreement dated June 25, 1998, among American Cellular Wireless
LLC, as Borrower, and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, TD Securities (USA), Inc. and the
several other lenders parties thereto.(7)
10.18 Pledge and Escrow Agreement, dated as of May 13, 1998 by and between
American Cellular Corporation and Chase Manhattan Bank and Trust
Company, National Association.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of American Cellular Corporation.
23.1 Consent of Latham & Watkins (included in their opinion filed as
Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney of American Cellular Corporation (included on
signature page to this Registration Statement on Form S-4).
25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of 1939 of Chase Manhattan Bank and Trust Company,
National Association.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
(1) Incorporated herein by reference to PriCellular Corporation's Schedule
14C, filed on June 3, 1998.
(2) Incorporated herein by reference to PriCellular Wireless Corporation's
Registration Statement on Form S-1, No. 33-95834.
(3) Incorporated herein by reference to PriCellular Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996.
(4) Incorporated herein by reference to PriCellular Corporation's Registration
Statement on Form S-1, No. 33-85678.
(5) Incorporated herein by reference to PriCellular Corporation's Annual
Report on Form 10-K for the year ended December 31, 1995.
(6) Incorporated herein by reference to PriCellular Corporation's Schedule
13E-3, filed on May 22, 1998.
(7) Incorporated herein by reference to PriCellular Corporation's Amendment
No. 1 to Schedule 13E-3, filed on July 2, 1998.
* To be filed by amendment.
(b) Financial Statement Schedules:
None.
II-3
<PAGE>
SCHEDULES OMITTED
Schedules not listed above are omitted because of the absence of the
conditions under which they are required or because the information required
by such omitted schedules is set forth in the financial statements or the
notes thereto.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrants hereby undertake that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to directors, officers and controlling persons of
the Registrants pursuant to the foregoing provisions, or otherwise, the
Registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim of
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or the registrant in the successful defense of
any action, suit paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
(b) The undersigned registrants hereby undertake to respond to requests for
information that is incorporated by reference into this Prospectus pursuant to
Item 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d)(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement; (i) to include any
Prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to
reflect in the Prospectus any facts or events arising after the effective date
of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental
change in the information set forth in the Registration Statement; (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
II-4
<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 Schaumburg, Illinois on
August 4, 1998.
AMERICAN CELLULAR CORPORATION
/s/ James J. Walter, Jr.
By: _________________________________
James J. Walter, Jr.
Vice President of Finance and
Secretary
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints James J.
Walter, Jr. to be such person's true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign this Registration
Statement, and any and all amendments thereto (including pre- and post-
effective amendments) to any registration statement for the same offering that
is to be effective upon filing pursuant to Rule 462(b) under the Securities
Act of 1933, as amended, and to file the same, with exhibits and schedules
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing necessary or
desirable to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agent or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacity and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Brian McTernan President and Director August 4, 1998
____________________________________ (Principal Executive
Brian McTernan Officer)
/s/ John Fujii Chief Executive Officer and August 4, 1998
____________________________________ Director
John Fujii
/s/ James J. Walter, Jr. Vice President of Finance August 4, 1998
____________________________________ and Secretary (Principal
James J. Walter, Jr. Accounting Officer)
/s/ Brion Applegate Director August 4, 1998
____________________________________
Brion Applegate
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Glenn M. Creamer Director August 4, 1998
____________________________________
Glenn M. Creamer
/s/ Jeffrey M. Lane Director August 4, 1998
____________________________________
Jeffrey M. Lane
/s/ Michael J. Marocco Director August 4, 1998
____________________________________
Michael J. Marocco
/s/ Kevin J. Maroni Director August 4, 1998
____________________________________
Kevin J. Maroni
/s/ Mark A. Pelson Director August 4, 1998
____________________________________
Mark A. Pelson
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1 Purchase Agreement, dated May 6, 1998, among American Cellular
Corporation, Merrill Lynch, Pierce, Fenner & Smith Incorporated, TD
Securities (USA), Inc. and Wasserstein Perella Securities, Inc.
relating to the 10 1/2% Senior Notes of American Cellular Corporation
due 2008.
2.1 Agreement and Plan of Merger, dated as of March 6, 1998, between
PriCellular Corporation and American Cellular Corporation, as amended
by Amendment No. 1 thereto, dated May 27, 1998.(1)
3.1 Certificate of Incorporation, dated February 26, 1998.
3.2 Certificate of Amendment of Certificate of Incorporation, dated March
3, 1998.
3.3 Certificate of Amendment to Certificate of Incorporation, dated April
21, 1998.
3.4 Certificate of Designation of Series A Preferred Stock, dated April
21, 1998.
3.5 Restated Certificate of Incorporation.*
3.6 Bylaws.
3.7 Amended Bylaws.*
4.1 Indenture, dated as of May 13, 1998, between American Cellular
Corporation and Chase Manhattan Bank and Trust Company, National
Association, as trustee, relating to $285,000,000 aggregate principal
amount of 10 1/2% Senior Notes due 2008.
4.2 Suppemental Indenture, dated as of July 31, 1998, by and between
American Cellular Corporation and Chase Manhattan Bank and Trust
Company, National Association.*
4.3 Registration Rights Agreement, dated as of May 13, 1998, among
American Cellular Corporation and Merrill Lynch, Pierce, Fenner &
Smith Incorporated, TD Securities (USA), Inc. and Wasserstein Perella
Securities, Inc.
4.4 Specimen Certificate of 10 1/2% Senior Notes due 2008 (the "Private
Notes") (included in Exhibit 4.1 hereto).
4.5 Specimen Certificate of 10 1/2% Senior Notes due 2008 (the "Exchange
Notes") (included in Exhibit 4.1 hereto).
5.1 Opinion of Latham & Watkins regarding the validity of the Exchange
Notes.
8.1 Opinion of Latham & Watkins regarding tax matters.
9.1 Voting Agreement, dated as of March 6, 1998, among American Cellular
Corporation, PriCellular Corporation, and the stockholders named
therein.(1)
10.1 Contribution Agreement by and among Texas/Illinois Cellular Limited
Partnership, a Delaware limited partnership, Southwestern Bell Mobile
Systems, Inc., a Delaware and Virginia corporation, PriCellular
Corporation, Cellular Information Systems of Laredo, Inc., a Texas
corporation, dated as of April 10, 1995.(2)
10.2 Asset Acquisition Agreement dated as of October 15, 1996 among
PriCellular, Cellular Information Systems of Florence, Inc. and
Horizon Cellular Telephone Company of Central Kentucky, L.P.(3)
10.3 Stockholders' Agreement dated as of April 28, 1995 by and among
PriCellular Corporation and the parties named therein.(4)
10.4 Voting Agreement dated as of December 28, 1995 by and among
PriCellular Corporation and the parties names therein.(5)
10.5 Operating Agreement dated as of April 28, 1994 by and between
PriCellular Corporation and McCaw.(4)
10.6 Warrant Agreement between PriCellular Corporation and Price
Communications Corporation.(3)
10.7 Spectrum Letter dated March 6, 1998.(6)
10.8 Consent and Waiver dated as of March 6, 1998 between PriCellular
Corporation and AT&T Wireless Services, Inc.(6)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.9 Stock Purchase Agreement, dated as of March 5, 1998, by and among
American Cellular Corporation and each of the parties listed on
Exhibit A thereto, as amended as of March 31, 1998.
10.10 Stockholders Agreement, dated as of March 5, 1998, by and among
American Cellular Corporation and each of the parties listed on
Exhibit A thereto.
10.11 Registration Rights Agreement dated as of March 5, 1998 by and among
American Cellular Corporation and each of the parties listed on
Exhibit A to such agreement.
10.12 Executive Agreement between American Cellular Corporation and Brian
McTernan, dated as of June 22, 1998.
10.13 Executive Agreement between American Cellular Corporation and John
Fujii, dated as of June 22, 1998.
10.14 Subscription Agreement between American Cellular Corporation and James
J. Walter, Jr., dated as of June 25, 1998.
10.15 Subscription Agreement between American Cellular Corporation and
Janice P. Mercer, dated as of June 25, 1998.
10.16 Asset Purchase Agreement dated as of October 31, 1997 by and among
PriCellular Corporation, Kyle Cellular Corporation and Tennessee 04
Partners, L.P., as amended by Amendment No. 1 thereto dated as of
March 27, 1998.
10.17 Credit Agreement dated June 25, 1998, among American Cellular Wireless
LLC, as Borrower, and Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, TD Securities (USA), Inc. and the
several other lenders parties thereto.(7)
10.18 Pledge and Escrow Agreement, dated as of May 13, 1998 by and between
American Cellular Corporation and Chase Manhattan Bank and Trust
Company, National Association.
12.1 Statement of Computation of Ratio of Earnings to Fixed Charges.
21.1 Subsidiaries of American Cellular Corporation.
23.1 Consent of Latham & Watkins (included in their opinion filed as
Exhibit 5.1).
23.2 Consent of Ernst & Young LLP.
23.3 Consent of Ernst & Young LLP
24.1 Power of Attorney of American Cellular Corporation (included on
signature page to this Registration Statement on Form S-4).
25.1 Statement of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of 1939 of Chase Manhattan Bank and Trust Company,
National Association.
27.1 Financial Data Schedule.
99.1 Form of Letter of Transmittal and related documents to be used in
conjunction with the Exchange Offer.
99.2 Form of Notice of Guaranteed Delivery.
</TABLE>
- --------
(1) Incorporated herein by reference to PriCellular Corporation's Schedule
14C, filed on June 3, 1998.
(2) Incorporated herein by reference to PriCellular Wireless Corporation's
Registration Statement on Form S-1, No. 33-95834.
(3) Incorporated herein by reference to PriCellular Corporation's Annual
Report on Form 10-K for the year ended December 31, 1996.
(4) Incorporated herein by reference to PriCellular Corporation's Registration
Statement on Form S-1, No. 33-85678.
(5) Incorporated herein by reference to PriCellular Corporation's Annual
Report on Form 10-K for the year ended December 31, 1995.
(6) Incorporated herein by reference to PriCellular Corporation's Schedule
13E-3, filed on May 22, 1998.
(7) Incorporated herein by reference to PriCellular Corporation's Amendment
No. 1 to Schedule 13E-3, filed on July 2, 1998.
* To be filed by amendment.
<PAGE>
EXHIBIT 1.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICAN CELLULAR CORPORATION
(a Delaware corporation)
$285,000,000
10 1/2% Senior Notes due 2008
PURCHASE AGREEMENT
------------------
Dated: May 6, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PURCHASE AGREEMENT...................................................................... 1
SECTION 1. Representations and Warranties.......................................... 3
------------------------------
(a) Representations and Warranties by the Issuer.............................. 3
(i) Similar Offerings.................................................. 4
-----------------
(ii) Offering Memorandum............................................... 4
-------------------
(iii) Independent Accountants.......................................... 4
-----------------------
(iv) Financial Statements.............................................. 4
--------------------
(v) No Material Adverse Change in Business............................. 5
--------------------------------------
(vi) Good Standing of the Issuer and PriCellular....................... 5
-------------------------------------------
(vii) Good Standing of Subsidiaries.................................... 6
-----------------------------
(viii) Capitalization.................................................. 6
--------------
(ix) Authorization of Agreements....................................... 6
---------------------------
(x) Authorization of the Indenture..................................... 7
------------------------------
(xi) Authorization of the Securities................................... 7
-------------------------------
(xii) Authorization of Credit Facility................................. 8
--------------------------------
(xiii) Description of the Securities and the Indenture................. 8
-----------------------------------------------
(xiv) Absence of Defaults and Conflicts................................ 8
---------------------------------
(xv) Absence of Labor Disputes......................................... 9
-------------------------
(xvi) Absence of Proceedings........................................... 10
----------------------
(xvii) Possession of Intellectual Property............................. 10
-----------------------------------
(xviii) Absence of Further Requirements................................ 10
-------------------------------
(xix) Possession of Licenses and Permits............................... 11
----------------------------------
(xx) Title to Property................................................. 11
-----------------
(xxi) Tax Returns...................................................... 12
-----------
(xxii) Insurance....................................................... 12
---------
(xxiii) Solvency....................................................... 12
--------
(xxiv) Stabilization or Manipulation................................... 13
-----------------------------
(xxv) Related Party Transactions....................................... 13
--------------------------
(xxvi) Environmental Laws.............................................. 13
------------------
(xxvii) Registration Rights............................................ 14
-------------------
(xxiii) Accounting Controls............................................ 14
-------------------
(xxix) Investment Company Act.......................................... 14
----------------------
(xxx) Rule 144A Eligibility............................................ 14
---------------------
(xxxi) No General Solicitation......................................... 15
-----------------------
(xxxii) No Registration Required....................................... 15
------------------------
(xxxiii) No Directed Selling Efforts................................... 15
---------------------------
(xxxiv) PORTAL......................................................... 15
------
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
(xxxv) Merger Agreement................................................. 15
----------------
(b) Officer's Certificates..................................................... 16
SECTION 2. Sale and Delivery to Initial Purchasers; Closing......................... 16
------------------------------------------------
(a) Securities................................................................. 16
(b) Payment.................................................................... 16
(c) Qualified Institutional Buyer.............................................. 17
(d) Denominations; Registration................................................ 17
SECTION 3. Covenants of the Issuer.................................................. 17
-----------------------
(a) Offering Memorandum........................................................ 17
(b) Notice and Effect of Material Events....................................... 17
(c) Amendment to Offering Memorandum and Supplements........................... 18
(d) Qualification of Securities for Offer and Sale............................. 18
(e) Integration................................................................ 18
(f) Rating of Securities....................................................... 18
(g) Rule 144A Information...................................................... 18
(h) Restriction on Resales..................................................... 19
(i) Use of Proceeds............................................................ 19
(j) Restriction on Sale of Securities.......................................... 19
(k) DTC Clearance.............................................................. 19
(l) Legends.................................................................... 19
(m) Interim Financial Statements............................................... 20
(n) Periodic Reports........................................................... 20
SECTION 4. Payment of Expenses...................................................... 20
-------------------
(a) Expenses................................................................... 20
(b) Termination of Agreement................................................... 20
SECTION 5. Conditions of Initial Purchasers' Obligations............................ 21
---------------------------------------------
(a) Opinion of Counsel for the Issuer.......................................... 21
(b) Opinion of Counsel for the Initial Purchasers.............................. 21
(c) Officers' Certificate...................................................... 21
(d) Accountants' Letters and Consents.......................................... 22
(e) Bring-down Letters......................................................... 22
(f) PORTAL..................................................................... 22
(g) Registration Rights Agreement, DTC Agreement, Pledge and Escrow
Agreement and Indenture................................................. 22
(h) Additional Escrow Amount................................................... 22
(i) Consent Solicitation....................................................... 23
(j) Additional Documents....................................................... 23
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
(k) Termination of Agreement................................................... 23
SECTION 6. Indemnification.......................................................... 23
---------------
(a) Indemnification of Initial Purchasers...................................... 23
(b) Indemnification of Issuer and Directors.................................... 24
(c) Actions against Parties; Notification..................................... 24
(d) Settlement without Consent if Failure to Reimburse......................... 25
SECTION 7. Contribution............................................................. 25
------------
SECTION 8. Representations, Warranties and Agreements to Survive
-----------------------------------------------------
Delivery............................................................... 26
--------
SECTION 9. Termination of Agreement................................................. 27
------------------------
(a) Termination; General....................................................... 27
(b) Liabilities................................................................ 27
SECTION 10. Default by One or More of the Initial Purchasers........................ 27
------------------------------------------------
SECTION 11. Notices................................................................. 28
-------
SECTION 12. Parties................................................................. 28
-------
SECTION 13. Governing Law And Time.................................................. 29
----------------------
SECTION 14. Effect of Headings...................................................... 29
------------------
</TABLE>
Schedule A--Initial Purchasers
Schedule B--Subsidiaries of PriCellular Corporation
Schedule C--Securities
Exhibit A--Form of Opinion
Exhibit B--Form of Letter
-iii-
<PAGE>
$285,000,000
10 1/2% Senior Notes due 2008
AMERICAN CELLULAR CORPORATION
(a Delaware corporation)
PURCHASE AGREEMENT
May 6, 1998
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
American Cellular Corporation, a Delaware corporation ("American Cellular"
or the "Issuer"), confirms its agreement with Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"), TD Securities
(USA) Inc. and Wasserstein Perella Securities, Inc. (collectively, the "Initial
Purchasers," which term shall also include any initial purchaser substituted as
hereinafter provided in Section 10 hereof), for whom Merrill Lynch is acting as
representative (in such capacity, the "Representative"), with respect to the
issue and sale by the Issuer and the purchase by the Initial Purchasers, acting
severally and not jointly, of the respective principal amounts set forth in said
Schedule A of $285,000,000 aggregate principal amount of the Issuer's Senior
Notes due 2008 (the "Securities"). The Securities are to be issued pursuant to
an indenture dated as of May 6, 1998 (the "Indenture") between the Issuer and
Chase Manhattan Bank and Trust Company, N.A., as trustee (the "Trustee").
Securities issued in book-entry form will be issued to Cede & Co. as nominee of
The Depository Trust Company ("DTC") pursuant to a letter agreement, to be dated
as of the Closing Time (as defined in Section 2(b)) (the "DTC Agreement"), among
the Issuer, the Trustee and DTC.
<PAGE>
The Issuer was organized to effect the Merger (as defined in the Offering
Memorandum (as hereinafter defined)), pursuant to the terms of the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of March 6, 1998, between the
Issuer and PriCellular Corporation ("PriCellular"). The proceeds of the sale of
the Securities will be used as part of the financing of the Merger. Pursuant to
the Merger, the Issuer will be merged with and into PriCellular, which will be
the surviving corporation in the Merger. Upon consummation of the Merger on the
Merger date, PriCellular will assume by Supplemental Indenture (the
"Supplemental Indenture") all of the obligations of the Issuer under the
Indenture and the Securities. After the consummation of the Merger, PriCellular
will change its name to American Cellular Corporation. In connection with the
Merger, the Issuer has received commitments from Merrill Lynch Capital
Corporation and TD Securities (USA) Inc. to provide PriCellular Wireless
Corporation ("Wireless"), a direct, wholly-owned subsidiary of PriCellular, with
a $1.0 billion senior secured credit facility (the "Credit Facility") and the
Issuer has received commitments for $350 million in equity contributions (the
"Equity Contribution") from several investors. Pending consummation of the
Merger, the Escrow Funds (as defined in the Offering Memorandum) (which consist
of the net proceeds from the sale of the Securities and an equity contribution
(the "Additional Escrow Amount") from the Equity Investors (as defined in the
Offering Memorandum) of $20.0 million) will be held by the Trustee in an escrow
and pledge account (the "Escrow and Pledge Account") pursuant to a Pledge and
Escrow Agreement (the "Pledge and Escrow Agreement").
The Issuer will be permitted to obtain release of the Escrow Funds (other
than an amount necessary to purchase the Pledged Securities (as defined in the
Offering Memorandum)) upon consummation of the Merger and related transactions
provided that at that time (a) the Issuer shall have received the Equity
Contribution of at least $350 million, (b) the Issuer (on a consolidated basis)
shall have incurred or assumed no greater than $925 million (plus the amount of
any (x) Old Notes (as defined in the Offering Memorandum) which have been
properly defeased and (y) Equity Contribution in excess of $350 million) and no
less than $750 million of Indebtedness (as defined in the Offering Memorandum)
under the Credit Facility and the Old Notes and (c) the Issuer (on a
consolidated basis) shall not have outstanding more than $25 million of
Indebtedness (other than the Securities, the Credit Facility, the Old Notes and
the Convertible Notes (as defined in the Offering Memorandum)) (the "Financing
Condition"). Upon the earlier to occur of (i) termination of the Merger
Agreement or (ii) 150 days after the Issue Date, if the Escrow Funds have not
been released by that time (provided that the 150-day period may be extended at
the option of the Issuer up to an additional 120 days if (a) the Issuer shall
have deposited an additional amount (to be reasonably determined by the Initial
Purchasers on the same basis as the determination of the Additional Escrow
Amount) in the Escrow and Pledge Account for the benefit of the holders of the
Securities (the "Holders"), (b) the basis under which the Merger Agreement is
not satisfied on such 150th day relates to pending Federal Communication
Commission or other governmental or regulatory approvals, (c) the lenders under
the Credit Facility shall, in their discretion, have extended their commitment
to lend no earlier than the date to which the escrow has been extended and (d)
the Issuer shall have issued a press release in a reasonably commercial manner
and notified the Trustee with respect to such extension of the escrow period,
all of the outstanding Securities will be subject to a Special Mandatory
Redemption (as defined in the Offering Memorandum) upon seven days' prior
written notice to
-2-
<PAGE>
the Holders with the Escrow Funds at a redemption price equal to 101% of the
principal amount plus accrued and unpaid interest, if any, to the date of
redemption.
Upon closing of the Merger, the Issuer must purchase and pledge the Pledged
Securities in such amount as will be sufficient upon receipt of scheduled
interest and principal payments of such securities to provide for payment of the
first six scheduled interest payments due on the Securities (unless already
paid).
The Issuer understands that the Initial Purchasers propose to make an
offering of the Securities on the terms and in the manner set forth herein and
agrees that the Initial Purchasers may resell, subject to the conditions set
forth herein, all or a portion of the Securities to purchasers ("Subsequent
Purchasers") at any time after the date of this Agreement. The Securities are
to be offered and sold through the Initial Purchasers without being registered
under the Securities Act of 1933, as amended (the "1933 Act"), in reliance upon
exemptions therefrom. Pursuant to the terms of the Securities and the
Indenture, investors that acquire Securities may only resell or otherwise
transfer such Securities if such Securities are hereafter registered under the
1933 Act or if an exemption from the registration requirements of the 1933 Act
is available (including the exemption afforded by Rule 144A ("Rule 144A") or
Regulation S ("Regulation S") of the rules and regulations promulgated under the
1933 Act by the Securities and Exchange Commission (the "Commission").
The Issuer has prepared and delivered to each Initial Purchaser copies of a
preliminary offering memorandum dated April 17, 1998 (the "Preliminary Offering
Memorandum") and has prepared and will deliver to each Initial Purchaser, on the
date hereof or the next succeeding day, copies of a final offering memorandum
dated May 6, 1998 (the "Final Offering Memorandum"), each to be used by such
Initial Purchaser in connection with its solicitation of, purchases of, or
offering of, the Securities. "Offering Memorandum" means, with respect to any
date or time referred to in this Agreement, the most recent offering memorandum
(whether the Preliminary Offering Memorandum or the Final Offering Memorandum,
or any amendment or supplement to either such document), including exhibits
thereto, which has been prepared and delivered by the Issuer to the Initial
Purchasers in connection with their solicitation of purchases of, or offering
of, the Securities.
The holders of the Securities will be entitled to the benefits of the
registration rights agreement to be dated as of the Closing Time (the
"Registration Rights Agreement"), to the extent provided therein, among the
Issuer and the Initial Purchasers, pursuant to which the Issuer will agree to
file, as soon as practicable after the Closing Time but in any event within 60
days of the closing of the Merger, a registration statement with the Commission
registering the Exchange Securities (as defined in the Registration Rights
Agreement) under the 1933 Act.
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Issuer. The Issuer represents
and warrants to each Initial Purchaser as of the date hereof and as of the
Closing Time referred to in Section 2(b) hereof, and agrees with each Initial
Purchaser as follows:
-3-
<PAGE>
(i) Similar Offerings. The Issuer has not, directly or indirectly,
-----------------
solicited any offer to buy or offered to sell, and will not, directly or
indirectly, solicit any offer to buy or offer to sell, in the United States
or to any United States citizen or resident, any security which is or would
be integrated with the sale of the Securities in a manner that would
require the Securities to be registered under the 1933 Act.
(ii) Offering Memorandum. The Offering Memorandum does not,
-------------------
and at the Closing Time will not, include an untrue statement of a material
fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, that this representation, warranty and
--------
agreement shall not apply to statements in or omissions from the Offering
Memorandum made in reliance upon and in conformity with information
furnished to the Issuer in writing by any Initial Purchaser through Merrill
Lynch expressly for use in the Offering Memorandum.
(iii) Independent Accountants. Each of the accountants who certified
-----------------------
the financial statements and supporting schedules included or incorporated
by and reference in the Offering Memorandum are independent certified
public accountants within the meaning of Regulation S-X under the 1933 Act
with respect to PriCellular and its subsidiaries.
(iv) Financial Statements. The financial statements of PriCellular,
--------------------
together with the related notes, included in the Offering Memorandum
present fairly the financial position of PriCellular and its consolidated
subsidiaries at the dates indicated and the statements of income, changes
in shareholders' equity and cash flows of PriCellular and its consolidated
subsidiaries for the periods specified; said financial statements have been
prepared in conformity with United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
involved. The selected financial data and the summary financial information
included in the Offering Memorandum present fairly the information shown
therein and have been compiled on a basis consistent with that of the
audited financial statements included in the Offering Memorandum. The pro
forma financial statements and pro forma financial information of
PriCellular and its subsidiaries and the related notes thereto included in
the Offering Memorandum present fairly the information shown therein, have
been prepared in accordance with the Commission's rules and guidelines with
respect to pro forma financial statements and pro forma financial
information and have been properly compiled on the bases described therein,
and the assumptions used in the preparation thereof are reasonable and the
adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.
(v) No Material Adverse Change in Business. Since the respective
--------------------------------------
dates as of which information is given in the Offering Memorandum, except
as otherwise stated therein, (A)(i) there has been no material adverse
change in the condition (financial or otherwise), earnings, business
affairs or business prospects of the Issuer whether or not arising in the
ordinary course of business and (ii) to the Issuer's knowledge there has
been no material adverse change in the condition (financial or otherwise),
earnings, business
-4-
<PAGE>
affairs or business prospects of PriCellular and its subsidiaries
considered as one enterprise, whether or not arising in the ordinary course
of business, (B)(i) there have been no transactions entered into by the
Issuer, other than those in the ordinary course of business, which are
material with respect to the Issuer and (ii) to the Issuer's knowledge
there have been no transactions entered into by PriCellular or any of its
subsidiaries, other than those in the ordinary course of business, which
are material with respect to PriCellular and its subsidiaries considered as
one enterprise (C)(i) there has been no dividend or distribution of any
kind declared, paid or made by the Issuer on any class of their capital
stock and (ii) to the Issuer's knowledge there has been no dividend or
distribution of any kind declared, paid or made by PriCellular on any class
of its capital stock.
(vi) Good Standing of the Issuer and PriCellular. The Issuer and
-------------------------------------------
PriCellular each has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and
each has corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the Offering
Memorandum and in the case of the Issuer to enter into and perform its
obligations under this Agreement, the Registration Rights Agreement, the
Pledge and Escrow Agreement, the Indenture, the Supplemental Indenture, the
Securities, the Exchange Securities, and the DTC Agreement and to enter
into and consummate all the transactions in connection therewith as
contemplated in the Offering Memorandum; and each of the Issuer and
PriCellular is duly qualified as a foreign corporation to transact business
and is in good standing in each other jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a material adverse change in
the condition (financial or otherwise), earnings, business affairs or
business prospects of the Issuer and PriCellular and its subsidiaries
considered as one enterprise (a "Material Adverse Effect").
(vii) Good Standing of Subsidiaries. The Issuer has no subsidiaries.
-----------------------------
To the Issuer's knowledge, Wireless is the only "significant subsidiary" of
PriCellular (as such term is defined in Rule 1-02 of Regulation S-X).
Wireless has been duly organized and is validly existing as a corporation
in good standing under the laws of the jurisdiction of its incorporation,
has corporate power and authority to own, lease and operate its properties
and to conduct its business as described in the Offering Memorandum and is
duly qualified as a foreign corporation to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Offering Memorandum, all of the issued and outstanding
capital stock of Wireless has been duly authorized and validly issued, is
fully paid and non-assessable and is owned by PriCellular, directly or
through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity (collectively, a "Lien"), except
for any Lien currently existing which will be released upon consummation of
the Merger and replaced with Liens created by the Credit Facility as
described in the Offering
-5-
<PAGE>
Memorandum; to the Issuer's knowledge none of the outstanding shares of
capital stock of Wireless or PriCellular's other subsidiaries (each a
"Designated Subsidiary" and collectively, the "Designated Subsidiaries")
was issued in violation of any preemptive or similar rights arising by
operation of law, or under the charter or by-laws of Wireless or any
Designated Subsidiary or under any agreement to which PriCellular, Wireless
or any Designated Subsidiary is a party. All of the subsidiaries of
PriCellular are listed on Schedule B attached hereto.
(viii) Capitalization. The pro forma capitalization of PriCellular,
--------------
as adjusted to give effect to the acquisition of TN-4 RSA and the Merger,
is as set forth in the Offering Memorandum in the column entitled "Pro
Forma As Adjusted" under the caption "Capitalization." The shares of issued
and outstanding capital stock of the Issuer have been duly authorized and
validly issued and are fully paid and non-assessable; and none of the
outstanding shares of capital stock of the Issuer were issued in violation
of the preemptive or other similar rights of any securityholder of the
Issuer arising by operation of law, under the charter or by-laws of the
Issuer, under any agreement to which the Issuer, or any of its subsidiaries
is a party or otherwise. Upon consummation of the Merger, the shares of
capital stock of Wireless will be duly authorized and validly issued and
fully paid and non-assessable and will be owned by the Issuer, free and
clear of all Liens except for Liens created by the Credit Facility.
(ix) Authorization of Agreements. This Agreement, the Registration
---------------------------
Rights Agreement, the DTC Agreement and the Pledge and Escrow Agreement
have each been duly authorized by the Issuer. This Agreement has been, and
as of the Closing Time each of the Registration Rights Agreement, the DTC
Agreement and the Pledge and Escrow Agreement will have been, duly executed
and delivered by the Issuer. Upon the execution and delivery thereof by the
Issuer, each of the Registration Rights Agreement, the DTC Agreement and
the Pledge and Escrow Agreement will constitute a valid and binding
obligation of the Issuer, enforceable against the Issuer in accordance with
its terms, except as the enforcement thereof may be limited by bankruptcy,
insolvency (including without limitation, all laws relating to fraudulent
transfer), reorganization, moratorium or other similar laws relating to or
affecting enforcement of creditors' rights generally, or by general
principles of equity (regardless of whether enforcement is considered in a
proceeding in equity or at law); and at the Deposit Time (as defined in the
Pledge and Escrow Agreement), the pledge of the Initial Collateral (as
defined in the Pledge and Escrow Agreement) securing the payment of the
Initial Secured Oblations (as defined in the Pledge and Escrow Agreement)
for the benefit of the Trustee and the Holders of the Notes will constitute
a first priority perfected security interest in such Initial Collateral,
enforceable against all creditors of the Issuer and any persons purporting
to purchase any of the Collateral from the Issuer; and at the Release Time
(as defined in the Pledge and Escrow Agreement) securing the payment of the
Subsequent Secured Obligations (as defined in the Pledge and Escrow
Agreement) for the benefit of the Trustee and the Holders of the Notes will
constitute a first priority perfected security interest in such Subsequent
Collateral, enforceable against all creditors of the Issuer and any persons
purporting to purchase any of the Collateral from the Issuer.
-6-
<PAGE>
(x) Authorization of the Indenture. The Indenture has been duly
------------------------------
authorized by the Issuer and, at the Closing Time, will have been duly
executed and delivered by the Issuer and will constitute a valid and
binding agreement of the Issuer (and, upon consummation of the Merger and
execution and delivery of the Supplemental Indenture, of PriCellular),
enforceable against the Issuer (and, upon consummation of the Merger,
PriCellular) in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including without
limitation, all laws relating to fraudulent transfer), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
(xi) Authorization of the Securities. The Securities have been duly
-------------------------------
authorized by the Issuer and, at the Closing Time, will have been duly
executed by the Issuer and, when authenticated in the manner provided for
in the Indenture and delivered against payment of the purchase price
therefor, will constitute valid and binding obligations of the Issuer (and,
upon consummation of the Merger and execution and delivery of the
Supplemental Indenture, of PriCellular), enforceable against the Issuer
(and, upon consummation of the Merger, PriCellular) in accordance with
their terms, except as the enforcement thereof may be limited by
bankruptcy, insolvency (including without limitation, all laws relating to
fraudulent transfer), reorganization, moratorium or other similar laws
relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is
considered in a proceeding in equity or at law) and will be in the form
contemplated by, and entitled to the benefits of, the Indenture. The
Exchange Securities have been duly authorized by the Issuer and, when
executed and authenticated and issued and delivered by the Issuer in
exchange for the Securities pursuant to the Exchange Offer (as defined in
the Registration Rights Agreement) (assuming no changes in applicable law
or interpretive rulings of the Securities and Exchange Commission related
thereto) will constitute valid and binding obligations of the Issuer,
enforceable against the Issuer in accordance with their terms, except as
the enforcement thereof may be limited by bankruptcy, insolvency (including
without limitation, all laws relating to fraudulent transfer),
reorganization, moratorium or other similar laws relating to or affecting
enforcement of creditors' rights generally, or by general principles of
equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
(xii) Authorization of Credit Facility. The Credit Facility has been
--------------------------------
duly authorized by the Issuer and, when executed and delivered, will
constitute a valid and binding obligation of the Issuer, enforceable
against the Issuer in accordance with its terms, except as the enforcement
thereof may be limited by bankruptcy, insolvency (including without
limitation, all laws relating to fraudulent transfer), reorganization,
moratorium or other similar laws relating to or affecting enforcement of
creditors' rights generally, or by general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
-7-
<PAGE>
(xiii) Description of the Securities and the Indenture. The
-----------------------------------------------
Securities, the Supplemental Indenture, the Indenture, the Registration
Rights Agreement and the Pledge and Escrow Agreement will conform in all
material respects to the respective statements relating thereto contained
in the Offering Memorandum and will be in substantially the respective
forms previously delivered to the Initial Purchasers. The Exchange
Securities will conform in all material respects to the statements relating
thereto contained in the Offering Memorandum.
(xiv) Absence of Defaults and Conflicts. Except as disclosed in
---------------------------------
the Offering Memorandum, none of the Issuer, or to the Issuer's knowledge,
PriCellular or any subsidiary of PriCellular, is in violation of its
charter or by-laws or in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which the Issuer, PriCellular or any of
its subsidiaries is a party or by which any of them may be bound, or to
which any of the property or assets of the Issuer, PriCellular or any of
its subsidiaries is subject (collectively, "Agreements and Instruments") or
has violated or is in violation of any applicable law, statute, rule,
regulation, judgment, order, writ or decree of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Issuer, PriCellular or any subsidiary of PriCellular or any of their assets
or properties, except in each case for such defaults or violations that
would not result in a Material Adverse Effect; and, except as disclosed in
the Offering Memorandum, the execution, delivery and performance of this
Agreement, the Registration Rights Agreement, the Pledge and Escrow
Agreement, the Indenture, the Supplemental Indenture, the DTC Agreement,
the Securities, the Exchange Securities and any other agreement or
instrument entered into or issued or to be entered into or issued by the
Issuer in connection with the transactions contemplated hereby or thereby
or in the Offering Memorandum or in connection with the consummation of the
transactions contemplated herein and in the Offering Memorandum (including
the issuance and sale of the Securities and the use of the proceeds from
the sale of the Securities as described in the Offering Memorandum under
the caption "Use of Proceeds") and compliance by the Issuer with its
respective obligations hereunder and under the Indenture and the Securities
(and, upon consummation of the Merger and execution and delivery of the
Supplemental Indenture, by PriCellular), do not and will not, whether with
or without the giving of notice or passage of time or both, conflict with
or constitute a breach of, or default or a Repayment Event (as defined
below) under, or result in the creation or imposition of any Lien, upon any
property or assets that are material to the business of the Issuer,
PriCellular or to any of its subsidiaries pursuant to, the Agreements and
Instruments, nor will such action result in any violation of the provisions
of the charter or by-laws of the Issuer, PriCellular or any of its
subsidiaries or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Issuer,
PriCellular or any of its subsidiaries or any of their assets or
properties. As used herein, a "Repayment Event" means any event or
condition which gives the holder of any note, debenture or other evidence
of indebtedness (or any person acting on such
-8-
<PAGE>
holder's behalf) the right to require the repurchase, redemption or
repayment of all or a portion of such indebtedness by the Issuer,
PriCellular or any of its subsidiaries.
(xv) Absence of Labor Disputes. No labor dispute with the employees
-------------------------
of the Issuer exists or, to the Issuer's knowledge, is imminent, and the
Issuer is not aware of any existing or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers, customers or
contractors, which, in either case, may reasonably be expected to result in
a Material Adverse Effect. To the Issuer's knowledge no labor dispute with
the employees of PriCellular or any subsidiary of PriCellular exists, or is
imminent and the Issuer is not aware of any existing or imminent labor
disturbance by the employees of any of PriCellular's, or any of
PriCellular's subsidiaries' principal suppliers, manufacturers, customers
or contractors, which in either case, may reasonably be expected to result
in a Material Adverse Effect.
(xvi) Absence of Proceedings. Except as disclosed in the Offering
----------------------
Memorandum, there is no action, suit, proceeding, inquiry or investigation,
in each case before or by any court or governmental agency or body,
domestic or foreign, now pending, or, to the knowledge of the Issuer,
threatened, against or affecting the Issuer, or to the knowledge of the
Issuer, PriCellular or any of its subsidiaries which, singly or in the
aggregate, might reasonably be expected to result in a Material Adverse
Effect, or which, singly or in the aggregate, might reasonably be expected
to materially and adversely affect the properties or assets of the Issuer,
PriCellular or any of its subsidiaries or the consummation of this
Agreement or the performance by the Issuer of its respective obligations
hereunder or under the Securities or the Exchange Securities. The aggregate
of all pending legal or governmental proceedings to which the Issuer,
PriCellular or any of its subsidiaries is a party or of which any of their
respective property or assets is the subject which are not described in the
Offering Memorandum, including ordinary routine litigation incidental to
the business, could not reasonably be expected to result in a Material
Adverse Effect.
(xvii) Possession of Intellectual Property. The Issuer, and to the
-----------------------------------
knowledge of the Issuer, PriCellular and its subsidiaries own, possess or
license, or can acquire on reasonable terms, adequate patents, licenses,
trademarks, service marks, trade names or other intellectual property
(collectively, "Intellectual Property") necessary to carry on the business
now operated by them, and none of the Issuer, and to the knowledge of the
Issuer, PriCellular or any of its subsidiaries has received any notice or
is otherwise aware of any infringement of or conflict with asserted rights
of others with respect to any Intellectual Property (including Intellectual
Property which is licensed) or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Issuer and to the knowledge of the Issuer, PriCellular or
any of its subsidiaries therein, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, singly or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.
(xviii) Absence of Further Requirements. No filing with, or
-------------------------------
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or
-9-
<PAGE>
governmental authority or agency is necessary or required for the
performance by the Issuer of its obligations hereunder, in connection with
the offering, issuance or sale of the Securities hereunder or the
consummation of the transactions contemplated by or for the due execution,
delivery or performance of this Agreement, the Registration Rights
Agreement, the Pledge and Escrow Agreement, the Indenture, the Supplemental
Indenture, the DTC Agreement, the Securities, the Exchange Securities or
any other agreement or instrument entered into or issued or to be entered
into or issued by the Issuer, PriCellular, Wireless or to the knowledge of
the Issuer, any of PriCellular's subsidiaries in connection with the
consummation of the transactions contemplated herein and in the Offering
Memorandum (including the issuance and sale of the Securities and the use
of the proceeds from the sale of the Securities as described in the
Offering Memorandum under the caption "Use of Proceeds"), except for such
approvals and consents set forth in the Merger Agreement or the Offering
Memorandum.
(xix) Possession of Licenses and Permits. Except as disclosed in
----------------------------------
the Offering Memorandum, the Issuer, and to the knowledge of the Issuer,
PriCellular and its subsidiaries possess such permits, licenses, approvals,
consents, certificates and other authorizations (collectively,
"Governmental Licenses") issued by the appropriate federal, state, local or
foreign regulatory agencies or bodies necessary to conduct the business now
operated by them; the Issuer, and to the knowledge of the Issuer,
PriCellular and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses and with the rules and
regulations of the regulatory authorities and governing bodies having
jurisdiction with respect thereto, except where the failure so to comply
would not, singly or in the aggregate, have a Material Adverse Effect; all
of the Governmental Licenses are valid and in full force and effect, except
when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and none of the Issuer, and to the knowledge of
the Issuer, PriCellular or any of its subsidiaries has received any notice
of proceedings relating to the revocation or modification of any such
Governmental Licenses, nor are there, to the knowledge of the Issuer,
pending or threatened actions, suits, claims or proceedings against the
Issuer, PriCellular or any of its subsidiaries before any court,
governmental agency or body or otherwise that, if successful, would limit,
revoke, cancel, suspend or cause not to be renewed any Governmental
License, in each case, which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xx) Title to Property. The Issuer, and to the knowledge of the
-----------------
Issuer, PriCellular and its subsidiaries have good and marketable title to
all real property owned by the Issuer, PriCellular and its subsidiaries and
good title to all other properties owned by them, in each case, free and
clear of all mortgages, pledges, liens, security interests, claims,
restrictions or encumbrances of any kind except such as (a) are described
in the Offering Memorandum or (b) do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Issuer,
PriCellular or any of its subsidiaries; and all of the leases and subleases
material to the business of the Issuer, PriCellular and its subsidiaries,
considered
-10-
<PAGE>
as one enterprise, and under which the Issuer, PriCellular or any of its
subsidiaries holds properties described in the Offering Memorandum, are in
full force and effect, and none of the Issuer, and to the knowledge of the
Issuer, PriCellular or any of its subsidiaries has any notice of any
material claim of any sort that has been asserted by anyone adverse to the
rights of the Issuer, PriCellular or any of its subsidiaries under any of
the leases or subleases mentioned above, or affecting or questioning the
rights of the Issuer, PriCellular or any of its subsidiaries to the
continued possession of the leased or subleased premises under any such
lease or sublease.
(xxi) Tax Returns. To the knowledge of the Issuer, all United
-----------
States federal income tax returns of PriCellular and its subsidiaries
required by law to be filed have been filed and all taxes shown by such
returns or otherwise assessed, which are due and payable, have been paid,
except assessments against which appeals have been or will be promptly
taken and as to which adequate reserves have been provided. To the
knowledge of the Issuer, PriCellular and its subsidiaries have filed all
other tax returns that are required to have been filed by them pursuant to
applicable foreign, federal, state, local or other law, and have paid all
taxes due pursuant to such returns or pursuant to any assessment received
by PriCellular and its subsidiaries, except for such taxes, if any, as are
being contested in good faith and by appropriate proceedings and as to
which adequate reserves have been provided. To the knowledge of the Issuer,
the charges, accruals and reserves on the books of PriCellular in respect
of all federal, state, local and foreign tax liabilities of PriCellular and
each of its subsidiaries for any years not finally determined are adequate
to meet any assessments or re-assessments for additional income tax for any
years not finally determined, except to the extent of any inadequacy that
would not result in a Material Adverse Effect.
(xxii) Insurance. To the knowledge of the Issuer, PriCellular and
---------
its subsidiaries carry or are entitled to the benefits of insurance, with
financially sound and reputable insurers, in such amounts and covering such
risks as is generally maintained by companies of established repute engaged
in the same or similar business, and all such insurance is in full force
and effect.
(xxiii) Solvency. The Issuer is, and immediately after the Merger
--------
will be, Solvent. As used herein, the term "Solvent" means, with respect to
the Issuer, as the case may be, on a particular date, that on such date (A)
the fair market value of the assets of the Issuer is greater than the total
amount of liabilities (including contingent liabilities) of the Issuer, (B)
the present fair salable value of the assets of the Issuer is greater than
the amount that will be required to pay the probable liabilities of the
Issuer on its debts as they become absolute and mature, (C) the Issuer is
able to realize upon its assets and pay its debts and other liabilities,
including contingent obligations, as they mature, and (D) the Issuer does
not have unreasonably small capital.
(xxiv) Stabilization or Manipulation. Neither the Issuer nor any
-----------------------------
of its respective officers, directors or controlling persons has taken,
directly or indirectly, any action designed to cause or to result in, or
that has constituted or which might reasonably be expected to constitute,
the stabilization or manipulation of the price of any security of
-11-
<PAGE>
the Issuer in order to facilitate the sale or resale of the Securities. The
Issuer has not distributed and, prior to the later to occur of (i) the
Closing Time and (ii) completion of the distribution of the Securities,
will not distribute any offering material in connection with the offering
and sale of the Securities other than the Offering Memorandum or other
materials, if any, permitted by the 1933 Act and approved by the
Representative.
(xxv) Related Party Transactions. (i) No relationship, direct or
--------------------------
indirect, exists between the Issuer or any affiliate of the Issuer, on the
one hand, and any director, officer, stockholder, customer or supplier of
the Issuer, on the other hand and (ii) to the knowledge of the Issuer, no
relationship, direct or indirect, exists between PriCellular or any
affiliate of PriCellular, on the one hand, and any director, officer,
stockholder, customer or supplier of PriCellular, on the other hand, which
is required by the 1933 Act or by the rules and regulations enacted
thereunder to be described in a registration statement on Form S-1 which is
not so described or is not described as required in the Offering
Memorandum.
(xxvi) Environmental Laws. To the knowledge of the Issuer except
------------------
as described in the Offering Memorandum and except such matters as would
not, singly or in the aggregate, result in a Material Adverse Effect, (A)
none of PriCellular or any of its subsidiaries is in violation of any
federal, state, local or foreign statute, law, rule, regulation, ordinance,
code, policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata) or wildlife,
including, without limitation, laws and regulations relating to the release
or threatened release of chemicals, pollutants, contaminants, wastes, toxic
substances, hazardous substances, petroleum or petroleum products or
nuclear or radioactive material (collectively, "Hazardous Materials") or to
the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials (collectively,
"Environmental Laws"), (B) PriCellular and its subsidiaries have all
permits, licenses, authorizations and approvals required for their
respective businesses under any applicable Environmental Laws and are each
in compliance with their requirements, (C) there are no pending or
threatened administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, liens, notices of noncompliance or violation,
investigation or proceedings relating to any Environmental Law against
PriCellular or any of its subsidiaries and (D) there are no events, facts
or circumstances that might reasonably be expected to form the basis of any
liability or obligation of PriCellular or any of its subsidiaries,
including, without limitation, any order, decree, plan or agreement
requiring clean-up or remediation, or any action, suit or proceeding by any
private party or governmental body or agency, against or affecting
PriCellular or any of its subsidiaries relating to any Hazardous Materials
or Environmental Laws.
(xxvii) Registration Rights. Except as disclosed in the Offering
-------------------
Memorandum, there are no holders of securities (debt or equity) of the
Issuer, or holders of rights (including, without limitation, preemptive
rights), warrants or options to obtain securities of the Issuer, who in
connection with the issuance, sale and delivery of the
-12-
<PAGE>
Securities and the Exchange Securities, if any, and the execution, delivery
and performance of this Agreement and the Registration Rights Agreement,
have the right to request the Issuer to register securities held by them
under the 1933 Act.
(xxiii) Accounting Controls. The Issuer, and to the knowledge of
-------------------
the Issuer PriCellular and its consolidated subsidiaries maintain a system
of internal accounting controls sufficient to provide reasonable assurances
that (A) transactions are executed in accordance with management's general
or specific authorization; (B) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets;
(C) access to assets is permitted only in accordance with management's
general or specific authorization; and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(xxix) Investment Company Act. The Issuer is not, and upon the
----------------------
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Offering
Memorandum will not be, an "investment company" or an entity "controlled"
by an "investment company" as such terms are defined in the Investment
Company Act of 1940, as amended (the "1940 Act").
(xxx) Rule 144A Eligibility. The Securities are eligible for
---------------------
resale pursuant to Rule 144A and will not be, at the Closing Time, of the
same class as securities listed on a national securities exchange
registered under Section 6 of the 1934 Act, or quoted in a U.S. automated
interdealer quotation system.
(xxxi) No General Solicitation. Neither the Issuer or any of its
-----------------------
affiliates, as such term is defined in Rule 501(b) under the 1933 Act
("Affiliates"), or any person acting on any of their behalf (other than the
Initial Purchasers, as to whom the Issuer makes no representation) has
engaged or will engage, in connection with the offering of the Securities,
in any form of general solicitation or general advertising within the
meaning of Rule 502(c) under the 1933 Act.
(xxxii) No Registration Required. Subject to compliance by the
------------------------
Initial Purchasers with the representations and warranties set forth in
Section 2, it is not necessary in connection with the offer, sale and
delivery of the Securities to the Initial Purchasers and to each Subsequent
Purchaser in the manner contemplated by this Agreement and the Offering
Memorandum to register the Securities under the 1933 Act or to qualify the
Indenture under the Trust Indenture Act of 1939, as amended (the "1939
Act").
(xxxiii) No Directed Selling Efforts. With respect to those
---------------------------
Securities sold in reliance on Regulation S, (A) none of the Issuer, any of
its Affiliates or any person acting on its behalf (other than the Initial
Purchasers, as to whom the Issuer makes no representation) has engaged or
will engage in any directed selling efforts within the meaning of
Regulation S and (B) the Issuer, any of its Affiliates and any person
acting on
-13-
<PAGE>
its behalf (other than the Initial Purchasers, as to whom the Issuer makes
no representation) has complied and will comply with the offering
restrictions requirement of Regulation S.
(xxxiv) PORTAL. There are no securities of the Issuer which are of
------
the same class as the Securities that are listed on a national securities
exchange registered under Section 6 of the 1934 Act, or quoted in a United
States automated inter dealer quotation system. The Issuer has been advised
by the National Association of Securities Dealers, Inc. PORTAL Market that
the Securities will be designated PORTAL eligible securities in accordance
with the rules and regulations of the National Association of Securities
Dealers, Inc.
(xxxv) Merger Agreement. The representations and warranties of
----------------
PriCellular made in the Merger Agreement are true and correct in all
material respects (provided that any representation or warranty contained
herein that is qualified by a materiality standard shall not be further
qualified hereby).
(b) Officer's Certificates. Any certificate signed by any officer of the
Issuer or any of its subsidiaries delivered to the Initial Purchasers or to
counsel for the Initial Purchasers shall be deemed a representation and warranty
by the Issuer or such subsidiary to each Initial Purchaser as to the matters
covered thereby.
SECTION 2. Sale and Delivery to Initial Purchasers; Closing.
------------------------------------------------
(a) Securities. On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Issuer
agrees to sell to each Initial Purchaser and each Initial Purchaser agrees to
purchase from the Issuer, at the price set forth in Schedule C, the aggregate
principal amount of Securities set forth in Schedule A opposite the name of such
Initial Purchaser, plus any additional principal amount of Securities which such
Initial Purchaser may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
(b) Payment. Payment of the purchase price for, and delivery of
certificates for, the Securities shall be made at the office of Fried, Frank,
Harris, Shriver & Jacobson, or at such other place as shall be agreed upon by
the Representative and the Issuer at 9:00 A.M. (New York Time) on the third
business day after the date hereof (unless postponed in accordance with the
provisions of Section 10), or such other time not later than ten business days
after such date as shall be agreed upon by the Representative and the Issuer
(such time and date of payment and delivery being herein called the "Closing
Time").
Payment shall be made to the Issuer by wire transfer of immediately
available funds to a bank account designated by the Issuer, against delivery to
the respective accounts of the Initial Purchasers of certificates for the
Securities to be purchased by them. It is understood that each Initial
Purchaser has authorized the Representative, for its account, to accept delivery
of, receipt for, and make payment of the purchase price for, the Securities
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the Initial Purchasers, may (but shall not
-14-
<PAGE>
be obligated to) make payment of the purchase price for the Securities to be
purchased by any Initial Purchaser whose funds have not been received by the
Closing Time, but such payment shall not relieve such Initial Purchaser from its
obligations hereunder. The certificates representing the Securities shall be
registered in the name of Cede & Co. pursuant to the DTC Agreement, or physical
certificates representing the Securities shall be registered in the names and
denominations requested by the Initial Purchasers, and in either case shall be
made available for examination and packaging by the Initial Purchasers in The
City of New York not later than 9:00 A.M. on the last business day prior to the
Closing Time.
(c) Qualified Institutional Buyer. Each Initial Purchaser severally and
not jointly represents and warrants to, and agrees with, the Issuer that it is a
"qualified institutional buyer" within the meaning of Rule 144A under the 1933
Act (a "Qualified Institutional Buyer") and an "accredited investor" within the
meaning of Rule 501(a) under the 1933 Act (an "Accredited Investor").
(d) Denominations; Registration. Certificates for the Securities shall be
in such denominations ($1,000 or integral multiples thereof) and registered in
such names as the Representative may request in writing at least one full
business day before the Closing Time.
SECTION 3. Covenants of the Issuer. The Issuer covenants with each
-----------------------
Initial Purchaser as follows:
(a) Offering Memorandum. The Issuer, as promptly as possible, will
furnish to each Initial Purchaser, without charge, such number of copies of the
Preliminary Offering Memorandum, the Final Offering Memorandum and any
amendments and supplements thereto and documents incorporated by reference
therein as such Initial Purchaser may reasonably request.
(b) Notice and Effect of Material Events. The Issuer will immediately
notify each Initial Purchaser, and confirm such notice in writing, of (x) any
filing made by the Issuer of information relating to the offering of the
Securities with any securities exchange or any other regulatory body in the
United States or any other jurisdiction, and (y) prior to the completion of the
placement of the Securities by the Initial Purchasers, to the knowledge of the
Issuer any material changes in or affecting the earnings, business affairs or
business prospects of the Issuer, PriCellular and its subsidiaries which (i)
make any statement in the Offering Memorandum false or misleading or (ii) are
not disclosed in the Offering Memorandum. In such event or if during such time
any event shall occur or condition shall exist as a result of which it is
necessary, in the opinion of the Issuer, its counsel, the Initial Purchasers or
counsel for the Initial Purchasers, to amend or supplement the Final Offering
Memorandum in order that the Final Offering Memorandum not include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein not misleading in the light of the circumstances
then existing, the Issuer will forthwith promptly amend or supplement the Final
Offering Memorandum by preparing and furnishing to each Initial Purchaser an
amendment or amendments of, or a supplement or supplements to, the Final
Offering Memorandum (in form and substance
-15-
<PAGE>
satisfactory in the opinion of counsel for the Initial Purchasers) so
that, as so amended or supplemented, the Final Offering Memorandum will not
include an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a Subsequent Purchaser,
not misleading.
(c) Amendment to Offering Memorandum and Supplements. The Issuer will
advise each Initial Purchaser promptly of any proposal to amend or supplement
the Offering Memorandum and will not effect such amendment or supplement without
the consent of the Initial Purchasers. Neither the consent of the Initial
Purchasers to, nor the Initial Purchaser's delivery of, any such amendment or
supplement, shall constitute a waiver of any of the conditions set forth in
Section 5 hereof.
(d) Qualification of Securities for Offer and Sale. The Issuer will use
its best efforts, in cooperation with the Initial Purchasers, to register or
qualify the Securities for offering and sale under the applicable securities
laws of such jurisdictions as the Representative may designate and will maintain
such qualifications in effect as long as required for the sale of the
Securities; provided, however, that the Issuer shall not be obligated to file
any general consent to service of process or to qualify as a foreign corporation
or as a dealer in securities in any jurisdiction in which it is not so qualified
or to subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject.
(e) Integration. The Issuer agrees that it will not and will cause its
affiliates not to make any offer or sale of securities of the Issuer of any
class if, as a result of the doctrine of "integration" referred to in Rule 502
under the 1933 Act, such offer or sale could be deemed to render invalid (for
the purpose of (i) the sale of the Securities by the Issuer to the Initial
Purchasers, (ii) the resale of the Securities by the Initial Purchasers to
Subsequent Purchasers or (iii) the resale of the Securities by such Subsequent
Purchasers to others) the exemption from the registration requirements of the
1933 Act provided by Section 4(2) thereof or by Rule 144A or by Regulation S
thereunder or otherwise.
(f) Rating of Securities. The Issuer shall take all reasonable action
necessary to enable Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc. ("S&P"), and Moody's Investors Service, Inc. ("Moody's"), to provide their
respective credit ratings of the Securities.
(g) Rule 144A Information. The Issuer agrees that in order to render the
Securities eligible for resale pursuant to Rule 144A under the 1933 Act, while
any of the Securities remain outstanding, it will make available to any
prospective purchaser of Securities or beneficial owner of Securities in
connection with any sale thereof of the information required by Rule 144A(d)(4)
under the Securities Act, until such time as the Issuer has either exchanged the
Securities for securities identical in all material respects which have been
registered under the Securities Act or until such time as the holders thereof
have disposed of such Securities pursuant to an effective registration statement
under the Securities Act (such information, whether made available to holders or
prospective purchasers or furnished to the Commission, is hereinafter referred
to as "Additional Information").
-16-
<PAGE>
(h) Restriction on Resales. Until the expiration of two years after the
original issuance of the Securities, the Issuer will not, and will cause their
"affiliates" (as such term is defined in Rule 144(a)(1) under the 1933 Act) not
to, resell any Securities which are "restricted securities" (as such term is
defined under Rule 144(a)(3) under the 1933 Act) that have been reacquired by it
and shall immediately upon any purchase of any such Securities submit such
Securities to the Trustee for cancellation.
(i) Use of Proceeds. The Issuer will use the net proceeds received by
them from the sale of the Securities in the manner specified in the Offering
Memorandum under "Use of Proceeds."
(j) Restriction on Sale of Securities. During a period of 180 days from
the date of this Agreement, the Issuer and its subsidiaries, if any, will not,
without the prior written consent of Merrill Lynch, on behalf of the Initial
Purchasers, directly or indirectly, issue, sell, pledge, offer or agree to sell,
grant any option for the sale of or otherwise dispose of, any debt securities of
the Issuer or any of its subsidiaries (other than in connection with the
Exchange Offer (as defined in the Offering Memorandum) or borrowings under the
Credit Facility).
(k) DTC Clearance. The Issuer will use all reasonable efforts in
cooperation with the Initial Purchasers to permit the Securities to be eligible
for clearance and settlement through DTC.
(l) Legends. Each certificate for a Security will bear the legend
contained in "Notices to Investors" in the Offering Memorandum for the time
period and upon the other terms stated in the Offering Memorandum.
(m) Interim Financial Statements. Prior to the Closing Time, the Issuer
shall furnish to the Initial Purchasers any unaudited interim financial
statements of the Issuer, promptly after they have been completed, for any
periods subsequent to the periods covered by the financial statements appearing
in the Offering Memorandum.
(n) Periodic Reports. For a period of three years after the Closing Time,
the Issuer will furnish to the Initial Purchasers copies of all annual reports,
quarterly reports and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K, or such other similar forms as may be designated by the
Commission, and such other documents, reports and information as shall be
furnished by the Issuer generally to the holders of the Securities or to
security holders of its publicly issued securities generally.
SECTION 4. Payment of Expenses.
-------------------
(a) Expenses. The Issuer will pay all expenses incident to the
performance of its obligations under this Agreement, including (i) the
preparation, printing and any filing of the Offering Memorandum (including
financial statements and any schedules or exhibits) and of each amendment or
supplement thereto, (ii) the preparation and delivery to the Initial Purchasers
of this Agreement, the Registration Rights Agreement, the Indenture, the
Supplemental Indenture and such other documents as may be required in connection
with the offering, purchase, sale and
-17-
<PAGE>
delivery of the Securities, (iii) the preparation, issuance and delivery of the
certificates for the Securities to the Initial Purchasers, including any charges
of DTC in connection therewith, (iv) the fees and disbursements of the Issuer's
counsel, accountants and other advisors, (v) the qualification of the Securities
under securities laws in accordance with the provisions of Section 3(d) hereof,
including filing fees and the reasonable fees and disbursements of counsel for
the Initial Purchasers not to exceed $2,500 unless otherwise agreed to by the
Issuer in connection therewith and in connection with the preparation of the
Blue Sky Survey, any supplement thereto, (vi) the fees and expenses of the
Trustee, including the fees and disbursements of counsel for the Trustee in
connection with the Indenture, the Supplemental Indenture and the Securities,
and (vii) any fees payable in connection with the rating of the Securities and
the listing of the Securities with the Private Offerings, Resales and Trading
Through Automated Linkages ("PORTAL") market.
(b) Termination of Agreement. If this Agreement is terminated by the
Representative in accordance with the provisions of Section 5 or Section 9(a)(i)
or 9(a)(ii) hereof, the Issuer shall reimburse the Initial Purchasers for all of
their out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Initial Purchasers.
SECTION 5. Conditions of Initial Purchasers' Obligations. The
---------------------------------------------
obligations of the several Initial Purchasers hereunder are subject to the
accuracy of the representations and warranties of the Issuer contained in
Section 1 hereof or in certificates of any officer of the Issuer, or any of its
subsidiaries delivered pursuant to the provisions hereof, to the performance by
the Issuer of its covenants and other obligations hereunder, and to the
following further conditions:
(a) Opinion of Counsel for the Issuer. At the Closing Time, the Initial
Purchasers shall have received the favorable opinion, dated as of the Closing
Time, of Latham & Watkins, counsel for the Issuer, in form and substance
satisfactory to counsel for the Initial Purchasers, together with signed or
reproduced copies of such letters for each of the other Initial Purchasers, to
the effect set forth in Exhibit A hereto and to such further effect as counsel
to the Initial Purchasers may reasonably request.
(b) Opinion of Counsel for the Initial Purchasers. At the Closing Time,
the Initial Purchasers shall have received the favorable opinion, dated as of
the Closing Time, of Fried, Frank, Harris, Shriver & Jacobson, counsel for the
Initial Purchasers, together with signed or reproduced copies of such letter for
each of the other Initial Purchasers, with respect to certain matters set forth
in paragraphs (i), (ii), (vi), (vii), (viii), (ix), (xi) (solely as to the
information in the Offering Memorandum under "Description of the Notes"), (xv)
and the penultimate paragraph of Exhibit A hereto. In giving such opinion such
counsel may rely, as to all matters governed by the laws of jurisdictions other
than the law of the State of New York and the federal law of the United States
and the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the Representative. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Issuer,
PriCellular and its subsidiaries and certificates of public officials.
-18-
<PAGE>
(c) Officers' Certificate. At the Closing Time, (i) the Offering
Memorandum, as it may then be amended or supplemented, including any documents
incorporated by reference therein, shall not contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; (ii) to the knowledge
of the Issuer there shall not have been, since the date hereof or since the
respective dates as of which information is given in the Offering Memorandum,
any material adverse change in the condition (financial or otherwise), earnings,
business affairs or business prospects of the Issuer, PriCellular and its
subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business; (iii) the Issuer shall have complied with all
agreements and satisfied all conditions on its part to be performed or satisfied
at or prior to the Closing Time; and (iv) the representations and warranties of
the Issuer in Section 1 shall be accurate and true and correct as though
expressly made at and as of the Closing Time. At the Closing Time, the Initial
Purchasers shall have received a certificate of the President or Chief Executive
Officer of the Issuer and the Vice President of Finance of the Issuer, dated as
of the Closing Time, to such effect.
(d) Accountants' Letters and Consents. At the time of the execution of
this Agreement, the Initial Purchasers shall have received from Ernst & Young a
letter dated such date, in form and substance satisfactory to the Representative
and to counsel for the Initial Purchasers, together with signed or reproduced
copies of such letter for each of the other Initial Purchasers, containing
statements and information of the type ordinarily included in accountants'
"comfort letters" to Initial Purchasers with respect to the financial statements
and certain financial information contained in the Offering Memorandum and in
the form included in Exhibit B attached hereto. Such accounting firm shall
include either in such letter or in a separate writing a consent to the
inclusion of their respective reports in the Offering Memorandum and to the
reference to them under the caption "Independent Auditors" in the Offering
Memorandum.
(e) Bring-down Letters. At the Closing Time, the Initial Purchasers shall
have received from Ernst & Young a letter, dated as of the Closing Time, to the
effect that they reaffirm the statements made in the letter furnished pursuant
to subsection (d) of this Section, except that the specified date referred to
shall be a date not more than three business days prior to the Closing Time.
(f) PORTAL. At the Closing Time, the Securities shall have been
designated for trading on PORTAL.
(g) Registration Rights Agreement, DTC Agreement, Pledge and Escrow
Agreement and Indenture. The Issuer shall have duly authorized, executed and
delivered the Registration Rights Agreement, the DTC Agreement, the Pledge and
Escrow Agreement, and the Indenture to the Initial Purchasers in a form and
substance satisfactory to the Representative and counsel to the Initial
Purchasers.
(h) Additional Escrow Amount. The Equity Investors shall have deposited
$20.0 million consisting of the Additional Escrow Amount in the Escrow and
Pledge Account.
-19-
<PAGE>
(i) Consent Solicitation. The Issuer shall have received all of the
Requisite Consents (as currently defined in the Issuer's outstanding tender
offer materials) pursuant to the Issuer's consent solicitation and tender offer
with respect to outstanding debt of Wireless and Wireless shall have executed
the related supplemental indentures.
(j) Additional Documents. At the Closing Time, counsel for the Initial
Purchasers shall have been furnished with such customary documents as they may
require (including any consents under any agreements to which the Issuer or
PriCellular is a party) for the purpose of enabling them to pass upon the
issuance and sale of the Securities as herein contemplated, or in order to
evidence the accuracy of any of the representations or warranties, or the
fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Issuer in connection with the issuance and sale of the Securities
as herein contemplated shall be satisfactory in form and substance to the
Initial Purchasers and counsel for the Initial Purchasers.
(k) Termination of Agreement. If any condition specified in this Section
shall not have been fulfilled when and as required to be fulfilled, this
Agreement may be terminated by the Representative by notice to the Issuer at any
time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4 and
except that Sections 1, 6 and 7 shall survive any such termination and remain in
full force and effect.
SECTION 6. Indemnification.
---------------
(a) Indemnification of Initial Purchasers. The Issuer agrees to indemnify
and hold harmless each Initial Purchaser and each person, if any, who controls
any Initial Purchaser within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Preliminary Offering Memorandum or the Final Offering Memorandum (or
any amendment or supplement thereto (including any document
incorporated by reference into the Preliminary Offering Memorandum or
Final Offering Memorandum)), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Issuer; and
-20-
<PAGE>
(iii) against any and all expense whatsoever, as incurred
(including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
- -------- -------
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Issuer by any
Initial Purchaser through Merrill Lynch expressly for use in the Offering
Memorandum (or any amendment thereto).
(b) Indemnification of Issuer and Directors. Each Initial Purchaser
severally agrees to indemnify and hold harmless the Issuer and its directors,
and each person, if any, who controls the Issuer within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act against any and all loss,
liability, claim, damage and expense described in the indemnity contained in
subsection (a) of this Section, as incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Offering Memorandum in reliance upon and in conformity with written information
furnished to the Issuer by such Initial Purchaser through Merrill Lynch
expressly for use in the Offering Memorandum.
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Issuer. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
--------
however, that counsel to the indemnifying party shall not (except with the
- -------
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation,
-21-
<PAGE>
proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(ii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
SECTION 7. Contribution. If the indemnification provided for in Section
------------
6 hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Issuer on the one
hand and the Initial Purchasers on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of the Issuer on the one hand and of the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Issuer on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the
Securities pursuant to this Agreement (before deducting expenses) received by
the Issuer and the total underwriting discount received by the Initial
Purchasers, bear to the aggregate initial offering price of the Securities.
The relative fault of the Issuer on the one hand and the Initial Purchasers
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Issuer, or by the Initial Purchasers, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission, it being agreed by the parties that the Issuer shall
be deemed to have access to information concerning PriCellular.
The Issuer and the Initial Purchasers agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Initial Purchasers were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
-22-
<PAGE>
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which such
Initial Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
Initial Purchaser within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act shall have the same rights to contribution as such Initial
Purchaser, and each director of the Issuer, and each person, if any, who
controls the Issuer within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Issuer.
The Initial Purchasers' respective obligations to contribute pursuant to this
Section 7 are several in proportion to the principal amount of Securities set
forth opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
--------------------------------------------------------------
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Issuer, PriCellular or any of its subsidiaries
submitted pursuant hereto, shall remain operative and in full force and effect,
regardless of any investigation made by or on behalf of any Initial Purchaser or
controlling person, or by or on behalf of the Issuer, and shall survive delivery
of the Securities to the Initial Purchasers.
SECTION 9. Termination of Agreement.
------------------------
(a) Termination; General. The Representative may terminate this
Agreement, by notice to the Issuer, at any time at or prior to the Closing Time
(i) if there has been, since the time of execution of this Agreement or since
the respective dates as of which information is given in the Offering
Memorandum, any material adverse change in the condition (financial or
otherwise), earnings, business affairs or business prospects of the Issuer,
PriCellular and its subsidiaries considered as one enterprise, whether or not
arising in the ordinary course of business, or (ii) if there shall have occurred
a downgrading in the rating assigned to the Securities or any of the Issuer's
and PriCellular's other debt securities by any nationally recognized securities
rating agency, or if such securities rating agency shall have publicly announced
that it has under surveillance or review, with possible negative implications,
its rating of the Securities or any of the Issuer's or PriCellular's other debt
securities or guarantees of debt securities, or (iii) if there has occurred any
material adverse change in the financial markets in the United States or the
-23-
<PAGE>
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Initial Purchasers, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iv) if trading in any
securities of the Issuer or PriCellular has been suspended or limited by the
Commission or the NASDAQ National Market System, or if trading generally on the
American Stock Exchange or the New York Stock Exchange or in the NASDAQ National
Market System has been suspended or limited, or minimum or maximum prices for
trading have been fixed, or maximum ranges for prices have been required, by any
of said exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority, or
(v) if a banking moratorium has been declared by either Federal, Delaware or New
York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party to any other
party except as provided in Section 4 hereof, and provided further that Sections
1, 6 and 7 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the Initial Purchasers. If one or
------------------------------------------------
more of the Initial Purchasers shall fail at Closing Time to purchase the
Securities which it or they are obligated to purchase under this Agreement (the
"Defaulted Securities"), the Representative shall have the right, but not the
obligation, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting Initial Purchasers, or any other initial purchasers, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the
Representative shall not have completed such arrangements within such 24-hour
period, then
(a) if the number of Defaulted Securities does not exceed 10% of the
aggregate principal amount of the Securities to be purchased hereunder,
each of the non-defaulting Initial Purchasers shall be obligated, severally
and not jointly, to purchase the full amount thereof in the proportions
that their respective obligations hereunder bear to the obligations of all
non-defaulting Initial Purchasers, or
(b) if the number of Defaulted Securities exceeds 10% of the aggregate
principal amount of the Securities to be purchased hereunder, this
Agreement shall terminate without liability on the part of any non-
defaulting Initial Purchaser.
No action taken pursuant to this Section shall relieve any defaulting
Initial Purchaser from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement, either the Representative the Issuer shall have the right to
postpone the Closing Time for a period not exceeding seven days in order to
effect any required changes in the Offering Memorandum or in any other documents
or arrangements. As used herein, the term "Initial Purchaser" includes any
person substituted for an Initial Purchaser under this Section 10.
-24-
<PAGE>
SECTION 11. Notices. All notices and other communications hereunder shall
-------
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Initial
Purchasers shall be directed to the Representatives at North Tower, World
Financial Center, New York, New York 10281-1201, attention of Lex Maultsby, with
a copy to Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New
York, New York 10004, attention of Valerie Ford Jacob, Esq.; notices to the
Issuer shall be directed to Providence Equity Partners, 50 Kennedy Plaza,
Providence, Rhode Island 02903, attention of Jonathan M. Nelson and Spectrum
Equity Investors, 245 Lytton Avenue, Suite 175, Palo Alto, California 94301,
attention of Brion Applegate, with a copy (which shall not constitute notice) to
Latham & Watkins, 505 Montgomery Street, Suite 1900, San Francisco, California,
attention of Gregory Miller, Esq.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
-------
and be binding upon the Initial Purchasers, the Issuer and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
Initial Purchasers, the Issuer and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Initial Purchasers, the Issuer
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any Initial
Purchaser shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. Governing Law And Time. THIS AGREEMENT SHALL BE GOVERNED BY
----------------------
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED IN SUCH STATE. SPECIFIED TIMES OF DAY HEREIN
REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
------------------
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
-25-
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Issuer a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Initial Purchasers and the Issuer in accordance with its terms.
Very truly yours,
AMERICAN CELLULAR CORPORATION
By /s/ Brion Applegate
--------------------------
Authorized Signatory
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
TD SECURITIES (USA) INC.
WASSERSTEIN PERELLA SECURITIES, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ John Curran
----------------------------
Authorized Signatory
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Principal
Amount of
Name of Initial Purchaser Securities
------------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................................ $185,250,000
TD Securities (USA) Inc..................................... 85,500,000
Wasserstein, Perella Securities, Inc........................ 14,250,000
------------
Total $285,000,000
------------
</TABLE>
-1-
<PAGE>
SCHEDULE B
Subsidiaries of PriCellular Corporation
---------------------------------------
<TABLE>
<CAPTION>
Name of Subsidiary State of Incorporation
------------------ ----------------------
<S> <C>
PriCellular Wireless Corporation Delaware
ConnectOne Communications Corporation Delaware
PCPCS Corporation Delaware
ICSB Corporation Delaware
Alton CellTelCo Cellular Corporation Delaware
Alton CellTelCo Partnership Illinois
Alexandra Cellular Corporation Delaware
Amro Cellular Corporation Delaware
Bunyon Cellular Corporation Delaware
Cellular Information Systems of Laredo, Inc. Texas
Central KY Cell Corp. Alabama
Chill Cellular Corporation Delaware
Chippewa Cellular Corporation Delaware
Dutchess County Cellular Telephone Company Delaware
Duluth/Superior Cellular, Inc. Minnesota
Eastern Wireless Cellular Corporation Delaware
Five Cellular Corporation Delaware
Four Cellular Corporation Delaware
Gilro Cellular Corporation Delaware
Jessica Cellular Corporation Delaware
Kyle Cellular Corporation Delaware
Marathon Cellular Corporation Delaware
Minnesota Six Cellular Corporation Louisiana
Northland Cellular Corporation Delaware
One Cellular Corporation Delaware
Pebbles Cellular Corporation Delaware
Seven Cellular Corporation Delaware
Three Cellular Corporation Delaware
Vilas Cellular Corporation Wisconsin
Wausau Cellular License Corporation Delaware
Wausau Cellular Limited Partnership Delaware
</TABLE>
-1-
<PAGE>
Non-Wholly Owned Subsidiaries
-----------------------------
<TABLE>
<CAPTION>
Subsidiary Economic Interest
---------- -----------------
<S> <C>
Alton CelTelCo Partnership 87.0%
Chill Cellular Corporation 99.4%
Dutchess County Cellular Telephone Company 95.5%
Wausau Cellular Limited Partnership 95.1%
Wausau Cellular License Corporation 95.1%
Texas/Illinois Cellular Limited Partnership 44.5%
</TABLE>
-2-
<PAGE>
SCHEDULE C
AMERICAN CELLULAR CORPORATION
$285,000,000 Senior Notes due 2008
1. The initial offering price of the Securities shall be 99.24% of the
principal amount thereof, plus accrued interest, if any, from the date of
issuance.
2. The purchase price to be paid by the Initial Purchasers for the
Securities shall be 96.24% of the principal amount thereof.
3. The interest rate on the Securities shall be 10.500% per annum.
4. The interest payment dates of the Securities shall be May 15 and
November 15 of each year, commencing November 15, 1998.
5. The Securities will be subject to redemption at any time on or after
May 15, 2003, at the option of the Issuer, at the following redemption prices
(expressed as percentages of the principal amount), if redeemed during the 12-
month period beginning May 15 of the years indicated below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2003 105.250%
2004 103.500%
2005 101.750%
</TABLE>
and thereafter at 100% of the principal amount, in each case, together with
accrued and unpaid interest, if any, to the redemption date (subject to the
rights of holders of record on relevant record dates to receive interest due on
an interest payment date).
6. At any time prior to May 15, 2001, the Issuer may, at its option, use
the net proceeds of one or more Public Equity Offerings to redeem up to an
aggregate of 35% of the aggregate principal amount of Securities originally
issued under the Indenture at a redemption price equal to 110.500% of the
aggregate principal amount thereof, plus accrued and unpaid interest thereon, if
any, to the redemption date; provided that at least 65% of the aggregate
-1-
<PAGE>
principal amount of Securities originally issued under the Indenture remains
outstanding immediately after the occurrence of such redemption.
-2-
<PAGE>
EXHIBIT A
FORM OF OPINION OF LATHAM & WATKINS
TO BE DELIVERED PURSUANT TO SECTION 5(a)
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center, North Tower
New York, N.Y. 10282
Re: American Cellular Corporation
-----------------------------
Ladies and Gentlemen:
We have acted as special counsel to American Cellular Corporation, a
Delaware corporation (the "Company"), in connection with the sale to you of
$285,000,000 aggregate principal amount of 10 1/2% Senior Notes due 2008 (the
"Initial Notes"), pursuant to the purchase agreement dated May 6, 1998 (the
"Purchase Agreement") between you, as initial purchasers (the "Initial
Purchasers"), and the Company. In connection with such sale, the Company has
prepared an Offering Memorandum dated May 6, 1998 (the "Offering Memorandum").
The Notes are being issued pursuant to an Indenture dated as of May 13, 1998
(the "Indenture") between the Company and Chase Manhattan Bank and Trust
Company, N.A., as trustee (the "Trustee"). This opinion is being rendered to
you pursuant to Section 5(a) of the Purchase Agreement.
As such counsel, we have made such legal and factual examinations and
inquiries as we have deemed necessary or appropriate for purposes of this
opinion. In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies. As to facts material to the opinions, statements and
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 2
assumptions expressed herein, we have, with your consent, relied upon oral or
written statements and representations of officers and other representatives of
the Company and others. In addition, we have obtained and relied upon such
certificates and assurances from public officials as we have deemed necessary.
We are opining herein as to the effect on the subject transaction only
of the federal laws of the United States, the internal laws of the State of New
York and the General Corporation Law of the State of Delaware (the "Delaware
GCL"), and we express no opinion with respect to the applicability thereto, or
the effect thereon, of the laws of any other jurisdiction or, in the case of
Delaware, any other laws, or as to any matters of municipal law or the laws of
any local agencies within any state.
Our opinion set forth in paragraph (x) below is based upon our
consideration of only the Delaware GCL and those New York and federal statutes,
rules and regulations which in our experience are normally applicable to
transactions of the type contemplated by the Purchase Agreement.
Whenever a statement herein is qualified by "to our knowledge" or a
similar phrase, it is intended to indicate that those attorneys in this firm who
have rendered legal services to the Company do not have current actual knowledge
of the inaccuracy of such statement. However, except as otherwise expressly
indicated, we have not undertaken any independent investigation to determine the
accuracy of any such statement, and no inference that we have any knowledge of
any matters pertaining to such statement should be drawn from our representation
of the Company.
For purposes of this opinion; (i) the term "Operative Agreements"
means the Purchase Agreement, the Registration Rights Agreement by and among the
Company and the Initial Purchasers dated May 13, 1998 (the "Registration Rights
Agreement"), the Indenture, the Initial Notes, the Exchange Notes to be issued
by the Company upon exchange of the Initial Notes (the "Exchange Notes" and,
together with the Initial Notes, the "Notes"), and the Pledge and Escrow
Agreement dated as of May 13, 1998 (the "Pledge and Escrow Agreement") between
the Company, as pledgor, and Chase Manhattan Bank and Trust Company, N.A., as
trustee (the "Trustee"), (ii) the term "Federal Security Entitlement" means
"security entitlements" as defined in Section 357.2 of the Federal Book-Entry
Regulations; (iii) "Federal Book-Entry Regulations" means, collectively, the
United States Department of Treasury regulations governing the transfer and
pledge of marketable Treasury Securities maintained in the form of entries in
the records of entries in the records of the Federal Reserve Banks as set forth
at 31 C.F.R. Part 357, including the NY UCC, which is incorporated by reference
pursuant to 31 C.F.R. 357.2, and (iv) the term "Federal Security" means
securities issued by the United States Treasury, maintained in TRADES and
constituting "Book-entry Securities" as such term is defined in 31 C.F.R. 357.2.
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 3
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:
(i) The Company has been duly incorporated and is validly existing
and in good standing under the laws of the State of Delaware, with
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Offering Memorandum. Based
solely upon certificates from public officials, we confirm that the Company
is qualified to do business in the following jurisdiction: the State of
Delaware.
(ii) PriCellular Corporation, a Delaware corporation
("PriCellular"), has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware, with corporate power
and authority to own, lease and operate its properties and to conduct its
business as described in the Offering Memorandum. Based solely upon
certificates from public officials, we confirm that PriCellular is
qualified to do business in the following jurisdictions: the States of
Delaware and New York.
(iii) PriCellular Wireless Corporation, a Delaware corporation
("Wireless"), has been duly incorporated and is validly existing and in
good standing under the laws of the State of Delaware. Based solely upon
certificates from public officials, we confirm that Wireless is qualified
to do business in the following jurisdictions: the States of Delaware, New
York and Washington.
(iv) The Initial Notes have been duly authorized by the Company and,
when executed and authenticated in accordance with the terms of the
Indenture and delivered to and paid for by the Initial Purchasers in
accordance with the terms of the Purchase Agreement, will be legally valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
(v) The Indenture has been duly authorized, executed and delivered
by the Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(vi) The Purchase Agreement has been duly authorized, executed and
delivered by the Company.
(vii) Each of the Registration Rights Agreement and the Pledge and
Escrow Agreement has been duly authorized, executed and delivered by the Company
and is a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms.
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 4
(viii) The Supplemental Indenture dated as of April 23, 1998 between
Wireless and Bank of Montreal Trust Company, as trustee (supplemental to the
indenture dated as of November 1, 1996 with respect to the 10 3/4% Senior Notes
due 2004 of Wireless), has been duly authorized, executed and delivered by
Wireless and, upon consummation of the Debt Tender Offers (as defined in the
Offering Memorandum), will be a valid and binding agreement of Wireless,
enforceable against Wireless in accordance with its terms. The Supplemental
Indenture dated as of April 23, 1998 among PriCellular, Wireless and Bank of
Montreal Trust Company, as trustee (supplemental to the indenture dated as of
September 15, 1995 with respect to the 12 1/4% Senior Subordinated Discount
Notes due 2003 of Wireless), has been duly authorized, executed and delivered by
each of PriCellular and Wireless and, upon consummation of the Debt Tender
Offers, will be a valid and binding agreement of each of PriCellular and
Wireless, enforceable against each of them in accordance with its terms. The
Supplemental Indenture dated as of April 23, 1998 among PriCellular, Wireless
and Bank of Montreal Trust Company, as trustee (supplemental to the indenture
dated as of November 15, 1994 with respect to the 14% Senior Subordinated
Discount Notes due 2001 of Wireless), has been duly authorized, executed and
delivered by each of PriCellular and Wireless and, upon consummation of the Debt
Tender Offers, will be a valid and binding agreement of each of PriCellular and
Wireless, enforceable against each of them in accordance with its terms. As
used herein, such Supplemental Indentures are collectively referred to as the
"Supplemental Indentures".
(ix) The Exchange Notes have been duly authorized by the Company.
(x) The execution, delivery and performance of the Purchase
Agreement and the other Operative Documents by the Company will not result in
the violation by the Company of its Certificate of Incorporation or bylaws, the
Delaware GCL or any federal or New York statute, rule or regulation known to us
to be applicable to the Company (other than federal or state securities laws,
which are specifically addressed elsewhere herein) or in the breach of or a
default under any of the Material Agreements identified on Exhibit A hereto;
and, to our knowledge, no consent, approval, authorization or order of, or
filing with, any federal or New York court or governmental agency or body is
required for the issuance and sale of the Initial Notes pursuant to the Purchase
Agreement, except such as may be required under state securities laws in
connection with the purchase and distribution of the Initial Notes by the
Initial Purchasers (other than federal securities laws, which are specifically
addressed elsewhere herein).
(xi) To our knowledge and except as is disclosed in the Offering
Memorandum, there are no legal or governmental proceedings that are pending or
threatened against the
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 5
Company, PriCellular or any of its subsidiaries that would be required by Item
103 of Regulation S-K to be disclosed in a Registration Statement on Form S-1.
(xii) No registration of the Initial Notes under the Securities Act
of 1933, and no qualification of the Indenture under the Trust Indenture Act of
1939, as amended, is required for the purchase of the Initial Notes by you or
the initial resale of the Initial Notes by you to Subsequent Purchasers, in each
case in the manner contemplated by the Purchase Agreement. We express no
opinion, however, as to when or under what circumstances any Initial Notes
initially sold by you may be reoffered or resold by Subsequent Purchasers.
(xiii) The statements under the captions "Business--Telecommunications
Act of 1996; Other Regulatory Developments", "Regulations" and "Description of
the Notes" in the Offering Memorandum, insofar as such statements constitute a
summary of the legal matters or documents referred to therein, fairly present in
all material respects such legal matters and documents.
(xiv) Neither the Company nor, to our knowledge, PriCellular is an
"investment company" as such term is defined under the Investment Company Act of
1940, as amended.
(xv) Assuming the Initial Escrow and Pledge Account (as such term is
defined in the Pledge and Escrow Agreement) is duly established and maintained
in the name of the Company with the Trustee and in accordance with the Pledge
and Escrow Agreement and also assuming the absence of an indispensable
instrument (as further described below), the provisions of the Pledge and Escrow
Agreement, together with the dominion and control of the Trustee in accordance
with the Pledge and Escrow Agreement, are effective under the laws of the States
of New York to create in favor of the Trustee for the benefit of the Holders (as
defined in the Indenture) of the Notes a first perfected security interest in,
and a lien on, such Initial Escrow and Pledge Account to secure the Initial
Secured Obligations (as defined in the Pledge and Escrow Agreement) to the
extent set forth in the Pledge and Escrow Agreement.
(xvi) The Indenture and the Pledge and Escrow Agreement are
sufficient under the Uniform Commercial Code as in effect in the State of New
York (the "NY UCC") to create in a favor of the Trustee for the benefit of the
Holders of the Notes, to secure the performance by the Company of the Initial
Secured Obligations or the Subsequent Secured Obligations (as defined in the
Pledge and Escrow Agreement), a valid security interest in all of the Company's
right, title and interest in and to such "security entitlements" arising from
the Initial Collateral or Subsequent Collateral (as defined in the Pledge and
Escrow Agreement), as the case may be, (such security entitlements, the
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 6
"Pledged Security Entitlements") and the "proceeds" (as defined in Section 9-306
of the NY UCC) thereof. No recording or filing with any New York governmental
body, agency or official is necessary to perfect the foregoing security
interest. The provisions of the Pledge and Escrow Agreement, are effective under
the NY UCC to perfect the security interest of the Trustee in the Pledged
Security Entitlements and assuming that the Trustee, on behalf of the Holders,
has obtained the Pledged Security Entitlement to the Collateral (as defined in
the Pledge and Escrow Agreement) in good faith and without notice of any
"adverse claim" (as defined in Section 8-102 of the NY UCC) in respect of the
Pledged Security Entitlements, such a perfected security interest in favor of
the Trustee under the Pledge and Escrow Agreement in the Company's right, title
and interest in and to the Pledged Security Entitlements will have priority over
any other security interest in the Pledged Security Entitlements under the NY
UCC hereafter created by arising through the Company, except as hereafter
stated.
(xvii) Assuming the Cash Collateral Account (as such term is defined
in the Pledge and Escrow Agreement) is duly established and maintained in the
name of the Company with the Trustee and in accordance with the Pledge and
Escrow Agreement and also assuming the absence of an indispensable instrument
(as further described below), the provisions of the Pledge and Escrow Agreement,
together with the dominion and control of the Trustee in accordance with the
Pledge and Escrow Agreement, are effective under the laws of the States of New
York to create in favor of the Trustee a perfected security interest in, and a
lien on, such Cash Collateral Account to secure the Subsequent Secured
Obligations (as defined in the Pledge and Escrow Agreement) to the extent set
forth in the Pledge and Escrow Agreement.
In addition, we have participated in conferences with officers and
other representatives of the Company, representatives of the independent public
accountants for the Company, officers of PriCellular, and the Initial
Purchasers' representatives, at which the contents of the Offering Memorandum
and related matters were discussed, and although we are not passing upon, and do
not assume any responsibility for, the accuracy, completeness or fairness of the
statements contained in the Offering Memorandum and have not made any
independent check or verification thereof (except as set forth in paragraph
(xiii) above), during the course of such participation, no facts came to our
attention that caused us to believe that the Offering Memorandum, as of its date
or as of the date hereof, contained or contains an untrue statement of a
material fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, it being understood that we express no belief with respect
to the financial statements or other financial data included in, or omitted
from, the Offering Memorandum.
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 7
The opinions rendered in each of paragraphs (iv), (v), (vii) and
(viii) relating to the enforceability of the Initial Notes, the Indenture, the
Registration Rights Agreement, the Pledge and Escrow Agreement and the
Supplemental Indentures, respectively, are subject to the following exceptions,
limitations and qualifications: (a) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to or affecting the rights and remedies of creditors; (b) the effect of
general principles of equity, whether enforcement is considered in a proceeding
in equity or law, and the discretion of the court before which any proceeding
therefor may be brought; (c) the unenforceability under certain circumstances
under law or court decisions of provisions providing for the indemnification of
or contribution to a party with respect to a liability where such
indemnification or contribution is contrary to public policy; (d) we express no
opinion concerning the enforceability of the specific performance remedy
contained in the Registration Rights Agreement; and (e) we express no opinion
regarding the waivers of rights or defenses contained in Section 4.15 of the
Indenture.
For purposes of the opinion expressed in paragraph (viii) above
relating to the enforceability of the Supplemental Indentures, we have assumed
with your permission that (a) the Debt Tender Offers will be consummated on the
terms set forth in the Company's Offer to Purchase and Consent Solicitation (the
"Offer to Purchase") dated as of April 1, 1998 and (b) consents received as of
the Solicitation Expiration Date (as defined in the Offer to Purchase) will not
have been revoked prior to the consummation of the Debt Tender Offers.
For purposes of the opinion expressed in paragraph (x) above insofar
as it requires interpretation of the Material Agreements, (a) we have assumed
with your permission that all courts of competent jurisdiction would enforce
such agreements as written but would apply the internal laws of the State of New
York without giving effect to any choice of law provisions contained therein or
any choice of law principles which would result in application of the internal
laws of any other state, (b) to the extent that any questions of legality or
legal construction have arisen in connection with our review, we have applied
the laws of the State of New York in resolving such questions and (c) we express
no opinion with respect to the effect of any action or inaction by the Company
under the Material Agreements which may result in a breach or default under any
Material Agreement. We advise you that certain of the Material Agreements may
be governed by other laws, that such laws may vary substantially from the law
assumed to govern for purposes of this opinion, and that this opinion may not be
relied upon as to whether or not a breach or default would occur under the law
actually governing such Material Agreements.
With your permission, for purposes of the opinion expressed in
paragraph (xi), we have relied solely upon certificates presented to us by
officers of the Company and PriCellular, and we have not conducted a judgment
roll search, an investigation of any
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 8
governmental records or court dockets or any other similar investigation of any
kind whatsoever.
With your permission, for purposes of the opinions rendered in
paragraph (xii), we have assumed that the representations and agreements of each
of you and the Company contained in the Purchase Agreement are accurate and have
been and will be complied with.
The opinions expressed in numbered paragraphs (xv) and (xvii) are
subject to the following limitations, qualifications and exceptions:
(a) we have assumed that each of the Initial Escrow and Pledge
Account and Cash Collateral Account exists, that the Company has sufficient
rights therein for the security interest of the Trustee to attach thereto and
that "value", as defined in Section 1-201(44) of the NY UCC has been given to
the Company;
(b) we call to your attention to the fact that Section 552 of the
Bankruptcy Code limits the extent to which property acquired by a debtor
after the commencement of a case under the Bankruptcy Code may be subject to
a security interest arising from a security agreement entered into by a
debtor before the commencement of a case;
(c) we call to your attention to the fact that the security interest
of the Trustee in proceeds is limited to the extent set forth in Section 9-
306 of the NY UCC or any other applicable law with respect to proceeds of
any funds or other property credited to the Initial Escrow and Pledge Account
or the Cash Collateral Account to the extent such funds or other property
constitute proceeds of the collateral;
(d) we express no opinion as to either of the Initial Escrow and
Pledge Account or the Cash Collateral Account except to the extent the
foregoing constitutes a "deposit account" (as such term is defined in Section
9-105(1)(e) of the NY UCC), and we call to your attention that if any portion
of the balances in the Initial Escrow and Pledge Account or the Cash
Collateral Account is invested in securities, such account may not be
classified as a "deposit account" for purposes of the NY UCC;
(e) we express no opinion with respect to property other than funds
credited to or deposited into the Initial Escrow and Pledge Account or the
Cash Collateral Account, and we call to your attention that any interest of
the Trustee in such other property may require possession or other action in
accordance with Article 8 of the NY UCC or other applicable law;
(f) we call to your attention that the transfer of a collateral
interest in "deposit accounts" is expressly excluded from the coverage of the
NY UCC (except to the extent
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 9
such accounts represent proceeds from collateral covered by the NY UCC).
Consequently, a secured party must look to the common law in such states to
determine the validity of security interests in such collateral.
Historically, the common law has required for the creation of a valid
"pledge" of a deposit account that the pledgor deliver an "indispensable
instrument" to the pledgee. In the case of a deposit account, an
indispensable instrument was something, such as a passbook or some other
document or instrument with respect to such deposit account, which was a
formal written evidence of an interest in the deposit account which so
represented the deposit account that the enjoyment, transfer, or enforcement
of the deposit account depended upon the possession of the indispensable
instrument. This requirement has become outdated by modern banking and
finance practice, and, as a result, the courts are now divided as to whether
a valid pledge can be created in the absence of such an instrument. At least
one New York court has held that the common law does not prevent the parties
from having a security interest in bank deposits which are not evidenced by
indispensable instruments by insertion of appropriate pledge or granting
language in an agreement; other courts have held to the contrary. In
addition, while not dispositive of the issue, some courts in other
jurisdictions which exclude security interests in "deposit accounts" from
their respective enactments of the relevant Uniform Commerical Code have held
that if a pledgee is given "exclusive possession and control" over a deposit
account, the requirements of a common law pledge should be satisfied,
notwithstanding the absence of any document or instrument that might be
characterized as an indispensable instrument.
The Pledge and Escrow Agreement does not contemplate the creation or
delivery of any indispensable instrument relating to the Initial Escrow and
Pledge Account or the Cash Collateral Account. It does, however, provide
that the Trustee will have "exclusive dominion and control" over the Initial
Escrow and Pledge Account and "sole dominion and control" over the Cash
Collateral Account. We note, however, that various court cases holding that
a cash collateral account in the possession of an agent satisfied the
requirements of the relevant jurisdictions UCC 9-304(1) regarding the
perfection of a pledge of money by possession and believe that the reasoning
employed and decisions reached in the cases decided in other similar
jurisdictions should be persuasive to a New York court considering the matter
and, therefore, believe that if a pledgee obtains "exclusive dominion and
control" or "sole dominion and control" over a deposit account, the pledgor
and pledgee with respect thereto should be deemed to have taken actions
substantially equivalent to the delivery of an indispensable instrument;
(g) we have assumed that there are no agreements prohibiting,
restricting or conditioning the assignment of any interest in the Initial
Escrow and Pledge Account or the Cash Collateral Account;
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 10
(h) we have assumed that neither the Trustee nor any Holder has
notice of any other interest in the Initial Escrow and Pledge Account or the
Cash Collateral Account for the property credited thereto; and
The opinions expressed in numbered paragraph (xvi) is subject to the
following limitations, qualifications and exceptions:
(a) we have assumed that the Company has sufficient rights in the
Pledged Security Entitlements for the security interest of the Trustee to
attach, and we express no opinion as to the nature or extent of the Company's
rights in, or title to, any of the Pledged Security Entitlements; in
addition, we express no opinion as to the nature or extent of the "securities
intermediary's (as defined in the NY UCC) rights in, or title to, any
financial assets underlying the Pledged Security Entitlements;
(b) our opinion is limited to the NY UCC and Federal Book Entry
Regulations, and such opinion does not address (I) laws of jurisdictions
other than (A) New York or (B) which are govered by the NY UCC and the
Federal Book Entry Regulations, (II) collateral of a type not subject to the
NY UCC or the Federal Book Entry Regulations, (III) under NY UCC Section 9-
103 or 8-110, what law governs perfection or priority of the security
interests granted in the collateral and (IV) what law governs perfection or
priority of security interests granted in Federal Security Entitlements;
(c) we express no opinion except to the extent that the Cash
Collateral Account constitutes a "securities account" within the meaning of
NY UCC Section 8-501(a) and with respect to each security entitlement, we
have assumed that the underlying security or other financial asset has been
endorsed to the securities intermediary or in blank or has been credited to a
securities account in the name of the securities intermediary;
(d) we express no opinion with respect to proceeds except to the
extent the proceeds constitute Pledged Security Entitlements;
(e) we express no opinion with respect to the priority of the
security interest of the Trustee in the Pledged Security Entitlements against
any of the following: (I) pursuant to Section 9-301(1) of the NY UCC, a lien
creditor who attached or levied prior to the perfection of the security
interest of the Trustee, (II) pursuant to Section 9-301(4) of the NY UCC, a
lien creditor with respect to future advances, (III) pursuant to Section 9-
312(7) of the NY UCC, another secured creditor to the extent that provision
limits the priority afforded future advances, (d) pursuant to Section 9-
312(6) of the NY UCC, another secured party with a prior perfected security
interest in other property of the Company to the extent that the Pledged
Security Entitlements are proceeds of such other property and (e) pursuant to
Section 8-603 of the NY UCC, another secured party with a perfected
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 11
security interest in the Pledged Security Entitlements to the extent such
creditor's security interest was perfected prior to the adoption of revised
Article 8 in the NY UCC;
(f) we note that pursuant to Section 9-115 of the NY UCC, the
security interest of the Trustee will be subordinate to any security interest
now or hereafter granted by the Company in favor of a "securities
intermediary" and will be of equal priority with any other secured party who
has or obtains control; and
(g) if and to the extent the securities intermediary is a "clearing
corporation" as defined in Section 8-102(a)(5), we call to your attention
that pursuant to Section 8-111 of the NY UCC, any rule adopted by a clearing
corporation governing the rights and obligations among the clearing
corporation and its participants is effective even if the rule conflicts with
the NY UCC and affects the rights of the Trustee.
To the extent that the opinions expressed in numbered paragraph (xvi)
relate to Federal Security Entitlements such opinion is subject to the following
limitations, qualifications and exceptions:
(a) we call to your attention that pursuant to the Federal Book-Entry
Regulations, the Secretary of the Treasury may waive provisions of the
Federal Book-Entry Regulations and we express no opinion on the effect of any
such waiver on the opinions expressed herein;
(b) our opinions are limited to Federal Book-Entry Regulations as
published in the Code of Federal Regulations or the Federal Register, without
regard to any interpretations, operating circulars or other communications
from the Department of the Treasury, the Board of Governors of the Federal
Reserve System or any Federal Reserve Bank.
(c) with respect to each Federal Security Entitlement we have assumed
that a Federal Security has been credited to a securities account in the name
of a securities intermediary;
(d) we note that pursuant to Section 9-115 of the UCC, the security
interest of the Trustee may be subordinate to any security interest now or
hereafter granted by the Company in favor of a "securities intermediary" and
will be of equal priority with any other secured party who has or obtains
control and pursuant to section 357.12(C) of the Federal Book-Entry
Regulations, the security interest of the Trustee will be subordinate to a
security interest in favor of the United States or in favor of any other
person if it is marked on the books and records of a federal reserve bank;
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 12
(e) we have assumed that the securities intermediary maintains
securities entitlements (as such term is defined in the Federal Book-Entry
Regulations) with respect to the Federal Securities in an amount equal to the
Pledged Securities Entitlements that are Federal Securities Entitlements with
a Participant (as such term is defined in the Federal Book-Entry Regulations)
who in turn maintains equal security entitlements on records of a federal
reserve bank;
(f) we call to your attention that our opinion with respect to the
security interest of the Trustee is limited to the Federal Book-Entry
Regulations and the UCC and pursuant to Section 357.11 of the Book-Entry
Regulations, the law of any securities intermediaries' jurisdiction governs,
among other things, the rights and duties of the securities intermediary and
the entitlement holder arising out of a security entitlement and whether an
adverse claim can be asserted against a person who acquires a security
entitlement from the securities intermediary;
To the extent that the obligations of the Company under the Indenture,
the Notes, the Registration Rights Agreement and the Pledge and Escrow Agreement
may be dependent upon such matters, we have assumed for purposes of this opinion
that (i) each of the Initial Purchasers, Trustee (as defined in the Indenture)
and Trustee (a) is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization; (b) has the requisite
organizational and legal power and authority to perform its obligations under
each of the Operative Agreements to which it is a party; (c) is duly qualified
to engage in the activities contemplated by each such Operative Agreement; and
(d) has duly authorized, executed and delivered each such Operative Agreement;
(ii) with respect to each of the Initial Purchasers, the Trustee (as defined in
the Indenture) and the Trustee, each Operative Document to which it is a party
constitutes its legally valid and binding agreement, enforceable against it in
accordance with its terms; and (iii) the Trustee is in compliance, generally and
with respect to acting as trustee under the Indenture, with all applicable laws
and regulations. We have also assumed, with your consent, that the choice of
law provisions in each of the Operative Agreements would be enforced by any
court in which enforcement thereof might be sought.
To the extent that the obligations of PriCellular or Wireless under
the Supplemental Indentures may be dependent upon such matters, we have assumed
for purposes of this opinion that (i) the trustee under each of the Supplemental
Indentures (a) is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization; (b) has the requisite
organizational and legal power and authority to perform its obligations under
such Supplemental Indenture; (c) is duly qualified to engage in the activities
contemplated by such Supplemental Indenture; and (d) has duly authorized,
executed and delivered such Supplemental Indenture; (ii) each Supplemental
Indenture constitutes the legally valid and binding agreement of the trustee
thereunder, enforceable against it in
<PAGE>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
May 13, 1998
Page 13
accordance with its terms; and (iii) each trustee under each Supplemental
Indenture is in compliance, generally and with respect to acting as trustee
thereunder, with all applicable laws and regulations. We have also assumed, with
your consent, that the choice of law provisions in each Supplemental Indenture
would be enforced by any court in which enforcement thereof might be sought.
We have not been requested to express and, with your knowledge and
consent, do not render any opinion as to the applicability to the obligations of
the Company under the Indenture and the Notes of Section 548 of the United
States Bankruptcy Code or applicable state law (including, without limitation,
Article 10 of the New York Debtor and Creditor Law) relating to preferences and
fraudulent transfers and obligations.
This opinion is rendered only to you and is solely for your benefit in
connection with the transactions covered hereby. This opinion may not be relied
upon by you for any other purpose, or furnished to, quoted to, or relied upon by
any other person, firm or corporation for any purpose, without our prior written
consent.
Very truly yours,
<PAGE>
EXHIBIT A
Material Agreements
1. Contribution Agreement by and among Texas/Illinois Cellular Limited
Partnership, a Delaware limited partnership, Southwestern Bell Mobile
Systems, Inc., a Delaware and Virginia corporation, PriCellular, Cellular
Information Systems of Laredo, Inc., a Texas corporation, dated as of April
10, 1995.
2. Asset Acquisition Agreement dated as of October 15, 1996 among PriCellular,
Cellular Information Systems of Florence, Inc. and Horizon Cellular
Telephone Company of Central Kentucky, L.P.
3. Indenture to 14% Senior Subordinated Discount Notes due 2001 among
PriCellular, Wireless and Bank of Montreal Trust Company, as trustee.
4. Indenture of 12 1/4% Senior Subordinated Notes due 2003 among PriCellular,
Wireless and Bank of Montreal Trust Company, as trustee.
5. Indenture to 10 3/4% Senior Subordinated Convertible Discount Notes due 2004
between the Company and Bank of Montreal Trust Company, as trustee.
6. Indenture to 10 3/4% Senior Notes due 2004 between Wireless and Bank of
Montreal Trust Company, as trustee.
7. Stockholders' Agreement dated as of April 28, 1995 by and among PriCellular
and the parties named therein.
8. Voting Agreement dated as of December 28, 1995 by and among PriCellular and
the parties names therein.
9. Operating Agreement dated as of April 28, 1994 by and between PriCellular
and McCaw.
10. Warrant Agreement between PriCellular and Price Communications Corporation.
11. Employment Agreement dated as of December 28, 1995 by and between
PriCellular and Robert Price.
12. Agreement and Plan of Merger dated as of March 6, 1998 between PriCellular
and the Company.
13. Voting Agreement dated as of March 6, 1998 among the Company, PriCellular
and shareholders of the Company.
14. Spectrum Letter, dated March 6, 1998.
<PAGE>
15. Consent and Waiver dated as of March 6, 1998 between PriCellular and AT&T
Wireless Services, Inc.
16. Stock Purchase Agreement dated as of March 5, 1998 among the Company and
the parties listed on Exhibit A to such agreement.
17. Stockholders Agreement dated as of March 5, 1998 by and among the Company
and parties listed on Exhibit A to such agreement.
18. Registration Rights Agreement dated as of March 5, 1998 by and among the
Company and each of the parties listed on Exhibit A to such agreement.
19. Asset Purchase Agreement dated as of October 31, 1997 by and among
PriCellular, Kyle Cellular Corporation and Tennessee 04 Partners, L.P.
<PAGE>
EXHIBIT B
FORM OF LETTER OF ERNST & YOUNG
PURSUANT TO SECTION 5(d)
May 6, 1998
American Cellular Corporation
and
Merrill Lynch, Pierce, Fenner & Smith Incorporated,
TD Securities (USA) Inc. and
Wasserstein Perella Securities, Inc.,
as the Initial Purchasers
Dear Sirs:
We have audited the balance sheets of PriCellular Corporation (the "Company") as
of December 31, 1997 and 1996, and the statements of operations and cash flows
for the years ended December 31, 1997, 1996 and 1995, included in the Offering
Memorandum for $285,000,000 of American Cellular Corporation's 10 1/2% senior
notes due 2008. Our report with respect thereto is included in the offering
memorandum. This offering memorandum, dated May 6, 1998, is herein referred to
as the Offering Memorandum.
This letter is being furnished in reliance upon your representation to us that:
a. You are knowledgeable with respect to the due diligence review process that
would be performed if this placement of securities were being registered
pursuant to the Securities Act of 1933 (the Act).
b. In connection with the offering the review process you have performed is
substantially consistent with the due diligence review process that you would
have performed if this placement of securities were being registered pursuant
to the Act.
In connection with the Offering Memorandum:
1. We are independent auditors with respect to PriCellular Corporation within
the meaning of the Act and the applicable rules and regulations thereunder.
2. In our opinion the consolidated financial statements audited by us and
included in the Offering Memorandum comply as to form in all material
respects with the applicable
<PAGE>
accounting requirements of the Act and the related published rules and
regulations thereunder.
3. We have not audited any financial statements of PriCellular Corporation as of
any date or for any period subsequent to December 31, 1997. The purpose (and
therefore the scope) of our audit for the year ended December 31, 1997 was to
enable us to express our opinion on the financial statements as of December
31, 1997, and for the year then ended, but not on the financial statements
for any interim period within that year. Therefore, we are unable to and do
not express any opinion on the financial position, results of operations, or
cash flows as of any other date or for any period subsequent to December 31,
1997.
4. For purposes of this letter we have read the 1998 minutes of the meetings of
the Board of Directors of PriCellular Corporation as set forth in the minutes
books through May 1, 1998, Company officials having advised us that the
minutes of all such meetings through that date were set forth therein, and
have carried out other procedures to May 1, 1998 as follows (our work did not
extend to the period from May 2, 1998 to May 6, 1998 inclusive):
With respect to the period from January 1, 1998 to February 28, 1998, we
have:
(i) read the unaudited financial statements for January and February of
both 1997 and 1998 furnished to us by PriCellular Corporation, and
agreed the amounts contained therein to the PriCellular's accounting
records. The financial information for January and February are
incomplete in that they omit the statements of cash flows and other
disclosures. Company officials having advised us that no such
financial statements as of any date or for any period subsequent to
February 28, 1998 were available; and
(ii) inquired of Company officials who have responsibility for financial
and accounting matters as to whether (a) the unaudited financial
statements referred to under 4.(i) are stated on a basis substantially
consistent with that of the audited financial statements included in
the Offering Memorandum (b) at February 28, 1998, there was any change
in the capital stock, increase in long-term debt or any decrease in
total assets, consolidated net current assets or shareholders' equity
of the consolidated companies as compared with amounts shown in the
December 31, 1997 audited consolidated balance sheet included in the
Offering Memorandum, and (c) for the period from January 1, 1998 to
February 28, 1998, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated revenue or
in operating income or in net loss.
<PAGE>
Those officials stated that (a) the unaudited consolidated financial
statements referred to in 4.(i) are stated on a basis substantially
consistent with that of the audited consolidated financial statements
included in the Offering Memorandum, (b) at February 28, 1998, there
was no change in the capital stock, no increase in long-term debt,
other than the increases resulting from the $60 million Senior Secured
Reducing Revolver used to acquire TN-4 and approximately $4.5 million
of accretion on PriCellular's discounted debt, and no decrease in
consolidated total assets, and no decreases in consolidated net
current assets, other than the decrease resulting from the purchase of
approximately $7 million of additional fixed assets or decreases in
shareholders' equity, other than the decrease resulting from the net
loss of approximately $3.2 million for the period ended February 28,
1998 of the consolidated companies as compared with amounts shown in
the December 31, 1997 audited consolidated balance sheet included in
the Offering Memorandum, and (c) there were no decreases for the
period from January 1, 1998 to February 28, 1998, as compared with the
corresponding period in the preceding year, in consolidated revenue or
in operating income or in net loss.
5. As mentioned under 4.(i) above, Company officials have advised us that no
financial statements as of any date or for any period subsequent to February
28, 1998 are available; accordingly, the procedures carried out by us with
respect to changes in financial statement items after February 28, 1998 have,
of necessity, been even more limited than those with respect to the periods
referred to in 4. above. We have inquired of Company officials who have
responsibility for financial and accounting matters as to whether: (a) at
April 30, 1998 there was any change in the capital stock or increase in long-
term debt as compared with the amounts shown on the December 31, 1997 audited
balance sheet included in the Offering Memorandum, or (b) for the period from
March 1, 1998 to April 30, 1998, there was any decrease, as compared with the
corresponding period in the preceding year, in consolidated revenues. On the
basis of these inquiries and our reading of the minutes as described in 4.
above, nothing came to our attention that caused us to believe that there was
any such increase or decrease, except in all instances for increases or
decreases which the Offering Memorandum discloses have occurred or may occur
and the accretion on PriCellular's discounted debt.
6. At your request, we also performed the following procedures:
a. Read the unaudited pro forma condensed combined balance sheet as of December
31, 1997, and the unaudited pro forma condensed combined statement of
operations for
<PAGE>
the year ended December 31, 1997, included in the Offering Memorandum.
b. Inquired of certain officials of the Company and of PriCellular Corporation
who have responsibility for financial and accounting matters as to whether
all significant assumptions regarding the business combination had been
reflected in the pro forma adjustments and whether the unaudited pro forma
condensed combined financial statements referred to in a. above comply as to
form in all material respects with the applicable accounting requirements of
Rule 11-02 of Regulation S-X. Those officials referred to above stated, in
response to our inquiries, that all significant assumptions regarding the
business combination had been reflected in the pro forma adjustments and that
the unaudited pro forma condensed combined financial statements referred to
in 6.a. comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X.
c. We also compared the financial information included on pages 24 to 27 of the
Offering Memorandum with the historical information for PriCellular
Corporation on pages F-3 and F-4 and found them to be in agreement. We have
not inquired of any officials or representatives of the TN-4 RSA system as to
the accuracy of the amounts listed under TN-4 RSA or whether all significant
assumptions regarding the TN-4 RSA acquisition have been reflected in the pro
forma adjustments and as a result we are unable to comment as to the accuracy
of the amounts listed under TN-4 RSA.
d. Proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts in the unaudited pro forma condensed
combined financial statements.
The foregoing procedures are less in scope than an examination, the objective of
which is the expression of an opinion on management's assumptions, the pro forma
adjustments, and the application of those adjustments to historical financial
information. Accordingly, we do not express such an opinion. We make no
representation about the sufficiency of the foregoing procedures for your
purposes. Had we performed additional procedures or had we made an examination
of the pro forma financial information, other matters might have come to our
attention that would have been reported to you.
7. Nothing came to our attention as a result of the procedures specified in
paragraph 6 that caused us to believe that the pro forma financial data
referred to in paragraph 6.a. included in the Offering Memorandum do not
comply as to form in. all material respects with the applicable accounting
requirements of Rule 11-02 of Regulation S-X and that the pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of the unaudited pro forma financial data.
<PAGE>
8. We compared the information included under the heading "Selected Financial
Data" with the disclosure requirements of Item 301 of Regulation S-K. We
also inquired of certain officials of the Company and American Cellular
Corporation who have responsibility for financial and accounting matters
whether this information conforms in all material respects with the
disclosure requirements of Item 301 of Regulation S-K. Nothing came to our
attention as a result of the forgoing procedures that caused us to believe
that this information does not conform in all material respects with the
disclosure requirements of Item 301 of Regulation S-K.
9. We compared the information labeled "ratio of earnings to fixed charges"
with the disclosure requirements of Item 503(d) of Regulation S-K. We also
inquired of certain officials of the Company and American Cellular
Corporation who have responsibility for financial and accounting matters
whether this information conforms in all material respects with the
disclosure requirements of Item 503(d) of Regulation S-K. Nothing came to
our attention as a result of the forgoing procedures that caused us to
believe that this information does not conform in all material respects with
the requirements of Item 503(d) of Regulation S-K.
10. At your request, we have also read the items identified by you on the
attached copy of the Offering Memorandum, and have performed the following
procedures, which were applied as indicated with respect to the symbols
explained below:
a. Compared the dollar amounts either to the amounts in the audited consolidated
financial statements described in the introductory paragraph of this letter
or, for prior years, included in the Company's annual reports to shareholders
for the 1995, 1994 and 1993, to the extent such amounts are included in or
can be derived from such statements and found them to be in agreement.
b. Compared the dollar and other amounts not derived directly from audited to
amounts in the Company's accounting records to the extent such amounts could
be so compared directly and found them to be in agreement.
c. Compared the dollar and other amounts not derived directly from audited or
that could not be compared directly to the Company's accounting records, to
amounts in analyses prepared by the Company from its accounting records and
found them to be in agreement.
d. Proved the arithmetic accuracy of the percentages or amounts based on the
data in the above-mentioned financial statements, accounting records, and
analyses.
<PAGE>
e. Compared the dollar amounts to the unaudited pro forma condensed combined
financial statements described in 6.a., to the extent such amounts are
included in or can be derived from such statements, and found them to be in
agreement. We have not inquired of any officials or representatives of the
TN-4 RSA system as to the accuracy of the amounts listed under TN-4 RSA or
whether all significant assumptions regarding the TN-4 RSA acquisition have
been reflected in the pro forma adjustments and as a result we are unable to
comment as to the accuracy of the amounts listed under TN-4 RSA.
e1. Compared the dollar and other amounts not derived directly from the
unaudited pro forma condensed combined financial statements described in
6.a. to amounts in analyses prepared by American Cellular Corporation and
found them to be in agreement.
We make no representation as to whether the transactions will take place. We
make no legal representations as to questions of legal interpretation.
11. Our audits of the consolidated financial statements for the periods referred
to in the introductory paragraph of this letter were comprised of audit
tests and procedures deemed necessary for the purpose of expressing an
opinion on such financial statements taken as a whole. For neither the
periods referred to therein nor any other period did we perform audit tests
for the purpose of expressing an opinion on individual balances of accounts
or summaries of selected transactions such as those enumerated above and,
accordingly, we do not express an opinion thereon.
12. It should be understood that we make no representations as to questions of
legal interpretation or as to the sufficiency for your purposes of the
procedures enumerated in the preceding paragraph; also, such procedures
would not necessarily reveal any material misstatement of the information
identified in 10. above. Further, we have addressed ourselves solely to the
foregoing data as set forth in the Offering Memorandum and make no
representations as to the adequacy of disclosure or as to whether any
material facts have been omitted.
13. This letter is solely for the information of the addressees and to assist
the initial purchasers in conducting and documenting their investigation of
the affairs of the PriCellular Corporation in connection with the offering
of securities covered by the Offering Memorandum, and it is not to be used,
circulated, quoted, or otherwise referred to for any purpose, including but
not limited to the purchase or sale of securities, nor is it to be filed
with or referred to in whole or in part in the Offering
<PAGE>
Memorandum or any other document, except that reference may be made to it in
the Purchase Contract or in any list of closing documents pertaining to the
offering of securities covered by the Offering Memorandum.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
LIVEWIRE ACQUISITION CORPORATION
ARTICLE I
---------
The name of the corporation (the "Corporation") is:
Livewire Acquisition Corporation
ARTICLE II
----------
The address of its registered office in the State of Delaware is 1013
Centre Road, in the City of Wilmington, County of New Castle, 19805. The name
of its registered agent at such address is Corporation Service Company.
ARTICLE III
-----------
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
----------
The total number of shares of stock which the Corporation shall have
authority to issue is one million (1,000,000), of which five hundred thousand
(500,000) shall be Common Stock, $.01 par value, and five hundred thousand
(500,000) shall be Preferred Stock, $.01 par value. Four hundred seventy-five
(475,000) shares of Common Stock shall be designated voting Class A Common
Stock, and twenty-five thousand (25,000) shares of Common Stock shall be
designated non-voting Class B Common Stock.
<PAGE>
All shares of Class A Common Stock and Class B Common Stock shall be
identical in every respect, except that the non-voting Class B Common Stock
shall carry no right to vote for the election of directors, and no right to vote
on any matter presented to the stockholders for their vote or approval, except
only as the laws of the State of Delaware shall require that voting rights be
granted to such non-voting shares.
The Board of Directors is authorized, subject to limitations prescribed by
law and the provisions of this Article IV, to provide for the issuance of the
shares of Preferred Stock in series, and by filing a certificate pursuant to the
applicable law of the State of Delaware, to establish from time to time the
number of shares to be included in each such series, and to fix the designation,
powers, preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include, but
not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative rights of
priority, if any, of payment of dividends on shares of that series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
2
<PAGE>
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or dates
upon or after which they shall be redeemable, and the amount per share payable
in case of redemption, which amount may vary under different conditions and at
different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of shares of that series; and
(h) Any other relative rights, preferences and limitations of that series.
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the same
dividend period.
If upon any voluntary or involuntary liquidation, dissolution or winding up
of the Corporation, the assets available for distribution to holders of shares
of Preferred Stock of all series shall be insufficient to pay such holders the
full preferential amount to which they are entitled, then such assets shall be
distributed ratably among the shares of all series of Preferred Stock in
accordance with the respective preferential amounts (including unpaid cumulative
dividends, if any) payable with respect thereto.
ARTICLE V
---------
The name and mailing address of the incorporator is:
Howard P. Young
Latham & Watkins
505 Montgomery Street
Suite 1900
San Francisco, CA 94111
3
<PAGE>
ARTICLE VI
----------
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to adopt, amend or repeal the By-
laws of the Corporation.
ARTICLE VII
-----------
Election of directors need not be by written ballot unless the By-laws of
the Corporation shall so provide.
ARTICLE VIII
------------
No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, (iii) under Section 174 of the General Corporation Law of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit.
I, THE UNDERSIGNED, being the sole incorporator hereinbefore named, for the
purpose of forming a corporation pursuant to the General Corporation Law of the
State of Delaware, do make this certificate, herein declaring and certifying
that this is my act and deed and the facts herein stated are true, and
accordingly have hereunto set my hand this 26th day of February, 1998.
/s/ Howard P. Young
----------------------------
Howard P. Young,
Incorporator
4
<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION
BEFORE PAYMENT OF ANY PART OF THE CAPITAL
OF
LIVEWIRE ACQUISITION CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
Livewire Acquisition Corporation.
2. The Corporation has not received any payment for any of its stock.
3. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Article I thereof and by substituting in lieu of said Article
the following new Article I:
"ARTICLE I
---------
The name of the corporation (the "Corporation") is:
American Cellular Corporation"
4. The amendment of the Certificate of Incorporation of the Corporation
herein certified was duly adopted, pursuant to the provisions of Section 241 of
the General Corporation Law of the State of Delaware, by the sole incorporator,
no directors having been named in the Certificate of Incorporation and no
directors having been elected.
Signed on March 2, 1998.
/s/ Howard P. Young
-------------------------
Howard P. Young,
Sole Incorporator
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
OF
AMERICAN CELLULAR CORPORATION
It is hereby certified that:
1. The name of the corporation (hereinafter called the "Corporation") is
American Cellular Corporation.
2. The Certificate of Incorporation of the Corporation is hereby amended
by striking out Article IV thereof and by substituting in lieu of said Article
the following new Article:
"ARTICLE IV
-----------
The total number of shares of stock which the Corporation shall have
authority to issue is five million five hundred thousand (5,500,000), of
which five hundred thousand (500,000) shall be Common Stock, $.01 par
value, and five million (5,000,000) shall be Preferred Stock, $.01 par
value. Four hundred seventy-five thousand (475,000) shares of Common Stock
shall be designated voting Class A Common Stock, and twenty-five thousand
(25,000) shares of Common Stock shall be designated non-voting Class B
Common Stock.
All shares of Class A Common Stock and Class B Common Stock shall be
identical in every respect, except that the non-voting Class B Common Stock
shall carry no right to vote for the election of directors, and no right to
vote on any matter presented to the stockholders for their vote or
approval, except only as the laws of the State of Delaware shall require
that voting rights be granted to such non-voting shares.
The Board of Directors is authorized, subject to limitations prescribed
by law and the provisions of this Article IV, to provide for the issuance
of the shares of Preferred Stock in series, and by filing a certificate
pursuant to the applicable law of the
<PAGE>
State of Delaware, to establish from time to time the number of shares to
be included in each such series, and to fix the designation, powers,
preferences and rights of the shares of each such series and the
qualifications, limitations or restrictions thereof.
The authority of the Board with respect to each series shall include,
but not be limited to, determination of the following:
(a) The number of shares constituting that series and the distinctive
designation of that series;
(b) The dividend rate on the shares of that series, whether dividends shall
be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
(c) Whether that series shall have voting rights, in addition to the voting
rights provided by law, and, if so, the terms of such voting rights;
(d) Whether that series shall have conversion privileges, and, if so, the
terms and conditions of such conversion, including provision for adjustment
of the conversion rate in such events as the Board of Directors shall
determine;
(e) Whether or not the shares of that series shall be redeemable, and, if
so, the terms and conditions of such redemption, including the date or
dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) Whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) The rights of the shares of that series in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and
the relative rights of priority, if any, of payment of shares of that
series; and
(h) Any other relative rights, preferences and limitations of that series.
2
<PAGE>
Dividends on outstanding shares of Preferred Stock shall be paid or
declared and set apart for payment before any dividends shall be paid or
declared and set apart for payment on the common shares with respect to the
same dividend period.
If upon any voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, the assets available for distribution to
holders of shares of Preferred Stock of all series shall be insufficient to
pay such holders the full preferential amount to which they are entitled,
then such assets shall be distributed ratably among the shares of all
series of Preferred Stock in accordance with the respective preferential
amounts (including unpaid cumulative dividends, if any) payable with
respect thereto."
3
<PAGE>
3. The amendment to the Certificate of Incorporation herein certified has
been duly adopted and written consent has been given in accordance with the
provisions of Sections 228 and 242 of the General Corporation Law of the State
of Delaware.
Signed on April 21, 1998.
/s/ Brion Applegate
---------------------------
Brion Applegate,
Chief Executive Officer
4
<PAGE>
EXHIBIT 3.4
CERTIFICATE OF DESIGNATION
OF
SERIES A PREFERRED STOCK
OF
AMERICAN CELLULAR CORPORATION
PURSUANT TO SECTION 151 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
American Cellular Corporation, a Delaware corporation (the
"Corporation"), certifies that pursuant to the authority contained in its
Certificate of Incorporation, and in accordance with the provisions of Section
151 of the General Corporation Law of the State of Delaware, its Board of
Directors (the "Board of Directors") has adopted the following resolution
creating a series of its Preferred Stock, par value $.01 per share, designated
as Series A Preferred Stock.
RESOLVED, that a series of the class of authorized Preferred Stock,
par value $.01 per share, of the Corporation be hereby created, and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
----------------------
The shares of such series shall be designated as the "Series A
Preferred Stock" (the "Series A Preferred Stock") and the number of shares
initially constituting such series shall be 3,250,000, which number may be
decreased (but not increased) by the Board of Directors without a vote of
stockholders; provided, however, that such number may not be decreased below the
-------- -------
number of then currently outstanding shares of Series A Preferred Stock. The
"Stated Value" per share of the Series A Preferred Stock shall be equal to $100.
Section 2. Dividends and Distributions.
---------------------------
(a) The holders of shares of Series A Preferred Stock, in
preference to and in priority over the holders of shares of any stock of the
Corporation ranking junior to the Series A Preferred Stock with respect to the
payment of dividends or the distribution of assets, whether upon liquidation,
dissolution, winding up or otherwise ("Junior Stock"), shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, dividends on the Series A Preferred
Stock, which shall accrue on a daily basis (computed on the basis of a 360-day
year of twelve 30-day months) at the rate per annum of twelve percent (12.0%),
compounded quarterly, on the Stated Value (plus all accrued or accumulated but
unpaid dividends) of each share of Series A Preferred Stock from the date of
original issuance thereof until the redemption of the Series A Preferred Stock
pursuant to Section 3 hereof.
<PAGE>
(b) Dividends shall accrue and be cumulative whether or not
they have been declared and whether or not there are profits, surplus or other
funds of the Corporation legally available for the payment of dividends.
Dividends shall be payable quarterly, in arrears, on the last day of each
December, March, June and September (each, a "Dividend Payment Date"). The
amount of dividends payable on each Dividend Payment Date shall be determined by
applying the rate specified in Section 2(a) from but excluding the immediately
preceding Dividend Payment Date (or from but excluding the date of issuance of
shares of Series A Preferred Stock with respect to the first dividend period) to
and including the Dividend Payment Date. Dividends shall be paid in cash. If the
payment date does not occur on a regular Dividend Payment Date, dividends shall
be calculated on the basis of the actual number of days elapsed from but
excluding the immediately preceding Dividend Payment Date to and including the
redemption date or such final distribution date.
(c) To the extent dividends are not paid on a Dividend Payment
Date, all dividends which shall have accrued on each share of Series A Preferred
Stock outstanding as of such Dividend Payment Date shall be accumulated
dividends.
(d) Dividends payable on each Dividend Payment Date shall be
paid to the record holders of the shares of Series A Preferred Stock as they
appear on the books of the Corporation at the close of business on the 10th
Business Day immediately preceding the respective Dividend Payment Date or on
such other record date as may be fixed by the Board of Directors of the
Corporation in advance of a Dividend Payment Date, provided that no such record
date shall be less than ten (10) nor more than sixty (60) calendar days
preceding such Dividend Payment Date. For purposes hereof, "Business Day" means
any day other than a Saturday, Sunday, or a day on which commercial banks in the
City of New York are authorized or obligated by law or executive order to close.
(e) Each fractional share of Series A Preferred Stock
outstanding shall be entitled to a ratably proportionate amount of all dividends
accruing with respect to each outstanding share of Series A Preferred Stock, and
all such dividends with respect to such outstanding fractional shares shall be
fully cumulative and shall accrue, whether or not declared, and shall be payable
in the same manner and at such times as provided herein with respect to
dividends on each outstanding share of Series A Preferred Stock.
(f) All dividends paid with respect to shares of Series A
Preferred Stock pursuant to Section 2(a) shall be paid pro rata to the holders
entitled thereto.
(g) So long as any shares of Series A Preferred Stock are
outstanding:
(i) No dividend or other distribution shall be declared or
paid, or set apart for payment on or in respect of, any Junior Stock, either
directly or indirectly, whether in cash, obligations, shares of the Corporation
or other property (other than dividends or distributions payable in shares of
Junior Stock or in rights to purchase Junior Stock), nor shall any Junior Stock,
or any warrants, rights, calls or options exercisable for or convertible into
any Junior Stock, be redeemed, purchased, retired or otherwise acquired for any
consideration (or any money be paid to a sinking fund or otherwise set apart for
the purchase or redemption of any such Junior Stock or any warrants, rights,
calls or options exercisable for or convertible into any
2
<PAGE>
Junior Stock), unless as of such date the Corporation has paid all dividends
accrued and payable to date on the Series A Preferred Stock in full and paid all
amounts due in respect of its redemption obligations under Section 3; provided
that notwithstanding the foregoing, the Company may effect purchases or
redemptions pursuant to employee stock subscription agreements with officers and
key employees of the Corporation and its subsidiaries.
(ii) No shares of Series A Preferred Stock shall be
redeemed, purchased or otherwise acquired for any consideration (or any money be
paid to a sinking fund or otherwise set apart for the purchase or redemption of
any such Series A Preferred Stock) by the Corporation unless (A) the full
cumulative dividends on all outstanding shares of Series A Preferred Stock shall
have been or contemporaneously are declared and paid for all dividend periods
terminating on or prior to the date on which such redemption, purchase or other
payment is to occur, or (B) all shares of Series A Preferred Stock are
simultaneously redeemed as provided in Section 3 hereof.
Section 3. Redemption.
----------
(a) The Corporation shall have the right, at its sole option
and election, to redeem outstanding shares of Series A Preferred Stock, in whole
or in part (pro-rata among the outstanding shares of Series A Preferred Stock)
at any time; provided, however, that the Corporation shall not optionally redeem
-------- -------
less than $5,000,000 in the aggregate of the stated amount of shares of Series A
Preferred Stock at any one time.
(b) On September 30, 2008, the Corporation shall redeem one-
third of the shares of Series A Preferred Stock then outstanding. On September
30, 2009, the Corporation shall redeem one-half of the shares of Series A
Preferred Stock then outstanding. On September 30, 2010, the Corporation shall
redeem all remaining shares of Series A Preferred Stock then outstanding.
(c) The redemption price per share for Series A Preferred Stock
redeemed on any optional or mandatory redemption date (the "Redemption Price")
shall be equal to the Stated Value per share of the shares to be redeemed plus
an amount equal to the aggregate dollar amount of all accrued or accumulated and
unpaid dividends through the redemption date. The Redemption Price shall be paid
in cash from any source of funds legally available therefor.
(d) Not less than thirty (30) nor more than sixty (60) days
prior the redemption date, a notice specifying the time and place of such
redemption shall be given by first class mail, postage prepaid, to the holders
of record of the shares of Series A Preferred Stock to be redeemed at their
respective addresses as the same shall appear on the books of the Corporation
(but no failure to mail such notice or any defect therein shall affect the
validity of the proceedings for redemption except as to the holder to whom the
Corporation has failed to mail such notice or except as to the holder whose
notice was defective), calling upon each such holder of record to surrender to
the Corporation on the redemption date at the place designated in such notice
such holder's certificate or certificates representing the then outstanding
shares of Series A Preferred held by such holder called for redemption. On or
after the redemption date, each holder of shares of Series A Preferred Stock
called for redemption shall surrender his certificate or certificates for such
shares to the Corporation at the place designated in the
3
<PAGE>
redemption notice and shall thereupon be entitled to receive payment of the
Redemption Price in the manner set forth in Section 3(c) above. If the
redemption is delayed for any reason, dividends shall continue to accrue on the
shares of Series A Preferred Stock, and shall be added to and become a part of
the Redemption Price of such shares, until the Redemption Price, as so adjusted,
for such shares is paid in full.
Section 4. Reacquired Shares. Any shares of Series A Preferred Stock
-----------------
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof, and, if necessary to provide for the lawful redemption or purchase of
such shares, the capital represented by such shares shall be reduced in
accordance with the General Corporation Law of the State of Delaware. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock, par value $.01 per share, of the Corporation and may be
reissued as part of another series of Preferred Stock, par value $.01 per share,
of the Corporation.
Section 5. Liquidation, Dissolution or Winding Up.
--------------------------------------
(a) If the Corporation shall adopt a plan of liquidation or of
dissolution, or commence a voluntary case under the Federal bankruptcy laws or
any other applicable state of Federal bankruptcy, insolvency or similar law, or
consent to the entry of an order for relief in any involuntary case under any
such law or to the appointment of a receiver, liquidator, assignee, custodian,
trustee or sequestrator (or similar official of the Corporation) or of any
substantial part of its property, or make an assignment for the benefit of its
creditors, or admit in writing its inability to pay its debts generally as they
become due, or if a decree or order for relief in respect of the Corporation
shall be entered by a court having jurisdiction in the premises in an
involuntary case under the Federal bankruptcy laws or any other applicable
Federal or state bankruptcy, insolvency or similar law, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or other
similar official) of the Corporation or of any substantial part of its property,
or ordering the winding up or liquidation of its affairs, and any such decree or
order shall be unstayed and in effect for a period of 90 consecutive days and on
account of such event the Corporation shall liquidate, dissolve or wind up, or
upon any other liquidation, dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of Junior Stock, unless
prior thereto, the holders of shares of Series A Preferred Stock shall have
received in cash the Stated Value per share in respect of all outstanding shares
plus all accrued or accumulated but unpaid dividends thereon to and including
the date fixed for such liquidation.
(b) No payment on account of any such liquidation, dissolution
or winding-up of the Corporation shall be paid to any holder of shares of Series
A Preferred Stock unless there shall be paid at the same time to all holders of
shares of Series A Preferred Stock proportionate amounts determined ratably in
proportion to the full amounts to which the holders of all outstanding shares of
Series A Preferred Stock are respectively entitled with respect to such
distribution.
(c) After payment of the full amount of the liquidation
preference to which the holders of shares of Series A Preferred Stock are
entitled under Section 5(a), such
4
<PAGE>
holders will not be entitled to any further participation in any distribution of
assets of the Corporation.
(d) Written notice of any liquidation, dissolution or winding-
up of the Corporation, stating the payment date or dates when and the place or
places where the amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage prepaid, not less than fifteen (15)
days prior to any payment date stated therein, to the holders of record of the
shares of Series A Preferred Stock at their respective addresses as the same
shall appear in the records of the Corporation.
(e) Any voluntary sale, conveyance, exchange or transfer of all
or substantially all of the property or assets of the Corporation or the
consolidation or merger of the Corporation with or into one or more other
corporations in which the holders of capital stock of the Corporation entitled
to vote in the election of directors prior to the consummation of such event own
less than 50% of the capital stock of the surviving corporation entitled to vote
in the election of directors shall be deemed to be a liquidation, winding-up or
dissolution of the Corporation, and the only amounts payable to the holders of
the Series A Preferred Stock upon any such consolidation, merger or sale of the
Corporation shall be the liquidation preference set forth in Section 5(a).
Section 6. Information Rights.
------------------
The Corporation will furnish to each person who, together with its
affiliates, holds shares of Series A Preferred Stock having an aggregate Stated
Value of at least $5,000,000 the following reports:
(a) As soon as practicable after the end of each fiscal year,
and in any event within ninety (90) days thereafter, audited consolidated
balance sheets of the Corporation as of the end of such fiscal year, and
consolidated statements of income and cash flows of the Corporation for such
year, prepared in accordance with generally accepted accounting principles and
setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail and certified by independent public
accountants of national standing selected by the Corporation.
(b) As soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Corporation, unaudited balance sheets of the Corporation as of the
end of each such quarter, and consolidated statements of income and cash flows
of the Corporation for each such quarter, all prepared in accordance with
generally accepted accounting principles.
(c) As soon as practicable, but in any event within thirty (30)
days after the end of each of the first two months of each quarter of the
Corporation, unaudited balance sheets of the Corporation as of the end of each
such month, and consolidated statements of income and cash flows of the
Corporation for each such month, all prepared in accordance with generally
accepted accounting principles.
(d) At least ten (10) days prior to submission thereof to the
Corporation's Board of Directors for approval, the Company's budget and
operating plan
5
<PAGE>
(including projected balance sheets and profit and loss and cash flow
statements) for each fiscal year.
Section 7. Voting.
------
Except as otherwise required by law, holders of shares of Series A
Preferred Stock shall have no voting rights; provided, however, that so long as
-------- -------
any of the Series A Preferred Stock is outstanding, the Corporation will not
authorize, create or issue, or increase the authorized or issued amount of, any
class or series of stock (or any security convertible or exchangeable therefor)
ranking senior to or pari passu with the Series A Preferred Stock with respect
to dividends or liquidation preference or reclassify or modify any Junior Stock
such that it ranks senior to or pari passu with the Series A Preferred Stock
with respect to dividends or liquidation preference without the affirmative vote
or consent of the holders of at least 66-2/3% of the shares of Series A
Preferred Stock then outstanding, voting as a separate class (given in person or
by proxy, either in writing or by resolution adopted at a special meeting called
for the purpose); and provided further, however, that the Corporation will not
---------------- -------
amend, alter or repeal any of the provisions applicable to the Series A
Preferred Stock set forth in its Certificate of Incorporation or in this
Certificate so as to change adversely (i) the dividend payable thereon, (ii) the
amount payable thereon upon liquidation or redemption or (iii) the mandatory
redemption provisions applicable thereto, without the affirmative vote or
consent of all holders of shares of Series A Preferred Stock then outstanding,
voting as a separate class (given in person or by proxy, either in writing or by
resolution adopted at a special meeting called for the purpose).
Each share of Series A Preferred Stock shall have one vote, and each
fractional share shall have a corresponding fractional vote.
6
<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designation of Series A Preferred Stock to be duly executed by its this 21st
day of April, 1998.
AMERICAN CELLULAR CORPORATION
By: /s/ Brion Applegate
___________________________
Brion Applegate,
Chief Executive Officer
7
<PAGE>
EXHIBIT 3.6
BYLAWS
OF
AMERICAN CELLULAR CORPORATION
<PAGE>
BYLAWS
OF
AMERICAN CELLULAR CORPORATION
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I. OFFICES.................................................... 1
-------
Section 1. REGISTERED OFFICES..................................... 1
Section 2. OTHER OFFICES.......................................... 1
ARTICLE II. MEETINGS OF STOCKHOLDERS.................................. 1
------------------------
Section 1. PLACE OF MEETINGS...................................... 1
Section 2. ANNUAL MEETING OF STOCKHOLDERS......................... 1
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF.......... 1
Section 4. VOTING................................................. 2
Section 5. PROXIES................................................ 2
Section 6. SPECIAL MEETINGS....................................... 2
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS....................... 2
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST......... 2
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING................................................ 3
ARTICLE III. DIRECTORS................................................ 3
---------
Section 1. THE NUMBER OF DIRECTORS................................ 3
Section 2. VACANCIES.............................................. 3
Section 3. POWERS................................................. 4
Section 4. PLACE OF DIRECTORS' MEETINGS........................... 4
Section 5. REGULAR MEETINGS....................................... 4
Section 6. SPECIAL MEETINGS....................................... 4
Section 7. QUORUM................................................. 4
Section 8. SUPERMAJORITY VOTING................................... 4
Section 9. ACTION WITHOUT MEETING................................. 6
Section 10. TELEPHONIC MEETINGS................................... 6
Section 11. COMMITTEES OF DIRECTORS............................... 6
Section 12. MINUTES OF COMMITTEE MEETINGS......................... 6
Section 13. COMPENSATION OF DIRECTORS............................. 6
ARTICLE IV. OFFICERS.................................................. 7
--------
Section 1. OFFICERS............................................... 7
Section 2. ELECTION OF OFFICERS................................... 7
Section 3. SUBORDINATE OFFICERS................................... 7
Section 4. COMPENSATION OF OFFICERS............................... 7
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES.................. 7
Section 6. CHAIRMAN OF THE BOARD.................................. 7
Section 7. PRESIDENT.............................................. 7
Section 8. VICE PRESIDENTS........................................ 8
Section 9. SECRETARY.............................................. 8
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Section 10. ASSISTANT SECRETARY....................................8
Section 11. TREASURER..............................................8
Section 12. ASSISTANT TREASURER....................................8
ARTICLE V. INDEMNIFICATION OF DIRECTORS AND OFFICERS...................9
-----------------------------------------
ARTICLE VI. INDEMNIFICATION OF EMPLOYEES AND AGENTS...................11
---------------------------------------
ARTICLE VII. CERTIFICATES OF STOCK....................................11
---------------------
Section 1. CERTIFICATES...........................................11
Section 2. SIGNATURES ON CERTIFICATES.............................11
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES.....11
Section 4. LOST CERTIFICATES......................................12
Section 5. TRANSFERS OF STOCK.....................................12
Section 6. FIXED RECORD DATE......................................12
Section 7. REGISTERED STOCKHOLDERS................................12
ARTICLE VIII. GENERAL PROVISIONS......................................13
------------------
Section 1. DIVIDENDS..............................................13
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES................13
Section 3. CHECKS.................................................13
Section 4. FISCAL YEAR............................................13
Section 5. CORPORATE SEAL.........................................13
Section 6. MANNER OF GIVING NOTICE................................13
Section 7. WAIVER OF NOTICE.......................................13
Section 8. ANNUAL STATEMENT.......................................14
ARTICLE IX. AMENDMENTS................................................14
----------
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS.................14
</TABLE>
ii
<PAGE>
BY-LAWS
OF
AMERICAN CELLULAR CORPORATION
ARTICLE I.
OFFICES
-------
Section 1. REGISTERED OFFICES. The registered office shall be in the City
of Wilmington, County of New Castle, State of Delaware.
Section 2. OTHER OFFICES. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the corporation may
require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
------------------------
Section 1. PLACE OF MEETINGS. Meetings of stockholders shall be held at
any place within or outside the State of Delaware designated by the Board of
Directors. In the absence of any such designation, stockholders' meetings shall
be held at the principal executive office of the corporation.
Section 2. ANNUAL MEETING OF STOCKHOLDERS. The annual meeting of
stockholders shall be held each year on a date and a time designated by the
Board of Directors. At each annual meeting directors shall be elected and any
other proper business may be transacted.
Section 3. QUORUM; ADJOURNED MEETINGS AND NOTICE THEREOF. A majority of
the stock issued and outstanding and entitled to vote at any meeting of
stockholders, the holders of which are present in person or represented by
proxy, shall constitute a quorum for the transaction of business except as
otherwise provided by law, by the Certificate of Incorporation, or by these
Bylaws. A quorum, once established, shall not be broken by the withdrawal of
enough votes to leave less than a quorum and the votes present may continue to
transact business until adjournment. If, however, such quorum shall not be
present or represented at any meeting of the stockholders, a majority of the
voting stock represented in person or by proxy may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
shall be present or represented. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might have
been transacted at the meeting as originally notified. If the adjournment is for
more than thirty days, or if after the adjournment a new record date is fixed
for the adjourned meeting, a notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat.
Section 4. VOTING. When a quorum is present at any meeting, in all matters
other than the election of directors, the vote of the holders of a majority of
the stock having voting power present in person or represented by proxy shall
decide any question brought before such meeting, unless the question is one upon
which by express provision of the statutes, or the Certificate of Incorporation,
or these Bylaws, a different vote is required in which case such express
provision shall govern and control
1
<PAGE>
the decision of such question. Directors shall be elected by a plurality of the
votes of the shares present in person or represented by proxy at the meeting and
entitled to vote on the election of directors.
Section 5. PROXIES. At each meeting of the stockholders, each stockholder
having the right to vote may vote in person or may authorize another person or
persons to act for him by proxy appointed by an instrument in writing subscribed
by such stockholder and bearing a date not more than three years prior to said
meeting, unless said instrument provides for a longer period. All proxies must
be filed with the Secretary of the corporation at the beginning of each meeting
in order to be counted in any vote at the meeting. Each stockholder shall have
one vote for each share of stock having voting power, registered in his name on
the books of the corporation on the record date set by the Board of Directors as
provided in Article VII, Section 6 hereof.
Section 6. SPECIAL MEETINGS. Special meetings of the stockholders, for any
purpose, or purposes, unless otherwise prescribed by statute or by the
Certificate of Incorporation, may be called by the President and shall be called
by the President or the Secretary at the request in writing of a majority of the
Board of Directors. Business transacted at any special meeting of stockholders
shall be limited to the purposes stated in the notice.
Section 7. NOTICE OF STOCKHOLDERS' MEETINGS. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given which notice shall state the place, date and hour of the
meeting, and, in the case of a special meeting, the purpose or purposes for
which the meeting is called. The written notice of any meeting shall be given to
each stockholder entitled to vote at such meeting not less than ten nor more
than sixty days before the date of the meeting. If mailed, notice is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation.
Section 8. MAINTENANCE AND INSPECTION OF STOCKHOLDER LIST. The officer who
has charge of the stock ledger of the corporation shall prepare and make, at
least ten days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least ten days prior to the meeting, either
at a place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at the
time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 9. STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Unless
otherwise provided in the Certificate of Incorporation, any action required to
be taken at any annual or special meeting of stockholders of the corporation, or
any action which may be taken at any annual or special meeting of such
stockholders, 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 the 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 and
shall be delivered to the corporation by delivery to its registered office in
Delaware, its principal place of business, or to an officer or agent of the
corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Every written consent shall bear the date of
signature of each stockholder who signs the consent and no written consent shall
be effective to take the corporate action referred to therein unless, within
sixty days of the earliest dated consent delivered in the manner required by
this Section 9 to the corporation, written consents signed by a sufficient
number of holders to take action are delivered to the corporation by delivery to
its registered
2
<PAGE>
office in Delaware, its principal place of business or to an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous written consent shall be given to those stockholders who have not
consented in writing.
ARTICLE III.
DIRECTORS
---------
Section 1. THE NUMBER OF DIRECTORS. The number of directors which shall
constitute the whole Board shall be not less than three (3) nor more than
fifteen (15), the number thereof to be determined from time to time by
resolution of the Board of Directors. The directors need not be stockholders.
The directors shall be elected at the annual meeting of the stockholders, except
as provided in Section 2 of this Article, and each director elected shall hold
office until his successor is elected and qualified; provided, however, that
unless otherwise restricted by the Certificate of Incorporation or by law, any
director or the entire Board of Directors may be removed, either with or without
cause, from the Board of Directors at any meeting of stockholders by a majority
of the stock represented and entitled to vote thereat.
Section 2. VACANCIES. Vacancies on the Board of Directors by reason of
death, resignation, retirement, disqualification, removal from office, or
otherwise, and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. The
directors so chosen shall hold office until the next annual election of
directors and until their successors are duly elected and shall qualify, unless
sooner displaced. If there are no directors in office, then an election of
directors may be held in the manner provided by statute. If, at the time of
filling any vacancy or any newly created directorship, the directors then in
office shall constitute less than a majority of the whole Board (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any stockholder or stockholders holding at least ten percent of
the total number of the shares at the time outstanding having the right to vote
for such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors chosen by
the directors then in office.
Section 3. POWERS. The property and business of the corporation shall be
managed by or under the direction of its Board of Directors. In addition to the
powers and authorities by these Bylaws expressly conferred upon them, the Board
may exercise all such powers of the corporation and do all such lawful acts and
things as are not by statute or by the Certificate of Incorporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
Section 4. PLACE OF DIRECTORS' MEETINGS. The directors may hold their
meetings and have one or more offices, and keep the books of the corporation
outside of the State of Delaware.
Section 5. REGULAR MEETINGS. Regular meetings of the Board of Directors
may be held without notice at such time and place as shall from time to time be
determined by the Board.
Section 6. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the President on forty-eight hours' notice to each director,
either personally or by mail or by telegram; special meetings shall be called by
the President or the Secretary in like manner and on like notice on the written
request of two directors unless the Board consists of only one director; in
which
3
<PAGE>
case special meetings shall be called by the President or Secretary in like
manner or on like notice on the written request of the sole director. Notice of
a meeting need not be given to any director who signs a waiver of notice,
whether before or after the meeting. The attendance by any director at a
meeting, without protesting either prior thereto or at its commencement the lack
of notice of such meeting, shall constitute a waiver of notice by him. Any
notice or waiver of notice of a meeting of the board of directors need not
specify the purpose of the meeting.
Section 7. QUORUM. At all meetings of the Board of Directors a majority of
the authorized number of directors shall be necessary and sufficient to
constitute a quorum for the transaction of business, and the vote of a majority
of the directors present at any meeting at which there is a quorum, shall be the
act of the Board of Directors, except as may be otherwise specifically provided
by statute, by the Certificate of Incorporation or by these Bylaws. 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. If only one
director is authorized, such sole director shall constitute a quorum.
Section 8. SUPERMAJORITY VOTING. In addition to the act of the majority of
the directors present at a meeting at which a quorum is present, from and after
the date of execution of that certain Stock Purchase Agreement to be entered
into between the corporation and the investors named therein with respect to,
among other things, the initial capitalization of the corporation (the "Stock
Purchase Agreement"), the following shall require the affirmative vote of at
least five (5) directors designated pursuant to Section 5.1 of the Stockholders
Agreement (as defined in Article VIII, Section 9 below) by the Stockholders (as
defined therein):
(i) the disposition of assets (in a single transaction or a series of
related transactions) in an amount in excess of $5,000,000;
(ii) the entry into any transaction which would result in a Change of
Control of the corporation, where "Change of Control" means (i) any sale,
transfer or other conveyance, whether direct or indirect, of a majority of the
fair market value of the assets of the corporation, in one transaction or a
series of related transactions, to any "person" or "group" (as such terms are
used for purposes of Section 13(d) of the Securities Exchange Act of 1934, as
amended, whether or not applicable), (ii) any "person" or "group" (as such terms
are used for purposes of such Section 13(d)) is or becomes the "beneficial
owner," directly or indirectly, of more than 50% of the total equity in the
aggregate of all classes of capital stock of the corporation then outstanding
normally entitled to vote in elections of directors, or (iii) during any period
of 12 consecutive months after an initial public offering, individuals who at
the beginning of any such 12-month period constituted the Board of Directors
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the corporation was approved by a
vote of a majority of the directors then still in office who were either
directors at the beginning of such period or whose election or nomination for
election was previously so approved) cease for any reason to constitute a
majority of the Board of Directors then in office;
(iii) the approval of a voluntary dissolution or liquidation of the
corporation;
(iv) the declaration or payment of any dividends on, or the
incurrence of any obligation to make any other distribution in respect of,
outstanding equity interests of the corporation;
4
<PAGE>
(v) the incurring of, entry into or commitment to any indebtedness,
in an aggregate principal amount in excess of $5,000,000 (except for incurrence
of indebtedness to finance a merger) in a single transaction or series of
related transactions;
(vi) any acquisition of assets (in a single transaction or a series
of related transaction) in an amount in excess of $5,000,000;
(vii) any amendment to the Certificate of Incorporation or these
Bylaws;
(viii) the repurchase or redemption of the corporation's capital stock
from a stockholder in an amount not equal to such stockholder's pro rata
ownership of such capital stock;
(ix) any change in the number of directors;
(x) the removal or appointment of any senior executives, including
the Chief Executive Officer, Chief Operating Officer and Chief Financial
Officer;
(xi) any issuance of additional shares of capital stock of the
corporation or any rights, options, warrants or other instruments convertible or
exchangeable therefor, other than the issuance of shares of capital stock
contemplated by the Stock Purchase Agreement;
(xii) any transaction with an affiliate with a value in excess of
$250,000; and
(xiii) sentering into any other contract or arrangement material to
the Company.
Section 9. ACTION WITHOUT MEETING. 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 all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 10. TELEPHONIC MEETINGS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in a
meeting shall constitute presence in person at such meeting.
Section 11. COMMITTEES OF DIRECTORS. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each such committee to consist of one or more of the directors of
the corporation. The Board may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee. In the absence or disqualification of a member of
a committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all the powers and authority 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
5
<PAGE>
may require it; but the acts of any such committee shall be subject to the
provisions of Section 8 of this Article, and no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
Bylaws of the corporation; and, unless the resolution or the Certificate of
Incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock.
Section 12. MINUTES OF COMMITTEE MEETINGS. Each committee shall keep
regular minutes of its meetings and report the same to the Board of Directors
when required.
Section 13. COMPENSATION OF DIRECTORS. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each 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.
ARTICLE IV.
OFFICERS
--------
Section 1. OFFICERS. The officers of this corporation shall be chosen by
the Board of Directors and shall include a Chairman of the Board of Directors or
a President, or both, and a Secretary. The corporation may also have at the
discretion of the Board of Directors such other officers as are desired,
including a Vice-Chairman of the Board of Directors, a Chief Executive Officer,
a Treasurer, one or more Vice Presidents, one or more Assistant Secretaries and
Assistant Treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 3 of this Article. In the event there are two or
more Vice Presidents, then one or more may be designated as Executive Vice
President, Senior Vice President, or other similar or dissimilar title. At the
time of the election of officers, the directors may by resolution determine the
order of their rank. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. ELECTION OF OFFICERS. The Board of Directors, at its first
meeting after each annual meeting of stockholders, shall choose the officers of
the corporation.
Section 3. SUBORDINATE OFFICERS. The Board of Directors may appoint such
other officers and agents as it shall deem necessary who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board.
Section 4. COMPENSATION OF OFFICERS. The salaries of all officers and
agents of the corporation shall be fixed by the Board of Directors.
6
<PAGE>
Section 5. TERM OF OFFICE; REMOVAL AND VACANCIES. The officers of the
corporation shall hold office until their successors are chosen and qualify in
their stead. Any officer elected or appointed by the Board of Directors may be
removed at any time by the affirmative vote of a majority of the Board of
Directors. If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the Board of Directors.
Section 6. CHAIRMAN OF THE BOARD. The Chairman of the Board, if such an
officer be elected, shall, if present, preside at all meetings of the Board of
Directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the Board of Directors or prescribed by these
Bylaws. If there is no President, the Chairman of the Board shall in addition be
the Chief Executive Officer of the corporation and shall have the powers and
duties prescribed in Section 7 of this Article IV.
Section 7. PRESIDENT. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the Chairman of the Board, if there be
such an officer, the President shall be the Chief Executive Officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. He shall preside at all meetings of the stockholders and, in the
absence of the Chairman of the Board, or if there be none, at all meetings of
the Board of Directors. He shall be an ex-officio member of all committees and
shall have the general powers and duties of management usually vested in the
office of President and Chief Executive Officer of corporations, and shall have
such other powers and duties as may be prescribed by the Board of Directors or
these Bylaws.
Section 8. VICE PRESIDENTS. In the absence or disability of the President,
the Vice Presidents in order of their rank as fixed by the Board of Directors,
or if not ranked, the Vice President designated by the Board of Directors, shall
perform all the duties of the President, and when so acting shall have all the
powers of and be subject to all the restrictions upon the President. The Vice
Presidents shall have such other duties as from time to time may be prescribed
for them, respectively, by the Board of Directors.
Section 9. SECRETARY. The Secretary shall attend all sessions of the Board
of Directors and all meetings of the stockholders and record all votes and the
minutes of all proceedings in a book to be kept for that purpose; and shall
perform like duties for the standing committees when required by the Board of
Directors. He shall give, or cause to be given, notice of all meetings of the
stockholders and of the Board of Directors, and shall perform such other duties
as may be prescribed by the Board of Directors or these Bylaws. He shall keep in
safe custody the seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it, and when so affixed it shall be
attested by his signature or by the signature of an 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 his signature.
Section 10. ASSISTANT SECRETARY. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors, or if there be no such determination, the Assistant Secretary
designated 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
may from time to time prescribe.
Section 11. TREASURER. The Treasurer 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
7
<PAGE>
the credit of the corporation, in such depositories as may be designated by the
Board of Directors. He 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 Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all his
transactions as Treasurer and of the financial condition of the corporation. If
required by the Board of Directors, he shall give the corporation a bond, 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 his office and for
the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control belonging
to the corporation.
Section 12. ASSISTANT TREASURER. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors, or if there be no such determination, the Assistant
Treasurer designated 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.
ARTICLE V.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
(a) The corporation shall indemnify to the maximum extent permitted by law
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that he is or was a director or
officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(b) The corporation shall indemnify to the maximum extent permitted by law
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director or officer of the corporation, or is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no such indemnification shall
be made in respect of any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the extent
that the Court of Chancery of
8
<PAGE>
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which such Court of Chancery or such other court
shall deem proper.
(c) To the extent that a director or officer of the corporation shall be
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in paragraphs (a) and (b), or in defense of any claim,
issue or matter therein, he shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
(d) Any indemnification under paragraphs (a) and (b) (unless ordered by a
court) shall be made by the corporation only as authorized in the specific case
upon a determination that indemnification of the director or officer is proper
in the circumstances because he has met the applicable standard of conduct set
forth in paragraphs (a) and (b). Such determination shall be made (1) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (2) by a committee of
such directors designated by a majority vote of such directors, even though less
than a quorum, or (3) if such a quorum is not obtainable, or, even if obtainable
a quorum of disinterested directors so directs, by independent legal counsel in
a written opinion, or (4) by the stockholders. The corporation, acting through
its Board of Directors or otherwise, shall cause such determination to be made
if so requested by any person who is indemnifiable under this Article V.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding shall be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that he is not entitled to be indemnified by
the corporation as authorized in this Article V.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Article V shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office.
(g) The Board of Directors may authorize, by a vote of a majority of a
quorum of the Board of Directors, the corporation to purchase and maintain
insurance on behalf of any person who is or was a director or officer of the
corporation, or is or was serving at the request of the corporation as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article V.
(h) For the purposes of this Article V, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors or
9
<PAGE>
officers so that any person who is or was a director or officer of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under the
provisions of this Article V with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
(i) For purposes of this section, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the corporation" shall include service
as a director or officer of the corporation which imposes duties on, or involves
services by, such director or officer with respect to an employee benefit plan,
its participants or beneficiaries; and a person who acted in good faith and in a
manner he reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to in
this section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article V shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director
or officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(k) The corporation shall be required to indemnify a person in connection
with an action, suit or proceeding (or part thereof) initiated by such person
only if the action, suit or proceeding (or part thereof) was authorized by the
Board of Directors of the corporation.
ARTICLE VI.
INDEMNIFICATION OF EMPLOYEES AND AGENTS
---------------------------------------
The corporation may indemnify every person who was or is a party or is or
was threatened to be made a party to any action, suit, or proceeding, whether
civil, criminal, administrative or investigative, by reason of the fact that he
is or was an employee or agent of the corporation or, while an employee or agent
of the corporation, is or was serving at the request of the corporation as an
employee or agent or trustee of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise, against expenses (including
counsel fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding,
to the extent permitted by applicable law.
ARTICLE VII.
CERTIFICATES OF STOCK
---------------------
Section 1. CERTIFICATES. Every holder of stock of 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 Secretary or an Assistant Secretary, or the Treasurer
or an Assistant Treasurer of the corporation, certifying the number of shares
represented by the certificate owned by such stockholder in the corporation.
10
<PAGE>
Section 2. SIGNATURES ON CERTIFICATES. Any or all of the signatures on the
certificate may be a facsimile. In case any 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 he were such officer, transfer agent, or registrar at the date
of issue.
Section 3. STATEMENT OF STOCK RIGHTS, PREFERENCES, PRIVILEGES. If the
corporation shall be authorized to issue more than one class of stock or more
than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualification, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the corporation shall issue to represent such
class or series of stock, provided that, except as otherwise provided in Section
202 of the General Corporation Law of Delaware, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each stockholder
who so requests the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
Section 4. LOST CERTIFICATES. 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,
stolen or destroyed, upon the making of an affidavit of that fact 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 his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it 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 5. TRANSFERS OF STOCK. Upon surrender to the corporation, or the
transfer agent of the corporation, of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation 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 6. FIXED RECORD DATE. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of the
stockholders, or any adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix a
record date which shall not be more than sixty nor less than ten days before the
date of such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. In order that the corporation may determine the stockholders entitled
to consent to corporate action in writing without a meeting, the Board of
Directors may fix a record date which shall not be more than ten days after the
date upon which the resolution fixing the record date is adopted by the Board of
Directors.
Section 7. REGISTERED STOCKHOLDERS. The corporation shall be entitled to
treat the holder of record of any share or shares of stock as the holder in fact
thereof and accordingly shall not be bound to recognize any equitable or other
claim or interest in such share on the part of any
11
<PAGE>
other person, whether or not it shall have express or other notice thereof, save
as expressly provided by the laws of the State of Delaware.
ARTICLE VIII.
GENERAL PROVISIONS
------------------
Section 1. DIVIDENDS. 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. Dividends may be paid in cash, in property, or in shares of the capital
stock, subject to the provisions of the Certificate of Incorporation.
Section 2. PAYMENT OF DIVIDENDS; DIRECTORS' DUTIES. Before payment of any
dividend there may be set aside out of any funds of the corporation available
for dividends such sum or sums as the directors from time to time, in their
absolute discretion, think proper as a reserve fund to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the directors shall think conducive to
the interests of the corporation, and the directors may abolish any such
reserve.
Section 3. CHECKS. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
Section 4. FISCAL YEAR. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Section 5. CORPORATE SEAL. The corporate seal shall have inscribed thereon
the name of the corporation, the year of its organization and the words
"Corporate Seal, Delaware." Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
Section 6. MANNER OF GIVING NOTICE. Whenever, under the provisions of the
statutes or of the Certificate of Incorporation or of these Bylaws, notice is
required to be given to any director or stockholder, it shall not be construed
to mean personal notice, but such notice may be given in writing, by mail,
addressed to such director or stockholder, at his address as it appears on the
records of the corporation, with postage thereon prepaid, and such notice shall
be deemed to be given at the time when the same shall be deposited in the United
States mail. Notice to directors may also be given by telegram.
Section 7. WAIVER OF NOTICE. Whenever any notice is required to be given
under the provisions of the statutes or of the Certificate of Incorporation or
of these Bylaws, a waiver thereof in writing, signed by the person or persons
entitled to said notice, whether before or after the time stated therein, shall
be deemed equivalent thereto.
Section 8. ANNUAL STATEMENT. The Board of Directors shall present at each
annual meeting, and at any special meeting of the stockholders when called for
by vote of the stockholders, a full and clear statement of the business and
condition of the corporation.
Section 9. STOCKHOLDERS AGREEMENT.
12
<PAGE>
If any conflict shall exist between the provisions of these Bylaws and the
provisions of that certain Stockholders Agreement to be entered into among the
corporation and the initial equity investors of the corporation, as amended from
time to time (the "Stockholders Agreement"), the provisions of the Stockholders
Agreement shall control. In the event the Stockholders Agreement and the Stock
Purchase Agreement are not executed and delivered the provisions of Article III,
Section 8 and any references thereto herein shall be null and void.
ARTICLE IX.
AMENDMENTS
----------
Section 1. AMENDMENT BY DIRECTORS OR STOCKHOLDERS. Subject to Article III,
Section 8 hereof, these Bylaws may be altered, amended or repealed or new Bylaws
may be adopted by the stockholders or by the Board of Directors, when such power
is conferred upon the Board of Directors by the Certificate of Incorporation at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or of the Board of Directors if notice of
such alteration, amendment, repeal or adoption of new Bylaws be contained in the
notice of such special meeting. If the power to adopt, amend or repeal Bylaws is
conferred upon the Board of Directors by the Certificate of Incorporation, it
shall not divest or limit the power of the stockholders to adopt, amend or
repeal Bylaws. Notwithstanding the foregoing, Article VIII, Section 9 may not be
amended or repealed while the Stockholders Agreement is in effect.
13
<PAGE>
CERTIFICATE OF SECRETARY
I, the undersigned, do hereby certify:
(1) That I am the duly elected and acting Secretary of American Cellular
Corporation, a Delaware corporation; and
(2) That the foregoing bylaws constitute the bylaws of said corporation as
duly adopted by the written consent of the Incorporator of said corporation as
of March 2, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name this 2nd day of
March, 1998.
/s/ Jonathan Nelson
_______________________________
Jonathan Nelson,
Secretary
14
<PAGE>
EXHIBIT 4.1
================================================================================
AMERICAN CELLULAR CORPORATION
Issuer,
and
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
Trustee
---------------------------
INDENTURE
Dated as of May 13, 1998
---------------------------
$285,000,000
10 1/2% Senior Notes due 2008
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS AND INCORPORATION BY REFERENCE.........................1
SECTION 1.1. Definitions..................................................1
SECTION 1.2. Incorporation by Reference of TIA...........................25
SECTION 1.3. Rules of Construction.......................................25
ARTICLE II THE SECURITIES...................................................26
SECTION 2.1. Form and Dating.............................................26
SECTION 2.2. Execution and Authentication................................26
SECTION 2.3. Registrar and Paying Agent..................................27
SECTION 2.4. Paying Agent to Hold Assets in Trust........................28
SECTION 2.5. Securityholder Lists........................................28
SECTION 2.6. [INTENTIONALLY OMITTED].....................................29
SECTION 2.7. REPLACEMENT SECURITIES......................................29
SECTION 2.8. OUTSTANDING SECURITIES......................................29
SECTION 2.9. TREASURY SECURITIES.........................................30
SECTION 2.10. TEMPORARY SECURITIES.......................................30
SECTION 2.11. CANCELLATION...............................................30
SECTION 2.12. DEFAULTED INTEREST.........................................30
SECTION 2.13. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE........32
SECTION 2.14. BOOK ENTRY PROVISIONS FOR GLOBAL SECURITIES................33
SECTION 2.15. SPECIAL TRANSFER AND EXCHANGE PROVISIONS...................35
SECTION 2.16. CUSIP NUMBERS..............................................39
ARTICLE III REDEMPTION......................................................39
SECTION 3.1. Rights of Redemption........................................39
SECTION 3.2. Notices to Trustee..........................................39
SECTION 3.3. Selection of Securities to Be Redeemed......................40
SECTION 3.4. Notice of Redemption........................................40
SECTION 3.5. Effect of Notice of Redemption..............................42
SECTION 3.6. Deposit of Redemption Price.................................42
SECTION 3.7. Securities Redeemed in Part.................................43
SECTION 3.8. Special Mandatory Redemption................................43
ARTICLE IV COVENANTS........................................................44
SECTION 4.1. Payment of Securities.......................................44
SECTION 4.2. Maintenance of Office or Agency.............................44
SECTION 4.3. Limitation on Restricted Payments...........................44
SECTION 4.4. Corporate Existence.........................................46
SECTION 4.5. Payment of Taxes and Other Claims...........................46
SECTION 4.6. Maintenance of Properties and Insurance.....................47
SECTION 4.7. Compliance Certificate; Notice of Default...................48
SECTION 4.8. Provision of Financial Statements...........................48
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
SECTION 4.9. [INTENTIONALLY OMITTED].....................................49
SECTION 4.10. Limitation on Transactions with Related Persons............49
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness........50
SECTION 4.12. Limitations on Restricting Subsidiary Dividends............53
SECTION 4.13. Limitations on Liens.......................................54
SECTION 4.14. Limitation on Asset Sales and Sales of Subsidiary Stock....55
SECTION 4.15. Waiver of Stay, Extension or Usury Laws....................60
SECTION 4.16. INTENTIONALLY OMITTED......................................61
SECTION 4.17. INTENTIONALLY OMITTED......................................61
SECTION 4.18. Limitation on Lines of Business............................61
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock.......61
SECTION 4.20. Limitation on Issuances of Guarantee of Indebtedness.......61
ARTICLE V SUCCESSOR CORPORATION.............................................62
SECTION 5.1. Limitation on Merger, Sale or Consolidation.................62
SECTION 5.2. Successor Corporation Substituted...........................63
ARTICLE VI EVENTS OF DEFAULT AND REMEDIES...................................63
SECTION 6.1. Events of Default...........................................63
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.....66
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement
by Trustee..................................................67
SECTION 6.4. Trustee May File Proofs of Claim............................68
SECTION 6.5. Trustee May Enforce Claims Without Possession of Securities.68
SECTION 6.6. Priorities..................................................69
SECTION 6.7. Limitation on Suits.........................................69
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
Premium and Interest........................................70
SECTION 6.9. Rights and Remedies Cumulative..............................70
SECTION 6.10. Delay or Omission Not Waiver...............................70
SECTION 6.11. Control by Holders.........................................71
SECTION 6.12. Waiver of Past Default.....................................71
SECTION 6.13. Undertaking for Costs......................................71
SECTION 6.14. Restoration of Rights and Remedies.........................72
ARTICLE VII TRUSTEE.........................................................72
SECTION 7.1. Duties of Trustee...........................................72
SECTION 7.2. Rights of Trustee...........................................73
SECTION 7.3. Individual Rights of Trustee................................75
SECTION 7.4. Trustee's Disclaimer........................................75
SECTION 7.5. Notice of Default...........................................75
SECTION 7.6. Reports by Trustee to Holders...............................75
SECTION 7.7. Compensation and Indemnity..................................76
SECTION 7.8. Replacement of Trustee......................................77
SECTION 7.9. Successor Trustee by Merger, Etc............................78
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
SECTION 7.10. Eligibility; Disqualification..............................78
SECTION 7.11. Preferential Collection of Claims against Company..........78
SECTION 7.12. Wire Transfers and Investments.............................78
ARTICLE VIII LEGAL DEFEASANCE AND COVENANT DEFEASANCE.......................79
SECTION 8.1. Option to Effect Legal Defeasance or Covenant Defeasance....79
SECTION 8.2. Legal Defeasance and Discharge..............................79
SECTION 8.3. Covenant Defeasance.........................................80
SECTION 8.4. Conditions to Legal or Covenant Defeasance..................80
SECTION 8.5. Deposited U.S. Legal Tender and Government Securities
to be Held in Trust; Other Miscellaneous Provisions.........82
SECTION 8.6. Repayment to the Company....................................82
SECTION 8.7. Reinstatement...............................................82
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS..............................83
SECTION 9.1. Supplemental Indentures Without Consent of Holders..........83
SECTION 9.2. Amendments, Supplemental Indentures and Waivers
with Consent of Holders.....................................84
SECTION 9.3. Compliance with TIA.........................................85
SECTION 9.4. Revocation and Effect of Consents...........................85
SECTION 9.5. Notation on or Exchange of Securities.......................86
SECTION 9.6. Trustee to Sign Amendments, Etc.............................87
ARTICLE X...................................................................87
SECTION 10.1. Security....................................................87
ARTICLE XI RIGHT TO REQUIRE REPURCHASE......................................89
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon
a Change of Control........................................89
ARTICLE XII [RESERVED]......................................................91
ARTICLE XIII MISCELLANEOUS..................................................91
SECTION 13.1. TIA Controls...............................................91
SECTION 13.2. Notices....................................................91
SECTION 13.3. Communications by Holders with Other Holders...............92
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.........92
SECTION 13.5. Statements Required in Certificate or Opinion..............93
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar..................93
SECTION 13.7. Legal Holidays.............................................93
SECTION 13.8. Governing Law..............................................94
SECTION 13.9. No Adverse Interpretation of Other Agreements..............94
SECTION 13.10. No Recourse against Others................................94
SECTION 13.11. Successors................................................95
SECTION 13.12. Duplicate Originals.......................................95
SECTION 13.13. Severability..............................................95
SECTION 13.14. Table of Contents, Headings, Etc..........................95
SECTION 13.15. Qualification of Indenture................................95
</TABLE>
- iii -
<PAGE>
<TABLE>
<S> <C>
SECTION 13.16. Registration Rights........................................96
SIGNATURES...................................................................97
EXHIBIT A - FORM OF SECURITY................................................A-1
EXHIBIT B - REGULATION S CERTIFICATE........................................B-1
EXHIBIT C - RESTRICTED SECURITIES CERTIFICATE...............................C-1
EXHIBIT D - UNRESTRICTED SECURITIES CERTIFICAT..............................D-1
EXHIBIT E - TELEPHONE NUMBER(S) FOR CALL-BACKS..............................E-1
</TABLE>
- iv -
<PAGE>
INDENTURE, dated as of May 13, 1998, by and between American Cellular
Corporation, a Delaware corporation (the "Company"), and Chase Manhattan Bank
and Trust Company, National Association , a banking corporation organized under
the laws of the United States of America, as Trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each other
party and for the equal and ratable benefit of the Holders of the Company's
10 1/2% Series A Senior Notes due 2008 (the "Series A Securities" or the
"Initial Securities"), and the 10 1/2% Series B Senior Notes due 2008 (the
"Series B Securities" and, together with the Series A Securities, the
"Securities"), which may be exchanged for the 10 1/2% Series A Senior Notes due
2008:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1. Definitions.
-----------
"Acceleration Notice" shall have the meaning specified in Section 6.2.
"Acquired Indebtedness" means Indebtedness of a person (i) existing at
the time such person becomes a Restricted Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Restricted Subsidiary or such acquisition, as the case may be.
Acquired Indebtedness shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the Acquired Person becomes a
Restricted Subsidiary, as the case may be.
"Acquired Person" shall have the meaning as set forth in the
definition of "Permitted Investment."
"Additional Escrow Amount" means that certain equity contribution from
the Equity Investors, in the amount of $20 million, which is placed in the
Escrow and Pledge Account with the net proceeds realized from the sale of the
Notes.
"Affiliate" means, with respect to any specified Person, (i) any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person or (ii) any officer,
director, or controlling stockholder of such other Person. For purposes of this
definition, the term "control" means (a) the power to direct the management and
policies of a Person, directly or through one or more intermediaries, whether
through the
<PAGE>
ownership of voting securities, by contract, or otherwise, or (b) without
limiting the foregoing, the beneficial ownership of 10% or more of the voting
power of the voting common equity of such Person (on a fully diluted basis) or
of warrants or other rights to acquire such equity (whether or not presently
exercisable).
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Annualized Operating Cash Flow" on any date means, with respect to
any Person, the Operating Cash Flow for the Reference Period multiplied by two.
"Annualized Operating Cash Flow Ratio" on any date (the "Transaction
Date") means, with respect to any Person and its Subsidiaries, the ratio of (i)
consolidated Indebtedness of such Person and its Subsidiaries on the Transaction
Date (after giving pro forma effect to the Incurrence of such Indebtedness) (and
without duplication of any Indebtedness that may be the obligation of such
Person and/or one of its Subsidiaries) divided by (ii) the aggregate amount of
Annualized Operating Cash Flow of such Person (determined on a pro forma basis
after giving effect to all acquisitions or dispositions of businesses made by
such Person and its Subsidiaries from the beginning of the Reference Period
through the Transaction Date as if such acquisition or disposition had occurred
at the beginning of such Reference Period); provided that for purposes of such
computation, in calculating Annualized Operating Cash Flow and consolidated
Indebtedness, (a) the transaction giving rise to the need to calculate the
Annualized Operating Cash Flow Ratio will be assumed to have occurred (on a pro
forma basis) on the first day of the Reference Period; (b) the incurrence of any
Indebtedness during the Reference Period or subsequent thereto and on or prior
to the Transaction Date (and the application of the proceeds therefrom to the
extent used to retire Indebtedness or to acquire businesses) will be assumed to
have occurred (on a pro forma basis) on the first day of such Reference Period;
(c) Consolidated Interest Expense attributable to any Indebtedness (whether
existing or being incurred) bearing a floating interest rate shall be computed
as if the rate in effect on the Transaction Date had been the applicable rate
for the entire period; and (d) all members of the consolidated group of such
Person on the Transaction Date that were acquired during the Reference Period
shall be deemed to be members of the consolidated group of such Person for the
entire Reference Period. When the foregoing definition is used in connection
with the Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the Company
and its Restricted Subsidiaries.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein, the
rules and procedures of the Depositary for such Security, Euroclear and Cedel,
in each case
- 2 -
<PAGE>
to the extent applicable to such transaction and as in effect at the time of
such transfer or transaction.
"Asset Sale" shall have the meaning specified in Section 4.14.
"Asset Sale Amount" shall have the meaning specified in Section 4.14.
"Asset Sale Offer" shall have the meaning specified in Section 4.14.
"Asset Sale Offer Amount" shall have the meaning specified in Section
4.14.
"Asset Sale Offer Price" shall have the meaning specified in Section
4.14.
"Asset Sale Purchase Date" shall have the meaning specified in Section
4.14.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar Federal,
state or foreign law for the relief of debtors.
"Board of Directors" means, with respect to any Person, the Board of
Directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly adopted
resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligations" means obligations under a lease that
are required to be capitalized for financial reporting purposes in accordance
with GAAP, and the amount of Indebtedness represented by such obligations shall
be the capitalized amount of such obligations, as determined in accordance with
GAAP.
"Capital Stock" means, with respect to any Person, any capital stock
of such Person and shares, interests, participations or other ownership
interests (however designated) of any Person and any rights (other than debt
securities convertible into capital stock), warrants and options to purchase any
of the foregoing, including (without limitation) each class of common stock and
preferred stock of such Person if such Person is a corporation and each general
and limited partnership interest of such Person if such Person is a partnership.
- 3 -
<PAGE>
"Cash Equivalents" means (i) Securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case maturing within
one year after the date of acquisition, (ii) time deposits and certificates of
deposit and commercial paper issued by the parent corporation of any domestic
commercial bank of recognized standing having capital and surplus in excess of
$500 million and commercial paper issued by others rated at least A-2 or the
equivalent thereof by Standard & Poor's Corporation or at least P-2 or the
equivalent thereof by Moody's Investors Service, Inc. and in each case maturing
within one year after the date of acquisition and (iii) investments in money
market funds substantially all of whose assets comprise securities of the types
described in clauses (i) and (ii) above, including funds for which the Trustee,
its parent holding company or any affiliate or subsidiary of the Trustee or such
holding company provide investment advisory or other management services.
"Change of Control" means (i) any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Company, on a consolidated basis, in one transaction or a series of related
transactions, if, immediately after giving effect to such transaction, any
"person" or "group" (as such terms are used for purposes of Sections 13(d) and
14(d) of the Exchange Act, whether or not applicable), other than an Excluded
Person or Excluded Group, is or becomes the "beneficial owner" (as such term is
used in Rule 13d-3 promulgated pursuant to the Exchange Act), directly or
indirectly, of Voting Stock representing more than 50% of the voting power of
the Voting Stock of the transferee, (ii) any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether
or not applicable), other than an Excluded Person or Excluded Group, is or
becomes the "beneficial owner" (as such term is used in Rule 13d-3 promulgated
pursuant to the Exchange Act), directly or indirectly, of Voting Stock
representing more than 50% of the voting power of the Voting Stock of the
Company then outstanding normally entitled to vote in elections of directors, or
(iii) during any period of 12 consecutive months after the Issue Date,
individuals who at the beginning of any such 12-month period constituted the
Board of Directors of the Company (together with any new directors whose
election by such Board or whose nomination for election by the Excluded Persons
or any Excluded Group or the shareholders of the Company was approved by a vote
of a majority of the directors then still in office who were either directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
Board of Directors of the Company then in office.
"Change of Control Offer" shall have the meaning specified in Section
11.1.
- 4 -
<PAGE>
"Change of Control Offer Period" shall have the meaning specified in
Section 11.1.
"Change of Control Purchase Date" shall have the meaning specified in
Section 11.1.
"Change of Control Purchase Price" shall have the meaning specified in
Section 11.1.
"Closing Price" on any Trading Day with respect to the per share price
of any shares of Capital Stock means the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange or, if such shares of Capital Stock are not listed or
admitted to trading on such exchange, on the principal national securities
exchange on which such shares are listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on Nasdaq
National Market or, if such shares are not listed or admitted to trading on any
national securities exchange or quoted on Nasdaq National Market but the issuer
is a Foreign Issuer (as defined in Rule 3b-4(b) under the Exchange Act) and the
principal securities exchange on which such shares are listed or admitted to
trading is a Designated Offshore Securities Market (as defined in Rule 902(a)
under the Securities Act), the average of the reported closing bid and asked
prices regular way on such principal exchange, or, if such shares are not listed
or admitted to trading on any national securities exchange or quoted on Nasdaq
National Market and the issuer and principal securities exchange do not meet
such requirements, the average of the closing bid and asked prices in the over-
the-counter market as furnished by any New York Stock Exchange member firm is
selected from time to time by the Issuer for that purpose and is reasonably
acceptable to the Trustee.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it pursuant to the Indenture, and thereafter means such
successor.
"Company Order" or "Company Request" means a written request or order
signed in the name of the Company by any one of its Chairman of the Board, its
President, its Chief Executive Officer, its Chief Financial Officer or a Vice
President (regardless of Vice Presidential designation), and any one of its
Treasurer, or Assistant Treasurer, its Secretary or an Assistant Secretary, and
delivered to the Trustee.
- 5 -
<PAGE>
"Consolidated Interest Expense" of any Person means, for any period,
the aggregate amount (without duplication and determined in each case in
accordance with GAAP) of (a) interest expensed or capitalized, paid, accrued, or
scheduled to be paid or accrued (including, in accordance with the following
sentence, interest attributable to the Capitalized Lease Obligations) of such
Person and its consolidated Subsidiaries during such period, including (i)
original issue discount and non-cash interest payments or accruals on any
Indebtedness, (ii) the interest portion of all deferred payment obligations, and
(iii) all commissions, discounts and other fees and charges owed with respect to
bankers' acceptances and letters of credit financings and currency and Interest
Rate Protection Agreements, in each case to the extent attributable to such
period, and (b) the amount of cash dividends accrued or payable by such Person
or any of its consolidated Restricted Subsidiaries in respect of Preferred Stock
(other than by Restricted Subsidiaries of such Person to such Person or such
Person's Wholly Owned Subsidiaries). For purposes of this definition, (x)
interest on a Capitalized Lease Obligation shall be deemed to accrue at an
interest rate reasonably determined by the Company to be the rate of interest
implicit in such Capitalized Lease Obligation in accordance with GAAP and (y)
interest expense attributable to any Indebtedness represented by the guaranty by
such Person or a Subsidiary of such Person of an obligation of another Person
shall be deemed to be the interest expense attributable to the Indebtedness
guaranteed. When the foregoing definition is used in connection with the Company
and its Restricted Subsidiaries, references to a Person and its Subsidiaries in
the foregoing definition shall be deemed to refer to the Company and its
Restricted Subsidiaries.
"Consolidated Net Income" of any Person for any period means the net
income (or loss) of such Person and its consolidated Subsidiaries for such
period, determined (on a consolidated basis) in accordance with GAAP, adjusted
to exclude (only to the extent included in computing such net income (or loss)
and without duplication) (i) all extraordinary gains or losses and all gains and
losses from the sales or other dispositions of assets out of the ordinary course
of business (net of taxes, fees and expenses relating to the transaction giving
rise thereto) for such period), (ii) the net income, if positive, of any Person,
that is not a Subsidiary in which such Person or any of its Subsidiaries has an
interest, except to the extent of the amount of dividends or distributions
actually paid to such Person or a Subsidiary of such Person that both (x) are
actually paid in cash to such Person or a Subsidiary of such Person during such
period and (y) when taken together with all other dividends and distributions
paid during such period in cash to such Person or a Subsidiary of such Person,
are not in excess of such Person's pro rata share of such other Person's
aggregate net income earned during such period, (iii) except as provided in the
definition of "Annualized Operating Cash Flow Ratio," the net income (or loss)
of any Subsidiary acquired in a pooling of interests transaction for any period
prior to the date of such acquisition, (iv) for purposes of Section 4.3,
- 6 -
<PAGE>
the net income, if positive, of any Subsidiary of such Person to the extent that
the declaration or payment of dividends or similar distributions is not at the
time permitted by operation of the terms of its charter or any agreement or
instrument applicable to such Subsidiary, and (v) the cumulative effect of a
change in accounting principles. When the foregoing definition is used in
connection with the Company and its Restricted Subsidiaries, references to a
Person and its Subsidiaries in the foregoing definition shall be deemed to refer
to the Company and its Restricted Subsidiaries.
"Convertible Notes" means the 10 3/4% Senior Subordinated Convertible
Discount Notes due 2004 of PriCellular.
"Corporate Trust Office" means the principal office of the Trustee at
which at any particular time its corporate trust business shall be administered,
which address as of the date hereof is located at 101 California Street, Suite
2725, San Francisco, California 94111 and, for the purposes required for
Section 4.2 hereunder, c/o The Chase Manhattan Bank, 55 Water Street, Room 234,
North Building, New York, New York 10041.
"Covenant Defeasance" shall have the meaning specified in Section 8.3.
"Credit Facility" means, that certain Credit Facility to be entered
into among a Restricted Subsidiary of the Company, Merrill Lynch Capital
Corporation, Toronto Dominion (Texas), Inc., and the other financial
institutions a party thereto, as such agreement in whole or in part, may be, in
one or more agreements with one or more bank lending groups, amended, renewed,
extended, substituted, refinanced, restructured, replaced, supplemented or
otherwise modified, in whole or in part, from time to time (including, without
limitation, any successive renewals, extensions, substitutions, refinancings,
restructurings, replacements, supplementations or other modifications of the
foregoing) to which the Issuer or any Restricted Subsidiary is a party including
to increase the commitments thereunder or to add or eliminate borrowers or
guarantors thereunder.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"Default" means any event or condition that is, or after notice or
passage of time or both would be, an Event of Default.
"Defaulted Interest" shall have the meaning specified in Section 2.12.
- 7 -
<PAGE>
"Definitive Securities" means Securities that are in the form of
Security attached hereto as Exhibit A that do not include the information called
for by footnotes 1 and 3 thereof.
"Depositary" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.3 as the
Depositary with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provision of this
Indenture, and, thereafter, "Depositary" shall mean or include such successor.
"Disqualified Capital Stock" means, with respect to any Person,
Capital Stock of such Person that, by its terms or by the terms of any security
into which it is convertible, exercisable or exchangeable, is, or upon the
happening of any event or the passage of time would be, required to be redeemed
or repurchased (including at the option of the holder thereof) by such Person or
any of its Subsidiaries, in whole or in part, on or prior to the Stated Maturity
of the Securities; provided that (a) Capital Stock will not be deemed to be
Disqualified Capital Stock if it may only be so redeemed or repurchased solely
in consideration of Qualified Capital Stock of the Issuer and (b) any Capital
Stock that would not constitute Disqualified Capital Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Securities shall not
constitute Disqualified Capital Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the holders
of such Capital Stock than the provisions contained in Sections 4.14 and 11.1
hereof and such Capital Stock specifically provides that such Person will not
repurchase or redeem any such stock pursuant to such provision prior to the
Company's repurchase of such Securities as are required to be repurchased
pursuant to the provisions contained in Sections 4.14 and 11.1 hereof.
"Eligible Institution" means a commercial banking institution that has
combined capital and surplus of not less than $500 million or its equivalent in
foreign currency, whose debt is rated "A-3" or higher, "A" or higher or "A-" or
higher according to Moody's Investor Service, Inc., Standard & Poor's Ratings
Group or Duff & Phelps Credit Rating Co. (or such similar equivalent rating by
at least one "nationally recognized statistical rating organization" (as defined
in Rule 436 under the Securities Act)) respectively, at the time as of which any
investment or rollover therein is made.
"Equity Investors" means collectively, Spectrum Equity Investors II,
L.P., Providence Equity Partners, L.P. and the other Persons listed as
"Principal Stockholders" in the Offering Memorandum.
- 8 -
<PAGE>
"Escrow and Pledge Account" means an account established with the
Trustee pursuant to the terms of the Pledge and Escrow Agreement for the deposit
of the net proceeds realized from the sale of the Notes, together with the
Additional Escrow Amount; and after the Merger such account will hold the
Pledged Securities purchased by the Issuer with a portion of the net proceeds
from the Offering.
"Escrow Funds" means the net proceeds of the Offering and an equity
contribution from the Equity Investors of $20.0 million, all held in the Escrow
and Pledge Account pursuant to the Pledge and Escrow Agreement.
"Event of Default" shall have the meaning specified in Section 6.1.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated by the SEC thereunder.
"Exchange Offer Registration Statement" means the registration
statement under the Securities Act contemplated by Section 2.1 of the
Registration Rights Agreement.
"Exchange Securities" means the 10 1/2% Series B Senior Notes due 2008
to be issued pursuant to this Indenture in connection with the offer to exchange
Exchange Securities for the Initial Securities that may be made by the Company
pursuant to the Registration Rights Agreement.
"Excluded Group" means a "group" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act) that includes one or more Excluded Persons;
provided that the voting power of the Capital Stock of the Company "beneficially
owned" (as such term is used in Rule 13d-3 promulgated under the Exchange Act)
by such Excluded Persons (without attribution to such Excluded Persons of the
ownership by other members of the "group") represents a majority of the voting
power of the Capital Stock "beneficially owned" (as such term is used in Rule
13d-3 promulgated under the Exchange Act) by such group.
"Excluded Person" means Spectrum Equity Investors, Providence Equity
Partners and MLC Industries, Inc. and any Affiliate of any of the foregoing that
is directly or indirectly controlling or controlled by, or under direct or
indirect common control with, any of the foregoing.
"Final Put Date" shall have the meaning specified in Section 4.14.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
- 9 -
<PAGE>
pronouncements of the Financial Accounting Standards Board ("FASB") or, if FASB
ceases to exist, any successor thereto; provided, however, that for purposes of
determining compliance with covenants in the Indenture, "GAAP" means such
generally accepted accounting principles as in effect as of the Issue Date.
"Global Security" means a Security that contains the paragraph
referred to in footnote 1 and the additional schedule referred to in footnote 3
to the form of Security attached hereto as Exhibit A.
"Government Securities" means non-callable direct obligations of, or
obligations guaranteed by, the United States of America for the payment of which
obligations or guarantee the full faith and credit of the United States is
pledged and which have a remaining weighted average life to maturity of not more
than the date of the interest payment as to which such Investment in the
Government Security is intended to pay.
"Holder" or "Securityholder" means a Person in whose name a Security
is registered. The Holder of a Security will be treated as the owner of such
Security for all purposes.
"Incur" shall have the meaning specified in Section 4.11.
"Indebtedness" of any Person means, without duplication, (a) all
liabilities and obligations, contingent or otherwise, of such Person, (i) in
respect of borrowed money (whether or not the recourse of the lender is to the
whole of the assets of such Person or only to a portion thereof), (ii) evidenced
by bonds, notes, debentures or similar instruments, (iii) representing the
balance deferred and unpaid of the purchase price of any property or services
except (other than accounts payable or other obligations to trade creditors
which have remained unpaid for greater than 90 days past their original due date
or to financial institutions, which obligations are not being contested in good
faith and for which appropriate reserves have been established) those incurred
in the ordinary course of its business that would constitute ordinarily a trade
payable to trade creditors, (iv) evidenced by bankers' acceptances or similar
instruments issued or accepted by banks, (v) for the payment of money relating
to a Capitalized Lease Obligation, or (vi) evidenced by a letter of credit or a
reimbursement obligation of such Person with respect to any letter of credit;
(b) all obligations of such Person under Interest Rate Protection Agreements;
(c) all liabilities of others of the kind described in the preceding clauses (a)
or (b) that such Person has guaranteed or that is otherwise its legal liability
or which are secured by any assets or property of such Person and all
obligations to purchase, redeem or acquire any Capital Stock; (d) all
Disqualified Capital Stock of such Person and all Preferred Stock of such
Person's Restricted Subsidiaries and (e) any and all deferrals, renewals,
extensions, refinancing and
- 10 -
<PAGE>
refundings (whether direct or indirect) of, or amendments, modifications or
supplements to, any liability of the kind described in any of the preceding
clauses (a), (b), (c), (d) or this clause (e), whether or not between or among
the same parties; provided that the outstanding principal amount at any date of
any Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such date.
"Indenture" means this Indenture, as amended or supplemented from time
to time in accordance with the terms hereof.
"Initial Purchasers" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated, TD Securities (USA) Inc., and Wasserstein Perella Securities, Inc.
"Initial Securities" means the 10 1/2% Series A Senior Notes due 2008,
as supplemented from time to time in accordance with the terms hereof, issued
pursuant to this Indenture.
"Interest Payment Date" means the stated due date of an installment of
interest on the Securities.
"Interest Rate Protection Agreement" means, with respect to any
Person, the Obligations of such Person under (a) interest rate swap agreements,
interest rate cap agreements and interest rate collar agreements and (b) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates. For purposes of this Indenture, the amount of such
obligations shall be the amount determined in respect thereof as of the end of
the then most recently ended fiscal quarter of such Person, based on the
assumption that such obligation had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
obligation provides for the netting of amounts payable by and to such Person
thereunder of if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligations shall be the net amount so determined, plus any premium due upon
default by such Person.
"Investment" by any Person in any other Person means (without
duplication) (a) the acquisition (whether by purchase, merger, consolidation or
otherwise) by such Person (whether for cash, property, services, securities or
otherwise) of capital stock, bonds, notes, debentures, partnership or other
ownership interests or other securities of such other Person or any agreement to
make any such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person)
- 11 -
<PAGE>
or any commitment to make any such advance, loan or extension; (c) the entering
into by such Person of any guarantee of, or other contingent obligation with
respect to, Indebtedness or other liability of such other Person; (d) the making
of any capital contribution by such Person to such other Person; and (e) the
designation by the Board of Directors of the Company of any Person to be an
Unrestricted Subsidiary. For purposes of Section 4.3, (i) "Investment" shall
include and be valued at the fair market value of the net assets of any
Restricted Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the net
assets of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Restricted Subsidiary and (ii) the amount of any
Investment shall be the fair market value of such Investment plus the fair
market value of all additional Investments by the Company or any of its
Restricted Subsidiaries at the time any such Investment is made; provided that,
for purposes of this sentence, the fair market value of net assets in excess of
$5,000,000 shall be as determined by an independent appraiser of national
reputation.
"Issue Date" means the time and date of the first issuance of the
Securities under the Indenture.
"Junior Indebtedness" means Indebtedness of the Company that (i)
requires no payment of principal prior to or on the date on which all principal
of and interest on the Securities is paid in full and (ii) is subordinate and
junior in right of payment to the Securities in all respects.
"Legal Defeasance" shall have the meaning specified in Section 8.2.
"Legal Holiday" shall have the meaning specified in Section 13.7.
"Lien" means any mortgage, lien, pledge, charge, security interest, or
other encumbrance of any kind, whether or not filed, recorded or otherwise
perfected under applicable law (including any conditional sale or other title
retention agreement and any lease deemed to constitute a security interest and
any option or other agreement to give any security interest).
"Marketable U.S. Securities" means: (i) Government Securities; (ii)
any time deposit account, money market deposit and certificate of deposit
maturing not more than 270 days after the date of acquisition issued by, or time
deposit of, an Eligible Institution; (iii) commercial paper maturing not more
than 270 days after the date of acquisition issued by a corporation (other than
an Affiliate of the Issuer) with a rating, at the time as of which any
investment therein is made, of "P-1" or higher according to Moody's Investors
Service, Inc., "A-1" or higher according to Standard & Poor's Ratings Group or
"A-1" or higher according to Duff & Phelps Credit Rating Co. (or such similar
equivalent rating by at least
- 12 -
<PAGE>
one "nationally recognized statistical rating organization" (as defined in Rule
436 under the Securities Act)); (iv) any banker's acceptances or money market
deposit accounts issued or offered by an Eligible Institution; (v) repurchase
obligations with a term of not more than 7 days for Government Securities
entered into with an Eligible Institution; and (vi) any fund investing
exclusively in investments of the types described in clauses (i) through (v)
above, including funds for which the Trustee, its parent holding company or any
affiliate or subsidiary of the Trustee or such holding company provides
investment advisory or other management services.
"Maturity Date" means, when used with respect to any Security, the
date specified on such Security as the fixed date on which the final installment
of principal of such Security is due and payable (in the absence of any
acceleration thereof pursuant to the provisions of the Indenture regarding
acceleration of Indebtedness or any Change of Control Offer, or Asset Sale
Offer).
"Merger" means the merger of American Cellular Corporation with and
into PriCellular Corporation, pursuant to the Merger Agreement.
"Merger Agreement" means that certain Agreement and Plan of Merger,
dated as of March 6, 1998 between PriCellular Corporation and American Cellular
Corporation.
"Merger Date" means the date upon which the Merger is consummated.
"Minimum Accumulation Date" shall have the meaning specified in
Section 4.14.
"Net Cash Proceeds" means the aggregate amount of cash and Cash
Equivalents received by the Company and its Restricted Subsidiaries in respect
of an Asset Sale (including upon the conversion to cash and Cash Equivalents of
(A) any note or installment receivable at any time, or (B) any other property as
and when any cash and Cash Equivalents are received in respect of any property
received in an Asset Sale but only to the extent such cash and Cash Equivalents
are received within one year after such Asset Sale), less the sum of (i) all
reasonable out-of-pocket fees, commissions and other expenses incurred in
connection with such Asset Sale, including the amount (estimated in good faith
by the Board of Directors of the Company) of income, franchise, sales and other
applicable taxes required to be paid by the Company or any Restricted Subsidiary
of the Company in connection with such Asset Sale and (ii) the aggregate amount
of cash so received which is used to retire any existing Senior Indebtedness of
the Company or Indebtedness of its Restricted Subsidiaries, as the case may be,
which is required to be repaid in connection with such Asset Sale or is secured
by a Lien
- 13 -
<PAGE>
on the property or assets of the Company or any of its Restricted Subsidiaries,
as the case may be.
"Net Proceeds" means the aggregate net proceeds (including the fair
market value of non-cash proceeds constituting equipment or other assets of a
type generally used in a Related Business an amount reasonably determined by the
Board of Directors of the Company for amounts under $5,000,000 and by a
financial advisor or appraiser of national reputation for equal or greater
amounts) received by a Person from the sale of Qualified Capital Stock (other
than to a Subsidiary of such Person) after payment of out-of-pocket expenses,
commissions and discounts incurred in connection therewith.
"Non-U.S. Person" means a Person that is not a "U.S. Person" as
defined in Regulation S under the Securities Act.
"Notice of Default" shall have the meaning specified in Section
6.1(3).
"Obligation" means any principal, premium, interest (including
interest accruing subsequent to a bankruptcy or other similar proceeding whether
or not such interest is an allowed claim enforceable against the Company in a
bankruptcy case under Federal bankruptcy law), penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable pursuant
to the terms of the documentation governing any Indebtedness.
"Offering" means the offering of the Securities by the Company.
"Offering Memorandum" means that certain Offering Memorandum of the
Company, dated May 6, 1998, relating to the original issuance and sale of the
Initial Securities to the Initial Purchasers.
"Officer" means, with respect to the Company, the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer, the Controller, or the Secretary of the Company.
"Officers' Certificate" means, with respect to the Company, a
certificate signed by two Officers or by an Officer and an Assistant Secretary
of the Company, respectively, and otherwise complying with the requirements of
Sections 13.4 and 13.5.
"Old Notes" means the 10 3/4% Senior Notes due 2004 of PriCellular
Wireless Corporation ("Wireless"), the 12 1/4% Senior Subordinated Notes due
2003 of Wireless and the 14% Senior Subordinated Discount Notes due 2001 of
Wireless.
- 14 -
<PAGE>
"Operating Cash Flow" of any Person means (a) with respect to any
period, the Consolidated Net Income of such Person for such period, plus (b) the
sum, without duplication (and only to the extent such amounts are deducted from
net revenues in determining such Consolidated Net Income), of (i) the provisions
for income taxes for such period for such Person and its consolidated
Subsidiaries, (ii) depreciation, amortization and other non-cash charges of such
Person and its consolidated Subsidiaries and (iii) Consolidated Interest Expense
of such Person for such period, determined, in each case, on a consolidated
basis for such Person and its consolidated Subsidiaries in accordance with GAAP,
less (c) the amount of all cash payments made during such period by such Person
and its Subsidiaries to the extent such payments relate to non-cash charges that
were added back in determining Operating Cash Flow for such period or for any
prior period. When the foregoing definition is used in connection with the
Company and its Restricted Subsidiaries, references to a Person and its
Subsidiaries in the foregoing definition shall be deemed to refer to the Company
and its Restricted Subsidiaries.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee complying with the requirements of Sections
13.4 and 13.5.
"Paying Agent" shall have the meaning specified in Section 2.3.
"Permitted Investment" means (i) Investments in Cash Equivalents; (ii)
Investments in the Company or a Restricted Subsidiary; (iii) Investments in a
Person substantially all of whose assets are of a type generally used in a
Related Business (an "Acquired Person") if, as a result of such Investments, (A)
the Acquired Person immediately thereupon becomes a Restricted Subsidiary or (B)
the Acquired Person immediately thereupon either (1) is merged or consolidated
with or into the Company or any of its Restricted Subsidiaries and the surviving
Person is the Company or a Restricted Subsidiary or (2) transfers or conveys all
or substantially all of its assets to, or is liquidated into, the Company or any
of its Restricted Subsidiaries; (iv) Investments in accounts and notes
receivable acquired in the ordinary course of business; (v) any securities
received in connection with an Asset Sale and any Investment with the Net Cash
Proceeds from any Asset Sale in Capital Stock of a Person, all or substantially
all of whose assets are of a type used in a Related Business, that complies with
Section 4.14; (vi) any guarantee issued by a Restricted Subsidiary incurred in
compliance with the Indenture; (vii) advances and prepayments for asset
purchases in the ordinary course of business in a Related Business of the
Company or a Restricted Subsidiary; (viii) loans made to certain officers upon
the Merger Date, the term of which will not exceed one year and the aggregate
outstanding balance of which will not exceed $2.0 million; (ix) customary loans
or advances made in the ordinary course of business to officers, directors or
employees of the Company or any of its Restricted
- 15 -
<PAGE>
Subsidiaries for travel, entertainment, and moving and other relocation
expenses; (x) Investments in Permitted Joint Ventures which in the aggregate at
any one time outstanding do not exceed $15.0 million; and (xi) Investments which
in the aggregate at any one time outstanding do not exceed $5.0 million;
provided, however, such Investments may be increased to $10.0 million in the
aggregate provided that Wireless' Annualized Operating Cash Flow Ratio, after
giving effect to such Investments, would have been less than 6.25 to 1.00.
"Permitted Joint Venture" means, as applied to any Person, any other
Person (a) engaged in a Related Business, (b) over which such Person is
responsible (either directly or through a services agreement) for day-to-day
operations or otherwise has operational and managerial control or (c) of which
more than forty percent (40%) of the outstanding Voting Stock (other than
directors' qualifying shares) in the case of a corporation, or more than forty
percent (40%) of the outstanding ownership interests, in the case of an entity
other than a corporation, is at the time owned directly or indirectly by such
Person.
"Permitted Lien" means (a) Liens existing on the Issue Date; (b) Liens
imposed by governmental authorities for taxes, assessments or other charges not
yet subject to penalty or which are being contested in good faith and by
appropriate proceedings, if adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (c) statutory
liens of carriers, warehousemen, mechanics, materialmen, landlords, repairmen or
other like Liens arising by operation of law in the ordinary course of business,
provided that (i) the underlying obligations are not overdue for a period of
more than 30 days, and (ii) such Liens are being contested in good faith and by
appropriate proceedings and adequate reserves with respect thereto are
maintained on the books of the Company in accordance with GAAP; (d) Liens
securing the performance of bids, trade contracts (other than borrowed money),
leases, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(e) easements, rights-of-way, zoning, similar restrictions and other similar
encumbrances or title defects which, singly or in the aggregate, do not in any
case materially detract from the value of the property, subject thereto (as such
property is used by the Company or any of its Restricted Subsidiaries) or
interfere with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (f) Liens arising by operation of law in connection
with judgments, only to the extent, for an amount and for a period not resulting
in an Event of Default with respect thereto; (g) pledges or deposits made in the
ordinary course of business in connection with worker's compensation,
unemployment insurance and other types of social security legislation; (h) Liens
in favor of the Trustee arising under the Indenture; (i) Liens securing the
Credit Facility; (j) Liens securing Indebtedness of a Person existing at the
time such Person becomes a Restricted
-16 -
<PAGE>
Subsidiary or is merged with or into the Company or a Restricted Subsidiary,
provided that such Liens were in existence prior to the date of such
acquisition, merger or consolidation, were not incurred in anticipation thereof,
and do not extend to any other assets; (k) Liens arising from Purchase Money
Indebtedness permitted under the Indenture; (l) Liens securing Refinancing
Indebtedness Incurred to refinance any Indebtedness that was previously so
secured in a manner no more adverse to the Holders of the Securities than the
terms of the Liens securing such refinanced Indebtedness; (m) Liens securing
Indebtedness (including Capital Lease Obligations) permitted by clause (vi) of
Section 4.11; and (n) Liens in favor of the Company or a Wholly Owned Restricted
Subsidiary.
"Person" means any corporation, individual, joint stock company, joint
venture, partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust, municipality or
other entity.
"Pledge and Escrow Agreement" means the Pledge and Escrow Agreement,
dated as of the date of the Indenture, between the Company and the Trustee.
"Pledged Securities" means the securities purchased by the Company
with a portion of the net proceeds from the Offering to be deposited in the
Escrow and Pledge Account.
"Preferred Stock" means Capital Stock, other than common stock of an
issuer having no preferences or privileges as to the payment of dividends or the
distribution of the issuer's assets over any other class of such issuer's
Capital Stock.
"PriCellular" means PriCellular Corporation, a Delaware corporation.
"PriCellular Class A Shares" means shares of Class A Common Stock, par
value $0.01 per share, of PriCellular.
"PriCellular Class B Shares" means shares of Class B Common Stock, par
value $0.01 per share, of PriCellular.
"PriCellular Class A Preferred Stock" means shares of Series A
Cumulative Convertible Preferred Stock, par value $0.01 per share, of
PriCellular.
"Principal" of any Indebtedness means the principal of such
Indebtedness plus, without duplication, applicable premium, if any, on such
Indebtedness.
- 17 -
<PAGE>
"Private Placement Legend" means the legend set forth on the face of
the form of Security attached hereto as Exhibit A.
"Property" means any right or interest in or to property or assets of
any kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Public Equity Offering" means an offer and sale of common stock
(which is Qualified Capital Stock) of the Company, with aggregate proceeds of at
least $50 million pursuant to a registration statement that has been declared
effective by the Commission pursuant to the Securities Act (other than a
registration statement on Form S-8, S-4 or otherwise relating to equity
securities issuable under any employee benefit plan of such corporate entity).
"Purchase Agreement" means that certain Purchase Agreement dated May
6, 1998 by and among the Company and the Initial Purchasers, as such agreement
may be amended, modified or supplemented from time to time in accordance with
the terms thereof.
"Purchase Money Indebtedness" means Indebtedness of the Company or its
Restricted Subsidiaries Incurred in connection with the purchase of property or
assets for the business of the Company or its Restricted Subsidiaries, provided
that the recourse of the lenders with respect to such Indebtedness is limited
solely to the property or assets so purchased without further recourse to either
the Company or any of its Restricted Subsidiaries.
"Qualified Capital Stock" means any Capital Stock of a Person that is
not Disqualified Capital Stock.
"Record Date" means a Record Date specified in the Securities whether
or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to Article III of
this Indenture and Paragraph 5 in the form of Security attached hereto as
Exhibit A.
"Redemption Price," when used with respect to any Security to be
redeemed pursuant to any provision in this Indenture means the price at which it
is to be redeemed pursuant to this Indenture, which shall include, without
duplication, in each case, any accrued and unpaid interest to the Redemption
Date.
"Reference Period" with regard to any Person means the last two full
fiscal quarters of such Person for which financial information (which the
Company shall use its best efforts to compile in a timely manner) in respect
thereof is
- 18 -
<PAGE>
available ended on or immediately preceding any date upon which any
determination is to be made pursuant to the terms of the Securities or the
Indenture.
"Refinancing Indebtedness" means any Indebtedness of the Issuer or any
of its Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used to extend, refinance, renew, replace, defease or refund other
Indebtedness of the Issuer or such Restricted Subsidiary (other than
intercompany Indebtedness); provided that: (i) the principal amount (or
accreted value, if applicable) of such Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable) plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (ii) such Refinancing Indebtedness has a final maturity date later
than the final maturity date of, and has a Weighted Average Life equal to or
greater than the Weighted Average Life of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Refinancing Indebtedness has
a final maturity date later than the final maturity date of, and is subordinated
in right of payment to, the Notes on terms at least as favorable to the holders
of Notes as those contained in the documentation governing the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded; and (iv)
such Indebtedness is incurred either by the Issuer or by the Restricted
Subsidiary who is the obligor on the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Registrar" shall have the meaning specified in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement dated May 13, 1998 by and among the Initial Purchasers and the
Company, as such agreement may be amended, modified or supplemented from time to
time in accordance with the terms thereof.
"Regulation S" means Regulation S under the Securities Act, as amended
from time to time.
"Regulation S Global Securities" means one or more permanent global
Securities in registered form representing the aggregate principal amount of
Securities sold in reliance on Regulation S under the Securities Act.
"Related Business" means any business related to, or complementary to,
the ownership, development, operation, or acquisition of wireless communications
systems as determined by the Board of Directors of the Company.
- 19 -
<PAGE>
"Related Person" means, with respect to any Person, (i) any Affiliate
of such Person or any spouse, immediate family member, or other relative who has
the same principal residence of any Affiliate of such Person and (ii) any trust
in which any Person described in clause (i) above, has a beneficial interest.
"Restricted Partnership" shall have the meaning specified in Section
4.19.
"Restricted Payment" means, with respect to any Person, (i) any
dividend or other distribution on shares of Capital Stock of such Person or any
Subsidiary of such Person, (ii) any payment on account of the purchase,
redemption or other acquisition or retirement for value, or any payment in
respect of any amendment (in anticipation of or in connection with any such
retirement, acquisition or defeasance) in whole or in part, of any shares of
Capital Stock of such Person or any Subsidiary of such Person held by Persons
other than such Person or any of its Restricted Subsidiaries, (iii) any
defeasance, redemption, repurchase or other acquisition or retirement for value,
or any payment in respect of any amendment (in anticipation of or in connection
with any such retirement, acquisition or defeasance) in whole or in part, of any
Indebtedness of the Company (other than the scheduled repayment thereof at
maturity and any mandatory redemption or mandatory repurchase thereof pursuant
to the terms thereof) by such Person or a Subsidiary of such Person that is
subordinate in right of payment to the Securities (other than in exchange for
Refinancing Indebtedness permitted to be Incurred under the Indenture and except
for any such defeasance, redemption, repurchase, other acquisition or payment in
respect of Indebtedness held by any Restricted Subsidiary) and (iv) any
Investment (other than a Permitted Investment); provided, however, that the term
"Restricted Payment" does not include (i) any dividend, distribution or other
payment on shares of Capital Stock of the Company or any Restricted Subsidiary
solely in shares of Qualified Capital Stock, (ii) any dividend, distribution or
other payment to the Company, or any dividend to any of its Restricted
Subsidiaries, by any of its Subsidiaries, (iii) any dividend, distribution or
other payment by any Restricted Subsidiary on shares of its Capital Stock that
is paid pro rata to all holders of such Capital Stock, and (iv) the purchase,
redemption or other acquisition or retirement for value of shares of Capital
Stock of any Restricted Subsidiary held by Persons other than the Company or any
of its Restricted Subsidiaries.
"Restricted Period" means the period through and including the 40/th/
day after the later of the commencement of the Offering and the original issue
date of the Securities.
"Restricted Security" means a Security, unless or until it has been
(i) disposed of in a transaction effectively registered under the Securities Act
or (ii)
- 20 -
<PAGE>
distributed to the public pursuant to Rule 144 (or any similar provision then in
force) under the Securities Act; provided that in no case shall an Exchange
Security issued in accordance with this Indenture and the terms and provisions
of the Registration Rights Agreement be a Restricted Security.
"Restricted Subsidiary" means any Subsidiary of the Company which at
the time of determination is not an Unrestricted Subsidiary. The Board of
Directors of the Company may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary only if, immediately before and after giving effect to
such designation, there would exist no Default or Event of Default and the
Company could incur at least $1.00 of Indebtedness pursuant to the Annualized
Operating Cash Flow Ratio test of Section 4.11, on a pro forma basis, taking
into account such designation.
"Rule 144A" means Rule 144A under the Securities Act, as amended from
time to time.
"Rule 144A Global Securities" means one or more permanent Global
Securities in registered form representing the aggregate principal amount of
Securities sold in reliance on Rule 144A under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities" means, collectively, the Initial Securities and, when and
if issued as provided in the Registration Rights Agreement, the Exchange
Securities.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder.
"Securities Custodian" means the Trustee, as custodian with respect to
the Securities in global form, or any successor entity thereto.
"Senior Indebtedness" means all Indebtedness of the Company
(including, with respect to the Credit Facility, all Obligations) including
interest thereon, whether outstanding on the Issue Date or thereafter issued,
other than (a) Indebtedness that is expressly subordinated or junior in right of
payment to any Indebtedness of the Company, (b) Indebtedness represented by
Disqualified Capital Stock, (c) any liability for federal, state, local or other
taxes owed or owing by the Company, (d) Indebtedness of the Company to any
Subsidiary of the Company or any Affiliate of the Company, (e) trade payables
and (f) Indebtedness incurred in violation of the Indenture.
- 21 -
<PAGE>
"Series B Global Securities" means one or more permanent Global
Securities in registered form representing the aggregate principal amount of
Series B Securities exchanged for Series A Securities pursuant to the Exchange
Offer.
"Significant Restricted Subsidiary" means one or more Restricted
Subsidiaries having an aggregate net book value of assets in excess of 5% of the
net book value of the assets of the Company and its Restricted Subsidiaries on a
consolidated basis.
"Special Record Date" for payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
"Special Redemption Price" has the meaning set forth in Section 3.8.
"Special Rights" shall have the meaning specified in Section 4.19.
"Stated Maturity" means the date fixed for the payment of any
principal or premium pursuant to the Indenture and the Securities, including the
Maturity Date, upon redemption, acceleration, Asset Sale Offer, Change of
Control Offer or otherwise.
"Strategic Equity Investor" means any Person which is (or a controlled
Affiliate of any Person which is) engaged in the ownership, development,
operation or acquisition of communications systems and which, as of the last
available annual or quarterly financial statements, has Total Common Equity of
at least $1.0 billion.
"Strategic Equity Offering" means an offer or sale of common stock or
Preferred Stock (other than Disqualified Capital Stock) of the Company, with
aggregate proceeds of at least $50.0 million to a Strategic Equity Investor
other than in connection with or after the occurrence of a Change of Control.
"Subsidiary" with respect to any Person, means (i) a corporation at
least fifty percent of whose Capital Stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by such Person and one or more Subsidiaries of such Person or by
one or more Subsidiaries of such Person, or (ii) a partnership in which such
Person or a Subsidiary of such Person is, at the time, a general partner of such
partnership, or (iii) any Person in which such Person, one or more Subsidiaries
of such Person, or such Person and one or more Subsidiaries of such Person,
directly or indirectly, at the date of determination thereof has (x) at least a
fifty percent ownership interest or (y) the power to elect or direct the
election of the directors or other governing body of such Person.
- 22 -
<PAGE>
"Successor Security" of any particular Security means every Security
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 2.15 in exchange for or in
lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to
evidence the same debt as the mutilated, destroyed, lost or stolen Security.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code ss.ss.
77aaa-77bbbb) as in effect on the date of the execution of this Indenture.
"Total Common Equity" of any Person means, as of any date of
determination the product of (i) the aggregate number of outstanding primary
shares of common stock of such Person on such day (which shall not include any
options or warrants on, or securities convertible or exchangeable into, shares
of common stock of such Person) and (ii) the average Closing Price of such
common stock over the 20 consecutive Trading Days immediately preceding such
day. If no such Closing Price exists with respect to shares of any such class,
the value of such shares for purposes of clause (ii) of the preceding sentence
shall be determined by the Board of Directors of the Issuer in good faith and
evidenced by a resolution of the Board of Directors filed with the Trustee.
"Trading Day," with respect to a securities exchange or automated
quotation system, means a day on which such exchange or system is open for a
full day of trading.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth on the face of the form of Security
attached hereto as Exhibit A.
"Trust Officer" means any officer within the corporate trust division
(or any successor group) of the Trustee or any other officer of the Trustee
customarily performing functions similar to those performed by the Persons who
at that time shall be such officers assigned and duly authorized by the Trustee
to administer its corporate trust matters hereunder, and also means, with
respect to a particular corporate trust matter hereunder, any other officer of
the Trustee to whom such trust matter is referred because of his knowledge of
and familiarity with the particular subject.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"Unrestricted Subsidiary" shall mean any Subsidiary of the Company
that, at the time of determination, shall be an Unrestricted Subsidiary (as
- 23 -
<PAGE>
designated by the Board of Directors of the Company, as provided below). The
Board of Directors of the Company may designate any Subsidiary of the Company
(including any newly acquired or newly formed Subsidiary at or prior to the time
it is so formed or acquired) to be an Unrestricted Subsidiary if (a) no Default
or Event of Default is existing or will occur as a consequence thereof, (b) such
Subsidiary does not own any Capital Stock of, or own or hold any Lien on any
property or asset of, the Company or any Restricted Subsidiary that is not a
Subsidiary of the Subsidiary to be so designated and (c) such Subsidiary and
each of its Subsidiaries has not at the time of designation, and does not
thereafter, create, incur, issue, assume, guarantee, or otherwise become
directly or indirectly liable with respect to any Indebtedness pursuant to which
the lender has recourse to any property or assets of the Company or any of its
Restricted Subsidiaries (except that such Subsidiary and its Subsidiaries may
guarantee the Securities); provided that either (A) the Subsidiary to be so
designated has total assets of $1,000 or less or (B) if such Subsidiary has
assets greater than $1,000, that such designation would be permitted under
Section 4.3. Each such designation shall be evidenced by filing with the
Trustee a certified copy of the resolution giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing conditions.
"U.S. Legal Tender Equivalents" means securities issued or directly
and fully guaranteed or insured by the United States of America or any agency or
instrumentality thereof with a maturity of 90 days or less (provided that the
full faith and credit of the United States of America is pledged in support
thereof).
"Voting Stock" means Capital Stock of the Company having generally the
right to vote in the election of a majority of the directors of the Company or
having generally the right to vote with respect to the organizational matters of
the Company.
"Weighted Average Life" means, when applied to any Indebtedness at any
date, the number of years obtained by dividing (i) the sum of the products
obtained by multiplying (a) the amount of each then remaining installment,
sinking fund, serial maturity or other required payments of principal, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount of
such Indebtedness.
"Wholly Owned" means, with respect to a Subsidiary of the Company, (i)
a Subsidiary that is a corporation, of which not less than 99% of the Capital
Stock (except for directors' qualifying shares or certain minority interests
owned by other Persons solely due to local law requirements that there be more
than one stockholder, but which interest is not in excess of what is required
for
- 24 -
<PAGE>
such purpose) is owned directly by such Person or through one or more other
Wholly Owned Subsidiaries of such Person, or (ii) any entity other than a
corporation in which such Person, directly or indirectly, owns not less than 99%
of the Capital Stock of such entity.
SECTION 1.2. Incorporation by Reference of TIA.
---------------------------------
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture securityholder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them thereby.
SECTION 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(l) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the plural
include the singular;
(5) provisions apply to successive events and transactions;
- 25 -
<PAGE>
(6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision;
(7) references to Sections or Articles means reference to such Section
or Article in this Indenture, unless stated otherwise; and
(8) whenever in this Indenture or the Securities it is provided that
the principal amount with respect to a Security shall be paid, such provision
shall be deemed to require (whether or not so expressly stated) the simultaneous
payment of any accrued and unpaid interest to the date of payment on such
Security payable pursuant to paragraph 1 of the Securities.
ARTICLE II
THE SECURITIES
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificate of authentication in
respect thereof shall be substantially in the form of Exhibit A hereto, which
Exhibit is part of this Indenture. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Any such notations, legends or endorsements not contained in the form of
Security attached as Exhibit A hereto shall be delivered in writing to the
Trustee. Each Security shall be dated the date of its authentication.
The terms and provisions contained in the forms of Securities shall
constitute, and are hereby expressly made, a part of this Indenture and, to the
extent applicable, the Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Securities for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Securities and may be in facsimile form.
If an Officer whose signature is on a Security was an Officer at the
time of such execution but no longer holds that office at the time the Trustee
authenticates the Security, the Security shall be valid nevertheless and the
- 26 -
<PAGE>
Company shall nevertheless be bound by the terms of the Securities and this
Indenture.
A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security but
such signature shall be conclusive evidence that the Security has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Initial Securities for original issue
in the aggregate principal amount of up to $285,000,000 and shall authenticate
Exchange Securities for original issue in the aggregate principal amount of up
to $285,000,000, in each case upon a written order of the Company in the form of
an Officers' Certificate; provided that such Exchange Securities shall be
issuable only upon the valid surrender for cancellation of Initial Securities of
a like aggregate principal amount in accordance with the Registration Rights
Agreement. The Officers' Certificate shall specify the amount of Securities to
be authenticated and the date on which the Securities are to be authenticated.
The aggregate principal amount of Securities outstanding at any time may not
exceed $285,000,000, except as provided in Section 2.7. Upon the written order
of the Company in the form of an Officers' Certificate, the Trustee shall
authenticate Securities in substitution of Securities originally issued to
reflect any name change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company, any Affiliate of the Company,
or any of their respective Subsidiaries.
Securities shall be issuable only in registered form without coupons
in denominations of $1,000 and any integral multiple thereof. Interest shall be
payable in the manner and at the times specified in the form of Securities
attached hereto.
SECTION 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency in the Borough of
Manhattan, The City of New York, where Securities may be presented for
registration of transfer or for exchange ("Registrar") and an office or agency
where Securities may be presented for payment ("Paying Agent") and where notices
and demands to or upon the Company in respect of the Securities may be served.
The Company may act as Registrar or Paying Agent, except that, for the purposes
of Articles III, VIII, XI and Section 4.14 and as otherwise specified in this
Indenture,
- 27 -
<PAGE>
neither the Company nor any Affiliate of the Company shall act as Paying Agent.
The Registrar shall keep a register of the Securities and of their transfer and
exchange. The Company may have one or more co-Registrars and one or more
additional Paying Agents. The term "Paying Agent" includes any additional Paying
Agent. The Company hereby initially appoints the Trustee as Registrar and Paying
Agent, and the Trustee hereby agrees so to act.
The Company shall enter into an appropriate written agency agreement
with any Agent not a party to this Indenture, which agreement shall implement
the provisions of this Indenture that relate to such Agent. The Company shall
promptly notify the Trustee in writing of the name and address of any such
Agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee
shall act as such.
The Company initially appoints The Depository Trust Company ("DTC") to
act as Depositary with respect to the Global Securities.
The Company initially appoints the Trustee to act as Securities
Custodian with respect to the Global Securities.
SECTION 2.4. Paying Agent to Hold Assets in Trust.
------------------------------------
The Company shall require each Paying Agent other than the Trustee to
agree in writing that each Paying Agent shall hold in trust for the benefit of
the Holders or the Trustee all assets held by the Paying Agent for the payment
of principal of, premium, if any, or interest on, the Securities (whether such
assets have been distributed to it by the Company or any other obligor on the
Securities), and shall promptly notify the Trustee in writing of any Default in
making any such payment. If either of the Company or a Subsidiary of the Company
acts as Paying Agent, it shall segregate such assets and hold them as a separate
trust fund for the benefit of the Holders or the Trustee. The Company at any
time may require a Paying Agent to distribute all assets held by it to the
Trustee and account for any assets disbursed and the Trustee may at any time
during the continuance of any payment Default, upon written request to a Paying
Agent, require such Paying Agent to distribute all assets held by it to the
Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent (if other than the Company) shall have no further
liability for such assets.
SECTION 2.5. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders. If the Trustee is not the Registrar, the Company shall furnish to the
- 28 -
<PAGE>
Trustee on or before the third Business Day preceding each Interest Payment Date
and at such other times as the Trustee may request in writing a list in such
form and as of such date as the Trustee reasonably may require of the names and
addresses of Holders.
SECTION 2.6. [INTENTIONALLY OMITTED].
---------------------
SECTION 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims and submits an affidavit or other evidence, satisfactory to
the Trustee, to the Trustee to the effect that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security if the Trustee's requirements are met. If
required by the Trustee or the Company, such Holder must provide an indemnity
bond or other indemnity, sufficient in the judgment of both the Company and the
Trustee, to protect the Company, the Trustee or any Agent from any loss which
any of them may suffer if a Security is replaced. The Company may charge such
Holder for its reasonable, out-of-pocket expenses in replacing a Security.
Every replacement Security is an additional obligation of the Company.
SECTION 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all the Securities that have
been authenticated by the Trustee (including any Security represented by a
Global Security) except those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Security effected by
the Trustee hereunder and those described in this Section 2.8 as not
outstanding. A Security does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Security, except as provided in Section
2.9.
If a Security is replaced pursuant to Section 2.7 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be outstanding
upon surrender of such Security and replacement thereof pursuant to Section 2.7.
If on a Redemption Date or the Maturity Date the Paying Agent (other
than the Company or an Affiliate of a Company) holds cash sufficient to pay all
of the principal and interest due on the Securities payable on that date and
payment of the Securities called for redemption or payable on such Maturity Date
- 29 -
<PAGE>
is not otherwise prohibited pursuant to this Indenture, then on and after that
date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, Securities owned by the Company or Affiliates of the Company shall be
disregarded, except that, for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, amendment, supplement,
waiver or consent, only Securities that the Trustee knows are so owned shall be
disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company reasonably and in good faith considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until so exchanged, the temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
permanent Securities authenticated and delivered hereunder.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or an Affiliate of the Company), and no one else, shall
cancel and, at the written direction of the Company, shall dispose of all
Securities surrendered for transfer, exchange, payment or cancellation. Subject
to Section 2.7, the Company may not issue new Securities to replace Securities
that have been paid or delivered to the Trustee for cancellation. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section 2.11, except as expressly permitted in the form of
Securities and as permitted by this Indenture.
SECTION 2.12. Defaulted Interest.
------------------
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the person in
whose name that Security (or one or more predecessor Securities) is registered
at the close of business on Record Date for such interest.
- 30 -
<PAGE>
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date plus, to the extent
lawful, any interest payable on the defaulted interest (herein called "Defaulted
Interest") shall forthwith cease to be payable to the registered holder on the
relevant Record Date, and such Defaulted Interest may be paid by the Company, at
its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the persons in whose names the Securities (or their respective predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company shall notify the Trustee in writing of the amount of
Defaulted Interest proposed to be paid on each Security and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of cash equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date of the proposed payment, such
cash when deposited to be held in trust for the benefit of the persons entitled
to such Defaulted Interest as provided in this clause (1). Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment and not less than 10 days after the receipt by the Trustee
of the notice of the proposed payment. The Trustee shall promptly notify the
Company of such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage prepaid,
to each Holder at his address as it appears in the Security register not less
than 10 days prior to such Special Record Date. Notice of the proposed payment
of such Defaulted Interest and the Special Record Date therefor having been
mailed as aforesaid, such Defaulted Interest shall be paid to the persons in
whose names the Securities (or their respective predecessor Securities) are
registered on such Special Record Date and shall no longer be payable pursuant
to the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner shall be deemed
practicable by the Trustee in its sole discretion.
Subject to the foregoing provisions of this Section, each Security delivered
under this Indenture upon transfer of or in exchange for or in lieu of any other
Security
- 31 -
<PAGE>
shall carry the rights to interest accrued and unpaid, and to accrue, which were
carried by such other Security.
SECTION 2.13. Registration, Registration of Transfer and Exchange.
---------------------------------------------------
The Company shall cause the Trustee to keep, so long as it is the
Security Registrar, at the Corporate Trust Office of the Trustee, or such other
office as the Trustee may designate, a register (the register maintained in such
office or in any other office or agency designated pursuant to Section 4.2 being
herein sometimes referred to as the "Security Register") in which, subject to
such reasonable regulations as the Security Registrar may prescribe, the Company
shall provide for the registration of Securities and of transfers of Securities.
The Trustee shall initially be the "Security Registrar" for the purpose of
registering Securities and transfers of Securities as herein provided. The
Company may change the Security Registrar or appoint one or more co-Security
Registrars without notice.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 4.2, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of the same
series of any authorized denomination or denominations, of a like aggregate
principal amount.
Furthermore, any Holder of the Global Security shall, by acceptance of
such Global Security, agree that transfers of beneficial interests in such
Global Security may be effected only through a book-entry system maintained by
the Holder of such Global Security (or its agent), and that ownership of a
beneficial interest in a Security shall be required to be reflected in a book
entry.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination or denominations, of a like aggregate
principal amount, upon surrender of the Securities to be exchanged at such
office or agency. Whenever any Securities are so surrendered for exchange, the
Company shall execute, and the Trustee shall authenticate and deliver,
Securities of the same series which the Holder making the exchange is entitled
to receive; provided that no exchange of Series A Securities for Series B
Securities shall occur until an Exchange Offer Registration Statement shall have
been declared effective by the Commission and that the Series A Securities
exchanged for the Series B Securities shall be canceled.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
- 32 -
<PAGE>
Indebtedness, and entitled to the same benefits under this Indenture, as the
Securities surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer,
or for exchange, repurchase or redemption, shall (if so required by the Company
or the Trustee) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar, duly
executed by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made to a Holder for any registration of
transfer, exchange or redemption of Securities, except for any tax or other
governmental charge that may be imposed in connection therewith, other than all
exchanges pursuant to Section 2.1, 2.2, 2.7, 2.10, 2.13, 3.7, 4.14, 9.5 or 11.1
not involving any transfer.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the mailing of a notice of redemption of the Securities selected
for redemption under Section 3.3 and ending at the close of business on the day
of such mailing or (b) to register the transfer of or exchange any Security so
selected for redemption in whole or in part, except the unredeemed portion of
Securities being redeemed in part.
Every Security shall be subject to the restrictions on transfer
provided in the legend required to be set forth on the face of each Security as
indicated on the form of Security attached hereto as Exhibit A, and the
restrictions set forth in this Section 2.13, and the Holder of each Security, by
such Holder's acceptance thereof (or interest therein), agrees to be bound by
such restrictions on transfer.
Except as provided in the preceding paragraph, any Security
authenticated and delivered upon registration of transfer of, or in exchange
for, or in lieu of, any Global Security, whether pursuant to this Section 2.13,
Section 2.7, 2.10, 3.7 or 9.5 or otherwise, shall also be a Global Security and
bear the legend indicated on the form of Security attached hereto as Exhibit A.
SECTION 2.14. Book Entry Provisions for Global Securities.
-------------------------------------------
(a) Each Global Security initially shall (i) be registered in the name
of the Depositary for such Global Security or the nominee of such Depositary,
(ii) be deposited with, or on behalf of, the Depositary or with the Trustee as
custodian for such Depositary and (iii) bear legends indicated on the form of
Security attached hereto as Exhibit A.
- 33 -
<PAGE>
Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee as its custodian, or under such
Global Security, and the Depositary may be treated by the Company, the Trustee
and any agent of the Company or the Trustee as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Trustee or any agent of the Company or the
Trustee from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
(b) Notwithstanding any other provision in this Indenture, no Global
Security may be exchanged in whole or in part for Securities registered, and no
transfer of a Global Security in whole or in part may be registered, in the name
of any Person other than the Depositary for such Global Security or a nominee
thereof unless (i) such Depositary (A) has notified the Company that it is
unwilling or unable to continue as Depositary for such Global Security or (B)
has ceased to be a clearing agency registered as such under the Exchange Act,
and in either case the Company fails to appoint a successor Depositary, (ii) the
Company, at its option, executes and delivers to the Trustee a Company Order
stating that it elects to cause the issuance of the Securities in certificated
form and that all Global Securities shall be exchanged in whole for Securities
that are not Global Securities (in which case such exchange shall be effected by
the Trustee) or (iii) there shall have occurred and be continuing an Event of
Default or any event which after notice or lapse of time or both would be an
Event of Default with respect to such Global Security.
(c) If any Global Security is to be exchanged for other Securities or
canceled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Trustee, as Security Registrar, for exchange or cancellation
as provided in this Article Two. If any Global Security is to be exchanged for
other Securities or canceled in part, or if another Security is to be exchanged
in whole or in part for a beneficial interest in any Global Security, then
either (i) such Global Security shall be so surrendered for exchange or
cancellation as provided in this Article Two or (ii) the principal amount
thereof shall be reduced or increased by an amount equal to the portion thereof
to be so exchanged or canceled, or equal to the principal amount of such other
Security to be so exchanged for a beneficial interest therein, as the case may
be, by means of an appropriate adjustment made on the records of the Trustee, as
Security Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized representative to
make a corresponding adjustment to its records. Upon any such surrender or
adjustment of a Global Security, the Trustee shall, subject to
- 34 -
<PAGE>
this Section 2.14(c) and as otherwise provided in this Article Two, authenticate
and deliver any Securities issuable in exchange for such Global Security (or any
portion thereof) to or upon the order of, and registered in such names as may be
directed by, the Depositary or its authorized representative. Upon the request
of the Trustee in connection with the occurrence of any of the events specified
in the preceding paragraph, the Company shall promptly make available to the
Trustee a reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order, direction or
request of the Depositary or its authorized representative which is given or
made pursuant to this Article Two if such order, direction or request is given
or made in accordance with the Applicable Procedures.
(d) Every Security authenticated and delivered upon registration of
transfer of, or in exchange for or in lieu of, a Global Security or any portion
thereof, whether pursuant to this Article Two or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Security,
unless such Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a Global
Security, shall be the Holder of such Global Security for all purposes under the
Indenture and the Securities, and owners of beneficial interests in a Global
Security shall hold such interests pursuant to the Applicable Procedures.
Accordingly, any such owner's beneficial interest in a Global Security will be
shown only on, and the transfer of such interest shall be effected only through,
records maintained by the Depositary or its nominee or its Agent Members.
SECTION 2.15. Special Transfer and Exchange Provisions.
----------------------------------------
(a) Certain Transfers and Exchanges. Transfers and exchanges of
-------------------------------
Securities and beneficial interests in a Global Security of the kinds specified
in this Section 2.15 shall be made only in accordance with this Section 2.15.
(i) Rule 144A Global Security to Regulation S Global Security.
---------------------------------------------------------
If the owner of a beneficial interest in the Rule 144A Global Security
wishes at any time to transfer such interest to a Person who wishes to
acquire the same in the form of a beneficial interest in the
Regulation S Global Security, such transfer may be effected only in
accordance with the provisions of this paragraph and paragraph (iv)
below and subject to the Applicable Procedures. Upon receipt by the
Trustee, as Security Registrar, of (a) an order given by the
Depositary or its authorized representative directing that a
beneficial interest in the Regulation S Global Security in a
- 35 -
<PAGE>
specified principal amount be credited to a specified Agent Member's
account and that a beneficial interest in the Rule 144A Global
Security in an equal principal amount be debited from another
specified Agent Member's account and (b) a Regulation S Certificate in
the form of Exhibit B hereto, satisfactory to the Trustee and duly
executed by the owner of such beneficial interest in the Rule 144A
Global Security or his attorney duly authorized in writing, then the
Trustee, as Security Registrar but subject to paragraph (iv) below,
shall reduce the principal amount of the Rule 144A Global Security and
increase the principal amount of the Regulation S Global Security by
such specified principal amount as provided in Section 2.14(c).
(ii) Regulation S Global Security to Rule 144A Global Security.
---------------------------------------------------------
If the owner of a beneficial interest in the Regulation S Global
Security wishes at any time to transfer such interest to a Person who
wishes to acquire the same in the form of a beneficial interest in the
Rule 144A Global Security, such transfer may be effected only in
accordance with this paragraph (ii) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of (a)
an order given by the Depositary or its authorized representative
directing that a beneficial interest in the Rule 144A Global Security
in a specified principal amount be credited to a specified Agent
Member's account and that a beneficial interest in the Regulation S
Global Security in an equal principal amount be debited from another
specified Agent Member's account and (b) if such transfer is to occur
during the Restricted Period, a Restricted Securities Certificate in
the form of Exhibit C hereto, satisfactory to the Trustee and duly
executed by the owner of such beneficial interest in the Regulation S
Global Security or his attorney duly authorized in writing, then the
Trustee, as Security Registrar, shall reduce the principal amount of
the Regulation S Global Security and increase the principal amount of
the Rule 144A Global Security by such specified principal amount as
provided in Section 2.14(c).
(iii) Exchanges between Global Security and Non-Global Security.
---------------------------------------------------------
A beneficial interest in a Global Security may be exchanged for a
Security that is not a Global Security as provided in Section 2.15(b);
provided that, if such interest is a beneficial interest in the Rule
144A Global Security, or if such interest is a beneficial interest in
the Regulation S Global Security and such exchange is to occur during
the Restricted Period, then such interest shall bear the Private
Placement Legend (subject in each case to Section 2.15(b).
- 36 -
<PAGE>
(iv) Regulation S Global Security to be Held Through Euroclear
---------------------------------------------------------
or Cedel during Restricted Period. The Company shall use its best
---------------------------------
efforts to cause the Depositary to ensure that, until the expiration
of the Restricted Period, beneficial interests in the Regulation S
Global Security may be held only in or through accounts maintained at
the Depositary by Euroclear or Cedel (or by Agent Members acting for
the account thereof), and no person shall be entitled to effect any
transfer or exchange that would result in any such interest being held
otherwise than in or through such an account; provided that this
paragraph (iv) shall not prohibit any transfer or exchange of such an
interest in accordance with paragraph (ii) above.
(b) Private Placement Legends. Rule 144A Securities and their
-------------------------
Successor Securities and Regulation S Securities and their Successor
Securities shall bear a Private Placement Legend, subject to the
following:
(i) subject to the following clauses of this Section 2.15(b),
a Security or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Security or any portion thereof shall bear the
Private Placement Legend borne by such Global Security while
represented thereby;
(ii) subject to the following clauses of this Section 2.15(b),
a new Security which is not a Global Security and is issued in
exchange for another Security (including a Global Security) or any
portion thereof, upon transfer or otherwise, shall bear the Private
Placement Legend borne by such other Security;
(iii) Exchange Securities, and all other Securities sold or
otherwise disposed of pursuant to an effective registration statement
under the Securities Act, together with their respective Successor
Securities, shall not bear a Private Placement Legend;
(iv) at any time after the Securities may be freely transferred
without registration under the Securities Act or without being subject
to transfer restrictions pursuant to the Securities Act, a new
Security which does not bear a Private Placement Legend may be issued
in exchange for or in lieu of a Security (other than a Global
Security) or any portion thereof which bears such a legend if the
Trustee has received an Unrestricted Securities Certificate
substantially in the form of Exhibit D hereto, satisfactory to the
Trustee and duly executed by the Holder of such legended Security
- 37 -
<PAGE>
or his attorney duly authorized in writing, and after such date and
receipt of such certificate, the Trustee shall authenticate and
deliver such a new Security in exchange for or in lieu of such other
Security as provided in this Article II;
(v) a new Security which does not bear a Private Placement
Legend may be issued in exchange for or in lieu of a Security (other
than a Global Security) or any portion thereof which bears such a
legend if, in the Company's judgment, placing such a legend upon such
new Security is not necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at
the direction of the Company, shall authenticate and deliver such a
new Security as provided in this Article II; and
(vi) notwithstanding the foregoing provisions of this Section
2.15(b), a Successor Security of a Security that does not bear a
particular form of Private Placement Legend shall not bear such form
of legend unless the Company has reasonable cause to believe that such
Successor Security is a "restricted security" within the meaning of
Rule 144, in which case the Trustee, at the direction of the Company,
shall authenticate and deliver a new Security bearing a Private
Placement Legend in exchange for such Successor Security as provided
in this Article II.
By its acceptance of any Security bearing the Private Placement
Legend, each Holder of such a Security acknowledges the restrictions on transfer
of such Security set forth in this Indenture and in the Private Placement Legend
and agrees that it will transfer such Security only as provided in this
Indenture.
The Security Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.14 or this Section
2.15. The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time upon the
giving of reasonable written notice to the Security Registrar.
In the event that Regulation S is amended during the term of this
Indenture to alter the applicable holding period, all reference in this
Indenture to a holding period for Non-U.S. Persons will be deemed to include
such amendment.
SECTION 2.16. CUSIP Numbers.
-------------
Neither the Company nor the Trustee shall have any responsibility for
any defect in the CUSIP number that appears on any Security, check, advice of
payment or redemption notice, and any such document may contain a statement to
- 38 -
<PAGE>
the effect that CUSIP numbers have been assigned by an independent service for
convenience of reference and that neither the Company nor the Trustee shall be
liable for any inaccuracy in such numbers.
ARTICLE III
REDEMPTION
SECTION 3.1. Rights of Redemption.
--------------------
(a) In addition to the provisions of Sections 4.14 and 11.1 hereof,
the Securities are subject to redemption at any time on or after May 15, 2003,
at the option of the Company, in whole or in part, subject to the conditions,
and at the Redemption Prices, specified in the form of Security attached hereto
as Exhibit A, together with accrued and unpaid interest, if any, to the
Redemption Date (subject to the rights of holders of record on relevant record
dates to receive interest due on an interest payment date).
(b) In addition, at any time prior to May 15, 2001, the Company, at
its option, may use the net cash proceeds of one or more Public Equity Offerings
or Strategic Equity Offerings in a single transaction or a series of related
transactions to redeem up to an aggregate of 35% of the aggregate principal
amount of Securities originally issued under this Indenture at a redemption
price equal to 110.5% of the aggregate principal amount thereof, plus accrued
and unpaid interest thereon, if any, to the redemption date; provided that at
least 65% of the initial aggregate principal amount of Securities remains
outstanding immediately after the occurrence of such redemption. In order to
effect the foregoing redemption, the Company must mail a notice of redemption no
later than 30 days after the closing of the related Public Equity Offering or
Strategic Equity Offering and must consummate such redemption within 60 days of
the closing of the Public Equity Offering or Strategic Equity Offering.
SECTION 3.2. Notices to Trustee.
------------------
If the Company elects to redeem Securities pursuant to Paragraph 5 of
the Securities, or is required to redeem Securities pursuant to Section 3.8 of
this Indenture or Paragraph 13 of the Securities, it shall notify the Trustee in
writing of the Redemption Date and the principal amount of Securities to be
redeemed and whether it wants the Trustee to give notice of redemption to the
Holders.
If the Company elects to reduce the principal amount of Securities to
be redeemed pursuant to Paragraph 5 of the Securities by crediting against any
such redemption Securities it has not previously delivered to the Trustee for
cancellation, it shall so notify the Trustee of the amount of the reduction and
deliver such Securities with such notice, provided that no Initial Securities
- 39 -
<PAGE>
received by the Company in exchange for Exchange Securities may be made the
basis for such credit.
The Company shall give each notice to the Trustee provided for in this
Section 3.2 at least 45 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee). Any such notice may be canceled at any
time prior to notice of such redemption being mailed to any Holder and shall
thereby be void and of no effect.
SECTION 3.3. Selection of Securities to Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed pursuant to
Paragraph 5 thereof, and in the case of a redemption pursuant to Section 3.8 of
this Indenture or Paragraph 13 of the Securities, the Trustee shall select the
Securities or portions thereof for redemption on a pro rata basis, by lot or in
such other manner as the Trustee shall determine to be fair and appropriate and
in such manner as complies with any applicable Depositary, legal and stock
exchange requirements. The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Securities selected for redemption and, in the
case of any Security selected for partial redemption, the principal amount
thereof to be redeemed. Securities in denominations of $1,000 may be redeemed
only in whole. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Securities that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Securities called for redemption also apply to portions of Securities called for
redemption.
SECTION 3.4. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption Date
(other than in connection with a Special Mandatory Redemption, which requires at
least seven days notice), the Company shall mail a notice of redemption by
first-class mail, postage prepaid, to the Trustee and each Holder whose
Securities are to be redeemed to such Holder's last address as then shown upon
the books of the Registrar. At the Company's request, the Trustee shall give
the notice of redemption in the Company's name and at the Company's expense.
Each notice for redemption shall identify the Securities to be redeemed and
shall state:
(1) the Redemption Date;
(2) the Redemption Price, including the amount of accrued and unpaid
interest, if any, to be paid upon such redemption;
(3) the name, address and telephone number of the Paying Agent;
- 40 -
<PAGE>
(4) that Securities called for redemption must be surrendered to the
Paying Agent at the address specified in such notice to collect
the Redemption Price;
(5) that, unless (a) the Company defaults in its obligation to
deposit cash with the Paying Agent in accordance with Section 3.6
hereof or (b) such redemption payment is prohibited pursuant to
this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the
Redemption Date and the only remaining right of the Holders of
such Securities is to receive payment of the Redemption Price,
including any accrued and unpaid interest to the Redemption Date,
upon surrender to the Paying Agent of the Securities called for
redemption and to be redeemed;
(6) if any Security is being redeemed in part, the portion of the
principal amount, equal to $1,000 or any integral multiple
thereof, of such Security to be redeemed and that, after the
Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification of the particular Securities (or portion thereof)
to be redeemed, as well as the aggregate principal amount of such
Securities to be redeemed and the aggregate principal amount of
Securities to be outstanding after such partial redemption;
(8) the CUSIP number of the Securities to be redeemed; and
(9) that the notice is being sent pursuant to this Section 3.4 and
pursuant to the optional redemption provisions of Paragraph 5 of
the Securities or pursuant to the mandatory redemption provisions
of Section 3.8 of this Indenture and Paragraph 13 of the
Securities.
SECTION 3.5. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed in accordance with Section 3.4,
Securities called for redemption become due and payable on the Redemption Date
and at the Redemption Price, including any accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or Paying Agent, such Securities
called for redemption shall be paid at the Redemption Price, including interest,
if
- 41 -
<PAGE>
any, accrued and unpaid to the Redemption Date; provided that if the Redemption
Date is after a regular Record Date and on or prior to the Interest Payment
Date, the accrued interest shall be payable to the Holder of the redeemed
Securities registered on the relevant Record Date; and provided, further, that
if a Redemption Date is a Legal Holiday, payment shall be made on the next
succeeding Business Day and no interest shall accrue for the period from such
Redemption Date to such succeeding Business Day.
SECTION 3.6. Deposit of Redemption Price.
---------------------------
On or prior to the Redemption Date, the Company shall deposit with the
Paying Agent (other than the Company or an Affiliate of the Company) cash
sufficient to pay the Redemption Price of, including any accrued and unpaid
interest on, all Securities to be redeemed on such Redemption Date (other than
Securities or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation). The Paying Agent
shall promptly return to the Company any cash so deposited which is not required
for that purpose.
If the Company complies with the preceding paragraph and the other
provisions of this Article III and payment of the Securities called for
redemption is not prohibited under this Indenture, interest on the Securities to
be redeemed will cease to accrue on the applicable Redemption Date, whether or
not such Securities are presented for payment. Notwithstanding anything herein
to the contrary, if any Security surrendered for redemption in the manner
provided in the Securities shall not be so paid upon surrender for redemption
because of the failure of the Company to comply with the preceding paragraph,
interest shall continue to accrue and be paid from the Redemption Date until
such payment is made on the unpaid principal, and, to the extent lawful, on any
interest not paid on such unpaid principal, in each case at the rate and in the
manner provided in Section 4.1 hereof and the Securities.
SECTION 3.7. Securities Redeemed in Part.
---------------------------
Upon surrender of a Security that is to be redeemed in part, the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge to the Holder, a new Security or Securities equal
in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.8. Special Mandatory Redemption.
----------------------------
(a) In addition to any payments required by Section 11.1 hereof, if
consummation of the Merger has not occurred on or prior to the earlier to occur
of (i) termination of the Merger Agreement or (ii) 150 days after the Issue Date
if
- 42 -
<PAGE>
the Escrow Funds have not been released by that time (provided that the 150-day
period may be extended at the option of the Company up to an additional 120 days
if (A) the Company shall have deposited an additional amount (to be reasonably
determined by the Initial Purchasers on the same basis as the determination of
the Additional Escrow Amount) in the Escrow and Pledge Account for the benefit
of the holders of the Securities, (B) the basis under which the Merger Agreement
is not satisfied on such 150th day relates to pending Federal Communications
Commission or other governmental or regulatory approvals, (C) the lenders under
the Credit Facility shall, in their discretion, have extended their commitment
to lend no earlier than the date to which such escrow has been extended, (D) the
Company shall have issued a press release in a reasonably commercial manner and
notified the Trustee with respect to such extension of the escrow period and (E)
the Company shall have provided the Trustee with an Officers' Certificate as to
satisfaction of the above conditions) the Company shall redeem all of the
outstanding Securities upon at least seven (7) days' prior written notice to the
Holders with the Escrow Funds delivered to the Paying Agent pursuant to the
terms of the Pledge and Escrow Agreement, at a redemption price equal to the
Special Redemption Price, plus accrued and unpaid interest, if any, to the date
of redemption (the "Special Mandatory Redemption").
(b) Once a date for any such redemption has been publicly announced,
it shall not be changed. The Trustee shall promptly notify the Holders of the
date fixed for any redemption pursuant to this Section 3.8.
(c) "Special Redemption Price" means, with respect to any Securities
as of any date of redemption with respect thereto, an amount equal to 101% of
the principal amount thereof.
(d) Other than as specifically provided in this Section 3.8, any
redemption pursuant to this Section 3.8 shall be made pursuant to the provisions
of Section 3.1 through 3.7 hereof.
ARTICLE IV
COVENANTS
SECTION 4.1. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid by the
Company on the date it is due if the Trustee or Paying Agent (other than the
Company or an Affiliate of the Company) holds for the benefit of the Holders, on
or before 10:00 a.m. New York City time on that date, cash deposited and
designated for and sufficient to pay the installment. The Company shall pay
interest on overdue
- 43 -
<PAGE>
principal and on overdue installments of interest at the rate specified in the
Securities compounded semi-annually, to the extent lawful.
SECTION 4.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain in the Borough of Manhattan, The City of
New York, an office or agency where Securities may be presented or surrendered
for payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company shall give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be made
or served at the address of the Trustee set forth in Section 13.2. The Company
may also from time to time designate one or more other offices or agencies where
the Securities may be presented or surrendered for any or all such purposes and
may from time to time rescind such designations; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in the Borough of Manhattan, The City
of New York, for such purposes. The Company shall give prompt written notice to
the Trustee of any such designation or rescission and of any change in the
location of any such other office or agency. The Company hereby initially
designates the Corporate Trust Office of the Trustee at 55 Water Street, Room
234, North Building, New York, New York 10041 as such office.
SECTION 4.3. Limitation on Restricted Payments.
---------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make any Restricted Payment, if,
immediately prior or after giving effect thereto (a) a Default or an Event of
Default would exist, (b) the Company would not be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash Flow
Ratio provision set forth in the second paragraph of Section 4.11, or (c) the
aggregate amount of all Restricted Payments made by the Company and its
Restricted Subsidiaries, including such proposed Restricted Payment (if not made
in cash, then the fair market value of any property used therefor) from and
after the Issue Date and on or prior to the date of such Restricted Payment,
shall exceed the sum of (i) the amount determined by subtracting (x) 2.0 times
the aggregate Consolidated Interest Expense of the Company for the period (taken
as one accounting period) from the Issue Date to the last day of the last full
fiscal quarter prior to the date of the proposed Restricted Payment (the
"Computation Period") from (y) Operating Cash Flow of the Company for the
Computation Period, plus
- 44 -
<PAGE>
(ii) the aggregate Net Proceeds received by the Company from the sale (other
than to a Subsidiary of the Company) of its Qualified Capital Stock after the
Issue Date and on or prior to the date of such Restricted Payment (other than
any such Net Proceeds received by the Company in connection with the financing
of the Merger) plus (iii) to the extent not otherwise included in clauses (i) or
(ii), above, an amount equal to the net reduction in Investments in Unrestricted
Subsidiaries resulting from payments of dividends, repayment of loans or
advances, or other transfers of assets, in each case to the Company or any
Wholly Owned Restricted Subsidiary of the Company from Unrestricted
Subsidiaries, or from redesignations of Unrestricted Subsidiaries as Restricted
Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed, in the case of any Unrestricted Subsidiary, the
amount of Investments previously made by the Company and any Restricted
Subsidiary in such Unrestricted Subsidiary.
Notwithstanding the foregoing, the provisions set forth in clause (b)
or (c) of the immediately preceding paragraph will not prohibit (and the
provision set forth in clause (a) of the immediately preceding paragraph will
not prohibit the payment described in clause (ii)) (i) the use of an aggregate
of $2.5 million to be used for Restricted Payments not otherwise permitted by
this Section 4.3 (provided that only $1.0 million of such amount may be used for
Restricted Payments prior to one year after the Issue Date and such $1.0 million
amount prior to one year after the Issue Date may not be used to make (a)
dividends or other distributions on shares of Capital Stock of the Company or
any of its Subsidiaries or (b) pay management or other similar fees to equity
investors (or their Affiliates) in the Company), (ii) the payment of any
dividend within 60 days after the date of its declaration if such dividend could
have been made on the date of its declaration in compliance with the foregoing
provisions and (iii) the redemption, defeasance, repurchase or other acquisition
or retirement of any Indebtedness or Capital Stock of the Company or its
Restricted Subsidiaries either in exchange for or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
Qualified Capital Stock (in the case of any redemption, defeasance, repurchase
or other acquisition or retirement of any Junior Indebtedness or Capital Stock
of the Company or its Restricted Subsidiaries) or Junior Indebtedness (in the
case of any redemption, defeasance, repurchase or other acquisition or
retirement of any Indebtedness of the Company or its Restricted Subsidiaries) of
the Company, (iv) the payment of management or other similar fees to equity
investors (or their Affiliates) in the Company in an amount not to exceed $1.0
million in the aggregate in any fiscal year, (v) the purchase, redemption or
other acquisition or retirement for value of Capital Stock of the Company from
employees, former employees, directors, former directors, consultants and former
consultants of the Company or any of its Subsidiaries pursuant to the terms of
the agreements pursuant to which such Capital Stock was acquired in an amount
not to exceed $2.5 million in the aggregate in any calendar year, (vi)
repurchases of Capital
- 45 -
<PAGE>
Stock of the Company deemed to occur upon exercise of stock options if such
Capital Stock represents a portion of the exercise price of such options and
(vii) acquisitions or repurchases or other payments in respect of PriCellular
Class A Shares, PriCellular Class B Shares, PriCellular Series A Preferred Stock
or the Convertible Notes, in each case of PriCellular or options or warrants to
purchase any of the foregoing pursuant to the Merger Agreement.
In determining the aggregate amount expended for Restricted Payments
in accordance with clause (c) of the first paragraph of this Section 4.3, 100%
of the amounts expended under clauses (i) through (v) of the immediately
preceding paragraph shall be deducted.
SECTION 4.4. Corporate Existence.
-------------------
Subject to Article V, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and the corporate or other existence of each of its Restricted
Subsidiaries in accordance with the respective organizational documents of each
of them and the rights (charter and statutory) and corporate franchises of the
Company and each of the Company's Restricted Subsidiaries; provided, however,
that the Company shall not be required to preserve, with respect to itself, any
right or franchise, and with respect to any Restricted Subsidiaries of the
Company, any such existence, right or franchise, if (a) the Board of Directors
of the Company shall determine that the preservation thereof is no longer
desirable in the conduct of the business of such entity and (b) the loss thereof
is not disadvantageous in any material respect to the Holders.
SECTION 4.5. Payment of Taxes and Other Claims.
---------------------------------
Except with respect to immaterial items, the Company shall, and shall
cause each of its Restricted Subsidiaries to, pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges (including withholding taxes and any
penalties, interest and additions to taxes) levied or imposed upon the Company
or any of its Restricted Subsidiaries or any of their respective properties and
assets and (ii) all lawful claims, whether for labor, materials, supplies,
services or anything else, which have become due and payable and which by law
have or may become a Lien upon the property and assets of the Company or any of
its Restricted Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves have been established in accordance with GAAP.
- 46 -
<PAGE>
SECTION 4.6. Maintenance of Properties and Insurance.
---------------------------------------
The Company shall cause all material properties used or useful to the
conduct of its business and the business of each of its Restricted Subsidiaries
to be maintained and kept in good condition, repair and working order
(reasonable wear and tear excepted) and shall cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
its reasonable judgment may be necessary, so that the business carried on in
connection therewith may be properly conducted at all times; provided, however,
that nothing in this Section 4.6 shall prevent the Company from discontinuing
any operation or maintenance of any of such properties, or disposing of any of
them, if such discontinuance or disposal is (a), in the judgment of the Board of
Directors of the Company, desirable in the conduct of the business of such
entity and (b) not disadvantageous in any material respect to the Holders.
The Company shall provide, or cause to be provided, for itself and
each of its Restricted Subsidiaries, insurance (including appropriate self-
insurance) against loss or damage of the kinds that, in the reasonable, good
faith opinion of the Company is adequate and appropriate for the conduct of the
business of the Company and such Restricted Subsidiaries in a prudent manner,
with (except for self-insurance) reputable insurers or with the government of
the United States of America or an agency or instrumentality thereof, in such
amounts, with such deductibles, and by such methods as shall be customary, in
the reasonable, good faith opinion of the Company and adequate and appropriate
for the conduct of the business of the Company and such Restricted Subsidiaries
in a prudent manner for entities similarly situated in the industry, unless
failure to provide such insurance (together with all other such failures) would
not have a material adverse effect on the financial condition or results of
operations of the Company or such Restricted Subsidiaries.
SECTION 4.7. Compliance Certificate; Notice of Default.
-----------------------------------------
(a) The Company shall deliver to the Trustee within 120 days after the
end of its fiscal year an Officers' Certificate complying with Section 314(a)(4)
of the TIA and stating that a review of its activities and the activities of its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled their obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether or not the signer knows of any failure by the Company or any Subsidiary
of the Company to comply with any conditions or covenants in this Indenture and,
if such signer does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate shall also
notify the
- 47 -
<PAGE>
Trustee should the relevant fiscal year end on any date other than the current
fiscal year end date.
(b) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly upon becoming aware of any
Default, Event of Default or fact which would prohibit the making of any payment
to or by the Trustee in respect of the Securities, an Officers' Certificate
specifying such Default, Event of Default or fact and what action the Company is
taking or proposes to take with respect thereto. The Trustee shall not be deemed
to have knowledge of any Default, any Event of Default or any such fact unless
one of its Trust Officers receives notice thereof from the Company or any of the
Holders.
SECTION 4.8. Provision of Financial Statements.
---------------------------------
After the earlier to occur of the consummation of the Exchange Offer
and the 120th calendar day following the Merger Date, whether or not the Company
is subject to Section 13(a) or 15(d) of the Exchange Act, the Company will, to
the extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to Section 13(a) or 15(d) if the
Company were so subject, such documents to be filed with the Commission on or
prior to the date (the "Required Filing Date") by which the Company would have
been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all holders, as their names and addresses appear in the
security register, without cost to such holders and (ii) file with the Trustee
copies of the annual reports, quarterly reports and other documents which the
Company would have been required to file with the Commission pursuant to Section
13(a) or 15(d) of the Exchange Act if the Company were subject to either of such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective holder at the Company's cost. So long as any of
the Initial Securities remain outstanding, the Company will make available to
any prospective purchaser of Initial Securities or beneficial owner of
Securities in connection with any sale thereof the information required by Rule
144(d)(4) under the Securities Act, until such time as the Company has either
exchanged the Initial Securities for Exchange Securities or until such time as
the holders thereof have disposed of such Initial Securities pursuant to an
effective registration statement under the Securities Act.
- 48 -
<PAGE>
SECTION 4.9. [INTENTIONALLY OMITTED].
-----------------------
SECTION 4.10. Limitation on Transactions with Related Persons.
-----------------------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries or Unrestricted Subsidiaries to, enter into any contract,
agreement, arrangement or transaction with any Related Person (each a "Related
Person Transaction"), or any series of Related Person Transactions, except for
transactions (a) entered into pursuant to clause (iv) of Section 4.3 and (b)
made in good faith, the terms of which are (i) fair and reasonable to the
Company or such Subsidiary, as the case may be, and (ii) are at least as
favorable as the terms which could be obtained by the Company or such
Subsidiary, as the case may be, in a comparable transaction made on an arm's
length basis with Persons who are not Related Persons.
Without limiting the foregoing, (a) with respect to any Related Person
Transaction or series of Related Person Transactions with an aggregate value in
excess of $1,000,000, the Company delivers an officers' certificate to the
Trustee certifying that such Related Person Transaction or series of Related
Person Transactions satisfies clauses (i) and (ii) in the preceding paragraph,
and (b) any Related Person Transaction or series of Related Person Transactions
with an aggregate value in excess of $5,000,000 must either first be approved by
a majority of the Board of Directors of the Company who are disinterested in the
subject matter of the transaction pursuant to a Board Resolution or the Company
must first obtain a favorable written opinion from an independent financial
advisor of national reputation as to the fairness from a financial point of view
of such transaction to the Company or such Subsidiary, as the case may be.
Notwithstanding the foregoing, the following shall not constitute
Related Person Transactions: (i) reasonable and customary payments on behalf of
directors, officers or employees of the Company or any of its Restricted
Subsidiaries, or in reimbursement of reasonable and customary payments or
reasonable and customary expenditures made or incurred by such Persons as
directors, officers or employees, (ii) any contract, agreement, arrangement, or
transaction solely between or among the Company and any of its Wholly Owned
Restricted Subsidiaries or between or among Wholly Owned Restricted
Subsidiaries of the Company, (iii) any Restricted Payment of the type described
by clauses (i) and (ii) of the definition thereof made to all stockholders on a
pro rata basis and not prohibited by Section 4.3, (iv) any loan or advance by
the Company or a Restricted Subsidiary to employees of the Company or a
Restricted Subsidiary (i) prior to one year from the Issue Date, in an aggregate
amount at any one time outstanding not to exceed $2,000,000, and (ii) thereafter
in the ordinary course of business in an aggregate amount at any one time
outstanding not to exceed
- 49 -
<PAGE>
$300,000, (v) any payment pursuant to a tax-sharing agreement between the
Company and any other Person with which the Company is required or permitted to
file a consolidated tax return or with which the Company is or could be part of
a consolidated group for tax purposes, which payments are not in excess of the
tax liabilities attributable solely to the Company and its Restricted
Subsidiaries (as a consolidated group) and (vi) any transaction pursuant to an
agreement in existence on the date of the Indenture or on the Merger Date or any
amendment thereto (so long as any such amendment is not disadvantageous to the
Holders in any material respect).
SECTION 4.11. Limitation on Incurrence of Additional Indebtedness.
---------------------------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, issue, create, incur, assume, guarantee
or otherwise directly or indirectly become liable for (including as a result of
an acquisition), or otherwise become responsible for, contingently or otherwise
(individually or collectively, to "Incur" or, as appropriate, an "Incurrence"),
any Indebtedness. Neither the accrual of interest (including the issuance of
"pay in kind" securities or similar instruments in respect of such accrued
interest) pursuant to the terms of Indebtedness Incurred in compliance with this
covenant, nor the accretion of original issue discount, nor the mere extension
of the maturity of any Indebtedness shall be deemed to be an Incurrence of
Indebtedness.
Notwithstanding the foregoing, if there exists no Default or Event of
Default immediately prior and subsequent thereto, the Company may Incur
Indebtedness and any Restricted Subsidiary may Incur Acquired Indebtedness if
the Company's Annualized Operating Cash Flow Ratio, after giving effect to the
Incurrence of such Indebtedness, would have been less than 8.5 to 1.0 at any
time prior to December 31, 2000 and 8.0 to 1.0 thereafter, and the application
of the proceeds therefrom.
In addition, the foregoing limitations will not apply to the
Incurrence of the following; provided that, except in the case of clauses (i),
(vii), (viii) and (xi) below, there exists no Default or Event of Default
immediately prior and subsequent thereto:
(i) Indebtedness of the Company or any of its Restricted
Subsidiaries under a Credit Facility in an aggregate principal amount
at any one time outstanding not to exceed $1.0 billion, reduced by (a)
permanent reductions in commitments in satisfaction of the Net Cash
Proceeds application requirement set forth in Section 4.14, (b)
permanent reductions in amounts outstanding pursuant to scheduled
- 50 -
<PAGE>
amortizations and mandatory prepayments in accordance with the terms
thereof (to the extent actually made), (c) the principal amount of the
Old Notes that at the relevant date of determination is outstanding
after consummation of the Merger and the transactions consummated
substantially contemporaneously therewith (other than Old Notes which
have been properly defeased) and (d) any Indebtedness outstanding
pursuant to clause (xiv);
(ii) Indebtedness of a Restricted Subsidiary under one or more
bank credit facilities provided such Indebtedness could be incurred by
the Issuer under the Annualized Operating Cash Flow Ratio provision
set forth in the second paragraph of this covenant;
(iii) Indebtedness of the Company evidenced by the Securities;
(iv) Indebtedness represented by the Old Notes or the
Convertible Notes that remain outstanding after consummation of the
Merger and the transactions consummated substantially
contemporaneously therewith;
(v) Indebtedness between the Company and any Restricted
Subsidiary of the Company or between Restricted Subsidiaries of the
Company, provided that, in the case of Indebtedness of the Company,
such obligations shall be unsecured and subordinated in all respects
to the Holders' rights pursuant to the Securities and the Company's
guarantee under the Credit Facility;
(vi) Capitalized Lease Obligations and Purchase Money
Indebtedness in an aggregate amount or aggregate principal amount, as
the case may be, outstanding at any time not to exceed in the
aggregate $20,000,000, provided that in the case of Purchase Money
Indebtedness, such Indebtedness shall not constitute more than 100% of
the cost (determined in accordance with GAAP) to the Company or such
Restricted Subsidiary of the property purchased or leased with the
proceeds thereof;
(vii) Indebtedness of the Company or any Restricted Subsidiary
arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from guarantees or letters
of credit, surety bonds or performance bonds securing any obligations
of the Company or its Restricted Subsidiaries pursuant to such
agreements, in any case Incurred in connection with the disposition of
any business, assets or Restricted
- 51 -
<PAGE>
Subsidiary of the Company to the extent none of the foregoing results
in the obligation to repay an obligation for money borrowed by any
Person and are limited in aggregate amount to no greater than 10% of
the fair market value of such business, assets or Restricted
Subsidiary so disposed of;
(viii) any guarantee by any Restricted Subsidiary made in
accordance with the provisions of Section 4.20;
(ix) Indebtedness Incurred by the Company or any of its
Restricted Subsidiaries in connection with the acquisition of a new
Restricted Subsidiary, the majority of whose revenues for the most
recent twelve months for which audited or unaudited financial
statements are available are from a Related Business, or of property,
business or assets which, or Capital Stock of a Person all or
substantially all of whose assets, are a type generally used in a
Related Business; provided that such Indebtedness was Incurred by the
prior owner of such Restricted Subsidiary, property, business, assets
or Capital Stock prior to such contemplation of, such acquisition by
the Company or one of its Restricted Subsidiaries and was not Incurred
in connection with, or in contemplation of, such acquisition by the
Company or one of its Restricted Subsidiaries; and provided, further,
that the principal amount (or accreted value, as applicable) of such
Indebtedness, together with any other outstanding Indebtedness
Incurred pursuant to this clause (ix), does not exceed $25.0 million
at any one time outstanding;
(x) Indebtedness of the Company or any Restricted Subsidiary
under standby letters of credit or reimbursement obligations with
respect thereto issued in the ordinary course of business and
consistent with industry practices limited in aggregate amount to $5.0
million at any one time outstanding;
(xi) Interest Rate Protection Obligations relating to (A)
Indebtedness of the Company or any Restricted Subsidiary (which
Indebtedness is otherwise permitted to be Incurred under this
covenant) or (B) Indebtedness for which a lender has provided a
commitment in an amount reasonably anticipated to be Incurred by the
Company or any Restricted Subsidiary in the 12 months after such
Interest Rate Protection Obligations has been Incurred; provided,
however, that the notional principal amount of such Interest Rate
Protection Obligation does not exceed the principal amount of the
Indebtedness (including Indebtedness subject to
- 52 -
<PAGE>
commitments) to which such Interest Rate Protection Obligations
relate;
(xii) Indebtedness of the Company (other than Indebtedness
permitted by clauses (i) through (xi) or (xiv) hereof) not to exceed
$75.0 million at any one time outstanding;
(xiii) Refinancing Indebtedness Incurred to extend, renew,
replace or refund Indebtedness permitted under clauses (iii) or (iv)
of this paragraph (plus any reasonably determined prepayment premium
necessary to accomplish such refinancing and such reasonable fees and
expenses incurred in connection therewith); and
(xiv) Refinancing Indebtedness Incurred by the Company to
extend, renew, replace or refund Indebtedness permitted under clause
(i) of this paragraph (plus any reasonably determined prepayment
premium necessary to accomplish such refinancing and such reasonable
fees and expenses incurred in connection therewith).
SECTION 4.12. Limitations on Restricting Subsidiary Dividends.
-----------------------------------------------
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, assume or suffer to exist any
consensual encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company to pay dividends or make other distributions on the
Capital Stock of any Restricted Subsidiary of the Company or pay or satisfy any
obligation to the Company or any of its Restricted Subsidiaries or otherwise
transfer assets or make or pay loans or advances to the Company or any of its
Restricted Subsidiaries, except encumbrances and restrictions existing under (i)
this Indenture and the Securities, (ii) the Credit Facility as in effect on the
Merger Date or thereafter (provided that any such encumbrance or restriction
does not restrict dividends by any Restricted Subsidiary to the Company or any
other Restricted Subsidiary in an amount equal to the interest payments on the
Securities then due, except if a payment default or any default under any
financial maintenance covenant under the Credit Facility shall have occurred and
be continuing or would arise therefrom; and provided, further, that any such
encumbrances or restrictions incurred under a Credit Facility after the Merger
Date shall not result in such encumbrances or restrictions being less favorable
in the aggregate in any material respect to the holders of the Securities than
the encumbrances or restrictions incurred under the Credit Facility on the
Merger Date, as determined in good faith by the Board of Directors of that
Company), (iii) any applicable law or any governmental or administrative
regulation or order, (iv) Refinancing Indebtedness permitted under this
Indenture, provided that the restrictions contained in the
- 53 -
<PAGE>
instruments governing such Refinancing Indebtedness are no more restrictive in
the aggregate than those contained in the instruments governing the Indebtedness
being refinanced immediately prior to such refinancing, (v) restrictions with
respect solely to a Restricted Subsidiary of the Company imposed pursuant to a
binding agreement which has been entered into for the sale or disposition of all
or substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided such restrictions apply solely to the Capital Stock or
assets being sold of such Restricted Subsidiary, (vi) restrictions contained in
any agreement relating to a Person or real or tangible personal property
acquired after the Issue Date which are not applicable to any Person or
property, other than the Person or property so acquired and which were not put
in place in connection with, or in contemplation of, such acquisition, (vii) any
agreement (other than those referred to in clause (vi)) of a Person acquired by
the Company or a Restricted Subsidiary of the Company, which restrictions
existed at the time of acquisition or (viii) encumbrances or restrictions
contained in the documentation governing a Permitted Joint Venture permitted
pursuant to clause (ix) of the definition of "Permitted Investment."
Notwithstanding the foregoing, neither (a) customary provisions restricting
subletting or assignment of any lease entered into the ordinary course of
business, consistent with past practices nor (b) Liens on assets securing Senior
Indebtedness, shall in and of themselves be considered a restriction on the
ability of the applicable Restricted Subsidiary to transfer such agreement or
assets, as the case may be.
SECTION 4.13. Limitations on Liens.
--------------------
The Company will not and will not permit any Restricted Subsidiary,
directly or indirectly, to Incur or suffer to exist any Lien (other than
Permitted Liens) upon any of its property or assets, whether now owned or
hereafter acquired.
SECTION 4.14. Limitation on Asset Sales and Sales of Subsidiary
-------------------------------------------------
Stock.
The Company will not, and will not permit any of its Restricted
Subsidiaries to, in one or a series of related transactions, convey, sell,
transfer, assign or otherwise dispose of, directly or indirectly, any of its
property, businesses or assets, including by merger or consolidation, and
including any sale or other transfer or issuance of any Capital Stock of any
Restricted Subsidiary of the Company, whether by the Company or a Restricted
Subsidiary (an "Asset Sale"), unless (1)(a) within one year after the date of
such Asset Sale, an amount equal to the Net Cash Proceeds therefrom (the "Asset
Sale Amount") are applied (i) to the optional redemption of the Securities in
accordance with the terms of Article III of this Indenture and other
Indebtedness of the Company ranking on a
- 54 -
<PAGE>
parity with the Securities from time to time outstanding with similar provisions
requiring the Company to make an offer to purchase or to redeem such
Indebtedness with the proceeds from asset sales, pro rata in proportion to the
respective principal amounts (or accreted values in the case of Indebtedness
issued with an original issue discount) of the Securities and such other
Indebtedness then outstanding or (ii) to the repurchase of the Securities and
such other Indebtedness pursuant to an irrevocable, unconditional offer (the
"Asset Sale Offer") to repurchase such Indebtedness at a purchase price (the
"Asset Sale Offer Price") of 100% of the principal amount thereof in the case of
the Securities or 100% of the principal amount (or accreted value in the case of
Indebtedness issued with an original issue discount) of such Indebtedness, plus,
in each case, accrued interest to the date of payment, made within one year of
such Asset Sale or (b) within one year of such Asset Sale, the Asset Sale Amount
is (i) invested (or committed, pursuant to a binding commitment subject only to
reasonable, customary closing conditions, to be invested, and in fact is so
invested, within an additional 90 days) in tangible assets and property (other
than notes, obligations or securities), which in the good faith reasonable
judgment of the Board of Directors of the Company are of a type used in a
Related Business, or Capital Stock of a Person (which, if such Person becomes a
Subsidiary of the Company by virtue of such Asset Sale, shall initially be
designated a Restricted Subsidiary) all or substantially all of whose assets and
property (in the good faith reasonable judgment of the Board of Directors of the
Company) are of a type used in a Related Business (provided that, with respect
to such Capital Stock, all of the requirements of the last proviso of clause (v)
of the following paragraph shall have been satisfied) or (ii) used to
permanently retire Senior Indebtedness or Indebtedness of any Restricted
Subsidiary, (2) with respect to any transaction or related series of
transactions of securities, property or assets with an aggregate fair market
value in excess of $2,500,000, at least 75% of the value of consideration for
the assets disposed of in such Asset Sale (excluding (a) Senior Indebtedness
(and any Refinancing Indebtedness issued to refinance any such Indebtedness)
assumed by a transferee which assumption permanently reduces the amount of
Indebtedness outstanding on the Issue Date and permitted to have been Incurred
pursuant to Section 4.11 (including that in the case of a revolver or similar
arrangement that makes credit available, such commitment is permanently reduced
by such amount), (b) Purchase Money Indebtedness secured exclusively by the
assets subject to such Asset Sale which is assumed by a transferee and (c)
marketable securities that are promptly converted into cash or Cash Equivalents)
consists of cash or Cash Equivalents, provided that any cash or Cash Equivalents
received within 12 months following any such Asset Sale upon conversion of any
property or assets (other than in the form of cash or Cash Equivalents) received
in consideration of such Asset Sale shall be applied promptly in the manner
required of Net Cash Proceeds of any such Asset Sale as set forth above, (3) no
Default or Event of Default shall occur
- 55 -
<PAGE>
or be continuing after giving effect to, on a pro forma basis, such Asset Sale,
and (4) the Board of Directors of the Company determines in good faith that the
Company or such Restricted Subsidiary, as applicable, would receive fair market
value in consideration of such Asset Sale. An Asset Sale Offer may be deferred
until the accumulated Net Cash Proceeds from Asset Sales not applied to the uses
set forth in (1)(b) above exceeds $5,000,000 and each Asset Sale Offer shall
remain open for 20 Business Days following its commencement and no longer,
except as otherwise required by applicable law (the "Asset Sale Offer Period").
Upon expiration of the Asset Sale Offer Period, the Company shall apply the
Asset Sale Amount, plus an amount equal to accrued interest to the purchase of
all Indebtedness properly tendered (on a pro rata basis as described above if
the Asset Sale Amount is insufficient to purchase all Indebtedness so tendered)
at the Asset Sale Offer Price (together with accrued interest).
Notwithstanding the foregoing provisions of the prior paragraph:
(i) the Company and its Restricted Subsidiaries may, in the
ordinary course of business, convey, sell, lease, transfer, assign or
otherwise dispose of assets acquired and held for resale in the
ordinary course of business;
(ii) the Company and its Restricted Subsidiaries may convey,
sell, lease, transfer, assign or otherwise dispose of assets pursuant
to and in accordance with Section 5.1;
(iii) the Company and its Restricted Subsidiaries may sell or
dispose of damaged, worn out or other obsolete property in the
ordinary course of business so long as such property is no longer
necessary for the proper conduct of the business of the Company or
such Restricted Subsidiary, as applicable;
(iv) the Company and its Restricted Subsidiaries may convey,
sell, lease, transfer, assign or otherwise dispose of assets to the
Company or any of its Wholly Owned Restricted Subsidiaries; and
(v) the Company and its Restricted Subsidiaries may, in the
ordinary course of business (or, if otherwise than in the ordinary
course of business, upon receipt of a favorable written opinion by an
independent financial advisor of national reputation as to the
fairness from a financial point of view to the Company or such
Restricted Subsidiary of the proposed transaction), exchange all or a
portion of its property, businesses or assets for property, businesses
or assets which, or Capital Stock of a Person all or substantially all
of whose
- 56 -
<PAGE>
assets, are of a type used in a Related Business (provided that such
Person shall initially be designated a Restricted Subsidiary if such
Person becomes a Subsidiary of the Company by virtue of such Asset
Sale), or a combination of any such property, businesses, or assets,
or Capital Stock of such a Person and cash or Cash Equivalents;
provided that (i) there shall not exist immediately prior or
subsequent thereto a Default or an Event of Default, (ii) a majority
of the independent directors of the Board of Directors of the Company
shall have approved a resolution of the Board of Directors that such
exchange is fair to the Company or such Restricted Subsidiary, as the
case may be, and (iii) any cash or Cash Equivalents received pursuant
to any such exchange shall be applied in the manner applicable to Net
Cash Proceeds from an Asset Sale as set forth pursuant to the
provisions of the immediately preceding paragraph of this covenant;
and provided, further, that any Capital Stock of a Person received in
an Asset Sale pursuant to this clause (v) shall be owned directly by
the Company or a Restricted Subsidiary and, when combined with the
Capital Stock of such Person already owned by the Company and its
Restricted Subsidiaries, shall constitute a majority of the voting
power and Capital Stock of such Person.
Restricted Payments that are made in compliance with, and are counted
against amounts available to be made as Restricted Payments pursuant to clause
(c) of Section 4.3, without giving effect to clause (i) of the second paragraph
thereof, shall not be deemed to be Asset Sales.
Any Asset Sale Offer shall be made in compliance with all applicable
laws, rules, and regulations, including, if applicable, Regulation 14E of the
Exchange Act and the rules and regulations thereunder and all other applicable
Federal and state securities laws, and any provisions of this Indenture that
conflict with such laws shall be deemed to be superseded by the provisions of
such laws.
The Company shall accumulate all Net Cash Proceeds and the aggregate
amount of such accumulated Net Cash Proceeds not used for the purposes permitted
and within the time provided by this Section 4.14 is referred to as the
"Accumulated Amount."
For purposes of this Section 4.14, "Minimum Accumulation Date" means
each date on which the Accumulated Amount exceeds $5,000,000. Not later than 10
Business Days after each Minimum Accumulation Date, the Company will commence an
Asset Sale Offer to the Holders and holders of other Indebtedness of the Company
ranking pari passu in right of payment with the Securities from time
- 57 -
<PAGE>
to time outstanding with similar provisions requiring the Company to make an
offer to purchase or to redeem such Indebtedness with the proceeds from asset
sales to purchase, on a pro rata basis in proportion to the respective principal
amounts (or accreted values in the case of Indebtedness issued with an original
issue discount) of the Securities and such other Indebtedness then outstanding,
for cash, Securities and such other Indebtedness that will have an aggregate
principal amount (and accreted value, as applicable)(the "Asset Sale Offer
Amount") on the purchase date equal to the Accumulated Amount, at a purchase
price equal to the Asset Sale Offer Price, plus accrued but unpaid interest, if
any, to, and including, the date of purchase (the "Asset Sale Purchase Date"),
which date shall be no later than 30 Business Days after the first date on which
the Asset Sale Offer is required to be made. Notice of an Asset Sale Offer will
be sent 20 Business Days prior to the close of business on the earlier of (a)
the third Business Day prior to the Asset Sale Purchase Date and (b) the third
Business Day following the expiration of the Asset Sale Offer (such earlier date
being the "Final Put Date"), by first-class mail, by the Company to each Holder
at its registered address, with a copy to the Trustee. The notice to the Holders
will contain all information, instructions and materials required by applicable
law or otherwise material to such Holders' decision to tender Securities
pursuant to the Asset Sale Offer. The notice to Holders, which (to the extent
consistent with the Indenture) shall govern the terms of the Asset Sale Offer,
shall state:
(1) that the Asset Sale Offer is being made pursuant to such notice
and this Section 4.14;
(2) the Asset Sale Offer Amount, the Asset Sale Offer Price
(including the amount of accrued and unpaid interest), the Final
Put Date, and the Asset Sale Purchase Date, which Asset Sale
Purchase Date shall be on or prior to 40 Business Days following
the Minimum Accumulation Date;
(3) that any Security or portion thereof not tendered or accepted for
payment will continue to accrue interest;
(4) that, unless the Company defaults in depositing cash with the
Paying Agent in accordance with the penultimate paragraph of this
Section 4.14 or such payment is otherwise prevented, any
Security, or portion thereof, accepted for payment pursuant to
the Asset Sale Offer shall cease to accrue interest after the
Asset Sale Purchase Date;
(5) that Holders electing to have a Security, or portion thereof,
purchased pursuant to an Asset Sale Offer will be required to
- 58 -
<PAGE>
surrender the Security, with the form entitled "Option of Holder
to Elect Purchase" on the reverse of the Security completed, to
the Paying Agent (which may not for purposes of this Section
4.14, notwithstanding anything this Indenture to the contrary, be
the Company or any Affiliate of the Company) at the address
specified in the notice prior to the close of business on the
Final Put Date;
(6) that Holders will be entitled to withdraw their elections, in
whole or in part, if the Paying Agent (which may not for purposes
of this Section 4.14, notwithstanding any other provision of this
Indenture, be the Company or any Affiliate of the Company)
receives, up to the close of business on the Final Put Date, a
telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Securities
the Holder is withdrawing and a statement that such Holder is
withdrawing his election to have such principal amount of
Securities purchased;
(7) that if Indebtedness in a principal amount in excess of the
principal amount of Securities to be acquired pursuant to the
Asset Sale Offer is tendered and not withdrawn, the Company shall
purchase Indebtedness on a pro rata basis in proportion to the
respective principal amounts (or accreted values in the case of
Indebtedness issued with an original issue discount) thereof
(with such adjustments as may be deemed appropriate by the
Company so that only Securities in denominations of $1,000 or
integral multiples of $1,000 shall be acquired);
(8) that Holders whose Securities were purchased only in part will be
issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered; and
(9) a brief description of the circumstances and relevant facts
regarding such Asset Sales.
On or before an Asset Sale Purchase Date, the Company shall (i) accept
for payment Securities or portions thereof properly tendered and not properly
withdrawn pursuant to the Asset Sale Offer on or before the Final Put Date (on a
pro rata basis if required pursuant to paragraph (7) hereof), (ii) deposit with
the Paying Agent cash sufficient to pay the Asset Sale Offer Price for all
Securities or portions thereof so tendered and accepted and (iii) deliver to the
Trustee Securities so accepted together with an Officers' Certificate stating
the
- 59 -
<PAGE>
Securities or portions thereof being purchased by the Company. The Paying Agent
shall on each Asset Sale Purchase Date mail or deliver to Holders of Securities
so accepted payment in an amount equal to the Asset Sale Offer Price for such
Securities, and the Trustee shall promptly authenticate and mail or deliver to
such Holders a new Security equal in principal amount to any unpurchased portion
of the Security surrendered. Any Security not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Trustee shall not
be deemed to have notice of any Asset Sale Purchase Date unless a Trust Officer
receives notice thereof from the Company or any Holder.
If the amount required to acquire all Indebtedness properly tendered
by Holders pursuant to the Asset Sale Offer (the "Acceptance Amount") made
pursuant to this Section 4.14 is less than the Asset Sale Offer Amount, the
excess of the Asset Sale Offer Amount over the Acceptance Amount may be used by
the Company for general corporate purposes without restriction, unless otherwise
restricted by the other provisions of the Indenture. Upon consummation of any
Asset Sale Offer made in accordance with the terms of the Indenture, the
Accumulated Amount will be reduced to zero irrespective of the amount of
Indebtedness tendered pursuant to the Asset Sale Offer.
SECTION 4.15. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law which would prohibit or forgive the Company from paying all or any
portion of the principal of, premium of, or interest on the Securities as
contemplated herein, wherever enacted, now or at any time hereafter in force, or
which may affect the covenants or the performance of this Indenture; and (to the
extent that it may lawfully do so) the Company hereby expressly waives all
benefit or advantage of any such law, and covenants that it will not hinder,
delay or impede the execution of any power herein granted to the Trustee, but
will suffer and permit the execution of every such power as though no such law
had been enacted.
SECTION 4.16. INTENTIONALLY OMITTED.
---------------------
SECTION 4.17. INTENTIONALLY OMITTED.
---------------------
SECTION 4.18. Limitation on Lines of Business.
-------------------------------
Neither the Company nor any of its Restricted Subsidiaries shall
directly or indirectly engage in any line or lines of business activity other
than that
- 60 -
<PAGE>
which, in the reasonable, good faith judgment of the Board of Directors of the
Company, is a Related Business.
SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock.
----------------------------------------------------
The Company will not sell, and will not permit any of its Restricted
Subsidiaries to issue or sell, any shares of Capital Stock of any Restricted
Subsidiary of the Company to any Person other than the Company or a Wholly Owned
Restricted Subsidiary of the Company, except for shares of common stock with no
preferences or special rights or privileges and with no redemption or prepayment
provisions ("Special Rights"); provided that, in the case of a Restricted
Subsidiary that is a partnership or joint venture partnership (a "Restricted
Partnership") the Company or any of its Restricted Subsidiaries may sell or such
Restricted Partnership may issue or sell Capital Stock of such Restricted
Partnership with Special Rights no more favorable than those held by the Company
or such Restricted Subsidiary in such Restricted Partnership.
SECTION 4.20. Limitation on Issuances of Guarantee of Indebtedness.
----------------------------------------------------
(a) The Company will not cause or permit any Restricted Subsidiary
(which is not a Guarantor), directly or indirectly, to guarantee, assume or in
any other manner become liable with respect to any Indebtedness of the Company
(other than under the Credit Facility) unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental indenture to the Indenture
providing for a Guarantee of the Securities on the same terms as the guarantee
of such Indebtedness except that (A) such guarantee need not be secured unless
required pursuant to Section 4.13 and (B) if such Indebtedness is by its terms
expressly subordinated in right of payment to the Securities, any such
assumption, guarantee or other liability of such Restricted Subsidiary with
respect to such Indebtedness shall be subordinated to such Restricted
Subsidiary's Guarantee of the Securities at least to the same extent as such
Indebtedness is subordinated to the Securities; provided, however, that the
foregoing shall not apply to Indebtedness of any Restricted Subsidiary that
would otherwise be covered solely by reason of the Company's guarantee of such
Indebtedness.
(b) Notwithstanding the foregoing, any Guarantee by a Restricted
Subsidiary of the Securities shall provide by its terms that it (and all Liens
securing the same) shall be automatically and unconditionally released and
discharged upon any sale, exchange or transfer, to any Person not an Affiliate
of the Company, all of the Company's Capital Stock in, or all or substantially
all the assets of, such Restricted Subsidiary, which transaction is in
compliance with the
- 61 -
<PAGE>
terms of the Indenture and such Restricted Subsidiary is released from all
guarantees, if any, by it of other Indebtedness of the Company or any Restricted
Subsidiaries and (ii) the release by the holders of the Indebtedness of the
Company described in clause (a) above of their security interest or their
guarantee by such Restricted Subsidiary (including any deemed release upon
payment in full of all obligations under such Indebtedness), at such time as (A)
no other Indebtedness of the Company has been secured or guaranteed by such
Restricted Subsidiary, as the case may be, or (B) the holders of all such other
Indebtedness which is secured or guaranteed by such Restricted Subsidiary also
release their security interest in or guarantee by such Restricted Subsidiary
(including any deemed release upon payment in full of all obligations under such
Indebtedness).
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1. Limitation on Merger, Sale or Consolidation.
-------------------------------------------
The Company will not consolidate with or merge with or into another
Person other than in connection with the Merger, or sell, lease, convey,
transfer or otherwise dispose of all or substantially all of its assets
(computed on a consolidated basis), whether in a single transaction or a series
of related transactions, to another Person or group of affiliated Persons,
unless (i) either (a) the Company is the continuing entity or (b) the resulting,
surviving or transferee entity is a corporation organized under the laws of the
United States, any state thereof or the District of Columbia and expressly
assumes by supplemental indenture all of the obligations of the Company in
connection with the Securities and this Indenture; (ii) no Default or Event of
Default shall exist or shall occur immediately after giving effect on a pro
forma basis to such transaction; (iii) immediately after giving effect to such
transaction on a pro forma basis, the consolidated resulting surviving or
transferee entity would immediately thereafter be permitted to incur at least
$1.00 of additional Indebtedness pursuant to the Annualized Operating Cash Flow
Ratio provision set forth in the second paragraph of Section 4.11; and (iv) the
Company shall have delivered to the Trustee an Officers' Certificate confirming
compliance with the requirements of this Section 5.1.
For purposes of this Section, the sale, lease, conveyance, assignment,
transfer or other disposition of all or substantially all of the properties and
assets of one or more Restricted Subsidiaries of the Company, which properties
and assets, if held by the Company instead of such Restricted Subsidiaries,
would constitute all or substantially all of the properties and assets of the
Company on a consolidated basis, shall be deemed to be the transfer of all or
substantially all of the properties and assets of the Company.
- 62 -
<PAGE>
SECTION 5.2. Successor Corporation Substituted.
---------------------------------
Upon any consolidation or merger or any transfer (other than a lease)
of all or substantially all of the assets of the Company (other than a transfer
that results in the transfer of assets constituting or accounting for less than
95% of the consolidated assets (as of the last balance sheet available to the
Company), revenues, or Operating Cash Flow of the Company (as of the last twelve
month period for which financial statements are available to the Company)) in
accordance with the foregoing, the successor corporation formed by such
consolidation or into which the Company is merged or to which such transfer is
made, shall succeed to, and be substituted for, and may exercise every right and
power of, the Company under this Indenture with the same effect as if such
successor corporation had been named therein as the Company, and the Company
shall be released from the obligations under the Securities and this Indenture.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default.
-----------------
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(1) the failure by the Company to pay any installment of interest on
the Securities as and when the same becomes due and payable, and
(x) with respect to the first six Interest Payment Dates, the
continuance of any such failure for 10 days and (y) with respect
to any installment of interest after the first six Interest
Payment Dates, the continuance of such failure for a period of 30
days;
(2) the failure by the Company to pay all or any part of the
principal, or premium, if any, on the Securities when and as the
same becomes due and payable at maturity, redemption, by
acceleration or otherwise, including, without limitation, payment
of the Change of Control Purchase Price in accordance with
Article XI, or the Asset Sale Offer Price in accordance with
Section 4.14;
(3) the failure by the Company to observe or perform any other
covenant, agreement or warranty, contained in the Securities
- 63 -
<PAGE>
or this Indenture (other than a default in the performance of any
covenant or agreement which is specifically dealt with elsewhere
in this Section 6.1), or failure by the Company to cause each
Unrestricted Subsidiary to comply with clause (c) of the
definition of "Unrestricted Subsidiary," and the continuance of
such failure for a period of 30 days after there has been given,
by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by Holders of at least 25% in
aggregate principal amount of the Securities outstanding, a
written notice specifying such default or breach, requiring it to
be remedied and stating that such notice is a "Notice of Default"
hereunder;
(4) a decree, judgment, or order by a court of competent jurisdiction
shall have been entered adjudging the Company or any of its
Significant Restricted Subsidiaries as bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization of
the Company or any of its Significant Restricted Subsidiaries
under any bankruptcy or similar law, and such decree or order
shall have continued undischarged and unstayed for a period of 60
days; or a decree or order of a court of competent jurisdiction
over the appointment of a receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of the Company, any of its
Significant Restricted Subsidiaries, or of the property of any
such Person, or for the winding up or liquidation of the affairs
of any such Person, shall have been entered, and such decree,
judgment, or order shall have remained in force undischarged and
unstayed for a period of 60 days;
(5) the Company or any of its Significant Restricted Subsidiaries
shall institute proceedings to be adjudicated a voluntary
bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or
consent seeking reorganization under any bankruptcy or similar
law or similar statute, or shall consent to the filing of any
such petition, or shall consent to the appointment of a
Custodian, receiver, liquidator, trustee, or assignee in
bankruptcy or insolvency of it or any of its assets or property,
or shall make a general assignment for the benefit of creditors,
or shall admit in writing its inability to pay its debts
generally as they become due, or shall, within the meaning of any
Bankruptcy Law, become insolvent, fails generally to pay
- 64 -
<PAGE>
its debts as they become due, or takes any corporate action in
furtherance of or to facilitate, conditionally or otherwise, any
of the foregoing;
(6) one or more defaults in any Indebtedness for money borrowed by
the Company or any of its Restricted Subsidiaries (or the payment
of which is guaranteed by the Company or any of its Restricted
Subsidiaries), whether such Indebtedness or guarantee now exists
or is created after the Issue Date, which default results from
the failure to pay Indebtedness at its final maturity date or
results in the acceleration of such Indebtedness prior to its
express maturity and, in each case, the principal amount of any
such Indebtedness, together with the principal amount of any
other such Indebtedness which was not paid at its final maturity
date or the maturity of which has been so accelerated, aggregates
$10,000,000 or more; or
(7) final unsatisfied judgments not covered by insurance aggregating
in excess of $10,000,000 at any one time rendered against the
Company or any of its Restricted Subsidiaries and not stayed,
bonded or discharged within 60 days.
If a Default of which the Trustee has actual knowledge occurs and is
continuing, the Trustee must, within 90 days after the occurrence of such
default, give to the Holders notice of such default.
SECTION 6.2. Acceleration of Maturity Date; Rescission and Annulment.
-------------------------------------------------------
If an Event of Default occurs and is continuing (other than an Event
of Default specified in Section 6.1(4) or (5)) relating to the Company or any
Restricted Subsidiary, then in every such case, unless the principal of all of
the Securities shall have already become due and payable, either the Trustee or
the Holders of not less than 25% in aggregate principal amount of the Securities
then outstanding, by notice in writing to the Company (and to the Trustee if
given by Holders) (an "Acceleration Notice"), may declare all of the principal
of the Securities (or the Change of Control Purchase Price if the Event of
Default includes failure to pay the Change of Control Purchase Price) (or the
Special Redemption Price, plus accrued and unpaid interest, if any, to the date
of redemption, in connection with any Special Mandatory Redemption, if the Event
of Default relates to failure to make payment in connection with the Special
Mandatory Redemption), determined as set forth below, including in each case
- 65 -
<PAGE>
accrued interest thereon to be due and payable immediately. If an Event of
Default specified in Section 6.1(4) or (5) above relating to the Company or any
Significant Restricted Subsidiary occurs, all principal (or the Change of
Control Purchase Price or Special Redemption Price, as applicable) and accrued
interest thereon will be immediately due and payable on all outstanding
Securities without any declaration or other act on the part of Trustee or the
Holders.
At any time after such a declaration of acceleration being made and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter provided in this Article VI, the Holders of a
majority in aggregate principal amount of then outstanding Securities, by
written notice to the Company and the Trustee, may rescind, on behalf of all
Holders, any such declaration of acceleration if:
(1) the Company has paid or deposited with the Trustee cash
sufficient to pay (A) all overdue interest on all Securities, (B)
the principal of (and premium, if any, applicable to any
Securities which would become due otherwise than by such
declaration of acceleration, and interest thereon at the rate
borne by the Securities, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest at the rate
borne by the Securities, (D) all sums paid or advanced by the
Trustee hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel, and
(2) all Events of Default, other than the non-payment of the
principal of, premium, if any, and interest on Securities which
have become due solely by such declaration of acceleration, have
been cured or waived as provided in Section 6.12, including, if
applicable, any Event of Default relating to the covenants
contained in Section 11.1.
Notwithstanding the previous sentence of this Section 6.2, no waiver shall be
effective against any Holder for any Event of Default or event which with notice
or lapse of time or both would be an Event of Default with respect to any
covenant or provision which cannot be modified or amended without the consent of
the Holder of each outstanding Security affected thereby, unless all such
affected Holders agree, in writing, to waive such Event of Default or other
event. No such waiver shall cure or waive any subsequent default or impair any
right consequent thereon.
- 66 -
<PAGE>
SECTION 6.3. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee.
- -------
The Company covenants that if an Event of Default in payment of
principal, premium, or interest specified in clause (1) or (2) of Section 6.1
occurs and is continuing, the Company shall, upon demand of the Trustee, pay to
it, for the benefit of the Holders of such Securities, the whole amount then due
and payable on such Securities for principal, premium (if any) and interest,
and, to the extent that payment of such interest shall be legally enforceable,
interest on any overdue principal (and premium, if any) and on any overdue
interest, at the rate borne by the Securities, and, in addition thereto, such
further amount as shall be sufficient to cover the reasonable costs and expenses
of collection, including compensation to, and expenses, disbursements and
advances of the Trustee, its agents and counsel.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust in favor of the
Holders, may institute a judicial proceeding for the collection of the sums so
due and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effective to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 6.4. Trustee May File Proofs of Claim.
--------------------------------
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Securities or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Securities
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company for the payment of overdue principal or interest) shall be entitled
and empowered, by intervention in such proceeding or otherwise to take any and
all actions under the TIA, including (1) to file and prove a claim for the whole
amount of principal (and
- 67 -
<PAGE>
premium, if any) and interest owing and unpaid in respect of the Securities and
to file such other papers or documents as may be necessary or advisable in order
to have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel) and of the Holders allowed in such judicial proceeding, and (2) to
collect and receive any moneys or other property payable or deliverable on any
such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.7.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment, or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.5. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities.
- ----------
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust in favor of the Holders, and any recovery of
judgment shall, after provision for the payment of compensation to, and
expenses, disbursements and advances of the Trustee, its agents and counsel, be
for the ratable benefit of the Holders of the Securities in respect of which
such judgment has been recovered.
SECTION 6.6. Priorities.
----------
Any money collected by the Trustee pursuant to this Article VI shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal, premium
(if any) or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
- 68 -
<PAGE>
FIRST: To the Trustee in payment of all amounts due pursuant to
Section 7.7;
SECOND: To the Holders in payment of the amounts then due and unpaid
for principal of, premium (if any) and interest on, the
Securities in respect of which or for the benefit of which
such money has been collected, ratably, without preference
or priority of any kind, according to the amounts due and
payable on such Securities for principal, premium (if any)
and interest, respectively; and
THIRD: To whomsoever may be lawfully entitled thereto, the
remainder, if any.
SECTION 6.7. Limitation on Suits.
-------------------
No Holder of any Security shall have any right to order or direct the
Trustee to institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless (A) such Holder has previously given written notice to
the Trustee of a continuing Event of Default; (B) the Holders of not less than
25% in principal amount of then outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default in its own name as Trustee hereunder; (C) such Holder or Holders have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities to be incurred or reasonably probable to be incurred in
compliance with such request; (D) the Trustee for 60 days after its receipt of
such notice, request and offer of indemnity has failed to institute any such
proceeding; and (E) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the outstanding Securities; it being understood and intended
that no one or more Holders shall have any right in any manner whatever by
virtue of, or by availing of, any provision of this Indenture to affect, disturb
or prejudice the rights of any other Holders, or to obtain or to seek to obtain
priority or preference over any other Holders or to enforce any right under this
Indenture, except in the manner herein provided and for the equal and ratable
benefit of all the Holders.
SECTION 6.8. Unconditional Right of Holders to Receive Principal,
----------------------------------------------------
Premium and Interest.
- --------------------
Notwithstanding any other provision of this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment of the principal of, and premium (if any) and accrued interest
on, such
- 69 -
<PAGE>
Security on the Maturity Date of such payments as expressed in such Security (in
the case of redemption, the Redemption Price on the applicable Redemption Date,
in the case of the Change of Control Purchase Price, on the applicable Change of
Control Purchase Date, and in the case of an Asset Sale Offer, the Asset Sale
Offer Price on the Asset Sale Purchase Date, and to institute suit for the
enforcement of any such payment after such respective dates, and such rights
shall not be impaired without the consent of such Holder.
SECTION 6.9. Rights and Remedies Cumulative.
------------------------------
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in Section 2.7, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.10. Delay or Omission Not Waiver.
----------------------------
No delay or omission by the Trustee or by any Holder of any Security
to exercise any right or remedy arising upon any Event of Default shall impair
the exercise of any such right or remedy or constitute a waiver of any such
Event of Default. Every right and remedy given by this Article VI or by law to
the Trustee or to the Holders may be exercised from time to time, and as often
as may be deemed expedient, by the Trustee or by the Holders, as the case may
be.
SECTION 6.11. Control by Holders.
------------------
The Holder or Holders of a majority in aggregate principal amount of
then outstanding Securities will have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee or
exercising any trust or power conferred upon the Trustee, provided that (1) such
direction shall not be in conflict with any rule of law or with this Indenture,
(2) the Trustee shall not determine that the action so directed would be
unjustly prejudicial to the Holders not taking part in such direction, (3) the
Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction, (4) the Trustee may require indemnification to
its satisfaction before taking any action in accordance with such direction and
(5) the Trustee shall not be liable with respect to any action so taken in good
faith.
- 70 -
<PAGE>
SECTION 6.12. Waiver of Past Default.
----------------------
Subject to Section 6.8, the Holder or Holders of not less than a
majority in aggregate principal amount of the outstanding Securities may, on
behalf of all Holders, prior to the declaration of the acceleration of the
maturity of the Securities, waive any past default hereunder and its
consequences, except a default (A) in the payment of the principal of, premium,
if any, or interest on, any Security as specified in clauses (1) and (2) of
Section 6.1, or (B) in respect of a covenant or provision hereof which, under
Article IX, cannot be modified or amended without the consent of the Holder of
each outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair the exercise of any right arising therefrom.
SECTION 6.13. Undertaking for Costs.
---------------------
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, in any suit for the enforcement of any right or remedy
under this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted to be taken by it as Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such suit, and that
such court may in its discretion assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in such suit, having due regard to
the merits and good faith of the claims or defenses made by such party litigant;
but the provisions of this Section 6.13 shall not apply to any suit instituted
by the Company, to any suit instituted by the Trustee, to any suit instituted by
any Holder, or group of Holders, holding in the aggregate more than 10% in
aggregate principal amount of the outstanding Securities, or to any suit
instituted by any Holder for enforcement of the payment of principal of, or
premium (if any) or interest on, any Security on or after the Maturity Date
expressed in such Security (including, in the case of redemption, on or after
the Redemption Date).
SECTION 6.14. Restoration of Rights and Remedies.
----------------------------------
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all
- 71 -
<PAGE>
rights and remedies of the Trustee and the Holders shall continue as though no
such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 7.1. Duties of Trustee.
-----------------
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent Person would exercise or use under the circumstances in the conduct
of his own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and
no covenants or obligations shall be implied in or read into
this Indenture which are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and
conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b) of
this Section 7.1.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless
- 72 -
<PAGE>
it is proved that the Trustee was negligent in ascertaining
the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.11.
(d) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of any of its
rights or powers.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c), (d) and (f) of this Section 7.1
and shall extend to the Registrar and Paying Agent.
(f) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may agree in writing with the Company.
Assets held in trust by the Trustee need not be segregated from other assets
except to the extent required by law.
SECTION 7.2. Rights of Trustee.
-----------------
Subject to Section 7.1:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may consult
with counsel and may require an Officers' Certificate or an Opinion of Counsel,
which shall conform to Sections 13.4 and 13.5. The Trustee shall not be liable
for any action it takes or omits to take in good faith in reliance on such
certificate or advice of counsel.
(c) The Trustee may act through its attorneys and agents and shall not
be responsible for the misconduct or negligence of any agent appointed with due
care.
(d) The Trustee will not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.
- 73 -
<PAGE>
(e) The Trustee will not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, notice, request, direction, consent, order, bond, debenture, or other
paper or document, but the Trustee, in its discretion, may make such further
inquiry or investigation into such facts or matters as it may see fit and, if
the Trustee shall determine to make such further inquiry or investigation it
shall be entitled to examine the books, records and premises of the Company
personally or by agent or attorney.
(f) The Trustee will be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request, order or
direction of any of the Holders, pursuant to the provisions of this Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which may be incurred
therein or thereby.
(g) Unless otherwise specifically provided for in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(h) The Trustee shall have no duty to inquire as to the performance of
the covenants in Article IV hereof. In addition, the Trustee shall not be deemed
to have knowledge of any Default or Event of Default hereunder or under the
Pledge and Escrow Agreement except (i) any Event of Default occurring pursuant
to Sections 6.1(1) or 6.1(2) (excluding failure to pay a Change of Control
Purchase Price or Asset Sale Purchase Price), or (ii) any Default or Event of
Default of which the Trustee shall have received written notification or
obtained actual knowledge. In the absence of such actual knowledge or notice,
the Trustee may conclusively assume that no default has occurred and is
continuing under this Indenture.
(i) The permissive rights of the Trustee to do things enumerated in
this Indenture shall not be construed as a duty unless so specified herein.
SECTION 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any of
the Company's Subsidiaries, or their respective Affiliates with the same rights
it would have if it were not Trustee. Any Agent may do the same with like
rights. However, the Trustee must comply with Sections 7.10 and 7.11.
- 74 -
<PAGE>
SECTION 7.4. Trustee's Disclaimer.
--------------------
The Trustee makes no representation as to the validity, adequacy or
priority of this Indenture or the Securities and it shall not be accountable for
the Company's use of the proceeds from the Securities, and it shall not be
responsible for any statement in the Securities, other than the Trustee's
certificate of authentication, or the use or application of any funds received
by a Paying Agent other than the Trustee.
SECTION 7.5. Notice of Default.
-----------------
If a Default or an Event of Default occurs and is continuing and if it
is actually known to the Trustee, the Trustee shall mail to each Securityholder
notice of the uncured Default or Event of Default within 90 days after such
Default or Event of Default occurs. Except in the case of a Default or an Event
of Default in payment of principal (or premium, if any) of, or interest on, any
Security (including the payment of the Change of Control Purchase Price on the
Change of Control Purchase Date, the payment of the Redemption Price on the
Redemption Date and the payment of the Asset Sale Offer Price on the Asset Sale
Purchase Date), the Trustee may withhold the notice if and so long as a Trust
Officer in good faith determines that withholding the notice is in the interest
of the Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall, if required by law, mail to each
Securityholder a brief report dated as of such May 15 that complies with TIA ss.
313(a). The Trustee also shall comply with TIA ss.ss. 313(b) and 313(c).
The Company shall promptly notify the Trustee in writing if the
Securities become listed on any stock exchange or automatic quotation system.
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
SECTION 7.7. Compensation and Indemnity.
--------------------------
The Company agrees to pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the
- 75 -
<PAGE>
reasonable compensation, disbursements and expenses of the Trustee's agents,
accountants, experts and counsel.
The Company agrees to indemnify the Trustee (in its capacity as
Trustee) and each of its officers, directors, attorneys-in-fact and agents for,
and hold it harmless against, any claim, demand, expense (including but not
limited to reasonable compensation, disbursements and expenses of the Trustee's
agents and counsel), loss or liability incurred by it without negligence or
willful misconduct on its part, arising out of or in connection with the
administration of this trust and its rights or duties hereunder including the
reasonable costs and expenses of defending itself against any claim or liability
in connection with the exercise or performance of any of its powers or duties
hereunder. The Trustee shall notify the Company promptly of any claim asserted
against the Trustee for which it may seek indemnity. The Company shall defend
the claim and the Trustee shall provide reasonable cooperation at the Company's
expense in the defense. The Trustee may have separate counsel and the Company
shall pay the reasonable fees and expenses of such counsel; provided that the
Company will not be required to pay such fees and expenses if they assume the
Trustee's defense and there is no conflict of interest between the Company and
the Trustee in connection with such defense. The Company need not pay for any
settlement made without their written consent. The Company need not reimburse
any expense or indemnify against any loss or liability to the extent incurred by
the Trustee through its negligence or willful misconduct.
To secure the Company's payment obligations in this Section 7.7., the
Trustee shall have a lien prior to the Securities on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal and premium, if any, of or interest on particular
Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.1(4) or (5) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien arising
hereunder shall survive the resignation or removal of the Trustee, the discharge
of the Company's obligations pursuant to Article VIII of this Indenture and any
rejection or termination of this Indenture under any Bankruptcy Law.
SECTION 7.8. Replacement of Trustee.
----------------------
The Trustee may resign by so notifying the Company in writing. The
Holder or Holders of a majority in principal amount of the outstanding
Securities may remove the Trustee by so notifying the Company and the Trustee in
writing
- 76 -
<PAGE>
and may appoint a successor trustee with the Company's consent. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes charge of the
Trustee or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the office of
Trustee for any reason, the Company shall promptly appoint a successor Trustee.
Within one year after the successor Trustee takes office, the Holder or Holders
of a majority in principal amount of the Securities may appoint a successor
Trustee to replace the successor Trustee appointed by the Company. A successor
Trustee shall deliver a written acceptance of its appointment to the retiring
Trustee and to the Company. Immediately after that and provided that all sums
owing to the trustee provided for in Section 7.7 have been paid, the retiring
Trustee shall transfer all property held by it as trustee to the successor
Trustee, subject to the lien provided in Section 7.7, the resignation or removal
of the retiring Trustee shall become effective, and the successor Trustee shall
have all the rights, powers and duties of the Trustee under this Indenture. A
successor Trustee shall mail notice of its succession to each Holder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holder or Holders of at least 10% in principal amount of the outstanding
Securities may petition any court of competent jurisdiction for the appointment
of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
7.8, the Company's obligations under Section 7.7 shall continue for the benefit
of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger, Etc.
---------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the
- 77 -
<PAGE>
resulting, surviving or transferee corporation without any further act shall, if
such resulting, surviving or transferee corporation is otherwise eligible
hereunder, be the successor Trustee.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
The Trustee shall at all times satisfy the requirements of TIA ss.
310(a)(1), (2) and (5). The Trustee shall have a combined capital and surplus of
at least $10,000,000 as set forth in its most recent published annual report of
condition. The Trustee shall comply with TIA ss. 310(b).
SECTION 7.11. Preferential Collection of Claims against Company.
-------------------------------------------------
The Trustee shall comply with TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated.
SECTION 7.12. Wire Transfers and Investments.
------------------------------
(a) The Trustee shall be authorized to seek confirmation of fund
transfer instructions by telephone call-back to the person or persons designated
on Exhibit E hereto, and the Trustee may rely upon the confirmations of any one
purporting to be the person or persons so designated. The persons and telephone
numbers for call-backs may be changed only in a writing actually received and
acknowledged by the Trustee. The parties to this Indenture acknowledge that
such security procedure is commercially reasonable.
(b) It is understood that the Trustee and the beneficiary's bank in
any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it executes
using any such identifying number, even where its use may result in a person
other than the beneficiary being paid, or the transfer of funds to a bank other
than the beneficiary's bank or an intermediary bank designated.
(c) All money held by the Trustee in any of the accounts or funds
established pursuant hereto shall be invested in Marketable U.S. Securities upon
receipt of a Company Request. In the absence of such Company Request, the
Trustee shall invest in those items described in clause (vi) of the definition
of Marketable U.S. Securities. The Trustee may act as principal or agent in the
acquisition or disposition of investments. The Trustee shall not be responsible
for any loss of any investment made in accordance herewith.
- 78 -
<PAGE>
ARTICLE VIII
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.1. Option to Effect Legal Defeasance or Covenant
---------------------------------------------
Defeasance.
The Company may, at its option and at any time, elect to have Section
8.2 or Section 8.3 applied to all outstanding Securities upon compliance with
the conditions set forth below in this Article VIII.
SECTION 8.2. Legal Defeasance and Discharge.
------------------------------
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.2, the Company shall be deemed to have been discharged from
its obligations with respect to all outstanding Securities on the date the
conditions set forth below are satisfied (hereinafter, "Legal Defeasance"). For
this purpose, such Legal Defeasance means that the Company shall be deemed to
have paid and discharged the entire Indebtedness represented by the outstanding
Securities, which shall thereafter be deemed to be "outstanding" only for the
purposes of Section 8.5 and the other Sections of this Indenture referred to in
(a) and (b) below, and to have satisfied all its other obligations under such
Securities and this Indenture (and the Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging the same), except
for the following which shall survive until otherwise terminated or discharged
hereunder: (a) the rights of Holders of outstanding Securities to receive solely
from the trust fund described in Section 8.4, and as more fully set forth in
such Section 8.4, payments in respect of the principal of, premium, if any, and
interest on such Securities when such payments are due, (b) the Company's
obligations with respect to such Securities under Sections 2.4, 2.7, 2.10, 2.13,
2.14, 2.15 and 4.2, (c) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and the Company's obligations in connection therewith and (d)
this Article VIII. Subject to compliance with this Article VIII, the Company may
exercise its option under this Section 8.2 notwithstanding the prior exercise of
its option under Section 8.3 with respect to the Securities.
SECTION 8.3. Covenant Defeasance.
-------------------
Upon the Company's exercise under Section 8.1 of the option applicable
to this Section 8.3, the Company shall be released from its obligations under
the covenants contained in Sections 4.3, 4.5, 4.6, 4.7, 4.8, 4.10, 4.11, 4.12,
4.13, 4.14, 4.18, 4.19, 4.20 and Article V (other than the obligation of any
successor to assume the obligations of the Company hereunder) with respect to
the outstanding Securities on and after the date the conditions set forth below
are satisfied (hereinafter, "Covenant Defeasance"), and the Securities shall
thereafter
- 79 -
<PAGE>
be deemed not "outstanding" for the purposes of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such Covenant Defeasance
means that, with respect to the outstanding Securities, the Company need not
comply with and shall have no liability in respect of any term, condition or
limitation set forth in any such covenant, whether directly or indirectly, by
reason of any reference elsewhere herein to any such covenant or by reason of
any reference in any such covenant to any other provision herein or in any other
document, but, except as specified above, the remainder of this Indenture and
such Securities shall be unaffected thereby.
SECTION 8.4. Conditions to Legal or Covenant Defeasance.
------------------------------------------
The following shall be the conditions to the application of either
Section 8.2 or Section 8.3 to the outstanding Securities:
(a) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements of
Section 7.10 who shall agree to comply with the provisions of this Article VIII
applicable to it) as trust funds in trust for the purpose of making the
following payments, specifically pledged as security for, and dedicated solely
to, the benefit of the Holders of such Securities, U.S. Legal Tender, Government
Securities or a combination thereof, in such amounts, as in each case will be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to the
Trustee, to pay and discharge and which shall be applied by the Trustee (or
other qualifying trustee) to pay and discharge the principal of, premium, if
any, and interest on such Securities on the Stated Maturity or on the applicable
Redemption Date of such principal or installment of principal of, premium, if
any, or interest on such Securities and the Holders of Securities must have a
valid, perfected, exclusive security interest in such trust; provided that the
Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender
or Government Securities to said payments with respect to the Securities.
(b) In the case of an election under Section 8.2, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (i) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (ii) since the date hereof, there has been a change in the applicable
Federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of such Securities will
not recognize income, gain or loss for Federal income tax purposes as a result
of such Legal Defeasance and
- 80 -
<PAGE>
will be subject to Federal income tax in the same amount, in the same manner and
at the same times as would have been the case if such Legal Defeasance had not
occurred;
(c) In the case of an election under Section 8.3, the Company shall
have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to such Trustee confirming that the Holders of such
Securities will not recognize income, gain or loss for Federal income tax
purposes as a result of such Covenant Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) No Default or Event of Default shall have occurred and be
continuing on the date of such deposit or, in so far as Section 6.1(4) or 6.1(5)
is concerned, at any time during the period ending on the 91st day after the
date of such deposit (it being understood that this condition is a condition
subsequent which shall not be deemed satisfied until the expiration of such
period, but in the case of Covenant Defeasance, the covenants which are defeased
under Section 8.3 will cease to be in effect unless an Event of Default under
Section 6.1(4) or 6.1(5) occurs during such period);
(e) Such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under this Indenture or any
other material agreement or instrument to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
(f) In the case of an election under either Section 8.2 or 8.3, the
Company shall have delivered to the Trustee an Officers' Certificate stating
that the deposit made by the Company pursuant to its election under Section 8.2
or 8.3 was not made by the Company with the intent of preferring the Holders of
such Notes over any other creditors of the Company or with the intent of
defeating, hindering, delaying or defrauding creditors of the Company or others;
and
(g) The Company shall have delivered to the Trustee an Officers'
Certificate stating that all conditions precedent provided for or relating to
either the Legal Defeasance under Section 8.2 or the Covenant Defeasance under
Section 8.3 (as the case may be) have been complied with as contemplated by this
Section 8.4.
- 81 -
<PAGE>
SECTION 8.5. Deposited U.S. Legal Tender and Government Securities to
--------------------------------------------------------
be Held in Trust; Other Miscellaneous Provisions.
- ------------------------------------------------
Subject to Section 8.6, all, U.S. Legal Tender and Government
Securities (including the proceeds thereof) deposited with the Trustee (or other
qualifying trustee, collectively for purposes of this Section 8.5, the
"Trustee") pursuant to Section 8.4 in respect of the outstanding Securities
shall be held in trust and applied by the Trustee, in accordance with the
provisions of such Securities and this Indenture, to the payment, either
directly or through any Paying Agent as the Trustee may determine, to the
Holders of such Securities of all sums due and to become due thereon in respect
of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
SECTION 8.6. Repayment to the Company.
------------------------
Subject to any applicable escheat or abandoned property laws, any
money deposited with the Trustee or any Paying Agent, or then held by the
Company, in trust for the payment of the principal of, premium, if any, or
interest on any Security and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company within sixty (60) days after termination of such two-year
period; and the Holder of such Security shall thereafter look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money shall thereupon cease. The Trustee shall
not be liable to the Company or any Holder for interest on funds held by it for
the payment and discharge of the interest, or premium (if any) on or principal
of any of the Securities to any Holder. The Company shall not be liable for any
interest on the sums paid to it pursuant to this paragraph and shall not be
regarded as a trustee of such money.
SECTION 8.7. Reinstatement.
-------------
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or Government Securities in accordance with Section 8.2 or 8.3, as the
case may be, by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, then
the Company's obligations under this Indenture and the Securities shall be
revived and reinstated as though no deposit had occurred pursuant to Section 8.2
or 8.3 until such time as the Trustee or Paying Agent is permitted to apply such
money in accordance with Sections 8.2 and 8.3, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Security following the reinstatement of its obligations,
the Company shall be
- 82 -
<PAGE>
subrogated to the rights of the Holders of such Securities to receive such
payment from the cash held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Supplemental Indentures Without Consent of Holders.
--------------------------------------------------
Without the consent of any Holder, the Company, when authorized by
Board Resolutions, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to cure any ambiguity, defect, or inconsistency, or to make any
other provisions with respect to matters or questions arising
under this Indenture which shall not be inconsistent with the
provisions of this Indenture, provided such action pursuant to
this clause (1) shall not adversely affect the interests of any
Holder in any respect;
(2) to add to the covenants of the Company for the benefit of the
Holders, or to surrender any right or power herein conferred upon
the Company or to make any other change that does not adversely
affect the rights of any Holder, provided that the Company has
delivered to the Trustee an Opinion of Counsel stating that such
change does not adversely affect the rights of any Holder;
(3) to provide for collateral or guarantors for the Securities;
(4) to evidence the succession of another Person to the Company, and
the assumption by any such successor of the obligations of the
Company, herein and in the Securities in accordance with Article
V;
(5) to comply with the TIA; or
(6) to provide for the issuance and authorization of the Exchange
Securities.
- 83 -
<PAGE>
SECTION 9.2. Amendments, Supplemental Indentures and Waivers with
----------------------------------------------------
Consent of Holders.
- ------------------
Subject to Section 6.8, with the consent of the Holders of not less
than a majority in aggregate principal amount of then outstanding Securities, by
written act of said Holders delivered to the Company and the Trustee, the
Company, when authorized by Board Resolutions, and the Trustee may amend or
supplement this Indenture or the Securities or enter into an indenture or
indentures supplemental hereto for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Indenture or
the Securities or of modifying in any manner the rights of the Holders under
this Indenture or the Securities. Subject to Section 6.8, the Holder or Holders
of not less than a majority, in principal amount of then outstanding Securities
may waive compliance by the Company with any provision of this Indenture or the
Securities. Notwithstanding any of the above, however, no such amendment,
supplemental indenture or waiver shall, without the consent of the Holder of
each outstanding Security affected thereby:
(1) reduce the percentage of principal amount of Securities whose
Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Securities;
(2) reduce the rate or extend the time for payment of interest on any
Security;
(3) reduce the principal amount of any Security, the Change of
Control Purchase Price, the Asset Sale Offer Price or the
Redemption Price;
(4) change the Stated Maturity or the Change of Control Purchase
Date, the Asset Sale Purchase Date, the Asset Sale Offer Period,
or the Change of Control Offer Period of any Security;
(5) alter the redemption provisions of Article III or paragraph 5 of
the Securities or the terms or provisions of Section 4.14 or the
terms or provisions of Article XI, in any case, in a manner
adverse to any Holder;
(6) make any changes in the provisions concerning waivers of Defaults
or Events of Default by Holders of the Securities or the rights
of Holders to recover the principal or premium of, interest on,
or redemption payment with respect to, any
- 84 -
<PAGE>
Security, including without limitation any changes in Section
6.8, 6.12 or this third sentence of this Section 9.2;
(7) make the principal of, or the interest on, any Security payable
with anything or in any manner other than as provided for in this
Indenture (including changing the place of payment where, or the
coin or currency in which, any Security or any premium or the
interest thereon is payable) and the Securities as in effect on
the date hereof; or
(8) make the Securities subordinated in right of payment to any
extent or under any circumstances to any other indebtedness.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section 9.2
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture or
waiver.
After an amendment, supplement or waiver under this Section 9.2 or
Section 9.4 becomes effective, it shall bind each Holder.
In connection with any amendment, supplement or waiver under this
Article IX, the Company may, but shall not be obligated to, offer to any Holder
who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3. Compliance with TIA.
-------------------
Every amendment, waiver or supplement of this Indenture or the
Securities shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Consents.
---------------------------------
Until an amendment, waiver or supplement becomes effective, a consent
to it by a Holder is a continuing consent by the Holder and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security, even if notation of the consent is not made on
any Security. However, any such Holder or subsequent Holder may
- 85 -
<PAGE>
revoke the consent as to his Security or portion of his Security by written
notice to the Company or the Person designated by the Company as the Person to
whom consents should be sent if such revocation is received by the Company or
such Person before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Securities have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement or waiver, which record date shall be the date so fixed by the
Company notwithstanding the provisions of the TIA. If a record date is fixed,
then notwithstanding the last sentence of the immediately preceding paragraph,
those Persons who were Holders at such record date, and only those Persons (or
their duly designated proxies), shall be entitled to revoke any consent
previously given, whether or not such Persons continue to be Holders after such
record date. No such consent shall be valid or effective for more than 90 days
after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder, unless it makes a change described in any of clauses
(1) through (8) of Section 9.2, in which case, the amendment, supplement or
waiver shall bind only each Holder of a Security who has consented to it and
every subsequent Holder of a Security or portion of a Security that evidences
the same debt as the consenting Holder's Security; provided that any such waiver
shall not impair or affect the right of any Holder to receive payment of
principal and premium of and interest on a Security, on or after the respective
dates set for such amounts to become due and payable expressed in such Security,
or to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the Trustee
or require the Holder to put an appropriate notation on the Security. The
Trustee may place an appropriate notation on the Security about the changed
terms and return it to the Holder. Alternatively, if the Company or the Trustee
so determines, the Company in exchange for the Security shall issue and the
Trustee shall authenticate a new Security that reflects the changed terms. Any
failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment, supplement or waiver.
- 86 -
<PAGE>
SECTION 9.6. Trustee to Sign Amendments, Etc.
--------------------------------
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided that the Trustee may, but shall
not be obligated to, execute any such amendment, supplement or waiver which
affects the Trustee's own rights, duties or immunities under this Indenture. The
Trustee shall be entitled to receive, and shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of any amendment,
supplement or waiver authorized pursuant to this Article IX is authorized or
permitted by this Indenture.
ARTICLE X
SECTION 10.1. Security.
--------
(a) At the Release Time (as defined in the Pledge and Escrow
Agreement) which shall occur on or about the Merger Date, the Trustee shall
purchase, for the benefit of the Holders of the Securities a portfolio of
securities initially consisting of Government Securities in such amount as will
be sufficient upon receipt of scheduled interest and/or principal payments of
such Pledged Securities, in the opinion of a nationally recognized firm of
independent public accountants selected by the Company, to provide for payment
in full of the first six scheduled interest payments due on the outstanding
Securities (unless already paid) and shall be held by the Trustee in the Escrow
and Pledge Account pending disposition pursuant to the Pledge and Escrow
Agreement.
(b) Each Holder, by its acceptance of a Security, consents and agrees
to the terms of the Pledge and Escrow Agreement (including, without limitation,
the provisions providing for foreclosure and release of the Pledged Securities)
as the same may be in effect or may be amended from time to time in accordance
with its terms, and authorizes and directs the Trustee to enter into the Pledge
and Escrow Agreement and to perform its respective obligations and exercise its
respective rights thereunder in accordance therewith. The Company will do or
cause to be done all such acts and things as may be necessary or proper, as the
case may be required by the provisions of the Pledge and Escrow Agreement, to
assure and confirm to the Trustee the security interest in the Pledged
Securities contemplated hereby, by the Pledge and Escrow Agreement or any part
thereof, as from time to time constituted, so as to render the same available
for the security and benefit of this Indenture and of the Securities secured
hereby, according to the intent and purposes herein expressed. The Company
shall take, or shall cause to be taken, any and all actions reasonably required
(and any action reasonably requested by the Trustee) to cause the Pledge and
Escrow Agreement to create and maintain, as security for the obligations of the
Company under this Indenture and the Securities, valid and enforceable first
priority liens in
- 87 -
<PAGE>
and on all the Pledged Securities, in favor of the Trustee, superior to and
prior to the rights of third Persons and subject to no other Liens. The Trustee
shall not be liable for the validity, sufficiency or priority of the funds or
Pledged Securities held under the Pledge and Escrow Agreement or for the
maintenance of the perfection of any funds or securities held therein.
(c) The release of any Pledged Securities pursuant to the Pledge and
Escrow Agreement will not be deemed to impair the security under this Indenture
in contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge and Escrow
Agreement. To the extent applicable, the Company shall cause TIA Section 314(d)
relating to the release of property or securities from the Lien and security
interest of the Pledge and Escrow Agreement (other than pursuant to Section 9(e)
and 9(g) thereof) and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge and
Escrow Agreement to be complied with. Any certificate or opinion required by
TIA Section 314(d) may be made by an Officer of the Company, except in cases
where TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected by the Company.
(d) The Trustee, in its sole discretion and without the consent of the
Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Securities then outstanding and upon receipt of indemnity
satisfactory to it shall, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (i) enforce any of the terms of the Pledge
and Escrow Agreement and (ii) collect and receive any and all amounts payable in
respect of the obligations of the Company thereunder. The Trustee shall have
power to institute and to maintain such suits and proceedings as the Trustee may
deem expedient to preserve or protect its interests and the interests of the
Holders in the Pledged Securities (including power to institute and maintain
suits or proceedings to restrain the enforcement of or compliance with any
legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interests of the Holders or of the Trustee).
- 88 -
<PAGE>
ARTICLE XI
RIGHT TO REQUIRE REPURCHASE
SECTION 11.1. Repurchase of Securities at Option of the Holder Upon a
-------------------------------------------------------
Change of Control.
- -----------------
(a) In the event that a Change of Control has occurred, each Holder of
Securities will have the right, at such Holder's option, pursuant to an
irrevocable and unconditional offer by the Company (the "Change of Control
Offer"), to require the Company to repurchase all or any part (equal to $1,000
principal amount or an integral multiple thereof) of such Holder's Securities,
on a date (the "Change of Control Purchase Date") that is no later than 45
Business Days after the occurrence of such Change of Control at a cash price
(the "Change of Control Purchase Price") equal to 101% of the aggregate
principal amount thereof, together with any accrued and unpaid interest to the
Change of Control Purchase Date. The Change of Control Offer shall be made
within 30 Business Days following a Change of Control and shall remain open for
20 Business Days following its commencement (the "Change of Control Offer
Period"). Upon expiration of the Change of Control Offer Period, the Company
shall purchase all Securities properly tendered in response to the Change of
Control Offer.
(b) In the event that, pursuant to this Section 11.1, the Company
shall be required to commence such an offer to purchase Securities (a "Change of
Control Offer"), the Company shall follow the procedures set forth in this
Section 11.1 as follows:
(1) the Company shall provide the Trustee with notice of the Change
of Control Offer at least 5 Business Days before the commencement
of any Change of Control Offer; and
(2) on or before the commencement of any Change of Control Offer, the
Company or the Trustee (upon the request and at the expense of
the Company) shall send, by first-class mail, a notice to each of
the Holders, which (to the extent consistent with this Indenture)
shall govern the terms of the Change of Control Offer and shall
state:
(i) that the Change of Control Offer is being made pursuant to
such notice and this Section 11.1 and that all Securities, or portions
thereof, tendered will be accepted for payment;
(ii) the Change of Control Purchase Price (including the amount
of accrued and unpaid interest), the Change of Control Purchase Date
and the Change of Control Put Date (as defined
- 89 -
<PAGE>
below);
(iii) that any Security, or portion thereof, not tendered or
accepted for payment will continue to accrue interest;
(iv) that, unless the Company defaults in depositing cash with
the Paying Agent in accordance with the last paragraph of this clause
(b) or such payment is prevented, any Security, or portion thereof,
accepted for payment pursuant to the Change of Control Offer shall
cease to accrue interest after the Change of Control Purchase Date;
(v) that Holders electing to have a Security, or portion
thereof, purchased pursuant to a Change of Control Offer will be
required to surrender the Security, with the form entitled "Option of
Holder to Elect Purchase" on the reverse of the Security completed, to
the Paying Agent (which may not for purposes of this Section 11.1,
notwithstanding anything in this Indenture to the contrary, be the
Company or any Affiliate of the Company) at the address specified in
the notice prior to the close of business on the earlier of (a) the
third Business Day prior to the Change of Control Purchase Date and
(b) the third Business Day following the expiration of the Change of
Control Offer (such earlier date being the "Change of Control Put
Date");
(vi) that Holders will be entitled to withdraw their election,
in whole or in part, if the Paying Agent (which may not for purposes
of this Section 11.1, notwithstanding anything in this Indenture to
the contrary, be the Company or any Affiliate of the Company)
receives, up to the close of business (5:00 p.m. New York Time) on the
Change of Control Put Date, a telegram, telex, facsimile transmission
or letter setting forth the name of the Holder, the principal amount
of the Securities the Holder is withdrawing and a statement that such
Holder is withdrawing his election to have such principal amount of
Securities purchased; and
(vii) a brief description of the events resulting in such Change
of Control.
On or before the Change of Control Purchase Date, the Company will (i)
accept for payment Securities or portions thereof properly tendered and not
properly withdrawn pursuant to the Change of Control Offer, (ii) deposit with
the Paying Agent cash sufficient to pay the Change of Control Purchase Price
(together with accrued and unpaid interest) of all Securities so tendered and
- 90 -
<PAGE>
(iii) deliver to the Trustee Securities so accepted together with an Officers'
Certificate listing the Securities or portions thereof being purchased by the
Company. The Paying Agent promptly will deliver to the Holders of Securities so
accepted payment in an amount equal to the Change of Control Purchase Price
(together with any accrued and unpaid interest), and the Trustee will promptly
authenticate and mail or deliver to such Holders a new Security equal in
principal amount to any unpurchased portion of the Security surrendered. Any
Securities not so accepted will be promptly mailed or delivered by the Company
to the Holder thereof. The Company will announce publicly the results of the
Change of Control Offer on or as soon as practicable after the Change of Control
Purchase Date.
Any Change of Control Offer will be made in compliance with all
applicable laws, rules and regulations, including, if applicable, Regulation 14E
under the Exchange Act and the rules thereunder and all other applicable Federal
and state securities laws and the Company may modify a Change of Control Offer
to the extent necessary to effect such compliance.
ARTICLE XII
[RESERVED]
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. TIA Controls.
------------
If any provision of this Indenture limits, qualifies, or conflicts
with the duties imposed by operation of the TIA, the imposed duties, upon
qualification of this Indenture under the TIA, shall control.
SECTION 13.2. Notices.
-------
Any notices or other communications to the Company or the Trustee
required or permitted hereunder shall be in writing, and shall be sufficiently
given if made by hand delivery, by telex, by telecopier or registered or
certified mail, postage prepaid, return receipt requested, addressed as follows:
if to the Company:
American Cellular Corporation
1336 Basswood Street
Suite F
Schaumburg, Illinois 60173
- 91 -
<PAGE>
Attention: Chief Financial Officer
Telecopy: 847-843-9091
if to the Trustee:
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725
San Francisco, CA 94111
Attention: Hank Helley
Telecopy: 415-693-8850
Any party by notice to each other party may designate additional or
different addresses as shall be furnished in writing by such party. Any notice
or communication to any party shall be deemed to have been given or made as of
the date so delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if telecopied; and five Business Days after
mailing if sent by registered or certified mail, postage prepaid (except that a
notice of change of address shall not be deemed to have been given until
actually received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to him by first class mail or other equivalent means at his address as it
appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.3. Communications by Holders with Other Holders.
--------------------------------------------
Securityholders may communicate pursuant to TIA ss. 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other Person shall
have the protection of TIA ss. 312(c).
SECTION 13.4. Certificate and Opinion as to Conditions Precedent.
--------------------------------------------------
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, such Person shall furnish to the Trustee:
(1) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the
- 92 -
<PAGE>
signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied
with; and
(2) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such
counsel, all such conditions precedent have been complied with.
SECTION 13.5. Statements Required in Certificate or Opinion.
---------------------------------------------
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion
has read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained
in such certificate or opinion are based;
(3) a statement that, in the opinion of such Person, he has made such
examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each such
Person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an
Opinion of Counsel may rely on an Officers' Certificate or
certificates of public officials.
SECTION 13.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for its
functions.
SECTION 13.7. Legal Holidays.
--------------
A "Legal Holiday" is a Saturday, a Sunday or a day on which banking
institutions in New York, New York or San Francisco, California are authorized
or obligated by law or executive order to close. If a payment date is a Legal
Holiday at such place, payment may be made at such place on the next
- 93 -
<PAGE>
succeeding day that is not a Legal Holiday, and no interest shall accrue for the
intervening period.
SECTION 13.8. Governing Law.
-------------
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS
MADE AND PERFORMED WITHIN THE STATE OF NEW YORK. THE COMPANY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE AND THE SECURITIES, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT AND ANY CLAIM THAT ANY
SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT THE RIGHT OF THE TRUSTEE OR ANY
SECURITYHOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO
COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE COMPANY IN ANY OTHER
JURISDICTION.
SECTION 13.9. No Adverse Interpretation of Other Agreements.
---------------------------------------------
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any of its respective Subsidiaries. Any such
indenture, loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse against Others.
--------------------------
No direct or indirect employee, stockholder, director or officer, as
such, past, present or future of the Company, or any successor entity, shall
have any personal liability in respect of the obligations of the Company under
the Securities or this Indenture by reason of his or its status as such
stockholder, employee, director or officer. Each Securityholder by accepting a
Security waives
- 94 -
<PAGE>
and releases all such liability. Such waiver and release are part of the
consideration for the issuance of the Securities.
SECTION 13.11. Successors.
----------
All agreements of the Company in this Indenture and the Securities
shall bind its successor. All agreements of the Trustee in this Indenture shall
bind its successor.
SECTION 13.12. Duplicate Originals.
-------------------
All parties may sign any number of copies or counterparts of this
Indenture. Each signed copy or counterpart shall be an original, but all of them
together shall represent the same agreement.
SECTION 13.13. Severability.
------------
In case any one or more of the provisions in this Indenture or in the
Securities shall be held invalid, illegal or unenforceable, in any respect for
any reason, the validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions shall not in any way be
affected or impaired thereby, it being intended that all of the provisions
hereof shall be enforceable to the full extent permitted by law.
SECTION 13.14. Table of Contents, Headings, Etc.
---------------------------------
The Table of Contents, Cross-Reference Table and headings of the
Articles and the Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 13.15. Qualification of Indenture.
--------------------------
The Company shall qualify this Indenture under the TIA in accordance
with the terms and conditions of the Registration Rights Agreement and shall pay
all costs and expenses (including attorneys' fees for the Company and the
Trustee) incurred in connection therewith, including, but not limited to, costs
and expenses of qualification of the Indenture and the Securities and printing
this Indenture and the Securities. The Trustee shall be entitled to receive from
the Company any such Officers' Certificates, Opinions of Counsel or other
documentation as it may reasonably request in connection with any such
qualification of this Indenture under the TIA.
- 95 -
<PAGE>
SECTION 13.16. Registration Rights.
-------------------
Certain Holders of the Securities are entitled to certain registration
rights with respect to such Securities pursuant to, and subject to the terms of,
the Registration Rights Agreement.
- 96 -
<PAGE>
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
AMERICAN CELLULAR
CORPORATION,
a Delaware corporation
By: /s/ Mark Pelson
____________________________
Name: Mark Pelson
Title: Vice President
CHASE MANHATTAN BANK
AND TRUST COMPANY, NATIONAL
ASSOCIATION,
Trustee
By: /s/ Hans H. Helley
____________________________
Name: Hans H. Helley
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[FORM OF SECURITY]
10 1/2% SERIES [A/B] SENIOR NOTE DUE 2008
No. $______________
CUSIP No.
American Cellular Corporation, a Delaware corporation (hereinafter
called the "Company," which term includes any successors under the Indenture
hereinafter referred to), for value received, hereby promises to pay to Cede &
Co., or registered assigns, the principal sum of $_____________ Dollars, on May
15, 2008.
Interest Payment Dates: May 15 and November 15;
commencing November 15, 1998.
Record Dates: May 1 and November 1.
Reference is made to the further provisions of this Security on the
reverse side, which will, for all purposes, have the same effect as if set forth
at this place.
A-1
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Instrument to be duly
executed under its corporate seal.
Dated:
AMERICAN CELLULAR
CORPORATION,
a Delaware corporation
By:
_______________________________
Name:
Title:
By:
_______________________________
Name:
Title:
A-2
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the Securities described in the within-mentioned
Indenture.
CHASE MANHATTAN BANK AND
TRUST COMPANY, NATIONAL
ASSOCIATION,
as Trustee
By:
_______________________________
Authorized Signatory
Dated:
A-3
<PAGE>
AMERICAN CELLULAR CORPORATION
10 1/2% Series [A/B] Senior Note due 2008
Unless and until it is exchanged in whole or in part for Securities in
definitive form, this Security may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation, ("DTC"), to the Company
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or in such other name
as is requested by an authorized representative of DTC (and any payment is made
to Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.(1)
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A")) OR (B) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION, (2)
AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY PRIOR TO THE DATE
WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE
LAST DATE ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF
THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY) ONLY (A) TO THE COMPANY, (B)
PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A INSIDE THE UNITED STATES,
___________________________
(1) This paragraph should only be added if the Security is issued in global
form.
A-4
<PAGE>
TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, (D) OUTSIDE THE UNITED STATES PURSUANT TO OFFERS
AND SALE TO NON-U.S. PERSONS IN AN OFFSHORE TRANSACTION WITHIN THE MEANING OF
REGULATION S UNDER THE SECURITIES ACT OR (E) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO
THE COMPANY'S AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER
(I) PURSUANT TO CLAUSES (D) OR (E) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM,
AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE TRUSTEE. AS USED HEREIN, THE TERMS
"UNITED STATES," "OFFSHORE TRANSACTION," AND "U.S. PERSON" HAVE THE RESPECTIVE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.(2)
1. Interest.
American Cellular Corporation, a Delaware corporation (hereinafter
called the "Company," which term includes any successors under the Indenture
hereinafter referred to), promises to pay interest on the principal amount of
this Security at the rate and in the manner specified below. Interest will
accrue at 10 1/2% per annum and will be payable semi-annually in cash on each
May 15 and November 15, commencing November 15, 1998, or if any such day is not
a Business Day on the next succeeding Business Day (each an "Interest Payment
Date") to Holders of record of the Securities at the close of business on the
immediately preceding May 1 or November 1, whether or not a Business Day (each,
a "Record Date").
The Holder of this Series A Security is entitled to the benefits of
the Registration Rights Agreement among the Company and the Initial Purchasers,
____________________________
(2) This Private Placement Legend should appear on the face of any Series A
Securities authenticated and delivered hereunder unless and until (i) an Initial
Security is sold under an effective Registration Statement or (ii) an Initial
Security is exchanged for a Series B Security in connection with an effective
Registration Statement, in each case pursuant to the Registration Rights
Agreement.
A-5
<PAGE>
dated May 13, 1998, pursuant to which, subject to the terms and conditions
thereof, the Company is obligated to consummate the Exchange Offer pursuant to
which the Holder of this Security shall have the right to exchange this Security
for 10 1/2% Senior Notes due 2008, Series B (herein called the "Series B
Securities") in like principal amount as provided therein. The Series A
Securities and the Series B Securities are together referred to as the
"Securities." The Series A Securities rank pari passu in right of payment with
the Series B Securities.
In the event that (a) the Exchange Offer Registration Statement is not
filed with the Commission on or prior to the 60th calendar day following the
Merger Date, (b) the Exchange Offer Registration Statement has not been declared
effective on or prior to the 120th calendar day following the Merger Date or (c)
the Exchange Offer is not consummated or a Shelf Registration Statement is not
declared effective, in either case, on or prior to the 150th calendar day
following the Merger Date (each such event referred to in clauses (a) through
(c) above, a "Registration Default"), the interest rate borne by the Series A
Securities shall be increased by one-quarter of one percent per annum upon the
occurrence of each Registration Default, which rate (as increased as aforesaid)
will increase by an additional one quarter of one percent each 90-day period
that such additional interest continues to accrue under any such circumstance,
with an aggregate maximum increase in the interest rate equal to one percent
(1%) per annum. Following the cure of all Registration Defaults the accrual of
additional interest will cease and the interest rate will revert to the original
rate. Interest will be computed on the basis of a 360-day year consisting of
twelve 30-day months. Interest shall accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance. To the extent lawful, the Company shall pay interest on overdue
principal at the rate of the then applicable interest rate on the Securities; it
shall pay interest on overdue installments of interest (without regard to any
applicable grace periods) at the same rate to the extent lawful.
2. Method of Payment.
The Company shall pay interest on the Securities (except defaulted
interest) to the Persons who are the registered Holders at the close of business
on the Record Date immediately preceding the Interest Payment Date. Holders must
surrender Securities to a Paying Agent to collect principal payments. Except as
provided below, the Company shall pay principal and interest in such coin or
currency of the United States of America as at the time of payment shall be
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal and interest by wire transfer of Federal
funds, or interest by its check payable in such U.S. Legal Tender. The Company
may deliver
A-6
<PAGE>
any such interest payment to the Paying Agent or the Company may mail any such
interest payment to a Holder at the Holder's registered address.
3. Paying Agent and Registrar.
Initially, Chase Manhattan Bank and Trust Company, National
Association (the "Trustee") will act as Paying Agent and Registrar. The Company
may change any Paying Agent, Registrar or co-Registrar without notice to the
Holders. The Company or any of its Subsidiaries may, subject to certain
exceptions, act as Paying Agent, Registrar or co-Registrar.
4. Indenture.
The Company issued the Securities under an Indenture, dated as of May
13, 1998 (the "Indenture"), between the Company and the Trustee. Capitalized
terms herein are used as defined in the Indenture unless otherwise defined
herein. The terms of the Securities include those stated in the Indenture and
those made part of the Indenture by reference to the Trust Indenture Act, as in
effect on the date of the Indenture. The Securities are subject to all such
terms, and Holders of Securities are referred to the Indenture and said Act for
a statement of them. The Securities are general obligations of the Company
limited in aggregate principal amount to $285,000,000.
5. Redemption.
The Securities are subject to redemption at any time on or after May
15, 2003, at the option of the Company, in whole or in part, on not less then 30
nor more than 60 days' prior notice, in amounts of $1,000 or an integral
multiple thereof, at the following redemption prices (expressed as percentages
of the principal amount), if redeemed during the 12 month period beginning May
15 of the years indicated below:
<TABLE>
<CAPTION>
Year Redemption Price
--- ----------------
<S> <C>
2003..................................... 105.250%
2004..................................... 103.500%
2005..................................... 101.750%
2006 and thereafter...................... 100.000%
</TABLE>
In addition, at any time prior to May 15, 2001, the Company, at its
option, may use the net cash proceeds of one or more Public Equity Offerings or
Strategic Equity Offerings in a single transaction or a series of related
transactions to redeem up to an aggregate of 35% of the aggregate principal
amount of Securities originally issued under this Indenture at a redemption
price equal to
A-7
<PAGE>
110.5% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon, if any, to the Redemption Date; provided that at least 65% of
the initial aggregate principal amount of Securities remains outstanding
immediately after the occurrence of such redemption. In order to effect the
foregoing redemption, the Company must mail a notice of redemption no later than
30 days after the closing of the related Public Equity Offering or Strategic
Equity Offering and must consummate such redemption within 60 days of the
closing of the Public Equity Offering or Strategic Equity Offering.
In the case of a partial redemption, the Trustee shall select the
Securities or portions thereof for redemption on a pro rata basis, by lot, or in
such other manner as it deems appropriate and fair. The Securities may be
redeemed in part in multiples of $1,000 only.
Any such redemption will comply with Article III of the Indenture.
6. Notice of Redemption.
Notice of redemption will be sent by first class mail, at least 30
days and not more than 60 days prior to the Redemption Date to the Holder of
each Security to be redeemed at such Holder's last address as then shown upon
the registry books of the Registrar.
Notice of a Special Mandatory Redemption will be given upon seven
days' prior written notice to the Holders.
Any notice which relates to a Security to be redeemed in part only
must state the portion of the principal amount to be redeemed and must state
that on and after the date fixed for redemption, upon surrender of such
Security, a new Security or Securities in a principal amount equal to the
unredeemed portion thereof will be issued. On and after the date fixed for
redemption, interest will cease to accrue on the portions of the Securities
called for redemption.
7. Denominations; Transfer; Exchange.
The Securities are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of, or exchange Securities in accordance with, the Indenture. The
Registrar may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and to pay any taxes and fees required by
law or permitted by the Indenture. The Registrar need not register the transfer
of or exchange any Securities selected for redemption prior to 15 days after the
notice of redemption.
A-8
<PAGE>
8. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
9. Unclaimed Money.
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee and the Paying Agent(s) will pay the money back to
the Company. After that, all liability of the Trustee and such Paying Agent(s)
with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
Except as set forth in the Indenture, if the Company irrevocably
deposits with the Trustee, in trust, for the benefit of the Holders, U.S. Legal
Tender and Government Securities or a combination thereof, in such amounts as
will be sufficient in the opinion of a nationally recognized firm of independent
public accountants selected by the Trustee, to pay the principal of, premium, if
any, and interest on the Securities to redemption or maturity and comply with
the other provisions of the Indenture relating thereto, the Company will be
discharged from certain provisions of the Indenture and the Securities
(including the financial covenants, but excluding their obligation to pay the
principal of and interest on the Securities). Upon satisfaction of certain
additional conditions set forth in the Indenture, the Company may elect to have
its obligations discharged with respect to outstanding Securities.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may be
amended or supplemented with the written consent of the Holders of at least a
majority in aggregate principal amount of the Securities then outstanding, and
any existing Default or Event of Default or compliance with any provision may be
waived with the consent of the Holders of a majority in aggregate principal
amount of the Securities then outstanding. Without notice to or consent of any
Holder, the parties thereto may amend or supplement the Indenture or the
Securities to, among other things, cure any ambiguity, defect or inconsistency,
or make any other change that does not adversely affect the rights of any Holder
of a Security.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to, among other things, incur additional
Indebtedness and Disqualified Capital Stock, pay dividends or make certain other
A-9
<PAGE>
restricted payments, enter into certain transactions with Affiliates, incur
Liens, sell assets, merge or consolidate with any other Person or transfer (by
lease, assignment or otherwise) substantially all of the properties and assets
of the Company. The limitations are subject to a number of important
qualifications and exceptions. The Company must periodically report to the
Trustee on compliance with such limitations.
13. Repurchase at Option of Holder; Special Mandatory Redemption.
(a) If there is a Change of Control, the Company shall be required to
offer to purchase on the Change of Control Purchase Date all outstanding
Securities at a purchase price equal to 101% of the principal amount thereof,
together with any accrued and unpaid interest, to the Change of Control Purchase
Date. Holders of Securities will receive a Change of Control Offer from the
Company prior to any related Change of Control Purchase Date and may elect to
have such Securities purchased by properly tendering such Securities pursuant to
the Change of Control Offer.
(b) The Indenture imposes certain limitations on the ability of the
Company and its Restricted Subsidiaries to sell assets. In the event the
proceeds from a permitted Asset Sale exceed certain amounts, as specified in the
Indenture, the Company will be required either to reinvest the proceeds of such
Asset Sale as described in the Indenture or to make an offer to purchase each
Holder's Securities at 100% of the principal amount thereof, plus accrued
interest, if any, to the purchase date.
(c) If the consummation of the Merger has not occurred on or prior to
the earlier to occur of (i) termination of the Merger Agreement or (ii) 150 days
after the Issue Date if the Escrow Funds have not been released by that time
(provided that the 150-day period may be extended at the option of the Company
up to an additional 120 days if the Extension Condition has been satisfied) the
Company is required to purchase all of the outstanding Securities with the
Escrow Funds, at a redemption price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of redemption.
14. Successors.
When a successor assumes all the obligations of its predecessor under
the Securities and the Indenture, the predecessor will be released from those
obligations.
A-10
<PAGE>
15. Defaults and Remedies.
If an Event of Default occurs and is continuing (other than as Event
of Default relating to certain events of bankruptcy, insolvency or
reorganization), then in every such case, unless the principal of all of the
Securities shall have already become due and payable, either the Trustee or the
Holders of 25% in aggregate principal amount of Securities then outstanding may
declare all the Securities to be due and payable immediately in the manner and
with the effect provided in the Indenture. The Holders of Securities may not
enforce the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of a
majority in aggregate principal amount of the Securities then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Securities notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest), if it determines
that withholding notice is in their interest.
16. Collateral.
The payment of the Securities will be secured by Pledged Securities
held in an account to secure and fund the first six scheduled interest payments
on the Securities. Once the first six scheduled interest payments are made, the
Securities will be unsecured.
17. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, perform investment advisory
or other management services and perform services for the Company or its
Affiliates, and may otherwise deal with the Company or its Affiliates as if it
were not the Trustee.
18. No Recourse Against Others.
No stockholder, director, officer or employee, as such, past, present
or future, of the Company or any successor corporation shall have any personal
liability in respect of the obligations of the Company under the Securities or
the Indenture by reason of his or its status as such stockholder, director,
officer or employee. Each Holder of a Security by accepting a Security waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
A-11
<PAGE>
19. Authentication.
This Security shall not be valid until the Trustee or authenticating
agent signs the certificate of authentication on the other side of this
Security.
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
22. Additional Rights of Holders of Transfer Restricted Securities.
In addition to the rights provided to Holders of Securities under the
Indenture, Holders of Securities shall have all the rights set forth in the
Registration Rights Agreement.
A-12
<PAGE>
[FORM OF] ASSIGNMENT
I or we assign this Security to
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number of assignee
_______________________
and irrevocably appoint __________ agent to transfer this Security on the books
of the Company. The agent may substitute another to act for him.
Dated: __________ Signed: ______________________________
_______________________________________________________________________________
(Sign exactly as name appears on
the other side of this Security)
Signature(s) must be guaranteed by an eligible guarantor institution (banks,
stock brokers, savings and loan associations and credit unions with membership
in an approved signature guarantee medallion program) pursuant to Securities and
Exchange Commission Rule 17Ad-15.
A-13
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.14 or Article XI of the Indenture, check the appropriate
box:
|_| Section 4.14 |_| Article XI If you want to elect to have only
part of this Security purchased by the Company pursuant to Section 4.14 or
Article XI of the Indenture, as the case may be, state the principal amount you
want to be purchased: $__________
Date: ________________ Signature: ___________________________________
(Sign exactly as your
name appears on the
other side of this Security)
A-14
<PAGE>
SCHEDULE OF EXCHANGES OF DEFINITIVE SECURITIES(3)
The following exchanges of a part of this Global Security for
Definitive Securities have been made:
<TABLE>
<CAPTION>
Principal
Amount of Amount of Amount of Signature of
decrease in increase in this Global authorized
Principal Principal Security officer of
Amount of Amount of following such Trustee or
Date of this Global this Global decrease (or Securities
Exchange Security Security increase) Custodian
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
</TABLE>
_______________________
(3) This schedule should only be added if the Security is issued in global
form.
A-15
<PAGE>
EXHIBIT B
REGULATION S CERTIFICATE
(For transfers pursuant to (S) 2.15(a)(i) of the Indenture)
Chase Manhattan Bank and Trust Company, National Association
101 California Street
Suite 2725
San Francisco, California 94111
Re: 10 1/2% Senior Notes due 2008 of American Cellular Corporation
(the "Securities")
Reference is made to the Indenture, dated as of May 13, 1998 (the
"Indenture"), between American Cellular Corporation, a Delaware corporation (the
"Company"), and Chase Manhattan Bank and Trust Company, National Association, as
Trustee. Terms used herein and defined in the Indenture or in Regulation S or
Rule 144 under the U.S. Securities Act of 1933 (the "Securities Act") are used
herein as so defined.
This certificate relates to US$____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). ______________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner." The Specified Securities are represented by a Global Security and are
held through the Depositary or an Agent Member in the name of the Undersigned,
as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Regulation S Global Security. In connection with such transfer, the Owner
hereby certifies that, unless such transfer is being effected pursuant to an
effective registration statement under the Securities Act, it is being effected
in accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
B-1
<PAGE>
(1) Rule 904 Transfers. If the transfer is being effected in
------------------
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities, an
affiliate of the Company or any such distributor or a person acting on
behalf of any of the foregoing;
(B) the offer of the Specified Securities was not made to a
person in the United States;
(C) either:
(i) at the time the buy order was originated, the
Transferee was outside the United States or the Owner and
any person acting on its behalf reasonably believed that the
Transferee was outside the United States, or
(ii) the transaction is being executed in, on or
through the facilities of the Eurobond market, as regulated
by the Association of International Bond Dealers, or another
designated offshore securities market and neither the Owner
nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United
States;
(D) no directed selling efforts have been made in the United
States by or on behalf of the Owner or any affiliate thereof;
(E) if the Owner is a dealer in securities or has received a
selling concession, fee or other remuneration in respect of the
Specified Securities, and the transfer is to occur during the
Restricted Period, then the requirements of Rule 904(c)(1) have been
satisfied; and
(F) the transaction is not part of a plan or scheme to evade
the registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected
------------------
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
B-2
<PAGE>
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
________________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
B-3
<PAGE>
EXHIBIT C
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to (S) 2.15(a)(ii) of the Indenture)
Chase Manhattan Bank and Trust Company, National Association
101 California Street
Suite 2725
San Francisco, California 94111
Re: 10 1/2% Senior Notes due 2008 of American Cellular Corporation
(the "Securities")
Reference is made to the Indenture, dated as of May 13, 1998 (the
"Indenture"), between American Cellular Corporation, a Delaware corporation (the
"Company") and Chase Manhattan Bank and Trust Company, National Association, as
Trustee. Terms used herein and defined in the Indenture or in Rule 144A or Rule
144 under the U.S. Securities Act of 1933 (the "Securities Act") are used herein
as so defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
ISIN No(s). If any. __________________
CERTIFICATE No(s). _______________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner." The Specified Securities are represented by a Global Security and are
held through the Depositary or an Agent Member in the name of the Undersigned,
as or on behalf of the Owner.
The Owner has requested that the Specified Securities be transferred
to a person (the "Transferee") who will take delivery in the form of a
Restricted Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 144A or Rule 144 under the Securities Act and all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
C-1
<PAGE>
(1) Rule 144A Transfers. If the transfer is being effected in
-------------------
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional buyer" within the meaning of
Rule 144A, acquiring for its own account or for the account of a
qualified institutional buyer; and
(B) the Owner and any person acting on its behalf have taken
reasonable steps to ensure that the Transferee is aware that the Owner
may be relying on Rule 144A in connection with the transfer; and
(2) Rule 144 Transfers. If the transfer is being effected
------------------
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the Specified Securities were last acquired from the
Company or from an affiliate of the Company, whichever is later, and
is being effected in accordance with the applicable amount, manner of
sale and notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period of at
least two years has elapsed since the Specified Securities were last
acquired from the Company or from an affiliate of the Company,
whichever is later, and the Owner is not, and during the preceding
three months has not been, an affiliate of the Company.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
___________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
C-2
<PAGE>
EXHIBIT D
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to (S) 2.15(b))
Chase Manhattan Bank and Trust Company, National Association
101 California Street
Suite 2725
San Francisco, California 94111
Re: 10 1/2% Senior Notes due 2008 of American Cellular Corporation
(the "Securities")
Reference is made to the Indenture, dated as of May 13, 1998 (the
"Indenture"), between American Cellular Corporation, a Delaware corporation (the
"Company"), and Chase Manhattan Bank and Trust Company, National Association, as
Trustee. Terms used herein and defined in the Indenture or in Rule 144 under
the U.S. Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to US$_____________ principal amount of
Securities, which are evidenced by the following certificate(s) (the "Specified
Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). ______________________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole beneficial owner
of the Specified Securities or (ii) it is acting on behalf of all the beneficial
owners of the Specified Securities and is duly authorized by them to do so.
Such beneficial owner or owners are referred to herein collectively as the
"Owner". If the Specified Securities are represented by a Global Security, they
are held through the Depositary or an Agent Member in the name of the
Undersigned, as or on behalf of the Owner. If the Specified Securities are not
represented by a Global Security, they are registered in the name of the
Undersigned, as or on behalf of the Owner.
The Owner has requested that the Specified Securities be exchanged for
Securities bearing no Private Placement Legend pursuant to Section 2.15(b) of
the Indenture. In connection with such exchange, the Owner hereby certifies
that the exchange is occurring after a holding period of at least two years
(computed in accordance with paragraph (d) of Rule 144) has elapsed since the
Specified Securities were last acquired from the Company or from an affiliate of
the Company, whichever is later, and the Owner is not, and during the preceding
three months has not been, an
D-1
<PAGE>
affiliate of the Company. The Owner also acknowledges that any future transfers
of the Specified Securities must comply with all applicable securities laws of
the states of the United States and other jurisdictions.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company and the Initial Purchasers.
Dated:
(Print the name of the Undersigned, as such term
is defined in the second paragraph of this
certificate.)
By:
____________________________________
Name:
Title:
(If the Undersigned is a corporation, partnership
or fiduciary, the title of the person signing on
behalf of the Undersigned must be stated.)
D-2
<PAGE>
EXHIBIT E
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
-----------------------------------------------------------
If to the Company:
Name Telephone Number
- ---- ----------------
1. John Fujii (847) 843-9081
2. Brian McTernan (847) 843-9081
E-1
<PAGE>
EXHIBIT 4.3
------------------------
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 13, 1998
AMONG
AMERICAN CELLULAR CORPORATION (A DELAWARE CORPORATION)
AND
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
TD SECURITIES (USA) INC.
AND
WASSERSTEIN PERELLA SECURITIES, INC.
--------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and
entered into this 13th day May, 1998, among American Cellular Corporation, a
Delaware corporation (the "Company"), and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, TD Securities (USA) Inc. and Wasserstein Perella Securities, Inc.,
(collectively, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated May
6, 1998, among the Company and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchasers of an aggregate of $285 million principal amount of the Company's 10
1/2% Senior Notes due 2008, Series A (the "Securities"). In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide to the Initial Purchasers and their direct and indirect transferees
the registration rights set forth in this Agreement. The execution of this
Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
--------
to time.
"1934 Act" shall mean the Securities Exchange Act of l934, as amended
--------
from time to time.
"Closing Date" shall mean the Closing Time as defined in the Purchase
------------
Agreement.
"Company" shall have the meaning set forth in the preamble and shall
-------
also include the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
----------
depositary appointed by the Company, provided, however, that such
depositary must have an address in the Borough of Manhattan, in the City
of New York.
"Exchange Offer" shall mean the exchange offer by the Company of
--------------
Exchange Securities for Registrable Securities pursuant to Section 2.1
hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
---------------------------
Act effected pursuant to Section 2.1 hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such
registration statement, including the Prospectus
-1-
<PAGE>
contained therein, all exhibits thereto and all documents incorporated by
reference therein.
"Exchange Period" shall have the meaning set forth in Section 2.1
---------------
hereof.
"Exchange Securities" shall mean, collectively, the 10 1/2% Senior
-------------------
Notes due 2008, Series B issued by the Company under the Indenture,
containing terms identical to the Securities in all material respects
(except for references to certain interest rate provisions, restrictions
on transfers and restrictive legends), to be offered to Holders of
Securities in exchange for Registrable Securities pursuant to the
Exchange Offer.
"Holder" shall mean an Initial Purchaser, for so long as it owns any
------
Registrable Securities, and each of its successors, assigns and direct
and indirect transferees who become registered owners of Registrable
Securities under the Indenture and each Participating Broker-Dealer that
holds Exchange Securities for so long as such Participating Broker-Dealer
is required to deliver a prospectus meeting the requirements of the 1933
Act in connection with any resale of such Exchange Securities.
"Indenture" shall mean the Indenture relating to the Securities and
---------
the Exchange Securities, dated as of May 13, 1998, between the Company
and Chase Manhattan Bank and Trust Company, National Association, as
trustee, as the same may be amended, supplemented, waived or otherwise
modified from time to time in accordance with the terms thereof.
"Initial Purchaser" or "Initial Purchasers" shall have the meaning set
----------------- ------------------
forth in the preamble.
"Majority Holders" shall mean the Holders of a majority of the
----------------
aggregate principal amount of Outstanding (as defined in the Indenture)
Registrable Securities; provided that whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company and other obligors
on the Securities or any Affiliate (as defined in the Indenture) of the
Company shall be disregarded in determining whether such consent or
approval was given by the Holders of such required percentage amount.
"Merger Date" shall mean the date of closing of the merger of the
-----------
Company with and into PriCellular Corporation, a Delaware corporation
("PriCellular"), as contemplated by the Merger Agreement, dated as of
March 6, 1998, between the Company and PriCellular.
"Participating Broker-Dealer" shall mean any of Merrill Lynch, Pierce,
---------------------------
Fenner & Smith Incorporated, TD Securities (USA) Inc., Wasserstein
Perella Securities, Inc. or any other broker-dealer which makes a market
in the Securities and exchanges Registrable Securities in the Exchange
Offer for Exchange Securities.
-2-
<PAGE>
"Person" shall mean an individual, partnership (general or limited),
------
corporation, limited liability company, trust or unincorporated
organization, or a government or agency or political subdivision thereof.
"Private Exchange" shall have the meaning set forth in Section 2.1
----------------
hereof.
"Private Exchange Securities" shall have the meaning set forth in
---------------------------
Section 2.1 hereof.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including any
such prospectus supplement with respect to the terms of the offering of
any portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
------------------
"Registrable Securities" shall mean, collectively, the Securities and,
----------------------
if issued, the Private Exchange Securities; provided, however, that
Securities and, if issued, the Private Exchange Securities, shall cease
to be Registrable Securities when (i) a Registration Statement with
respect to such Securities shall have been declared effective under the
1933 Act and such Securities shall have been disposed of pursuant to such
Registration Statement, (ii) such Securities have been sold to the public
pursuant to Rule l44 (or any similar provision then in force, but not
Rule 144A) under the 1933 Act, (iii) such Securities shall have ceased to
be outstanding or (iv) the Exchange Offer is consummated (except in the
case of Securities purchased from the Company and continued to be held by
the Initial Purchasers).
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement,
including without limitation: (i) all SEC, stock exchange or National
Association of Securities Dealers, Inc. (the "NASD") registration and
filing fees, including, if applicable, the fees and expenses of any
"qualified independent underwriter" (and its counsel) that is required to
be retained by any holder of Registrable Securities in accordance with
the rules and regulations of the NASD, (ii) all fees and expenses
incurred in connection with compliance with state securities or blue sky
laws and compliance with the rules of the NASD (including reasonable fees
and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange Securities
or Registrable Securities and any filings with the NASD), (iii) all
expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to
the performance of and compliance with this Agreement, (iv) all fees and
expenses incurred in connection with the listing, if any, of any of the
Registrable Securities on any
-3-
<PAGE>
securities exchange or exchanges, (v) all rating agency fees, (vi) the
fees and disbursements of counsel for the Company and of the independent
public accountants of the Company, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, (vii) the fees and expenses of the Trustee,
and any escrow agent or custodian and (viii) any fees and disbursements
of the underwriters customarily required to be paid by issuers or sellers
of securities and the fees and expenses of any special experts retained
by the Company in connection with any Registration Statement, but
excluding underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of Registrable Securities by a
Holder.
"Registration Statement" shall mean any registration statement of the
----------------------
Company which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"SEC" shall mean the Securities and Exchange Commission or any
---
successor agency or government body performing the functions currently
performed by the United States Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
------------------
Section 2.2 hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
----------------------------
statement of the Company pursuant to the provisions of Section 2.2 of
this Agreement which covers all of the Registrable Securities or all of
the Private Exchange Securities on an appropriate form under Rule 415
under the 1933 Act, or any similar rule that may be adopted by the SEC,
and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Securities and
-------
the Exchange Securities under the Indenture.
2. Registration Under the 1933 Act.
-------------------------------
2.1 Exchange Offer. The Company shall, for the benefit of the
--------------
Holders, at the Company's cost, use its best efforts (A) to prepare and, as soon
as practicable but not later than 60 days following the Merger Date, file with
the SEC an Exchange Offer Registration Statement on an appropriate form under
the 1933 Act with respect to a proposed Exchange Offer and the issuance and
delivery to the Holders, in exchange for the Registrable Securities (other than
Private Exchange Securities), of a like principal amount of Exchange Securities,
(B) to cause the Exchange Offer Registration Statement to be declared effective
under the 1933 Act within 120 days of the Merger Date, (C) to keep the Exchange
Offer Registration Statement effective
-4-
<PAGE>
until the closing of the Exchange Offer and (D) to cause the Exchange Offer to
be consummated not later than 150 days following the Merger Date. The Exchange
Securities will be issued under the Indenture. Upon the effectiveness of the
Exchange Offer Registration Statement, the Company shall promptly commence the
Exchange Offer, it being the objective of such Exchange Offer to enable each
Holder eligible and electing to exchange Registrable Securities for Exchange
Securities (assuming that such Holder (a) is not an affiliate of the Company
within the meaning of Rule 405 under the 1933 Act, (b) is not a broker-dealer
tendering Registrable Securities acquired directly from the Company for its own
account, (c) acquired or will acquire the Exchange Securities in the ordinary
course of such Holder's business and (d) has no arrangements or understandings
with any Person to participate in the Exchange Offer for the purpose of
distributing the Exchange Securities) to transfer such Exchange Securities from
and after their receipt without any limitations or restrictions under the 1933
Act and under state securities or blue sky laws.
In connection with the Exchange Offer, the Company shall:
(a) mail as promptly as practicable to each Holder a copy of
the Prospectus forming part of the Exchange Offer Registration Statement,
together with an appropriate letter of transmittal and related documents;
(b) keep the Exchange Offer open for acceptance for a period of
not less than 30 calendar days after the date notice thereof is mailed to the
Holders (or longer if required by applicable law) (such period referred to
herein as the "Exchange Period");
(c) utilize the services of the Depositary for the Exchange
Offer;
(d) permit Holders to withdraw tendered Registrable Securities
at any time prior to 5:00 p.m. (Eastern Time), on the last business day of the
Exchange Period, by sending to the institution specified in the notice, a
telegram, telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Securities delivered for exchange,
and a statement that such Holder is withdrawing such Holder's election to have
such Securities exchanged;
(e) notify each Holder that any Registrable Security not
tendered will remain outstanding and continue to accrue interest, but will not
retain any rights under this Agreement (except in the case of the Initial
Purchasers and Participating Broker-Dealers as provided herein); and
(f) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Securities acquired by them and having the status of an
unsold allotment in the initial distribution, the Company upon the request of
any Initial Purchaser shall, simultaneously with the delivery of the Exchange
Securities in the Exchange Offer, issue and deliver to such Initial Purchaser in
exchange (the "Private Exchange") for the Securities held by such Initial
Purchaser, a like
-5-
<PAGE>
principal amount of debt securities of the Company on a senior basis that are
identical (except that such securities shall bear appropriate transfer
restrictions) to the Exchange Securities (the "Private Exchange Securities").
The Exchange Securities and the Private Exchange Securities shall be
issued under (i) the Indenture or (ii) an indenture identical in all material
respects to the Indenture and which, in either case, has been qualified under
the Trust Indenture Act of 1939, as amended (the "TIA"), or is exempt from such
qualification and shall provide that the Exchange Securities shall not be
subject to the transfer restrictions set forth in the Indenture but that the
Private Exchange Securities shall be subject to such transfer restrictions. The
Indenture or such indenture shall provide that the Exchange Securities, the
Private Exchange Securities and the Securities shall vote and consent together
on all matters as one class and that none of the Exchange Securities, the
Private Exchange Securities or the Securities will have the right to vote or
consent as a separate class on any matter. The Private Exchange Securities
shall be of the same series as and the Company shall use all commercially
reasonable efforts to have the Private Exchange Securities bear the same CUSIP
number as the Exchange Securities. The Company shall not have any liability
under this Agreement solely as a result of such Private Exchange Securities not
bearing the same CUSIP number as the Exchange Securities.
As soon as practicable after the close of the Exchange Offer and/or
the Private Exchange, as the case may be, the Company shall:
(i) accept for exchange all Registrable Securities duly tendered
and not validly withdrawn pursuant to the Exchange Offer in accordance
with the terms of the Exchange Offer Registration Statement and the
letter of transmittal which shall be an exhibit thereto;
(ii) accept for exchange all Securities properly tendered
pursuant to the Private Exchange;
(iii) deliver to the Trustee for cancellation all Registrable
Securities so accepted for exchange; and
(iv) cause the Trustee promptly to authenticate and deliver
Exchange Securities or Private Exchange Securities, as the case may
be, to each Holder of Registrable Securities so accepted for exchange
in a principal amount equal to the principal amount of the Registrable
Securities of such Holder so accepted for exchange.
Interest on each Exchange Security and Private Exchange Security will
accrue from the last date on which interest was paid on the Registrable
Securities surrendered in exchange therefor or, if no interest has been paid on
the Registrable Securities, from the date of original issuance. The Exchange
Offer and the Private Exchange shall not be subject to any conditions, other
than (i) that the Exchange Offer or the Private Exchange, or the making of any
exchange by a Holder, does not violate applicable law or any applicable
interpretation of the staff of the SEC, (ii) the due tendering of Registrable
Securities in accordance with the Exchange Offer
-6-
<PAGE>
and the Private Exchange, (iii) that each Holder of Registrable Securities
exchanged in the Exchange Offer shall have represented that all Exchange
Securities to be received by it shall be acquired in the ordinary course of its
business and that at the time of the consummation of the Exchange Offer it shall
have no arrangement or understanding with any person to participate in the
distribution (within the meaning of the 1933 Act) of the Exchange Securities and
shall have made such other representations as may be reasonably necessary under
applicable SEC rules, regulations or interpretations to render the use of Form
S-4 or other appropriate form under the 1933 Act available and (iv) that no
action or proceeding shall have been instituted or threatened in any court or by
or before any governmental agency with respect to the Exchange Offer or the
Private Exchange which, in the Company's judgment, would reasonably be expected
to impair the ability of the Company to proceed with the Exchange Offer or the
Private Exchange. The Company shall inform the Initial Purchasers of the names
and addresses of the Holders to whom the Exchange Offer is made, and the Initial
Purchasers shall have the right to contact such Holders and otherwise facilitate
the tender of Registrable Securities in the Exchange Offer.
2.2 Shelf Registration. (i) If, because of any changes in law, SEC
------------------
rules or regulations or applicable interpretations thereof by the staff of the
SEC, the Company is not permitted to effect the Exchange Offer as contemplated
by Section 2.1 hereof, (ii) if for any other reason the Exchange Offer
Registration Statement is not declared effective within 120 days following the
Merger Date or the Exchange Offer is not consummated within 150 days following
the Merger Date, (iii) upon the request of any of the Initial Purchasers if any
such Initial Purchaser holds Securities acquired as part of an unsold allotment
or as to which such Initial Purchaser does not believe it would receive freely
tradeable securities if exchanged in the Exchange Offer or (iv) if a Holder is
not permitted to participate in the Exchange Offer or does not receive fully
tradeable Exchange Securities pursuant to the Exchange Offer, then in case of
each of clauses (i) through (iv) the Company shall, at its cost:
(a) As promptly as practicable, file with the SEC, and thereafter
shall use their best efforts to cause to be declared effective as promptly as
practicable but no later than 150 days after the Merger Date, a Shelf
Registration Statement relating to the offer and sale of the Registrable
Securities by the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders participating in the Shelf
Registration and set forth in such Shelf Registration Statement.
(b) Use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part thereof to
be usable by Holders for a period of two years from the date the Shelf
Registration Statement is declared effective by the SEC, or for such shorter
period that will terminate when all Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement or cease to be outstanding or otherwise to be Registrable Securities
(the "Effectiveness Period"); provided, however, that the Effectiveness Period
in respect of the Shelf Registration Statement shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements of Rule 174 under the 1933 Act and as otherwise provided herein.
-7-
<PAGE>
(c) Notwithstanding any other provisions hereof, use its best efforts
to ensure that (i) any Shelf Registration Statement and any amendment thereto
and any Prospectus forming part thereof and any supplement thereto complies in
all material respects with the 1933 Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and (iii) any Prospectus forming part
of any Shelf Registration Statement, and any supplement to such Prospectus (as
amended or supplemented from time to time), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to make
the statements, in light of the circumstances under which they were made, not
misleading.
The Company shall not permit any securities other than Registrable
Securities to be included in the Shelf Registration Statement. The Company
further agrees, if necessary, to supplement or amend the Shelf Registration
Statement, as required by Section 3(b) below, and to furnish to the Holders of
Registrable Securities copies of any such supplement or amendment promptly after
its being used or filed with the SEC.
2.3 Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to Section 2.1 or 2.2. Each Holder
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Securities
pursuant to the Shelf Registration Statement.
2.4. Effectiveness. (a) The Company will be deemed not have used
-------------
their best efforts to cause the Exchange Offer Registration Statement or the
Shelf Registration Statement, as the case may be, to become, or to remain,
effective during the requisite period if the Company voluntarily takes any
action that would, or omits to take any action which omission would, result in
any such Registration Statement not being declared effective or in the Holders
of Registrable Securities covered thereby not being able to exchange or offer
and sell such Registrable Securities during that period as and to the extent
contemplated hereby, unless such action is required by applicable law.
(b) An Exchange Offer Registration Statement pursuant to Section
2.1 hereof or a Shelf Registration Statement pursuant to Section 2.2 hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that if, after it has been declared effective, the
offering of Registrable Securities pursuant to an Exchange Offer Registration
Statement or a Shelf Registration Statement is interfered with by any stop
order, injunction or other order or requirement of the SEC or any other
governmental agency or court, such Registration Statement will be deemed not to
have become effective during the period of such interference, until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume.
2.5 Interest. The Indenture executed in connection with the
--------
Securities will provide that in the event that either (a) the Exchange Offer
Registration Statement is not filed with the Commission on or prior to the 60th
calendar day following the Merger Date, (b) the Exchange Offer Registration
Statement has not been declared effective on or prior to the 120th
-8-
<PAGE>
calendar day following the Merger Date, or (c) the Exchange Offer is not
consummated or a Shelf Registration Statement is not declared effective, in
either case, on or prior to the 150th calendar day following the Merger Date
(each such event referred to in clauses (a) through (c) above, a "Registration
Default"), the interest rate borne by the Securities shall be increased
("Additional Interest") by one-quarter of one percent per annum upon the
occurrence of each Registration Default, which rate will increase by one quarter
of one percent each 90-day period that such Additional Interest continues to
accrue under any such circumstance, provided that the maximum aggregate increase
in the interest rate will in no event exceed one percent (1%) per annum.
Following the cure of all Registration Defaults the accrual of Additional
Interest will cease and the interest rate will revert to the original rate.
If the Shelf Registration Statement is unusable by the Holders for any
reason, and the aggregate number of days in any consecutive twelve-month period
for which the Shelf Registration Statement shall not be usable exceeds 30 days
in the aggregate, then the interest rate borne by the Securities will be
increased by one-quarter of one percent per annum of the principal amount of the
Securities for the first 90-day period (or portion thereof) beginning on the
31st such date that such Shelf Registration Statement ceases to be usable, which
rate shall be increased by an additional one-quarter of one percent per annum of
the principal amount of the Securities at the beginning of each subsequent 90-
day period, provided that the maximum aggregate increase in the interest rate
will in no event exceed one percent (1%) per annum. Any amounts payable under
this paragraph shall also be deemed "Additional Interest" for purposes of this
Agreement. Upon the Shelf Registration Statement once again becoming usable,
the interest rate borne by the Securities will be reduced to the original
interest rate if the Company is otherwise in compliance with this Agreement at
such time. Additional Interest shall be computed based on the actual number of
days elapsed in each 90-day period in which the Shelf Registration Statement is
unusable.
The Company shall notify the Trustee within three business days after
each and every date on which an event occurs in respect of which Additional
Interest is required to be paid (an "Event Date"). Additional Interest shall be
paid by depositing with the Trustee, in trust, for the benefit of the Holders of
Registrable Securities, on or before the applicable semiannual interest payment
date, immediately available funds in sums sufficient to pay the Additional
Interest then due. The Additional Interest due shall be payable on each
interest payment date to the record Holder of Securities entitled to receive the
interest payment to be paid on such date as set forth in the Indenture. Each
obligation to pay Additional Interest shall be deemed to accrue from and
including the day following the applicable Event Date.
3. Registration Procedures.
In connection with the obligations of the Company with respect to
Registration Statements pursuant to Sections 2.1 and 2.2 hereof, the Company
shall:
(a) prepare and file with the SEC a Registration Statement, within
the relevant time period specified in Section 2, on the appropriate form under
the 1933 Act, which form (i) shall be selected by the Company, (ii) shall, in
the case of a Shelf Registration, be available for the sale of the Registrable
Securities by the selling Holders thereof, (iii) shall comply
-9-
<PAGE>
as to form in all material respects with the requirements of the applicable form
and include or incorporate by reference all financial statements required by the
SEC to be filed therewith or incorporated by reference therein, and (iv) shall
comply in all respects with the requirements of Regulation S-T under the 1933
Act, and use its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-
effective amendments to each Registration Statement as may be necessary under
applicable law to keep such Registration Statement effective for the applicable
period; and cause each Prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or any
similar provision then in force) under the 1933 Act and comply with the
provisions of the 1933 Act, the 1934 Act and the rules and regulations
thereunder applicable to them with respect to the disposition of all securities
covered by each Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the selling
Holders thereof (including sales by any Participating Broker-Dealer);
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Securities, at least five business days prior to filing, that a
Shelf Registration Statement with respect to the Registrable Securities is being
filed and advising such Holders that the distribution of Registrable Securities
will be made in accordance with the method selected by the Majority Holders
participating in the Shelf Registration; (ii) furnish to each Holder of
Registrable Securities and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as such Holder or underwriter may
reasonably request, including financial statements and schedules and, if the
Holder so requests, all exhibits in order to facilitate the public sale or other
disposition of the Registrable Securities; and (iii) hereby consent to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Holders of Registrable Securities in connection with the offering and sale of
the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a Registration
Statement and each underwriter of an underwritten offering of Registrable
Securities shall reasonably request prior to the time the applicable
Registration Statement is declared effective by the SEC, and do any and all
other acts and things which may be reasonably necessary or advisable to enable
each such Holder and underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be required to (i) qualify as a foreign
corporation or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), or (ii) take any
action which would subject it to general service of process or taxation in any
such jurisdiction where it is not then so subject;
(e) notify promptly each Holder of Registrable Securities under a
Shelf Registration or any Participating Broker-Dealer who has notified the
Company that it is utilizing
-10-
<PAGE>
the Exchange Offer Registration Statement as provided in paragraph (f) below
and, if requested by such Holder or Participating Broker-Dealer, confirm such
advice in writing promptly (i) when a Registration Statement has become
effective and when any post-effective amendments and supplements thereto become
effective, (ii) of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement has
become effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a Registration
Statement or the initiation of any proceedings for that purpose, (iv) in the
case of a Shelf Registration, if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered thereby,
the representations and warranties of the Company contained in any underwriting
agreement, securities sales agreement or other similar agreement, if any,
relating to the offering cease to be true and correct in all material respects,
(v) of the happening of any event or the discovery of any facts during the
period a Shelf Registration Statement is effective which makes any statement
made in such Registration Statement or the related Prospectus untrue in any
material respect or which requires the making of any changes in such
Registration Statement or Prospectus in order to make the statements therein not
misleading, (vi) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Registrable Securities or the
Exchange Securities, as the case may be, for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (vii) of any
determination by the Company that a post-effective amendment to such
Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer Registration Statement
(i) include in the Exchange Offer Registration Statement a section entitled
"Plan of Distribution" which section shall be reasonably acceptable to Merrill
Lynch on behalf of the Participating Broker-Dealers, and which shall contain a
summary statement of the positions taken or policies made by the staff of the
SEC with respect to the potential "underwriter" status of any broker-dealer that
holds Registrable Securities acquired for its own account as a result of market-
making activities or other trading activities and that will be the beneficial
owner (as defined in Rule 13d-3 under the Exchange Act) of Exchange Securities
to be received by such broker-dealer in the Exchange Offer, whether such
positions or policies have been publicly disseminated by the staff of the SEC or
such positions or policies, in the reasonable judgment of Merrill Lynch on
behalf of the Participating Broker-Dealers and its counsel, represent the
prevailing views of the staff of the SEC, including a statement that any such
broker-dealer who receives Exchange Securities for Registrable Securities
pursuant to the Exchange Offer may be deemed a statutory underwriter and must
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Securities, (ii) furnish to each Participating
Broker-Dealer who has delivered to the Company the notice referred to in Section
3(e), without charge, as many copies of each Prospectus included in the Exchange
Offer Registration Statement, including any preliminary prospectus, and any
amendment or supplement thereto, as such Participating Broker-Dealer may
reasonably request, (iii) hereby consent to the use of the Prospectus forming
part of the Exchange Offer Registration Statement or any amendment or supplement
thereto, by any Person subject to the prospectus delivery requirements of the
SEC, including all Participating Broker-Dealers, in connection with the sale or
transfer of the Exchange Securities covered by the Prospectus or any amendment
or supplement thereto, and (iv) include in the transmittal letter or similar
-11-
<PAGE>
documentation to be executed by an exchange offeree in order to participate in
the Exchange Offer (x) the following provision:
"If the exchange offeree is a broker-dealer holding Registrable
Securities acquired for its own account as a result of market-making
activities or other trading activities, it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any resale
of Exchange Securities received in respect of such Registrable
Securities pursuant to the Exchange Offer;" and
(y) a statement to the effect that by a broker-dealer making the acknowledgment
described in clause (x) and by delivering a Prospectus in connection with the
exchange of Registrable Securities, the broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the 1933 Act; and
(B) in the case of any Exchange Offer Registration Statement,
the Company agrees to deliver to the Initial Purchasers on behalf of the
Participating Broker-Dealers upon the effectiveness of the Exchange Offer
Registration Statement (i) an opinion of counsel or opinions of counsel
addressed to the Trustee for the benefit of all Holders of Registrable
Securities participating in the Exchange Offer or Private Exchange, and which
includes an opinion that (a) the Company has duly authorized, executed and
delivered the Exchange Securities and/or Private Exchange Securities, as
applicable, and the related indenture, and (b) each of the Exchange Securities
and related indenture constitute a legal, valid and binding obligation of the
Company enforceable against the Company the case may be, in accordance with its
respective terms (with customary exceptions), (ii) officers' certificates
substantially in the form customarily delivered in a public offering of debt
securities and (iii) a comfort letter or comfort letters in customary form to
the extent permitted by Statement on Auditing Standards No. 72 of the American
Institute of Certified Public Accountants (or if such a comfort letter is not
permitted, an agreed upon procedures letter in customary form) from the
Company's independent certified public accountants (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements are, or are
required to be, included in the Registration Statement) at least as broad in
scope and coverage as the comfort letter or comfort letters delivered to the
Initial Purchasers in connection with the initial sale of the Securities to the
Initial Purchasers;
(g) (i) in the case of an Exchange Offer, furnish counsel for the
Initial Purchasers and (ii) in the case of a Shelf Registration, furnish counsel
for the Holders of Registrable Securities copies of any comment letters received
from the SEC or any other request by the SEC or any state securities authority
for amendments or supplements to a Registration Statement and Prospectus or for
additional information;
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(i) in the case of a Shelf Registration, furnish to each Holder
of Registrable Securities, and each underwriter, if any, without charge, at
least one conformed copy
-12-
<PAGE>
of each Registration Statement and any post-effective amendment thereto,
including financial statements and schedules (without documents incorporated
therein by reference and all exhibits thereto, unless requested);
(j) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely preparation
and delivery of certificates representing Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities to
be in such denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the underwriters, if any, may
reasonably request at least three business days prior to the closing of any sale
of Registrable Securities;
(k) in the case of a Shelf Registration, upon the occurrence of
any event or the discovery of any facts, each as contemplated by Sections
3(e)(v) and 3(e)(vi) hereof, as promptly as practicable after the occurrence of
such an event, use their best efforts to 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
or Participating Broker-Dealers, such Prospectus will not contain at the time of
such delivery any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading or will remain so
qualified. At such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted material
fact, the Company agrees promptly to notify each Holder of such determination
and to furnish each Holder such number of copies of the Prospectus as amended or
supplemented, as such Holder may reasonably request;
(l) in the case of a Shelf Registration, a reasonable time prior
to the filing of any Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus or any
document which is to be incorporated by reference into a Registration Statement
or a Prospectus after initial filing of a Registration Statement, provide copies
of such document to the Initial Purchasers on behalf of such Holders; and make
representatives of the Company as shall be reasonably requested by the Holders
of Registrable Securities, or the Initial Purchasers on behalf of such Holders,
available for discussion of such document;
(m) obtain a CUSIP number for all Exchange Securities, Private
Exchange Securities or Registrable Securities, as the case may be, not later
than the effective date of a Registration Statement, and provide the Trustee
with certificates for the Exchange Securities, Private Exchange Securities or
the Registrable Securities, as the case may be, in a form eligible for deposit
with the Depositary;
(n) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the registration of the
Exchange Securities or Registrable Securities, as the case may be, (ii)
cooperate with the Trustee and the Holders to effect such changes to the
Indenture as may be required for the Indenture to be so qualified in
-13-
<PAGE>
accordance with the terms of the TIA and (iii) execute, and use its best efforts
to cause the Trustee to execute, all documents as may be required to effect such
changes, and all other forms and documents required to be filed with the SEC to
enable the Indenture to be so qualified in a timely manner;
(o) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and appropriate
actions 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:
(i) 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 similar underwritten offerings as may be reasonably requested by
them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if any,
and the holders of a majority in principal amount 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 sales of securities or underwritten offerings
and such other matters as may be reasonably requested by such Holders
and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from the
Company's independent certified public accountants (and, if necessary,
any other independent certified public accountants of any subsidiary
of the Company or of any business acquired by the Company for which
financial statements are, or are required to be, included in the
Registration Statement) addressed to the underwriters, if any, and use
reasonable efforts to have such letter addressed to the selling
Holders of Registrable Securities (to the extent consistent with
Statement on Auditing Standards No. 72 of the American Institute of
Certified Public Accounts), such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters to underwriters in connection with similar underwritten
offerings;
(iv) enter into a securities sales agreement with the Holders and
an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Securities, which agreement shall
be in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into, cause the same
to set forth indemnification provisions and procedures substantially
equivalent to the indemnification provisions and procedures set forth
in Section 4 hereof with respect to the underwriters and all other
parties to be indemnified pursuant to said
-14-
<PAGE>
Section or, at the request of any underwriters, in the form
customarily provided to such underwriters in similar types of
transactions; and
(vi) deliver such documents and certificates as may be reasonably
requested and as are customarily delivered in similar offerings to the
Holders of a majority in principal amount of the Registrable
Securities being sold and the managing underwriters, if any.
The above shall be done at (i) the effectiveness of such Registration Statement
(and each post-effective amendment thereto) and (ii) each closing under any
underwriting or similar agreement as and to the extent required thereunder;
(p) in the case of a Shelf Registration or if a Prospectus is
required to be delivered by any Participating Broker-Dealer in the case of an
Exchange Offer, make available for inspection by representatives of the Holders
of the Registrable Securities, any underwriters participating in any disposition
pursuant to a Shelf Registration Statement, any Participating Broker-Dealer and
any counsel or accountant retained by any of the foregoing, all financial and
other records, pertinent corporate documents and properties of the Company
reasonably requested by any such persons, and cause the respective officers,
directors, employees, and any other agents of the Company to supply all
information reasonably requested by any such representative, underwriter,
special counsel or accountant in connection with a Registration Statement, and
make such representatives of the Company available for discussion of such
documents as shall be reasonably requested by the Initial Purchasers;
(q) (i) in the case of an Exchange Offer Registration Statement,
a reasonable time prior to the filing of any Exchange Offer Registration
Statement, any Prospectus forming a part thereof, any amendment to an Exchange
Offer Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Initial Purchasers and to counsel to the
Holders of Registrable Securities and give reasonable consideration to any
comments on any such document prior to the filing thereof as the Initial
Purchasers or counsel to the Holders of Registrable Securities may reasonably
request and, except as otherwise required by applicable law, not file any such
document in a form to which the Initial Purchasers on behalf of the Holders of
Registrable Securities and counsel to the Holders of Registrable Securities
shall not have previously been advised and furnished a copy of or to which the
Initial Purchasers on behalf of the Holders of Registrable Securities or counsel
to the Holders of Registrable Securities shall reasonably object, and make the
representatives of the Company available for discussion of such documents as
shall be reasonably requested by the Initial Purchasers; and
(ii) in the case of a Shelf Registration, a reasonable time prior
to filing any Shelf Registration Statement, any Prospectus forming a
part thereof, any amendment to such Shelf Registration Statement or
amendment or supplement to such Prospectus, provide copies of such
document to the Holders of Registrable Securities, to the Initial
Purchasers, to counsel for the Holders and to the underwriter or
underwriters of an underwritten offering of Registrable Securities, if
any, make such changes in any such document prior to the filing
thereof as the
-15-
<PAGE>
Initial Purchasers, the counsel to the Holders or the underwriter or
underwriters reasonably request and not file any such document in a
form to which the Majority Holders, the Initial Purchasers on behalf
of the Holders of Registrable Securities, counsel for the Holders of
Registrable Securities or any underwriter shall not have previously
been advised and furnished a copy of or to which the Majority Holders,
the Initial Purchasers of behalf of the Holders of Registrable
Securities, counsel to the Holders of Registrable Securities or any
underwriter shall reasonably object, and make the representatives of
the Company available for discussion of such document as shall be
reasonably requested by the Holders of Registrable Securities, the
Initial Purchasers on behalf of such Holders, counsel for the Holders
of Registrable Securities or any underwriter.
(r) in the case of a Shelf Registration, use its best efforts to
cause all Registrable Securities to be listed on any securities exchange on
which similar debt securities issued by the Company are then listed if requested
by the Majority Holders, or if requested by the underwriter or underwriters of
an underwritten offering of Registrable Securities, if any;
(s) in the case of a Shelf Registration, use its best efforts to
cause the Registrable Securities to be rated by the appropriate rating agencies,
if so requested by the Majority Holders, or if requested by the underwriter or
underwriters of an underwritten offering of Registrable Securities, if any;
(t) otherwise comply with all applicable rules and regulations of
the SEC and make available to its security holders, as soon as reasonably
practicable, an earnings statement covering at least 12 months which shall
satisfy the provisions of Section 11(a) of the 1933 Act and Rule 158 thereunder;
(u) cooperate and assist in any filings required to be made with
the NASD and, in the case of a Shelf Registration, in the performance of any due
diligence investigation by any underwriter and its counsel (including any
"qualified independent underwriter" that is required to be retained in
accordance with the rules and regulations of the NASD); and
(v) upon consummation of an Exchange Offer or a Private Exchange,
obtain a customary opinion of counsel to the Company addressed to the Trustee
for the benefit of all Holders of Registrable Securities participating in the
Exchange Offer or Private Exchange, and which includes an opinion that (i) the
Company has duly authorized, executed and delivered the Exchange Securities
and/or Private Exchange Securities, as applicable, and the related indenture,
and (ii) each of the Exchange Securities and related indenture constitute a
legal, valid and binding obligation of the Company enforceable against the
Company the case may be, in accordance with its respective terms (with customary
exceptions).
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Company such information
regarding the Holder and the proposed distribution by
-16-
<PAGE>
such Holder of such Registrable Securities as the Company may from time to time
reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section 3(e)(v)
hereof, such Holder will forthwith discontinue disposition of Registrable
Securities pursuant to a Registration Statement until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
3(k) hereof, and, if so directed by the Company, such Holder will deliver to the
Company (at its expense) all copies in such Holder's possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice.
If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be acceptable to the Company. No Holder of Registrable
Securities may participate in any underwritten registration hereunder unless
such Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and (b) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
4. Indemnification; Contribution.
-----------------------------
(a) The Company agrees to indemnify and hold harmless the Initial
Purchasers, each Holder, each Participating Broker-Dealer, each Person who
participates as an underwriter (any such Person being an "Underwriter") and each
Person, if any, who controls any Holder or Underwriter within the meaning of
Section 15 of the 1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment or supplement thereto)
pursuant to which Exchange Securities or Registrable Securities were
registered under the 1933 Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any untrue
statement or alleged untrue statement of a material fact contained in
any Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
-17-
<PAGE>
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission; provided that (subject
to Section 4(d) below) any such settlement is effected with the
written consent of the Company; and
(iii) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by any indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
Holder or Underwriter expressly for use in a Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto).
(b) Each Holder severally, but not jointly, agrees to indemnify
and hold harmless the Company, the Initial Purchasers, each Underwriter and the
other selling Holders, and each of their respective directors and officers, and
each Person, if any, who controls the Company, the Initial Purchasers, any
Underwriter or any other selling Holder within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act, against any and all loss, liability,
claim, damage and expense described in the indemnity contained in Section 4(a)
hereof, as incurred, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Shelf Registration Statement
(or any amendment thereto) or any Prospectus included therein (or any amendment
or supplement thereto) in reliance upon and in conformity with written
information with respect to such Holder furnished to the Company by such Holder
expressly for use in the Shelf Registration Statement (or any amendment thereto)
or such Prospectus (or any amendment or supplement thereto); provided, however,
that no such Holder shall be liable for any claims hereunder in excess of the
amount of net proceeds received by such Holder from the sale of Registrable
Securities pursuant to such Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any action or proceeding
commenced against it in respect of which indemnity may be sought hereunder, but
failure so to notify an indemnifying party shall not relieve such indemnifying
party from any liability hereunder to the extent it is not materially prejudiced
as a result thereof and in any event shall not relieve it from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action; provided, however, that counsel to the indemnifying party shall not
(except with the consent of the indemnified party) also be
-18-
<PAGE>
counsel to the indemnified party. In no event shall the indemnifying party or
parties be liable for the fees and expenses of more than one counsel (in
addition to any local counsel) separate from their own counsel for all
indemnified parties in connection with any one action or separate but similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 4 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) effected without its
written consent if (i) such settlement is entered into more than 45 days after
receipt by such indemnifying party of the aforesaid request, (ii) such
indemnifying party shall have received notice of the terms of such settlement at
least 30 days prior to such settlement being entered into and (iii) such
indemnifying party shall not have reimbursed such indemnified party in
accordance with such request prior to the date of such settlement.
(e) If the indemnification provided for in this Section 4 is for
any reason unavailable to or insufficient to hold harmless an indemnified party
in respect of any losses, liabilities, claims, damages or expenses referred to
therein, then each indemnifying party shall contribute to the aggregate amount
of such losses, liabilities, claims, damages and expenses incurred by such
indemnified party, as incurred, in such proportion as is appropriate to reflect
the relative fault of the Company on the one hand and the Holders and the
Initial Purchasers on the other hand in connection with the statements or
omissions which resulted in such losses, liabilities, claims, damages or
expenses, as well as any other relevant equitable considerations.
The relative fault of the Company on the one hand and the Holders and
the Initial Purchasers on the other hand shall be determined by reference to,
among other things, whether any such untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company, the Holders or the Initial Purchasers
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company, the Holders and the Initial Purchasers agree that it
would not be just and equitable if contribution pursuant to this Section 4 were
determined by pro rata allocation (even if the Initial Purchasers were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 4. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
4 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or
-19-
<PAGE>
defending against any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue or alleged untrue statement or omission or alleged
omission.
Notwithstanding the provisions of this Section 4, no Initial Purchaser
shall be required to contribute any amount in excess of the amount by which the
total price at which the Securities sold by it were offered exceeds the amount
of any damages which such Initial Purchaser has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission.
No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the 1933 Act) shall be entitled to contribution from any
Person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 4, each Person, if any, who controls an
Initial Purchaser or Holder within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
Initial Purchaser or Holder, and each director of the Company, and each Person,
if any, who controls the Company within the meaning of Section 15 of the 1933
Act or Section 20 of the 1934 Act shall have the same rights to contribution as
the Company. The Initial Purchasers' respective obligations to contribute
pursuant to this Section 7 are several in proportion to the principal amount of
Securities set forth opposite their respective names in Schedule A to the
Purchase Agreement and not joint.
5. Miscellaneous.
-------------
5.1 Rule 144 and Rule 144A. For so long as the Company is subject to
----------------------
the reporting requirements of Section 13 or 15 of the 1934 Act, the Company
covenants that it will file the reports required to be filed by it under the
1933 Act and Section 13(a) or 15(d) of the 1934 Act and the rules and
regulations adopted by the SEC thereunder. If the Company is not required, or
ceases to be so required, to file such reports, the Company covenants that it
will upon the request of any Holder of Registrable Securities (a) make publicly
available such information as is necessary to permit sales pursuant to Rule 144
under the 1933 Act, (b) deliver such information to a prospective purchaser as
is necessary to permit sales pursuant to Rule 144A under the 1933 Act and it
will take such further action as any Holder of Registrable Securities may
reasonably request, and (c) take such further action that is reasonable in the
circumstances, in each case, to the extent required from time to time to enable
such Holder to sell its Registrable Securities without registration under the
1933 Act within the limitation of the exemptions provided by (i) Rule 144 under
the 1933 Act, as such Rule may be amended from time to time, (ii) Rule 144A
under the 1933 Act, as such Rule may be amended from time to time, or (iii) any
similar rules or regulations hereafter adopted by the SEC. Upon the request of
any Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether they have complied with such requirements.
5.2 No Inconsistent Agreements. The Company has not entered into and
--------------------------
the Company will not after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise
-20-
<PAGE>
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not and will not for the term of this Agreement in any way conflict
with the rights granted to the holders of the Company's other issued and
outstanding securities under any such agreements.
5.3 Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure.
5.4 Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(a) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 5.4, which address initially is the address set forth in the Purchase
Agreement with respect to the Initial Purchasers; and (b) if to the Company,
initially at the Company's address set forth in the Purchase Agreement, and
thereafter at such other address of which notice is given in accordance with the
provisions of this Section 5.4.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in such Indenture.
5.5 Successor and Assigns. This Agreement shall inure to the benefit
---------------------
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.
5.6 Third Party Beneficiaries. The Initial Purchasers (even if the
-------------------------
Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Holders, on the
-21-
<PAGE>
other hand, and shall have the right to enforce such agreements directly to the
extent they deem such enforcement necessary or advisable to protect their rights
or the rights of Holders hereunder. Each Holder of Registrable Securities shall
be a third party beneficiary to the agreements made hereunder between the
Company, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights hereunder.
5.7. Specific Enforcement. Without limiting the remedies available
--------------------
to the Initial Purchasers and the Holders, the Company acknowledges that any
failure by the Company to comply with their obligations hereunder may result in
material irreparable injury to the Initial Purchasers or the Holders for which
there is no adequate remedy at law, that it would not be possible to measure
damages for such injuries precisely and that, in the event of any such failure,
the Initial Purchasers or any Holder may obtain such relief as may be required
to specifically enforce the Company's obligations under Sections 2.1 through 2.4
hereof.
5.8. Restriction on Resales. Until the expiration of two years after
----------------------
the original issuance of the Securities, the Company will not, and will cause
their "affiliates" (as such term is defined in Rule 144(a)(1) under the 1933
Act) not to, resell any Securities which are "restricted securities" (as such
term is defined under Rule 144(a)(3) under the 1933 Act) that have been
reacquired by any of them and shall immediately upon any purchase of any such
Securities submit such Securities to the Trustee for cancellation.
5.9 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
5.10 Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
5.11 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.
5.12 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
-22-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
Very truly yours,
AMERICAN CELLULAR CORPORATION
By /s/ Mark A. Pelson
--------------------------------------
Name: Mark Pelson
Title: Vice President
<PAGE>
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
TD SECURITIES (USA) INC.
WASSERSTEIN PERELLA SECURITIES, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /s/ John Curran
------------------------------------------
Authorized Signatory
John Curran
<PAGE>
Exhibit A
---------
FORM OF OPINION OF COUNSEL
--------------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
TD Securities (USA) Inc.
Wasserstein Perella Securities, Inc.
c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
We have acted as counsel for American Cellular Corporation, Inc., a
Delaware corporation (the "Company") in connection with the sale by the Company
to the Initial Purchasers (as defined below) of $285,000,000 aggregate principal
amount of 10 1/2% Senior Notes due 2008 (the "Notes") of the Company pursuant to
the Purchase Agreement, dated May 6, 1998 (the "Purchase Agreement"), among the
Company, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, TD Securities,
and Wasserstein Perella Securities, Inc. (collectively, the "Initial
Purchasers") and the filing by the Company of an Exchange Offer Registration
Statement (the "Registration Statement") in connection with an Exchange Offer to
be effected pursuant to the Registration Rights Agreement (the "Registration
Rights Agreement"), dated May 13, 1998, between the Company and the Initial
Purchasers. This opinion is furnished to you pursuant to Section 3(f)(B) of the
Registration Rights Agreement. Unless otherwise defined herein, capitalized
terms used in this opinion that are defined in the Registration Rights Agreement
are used herein as so defined.
We have examined such documents, records and matters of law as we have
deemed necessary for purposes of this opinion. In rendering this opinion, as to
all matters of fact relevant to this opinion, we have assumed the completeness
and accuracy of, and are relying solely upon, the representations and warranties
of the Company set forth in the Purchase Agreement and the statements set forth
in certificates of public officials and officers of the Company, without making
any independent investigation or inquiry with respect to the completeness or
accuracy of such representations, warranties or statements, other than a review
of the certificate of incorporation, by-laws and relevant minute books of the
Company.
Based on and subject to the foregoing, we are of the opinion that:
1. The Exchange Offer Registration Statement and the Prospectus
(other than the financial statements, notes or schedules thereto and other
financial data and supplemental
-1-
<PAGE>
schedules included or incorporated by reference therein or omitted therefrom and
the Form T-1, as to which such counsel need express no opinion), comply as to
form in all material respects with the requirements of the 1933 Act and the
applicable rules and regulations promulgated under the 1933 Act.
2. We have participated in the preparation of the Registration
Statement and the Prospectus and in the course thereof have had discussions with
representatives of the Underwriters, officers and other representatives of the
Company and Ernst & Young LLP, the Company's independent public accountants,
during which the contents of the Registration Statement and the Prospectus were
discussed. We have not, however, independently verified and are not passing
upon, and do not assume any responsibility for, the accuracy, completeness or
fairness of the statements contained in the Registration Statement and the
Prospectus. Based on our participation as described above, nothing has come to
our attention that would lead us to believe that the Registration Statement
(except for financial statements and schedules and other financial data included
therein as to which we make no statement) contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or that the
Prospectus or any amendment or supplement thereto (except for financial
statements and schedules and other financial data included therein, as to which
such counsel need make no statement), at the time the Prospectus was issued, at
the time any such amended or supplemented Prospectus was issued or at the
Closing Time, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
3. When the Exchange Securities have been executed and authenticated
and issued and delivered by the Issuer in exchange for the Securities pursuant
to the Exchange Offer, the Exchange Securities will constitute valid and binding
obligations of the Issuer, enforceable against the Issuer in accordance with
their terms, subject to the following exceptions: (x) the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors and (y) the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or law, and the discretion of the court before which any
proceeding therefor may be brought; and the Exchange Securities will be entitled
to the benefits of the Indenture.
This opinion is being furnished to you solely for your benefit in
connection with the transactions contemplated by the Registration Rights
Agreement, and may not be used for any other purpose or relied upon by any
person other than you. Except with our prior written consent, the opinions
herein expressed are not to be used, circulated, quoted or otherwise referred to
in connection with any transactions other than those contemplated by the
Registration Rights Agreement by or to any other person.
Very truly yours,
-2-
<PAGE>
EXHIBIT 5.1
[Latham & Watkins Letterhead]
August 4, 1998
American Cellular Corporation
1336 Basswood Street, Suite F
Schaumburg, Illinois 60173
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
In connection with the registration of $285,000,000 aggregate
principal amount of 10 1/2% Senior Notes due 2008 (the "Exchange Notes") by
American Cellular Corporation, a Delaware corporation (the "Company"), on Form
S-4 filed with the Securities and Exchange Commission (the "Commission") on
August 4, 1998 (the "Registration Statement"), you have requested our opinion
with respect to the matters set forth below. The Exchange Notes will be issued
pursuant to an indenture (the "Indenture"), dated as of May 13, 1998 and a First
Supplemental Indenture dated as of July 31, 1998 (together, the "Indenture")
by and between the Company and Chase Manhattan Bank and Trust Company, National
Association as trustee (the "Trustee"). The Exchange Notes will be issued in
exchange for the Company's outstanding 10 1/2% Senior Notes due 2008 (the
"Private Notes") on the terms set forth in the prospectus contained in the
Registration Statement and the Letter of Transmittal filed as an exhibit thereto
(the "Exchange Offer").
In our capacity as your special counsel, we have made such legal and
factual examinations and inquiries, including an examination of originals or
copies certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals and the
conformity to authentic original documents of all documents submitted to us as
copies.
We are opining herein as to the effect on the subject transactions
only of the internal laws of the State of New York and the General Corporation
Law of the State of Delaware and we express no opinion with respect to the
applicability thereto, or the effect thereon, of the laws of any other
jurisdiction or, in the case of Delaware, any other laws, or as to any matters
of municipal law or the laws of any local agencies within any state.
<PAGE>
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof the Exchange Notes, when duly executed,
issued, authenticated and delivered in accordance with the terms of the Exchange
Offer and the Indenture, will be legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms.
The opinion rendered in the paragraph above is subject to the
following exceptions, limitations and qualifications: (i) the effect of
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting the rights and remedies of
creditors; (ii) the effect of general principles of equity, whether enforcement
is considered in a proceeding in equity or at law, and the discretion of the
court before which any proceeding therefor may be brought and (iii) we express
no opinion concerning the enforceability of the waiver of rights or defenses
contained in Section 4.15 of the Indenture.
To the extent that the obligations of the Company under the Indenture
may be dependent upon such matters, we have assumed for purposes of this opinion
that (i) the Trustee is validly existing and in good standing under the laws of
its jurisdiction of organization; (ii) the Trustee has been duly qualified to
engage in the activities contemplated by the Indenture; (iii) the Trustee is in
compliance generally, and with respect to acting as Trustee under the Indenture,
with all applicable laws and regulations; and (iv) the Trustee has the requisite
organizational and other power and authority to perform its obligations under
the Indenture.
We have not been requested to express and, with your knowledge and
consent, do not render any opinion with respect to the applicability to the
obligations of the Company under the Exchange Notes or the Indenture of Sections
547 and 548 of Title 11 of the Bankruptcy Reform Act of 1978, as amended, or
applicable state law (including, without limitation, Article 10 of the New York
Debtor & Creditor Law) relating to fraudulent transfers and obligations.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 8.1
[Latham & Watkins Letterhead]
August 4, 1998
American Cellular Corporation
1336 Basswood Street, Suite F
Schaumburg, Illinois 60173
Re: Registration Statement on Form S-4
----------------------------------
Ladies and Gentlemen:
You have requested our opinion concerning the material federal income
tax consequences expected to result to holders from the exchange of the 10 1/2%
Senior Notes due 2008 of American Cellular Corporation (the "Company"), in
connection with the Registration Statement on Form S-4 filed with the Securities
and Exchange Commission (the "Commission") on August 4, 1998 (File No. 333- )
(the "Registration Statement").
The facts, as we understand them, and upon which with your permission
we rely in rendering the opinion expressed herein, are set forth in the
Registration Statement. Based on such facts, it is our opinion that the
material federal income tax consequences are accurately set forth under the
heading "Material Federal Income Tax Considerations" in the Registration
Statement. No opinion is expressed as to any matter not discussed therein.
This opinion is based on various statutory provisions, regulations
promulgated thereunder and interpretations thereof by the Internal Revenue
Service and the courts having jurisdiction over such matters, all of which are
subject to change either prospectively or retroactively. Also, any variation or
difference in the facts from those set forth in the Registration Statement may
affect the conclusion stated herein.
This opinion is rendered to you solely for use in connection with the
Registration Statement. We consent to your filing this opinion as an exhibit to
the Registration Statement and to the reference of our firm under the heading
"Material Federal Income Tax Considerations."
Very truly yours,
/s/ Latham & Watkins
<PAGE>
EXHIBIT 10.9
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March 5,
---------
1998, is made by and among American Cellular Corporation, a Delaware corporation
(the "Company"), and the parties listed on Exhibit A to this Agreement (the
------- ---------
"Purchasers").
- -----------
RECITALS
--------
A. Each Purchaser desires to invest in the Company the aggregate sum
set forth opposite each Purchaser's name on Exhibit A through the purchase of
---------
shares of the Company's Class A Common Stock, par value $0.01 per share (the
"Class A Common Stock"), and shares of the Company's Series A Preferred Stock,
- ---------------------
par value $0.01 per share (the "Series A Preferred Stock"). Subject to the
------------------------
terms of this Agreement, the Purchasers shall initially purchase an aggregate of
250,000 shares of Class A Common Stock (the "Initial Shares") and shall, at the
--------------
request of the Company, purchase an aggregate of 325,000 shares of Series A
Preferred Stock (the "Committed Shares" and, collectively with the Initial
----------------
Shares, the "Shares"), in each case in the respective amounts set forth opposite
------
each Purchaser's name on Exhibit A. The Series A Preferred Stock shall have the
---------
rights set forth in the form of the Certificate of Designations of the Series A
Preferred Stock of American Cellular Corporation, attached hereto as Exhibit B
---------
(the "Certificate").
-----------
B. Simultaneously with the execution of this Agreement, the
Purchasers and the Company will enter into (a) the Stockholders Agreement (the
"Stockholders Agreement") in the form attached hereto as Exhibit C, and (b) the
- ----------------------- ---------
Registration Rights Agreement (the "Registration Rights Agreement") in the form
-----------------------------
attached hereto as Exhibit D.
---------
C. This Agreement, the Stockholders Agreement and the Registration
Rights Agreement are being entered into in contemplation of the merger (the
"Merger") of the Company with and into PriCellular Corporation, a Delaware
corporation ("PCC"), pursuant to an Agreement and Plan of Merger to be executed
---
by the Company and PCC (the "Merger Agreement"), which provides for, among other
----------------
things, a merger price of $14.00 per share of common stock of PCC.
D. The proceeds from the Purchasers' purchase of the Initial Shares
and the Committed Shares shall be used solely to consummate the Merger, and the
transactions relating thereto, and to pay any Transaction Costs (as defined in
Section 4.2).
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties agree as follows:
<PAGE>
ARTICLE I.
ISSUANCE OF SHARES
------------------
Each Purchaser, severally and not jointly, hereby agrees as follows:
1.1. Purchase and Sale of Initial Shares. At the Initial Closing (as
-----------------------------------
defined below), the Company shall sell to each Purchaser, and such Purchaser
shall purchase from the Company, the Initial Shares, at a purchase price of $100
per share in the respective amount set forth in Exhibit A. The purchase and
---------
sale of all the Initial Shares by the Purchasers is referred to herein as the
"Initial Purchase."
1.2. Initial Closing. The closing for the Initial Purchase (the "Initial
---------------
Closing") shall take place upon the 15th day after delivery to each of the
Purchasers of an Initial Funding Notice, executed by an officer of the Company,
which certifies that on the date of such notice, the Company and PCC have
entered into the Merger Agreement. If such 15th day is not a Business Day, the
Initial Closing shall occur on the next succeeding Business Day. As used in
this Agreement, the defined term "Initial Closing" shall refer to both the event
as well as the date of such closing.
1.3. Deliveries at the Initial Closing. At the Initial Closing each
---------------------------------
Purchaser shall deliver to the Company the purchase price for the respective
Initial Shares to be acquired by such Purchaser by wire transfer of immediately
available funds, and the Company shall deliver to such Purchaser one or more
certificates representing its respective Initial Shares, which certificates
shall be duly registered in such name as the Purchaser shall have specified to
the Company prior to the Initial Closing.
1.4. Subsequent Purchase of Committed Shares. Upon receipt by each
---------------------------------------
Purchaser of written notice from the Company (the "Drawdown Notice"), stating
---------------
that the Company anticipates that the Merger is reasonably expected to be
consummated within 20 days, such Purchaser shall, within 15 days after its
receipt of the Drawdown Notice, purchase at a purchase price of $1,000 per
share, all of the Committed Shares to be acquired by such Purchaser, as set
forth on Exhibit A. The purchase of all the Committed Shares by all the
---------
Purchasers is referred to herein as the "Subsequent Purchase," and the
-------------------
consummation of the Subsequent Purchase is referred to herein as the "Subsequent
----------
Closing."
- -------
1.5. Certificate of Designations; HSR Filing. On or prior to the
---------------------------------------
Subsequent Closing, (a) the Company shall have duly adopted and filed with the
Secretary of State of the State of Delaware the Certificate, and (b) any waiting
period, if applicable, under the Hart Scott Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), shall have terminated or expired.
-------
1.6. Deliveries at Subsequent Closing. At the Subsequent Closing:
--------------------------------
1.6.1. The Company shall deliver to each Purchaser one or more
certificates representing its respective Committed Shares;
2
<PAGE>
1.6.2. The Company shall deliver to each Purchaser a certificate,
executed by the Secretary of the Company, dated the date of the Subsequent
Closing, which certifies the resolutions adopted by the directors of the Company
duly authorizing all transactions contemplated at the Subsequent Closing; and
1.6.3. Each Purchaser shall deliver to the Company the purchase price
for such Purchaser's respective Committed Shares by wire transfer of immediately
available funds.
For purposes of this Agreement, the Initial Closing and Subsequent
Closing are sometimes referred to herein individually as a "Closing" and
-------
collectively as the "Closings."
--------
ARTICLE II.
CERTAIN REPRESENTATIONS, WARRANTIES
-----------------------------------
AND AGREEMENTS OF THE PURCHASERS
--------------------------------
Each Purchaser, severally and not jointly, hereby represents, warrants and
agrees as follows:
2.1. Transfer Restrictions and Stock Legend.
--------------------------------------
2.1.1. Acknowledgment. Such Purchaser understands that (a) a
--------------
transfer of any of the Shares to be purchased by it hereunder will not be valid
unless a Registration Statement under the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "Act") is
---
in effect as to such transfer or in the opinion of counsel for the Company such
registration is unnecessary in order for such transfer to comply with the Act;
and (b) such Shares shall bear the legends set forth in the Stockholders
Agreement.
2.1.2. Removal. The Company will remove the restrictive legends
-------
referenced above upon request of such Purchaser provided that the restrictions
described in such legends are no longer applicable and such Purchaser has
provided the Company with evidence satisfactory to the Company that the
conditions to the termination of such restrictions have been met.
2.2. Securities Unregistered. Such Purchaser acknowledges that it has
-----------------------
been advised that (a) the Shares to be acquired by it have not been registered
under the Act, (b) such Shares must be held indefinitely, and such Purchaser
must continue to bear the economic risk of the investment in such Shares, unless
such Shares are registered under the Act or an exemption from such registration
is available, (c) when and if such Shares may be disposed of without
registration in reliance on Rule 144 under the Act, such disposition can be made
only in limited amounts in accordance with the terms and conditions of said
Rule 144, and (d) a notation shall be made in the appropriate records of the
Company indicating that such Shares are subject to restrictions on transfer and,
subject to applicable provisions of this Agreement and the Stockholders
Agreement, if the Company engages the services of a stock transfer agent for the
Shares, appropriate stop transfer restrictions will be issued to such transfer
agent with respect to the Shares.
3
<PAGE>
2.3. Investment Representations. Such Purchaser (a) is acquiring the
--------------------------
Shares for investment for its own account and not with a view to, or for resale
in connection with, the distribution or other disposition thereof, except in
compliance with applicable laws regulating securities; (b) was not organized for
the purpose of acquiring the Shares; (c) does not have any contract,
undertaking, agreement or arrangement with any Person (as defined below) to
sell, transfer or grant participations to such Person or to any third Person,
with respect to the Shares; (d) is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D under the Act, (e) has been given the
opportunity to obtain any information or documents relating to, and to ask
questions and receive answers about, the Company and the business and prospects
of the Company which it deems necessary to evaluate the risks and merits related
to its investment in the Shares, and (f) has a financial condition such that it
can afford to bear the economic risk of holding the unregistered Shares for an
indefinite period of time and has adequate means for providing for its current
needs and contingencies. For purposes of this Agreement, "Person" shall mean
------
any individual, partnership, limited liability company, corporation, joint
venture, trust, unincorporated organization, or any other entity, or a
government or any department, agency or political subdivision thereof.
2.4. Authority; Authorization; No Conflicts. (i) Such Purchaser has full
--------------------------------------
organizational power and authority to enter into this Agreement, the
Stockholders Agreement and the Registration Rights Agreement, that such
agreements have been duly authorized, executed and delivered by it, that all
organizational action on the part of such Purchaser or its shareholders,
partners or members necessary for the authorization, execution, delivery and
performance of such agreements and the consummation of the transactions
contemplated hereby and thereby have been taken, and that such agreements are
the legal valid and binding obligations of such Purchaser, enforceable in
accordance with their respective terms; and (ii) the execution, delivery and
performance by such Purchaser of this Agreement, the Stockholders Agreement and
the Registration Rights Agreement will not result in any violation of and will
not conflict with, or result in a breach of any of the terms of or constitute a
default under, any provision of federal or state law to which such Purchaser is
subject, such Purchaser's governing documents or any mortgage, indenture,
agreement, instrument, judgment, decree, order, rule or regulation or other
restriction to which such Purchaser is a party or by which it is bound or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
its properties or its other assets.
2.5. Brokers, Intermediaries and Finder's Fees. No finder, broker, agent,
------------------------------------------
financial adviser or other intermediary has acted on behalf of such Purchaser in
connection with the purchase of the Shares to be acquired by it pursuant to this
Agreement or the negotiation or consummation of this Agreement.
2.6. Survival of Purchaser' Representations and Warranties. The
-----------------------------------------------------
representations and warranties set forth in this Article 2 shall survive the
Closings.
4
<PAGE>
ARTICLE III.
CERTAIN REPRESENTATIONS, WARRANTIES
-----------------------------------
AND AGREEMENTS OF THE COMPANY
-----------------------------
The Company represents and warrants to the Purchasers as follows:
3.1. Organization, Standing, etc. The Company is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has all requisite corporate power and authority to own
and operate its properties and its other assets and to carry on its business as
currently conducted, and to enter into this Agreement, the Registration Rights
Agreement and the Stockholders Agreement. Attached hereto as Schedule 3.1A is a
-------------
complete and correct copy of the Certificate of Incorporation of the Company,
and all amendments thereto, as the Certificate of Incorporation will be in
effect at the Initial Closing, and attached hereto as Schedule 3.1B is a
-------------
complete and correct copy of the By-laws of the Company as they will be in
effect at the Initial Closing. Except for the Certificate, as of the Initial
Closing, no further amendment or modification of the Certificate of
Incorporation or By-laws of the Company not set forth in Schedule 3.1A or
-------------
Schedule 3.1B has been authorized by the stockholders or Board of Directors of
- -------------
the Company or is otherwise contemplated by the Company. As of the Initial
Closing, the Company holds no equity interest in any Person. Since the date of
its incorporation, the Company has not engaged in any activities other than in
connection with negotiating the terms of the Merger Agreement and the
transactions contemplated thereby and in connection with arranging the financing
required to consummate the Merger and the other transactions contemplated by the
Merger Agreement.
3.2. Qualification. The Company is duly qualified or licensed and in good
-------------
standing as a foreign corporation authorized to transact business in each
jurisdiction where the conduct of its business or the ownership of its
properties or other assets requires such qualification and the failure to be so
qualified or licensed would have a material adverse effect on the assets,
condition or business of the Company.
3.3. Authorization; No Conflicts. All corporate action on the part of the
---------------------------
Company, its directors and stockholders necessary for the authorization,
execution, delivery and performance by the Company of this Agreement, the
Stockholders Agreement and the Registration Rights Agreement and for the
authorization, offer, issuance and delivery of the Initial Shares has been taken
and with respect to the Committed Shares, will be taken on or prior to the
Subsequent Closing. Prior to the Subsequent Closing, the Company shall duly
adopt and file the Certificate with the Secretary of State of Delaware. Each of
this Agreement, the Stockholders Agreement and the Registration Rights Agreement
has been duly authorized, executed and delivered by the Company and each such
agreement is the valid and binding obligation of the Company, enforceable in
accordance with its terms. The execution, delivery and performance by the
Company of this Agreement, the Stockholders Agreement and the Registration
Rights Agreement, and the offer, issuance and delivery of the Shares will not
result in any violation of, and will not conflict with or result in a breach of,
any of the terms of, or constitute a default under, any provision of federal or
state law to which the Company or any of its properties or its other assets is
subject, the Company's Certificate of Incorporation (upon filing of the
5
<PAGE>
Certificate), the Company's By-laws or any mortgage, indenture, instrument or
material agreement, or judgment, decree, order, rule or regulation or other
restriction to which the Company is a party or by which it is bound or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
its properties or its other assets.
3.4. Capitalization. The authorized capital stock of the Company consists
--------------
of 500,000 shares of common stock and 1,000,000 shares of preferred stock. Two
classes of Common Stock have been authorized, being 475,000 shares of Class A
Common Stock and 25,000 shares of Class B Common Stock. At the Initial Closing,
no option, warrant or other right for the purchase of any shares of capital
stock, or any security convertible or exchangeable therefor, of the Company is
outstanding, except as contemplated by this Agreement and the Stockholders
Agreement. All of the issued and outstanding shares of capital stock of the
Company have been offered, issued and sold in compliance with the Act and all
applicable state securities laws.
3.5. Authority and Validity of Issuance of Shares. The Shares, when
--------------------------------------------
issued and delivered in accordance with the terms hereof, will be duly
authorized and validly issued, fully paid and nonassessable and free of
preemptive rights.
3.6. The Offering. Neither the Company nor anyone acting on behalf of the
------------
Company has directly or indirectly offered the Shares to be delivered to the
Purchasers, any part thereof, or any similar security of the Company for
delivery to, or solicited any offer from, anyone other than the Purchasers and
other investors to whom such offers can be made without requiring the
registration of the Shares under the Act or state securities laws.
3.7. Consents. No consent, approval, order or authorization of, or
--------
registration, qualification, designation, declaration or filing with, any Person
is required in connection with the offer, sale or issuance of the Shares, or the
consummation of any other transaction contemplated hereby, other than filings
pursuant to state and federal securities laws and the HSR Act and the filing of
the Certificate with the Secretary of State of the State of Delaware.
3.8. Brokers, Intermediaries and Finder's Fees. No finder, broker, agent,
-----------------------------------------
financial adviser or other intermediary has acted on behalf of the Company in
connection with the offering of the Shares pursuant to this Agreement or the
negotiation or consummation of this Agreement. The Company hereby agrees to
indemnify and to hold the Purchasers harmless of any claim, demand, liability or
action for any commission or compensation in the nature of a finder's, broker's,
advisory or placement fee payable to any Person for which the Company or any of
its respective officers, directors, employees, partners, stockholders, agents or
representatives are responsible and for the costs and expenses of defending
against such liability or asserted liability.
3.9. Registration Rights. Other than pursuant to the Stockholders
-------------------
Agreement and the Registration Rights Agreement, the Company is not, as of the
Initial Closing, under any obligation to register under the Act or state
securities laws any of its then outstanding securities or any of its securities
that may subsequently be issued pursuant to any then existing convertible or
exercisable securities.
6
<PAGE>
3.10. Stockholders Agreements. Other than pursuant to this Agreement, the
-----------------------
Stockholders Agreement and agreements with employees or prospective employees of
the Company, as of the Initial Closing, there are no agreements among the
Company and any of the Company's stockholders, in their capacities as such, or,
to the knowledge of the Company, among any of the Company's stockholders.
3.11. Other Equity Securities. The Company has not issued or agreed to
-----------------------
issue any equity securities to any Person except (i) to the Purchasers as
contemplated by this Agreement and (ii) issuances of equity securities
(including rights to purchase equity securities) to employees or prospective
employees of the Company on terms and conditions set forth on Schedule 3.11 (as
-------------
such terms and conditions as may be amended from time to time in accordance with
the Stockholders Agreement) or otherwise in accordance with the Stockholders
Agreement.
ARTICLE IV.
COVENANTS OF THE COMPANY AND THE PURCHASERS
-------------------------------------------
4.1. Other Purchases; Most Favored Nation. Prior to the Merger, the
------------------------------------
Company will not issue any equity securities to any Person, except for (i)
issuances of Class A Common Stock and Series A Preferred Stock on the same terms
and at the same price or a greater price as the Initial Shares are being issued,
or the Committed Shares will be issued, pursuant to this Agreement, (ii)
issuances of equity securities (including rights to purchase equity securities)
to employees or prospective employees of the Company on terms set forth on
Schedule 3.11 (as such terms may be amended from time to time in accordance with
- -------------
the Stockholders Agreement) or (iii) issuances in accordance with the
Stockholders Agreement; provided that the Company may issue Class A Common Stock
and Series A Preferred Stock at a lesser price than the Class A Common Stock and
Series A Preferred Stock, as the case may be, if the Company pays the Purchasers
the difference between the price paid pursuant to this Agreement and such lower
price multiplied by the number of Initial Shares or Committed Shares, as the
case may be, purchased by them.
4.2. Fees and Expenses; Break-Up Fees. The Purchasers agree that the
--------------------------------
Company may pay all fees and expenses incurred by or on behalf of the Company in
connection with this Agreement, the Merger Agreement or the transactions
contemplated hereby or thereby, including, without limitation, the fees and
expenses of counsel, accountants, consultants, financial advisors, any costs
relating to the settlement or litigation of any disputes and other
administrative costs ("Transaction Costs"). Each Purchaser shall be entitled to
-----------------
receive from the Company its pro rata, based on such Purchaser's dollar
investments in the Company at the Initial Closing, share of the net amount of
any break-up fee or damages received by the Company as a result of a breach or
termination of the Merger Agreement.
4.3. Publicity. Except as required by applicable law, the Company shall
---------
at no time use the name of any Purchaser or of any of its respective Affiliates
in any press release or public statement without obtaining the prior written
consent of such Purchaser. If such disclosure is required by applicable law,
then the Company shall inform such Purchaser prior to such disclosure.
7
<PAGE>
ARTICLE V.
MISCELLANEOUS
-------------
5.1. Termination. This Agreement may be terminated and the transactions
-----------
contemplated hereby may be abandoned at any time:
5.1.1. by either the Company or any Purchaser (as to itself but not
other Purchasers), if by March 9, 1998, Persons agreeing hereunder to purchase
an aggregate of at least $25 million in Series A Common Stock and $325 million
in Series A Preferred Stock have not then yet executed this Agreement;
5.1.2. by either the Company or any Purchaser (as to itself but not
other Purchasers) if the Merger Agreement shall not have been entered into by
March 9, 1998; or
5.1.3. by either the Company or any Purchaser (as to itself but not
other Purchasers) if the Merger Agreement shall have been terminated.
5.2. Effect of Termination. In the event of the termination of this
---------------------
Agreement pursuant to Section 5.1, the Purchasers shall have no obligation to
purchase the Committed Shares and this Agreement shall otherwise forthwith
become void, and except for this Section 5.2, there shall be no liability on the
part of any party. Upon the termination of this Agreement, the Company shall be
dissolved and liquidated in accordance with Section 7.3 of the Stockholders
Agreement.
5.3. No Assignment; Effect of Merger. No party may assign any of its
-------------------------------
rights or obligations under this Agreement without the prior written consent of
the other parties hereto, except as permitted under the Stockholders Agreement.
Nothing expressed or referred to in this Agreement will be construed to give any
Person other than the parties to this Agreement any legal or equitable right,
remedy or claims under or with respect to this Agreement or any provision of
this Agreement (other than a Person which has incurred Transaction Costs).
Following consummation of the Merger, the term "Company" shall refer to the
surviving corporation of the Merger.
5.4. Survival. The representations and warranties made by the parties
--------
shall survive the Closings. Except as otherwise expressly provided herein, the
respective covenants of the parties hereto shall survive until the later of such
time as all of the Shares cease to be outstanding or the termination of the
Stockholders Agreement in accordance with its terms. All statements as to
factual matters contained in any certificate or exhibit delivered by or on
behalf of the Company pursuant hereto shall be deemed to be the representations
and warranties of the Company hereunder as of such date of such certificate or
exhibit.
5.5. Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to a party, upon any breach or default of the other
party under this Agreement, shall impair any such right, power or remedy of the
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of
8
<PAGE>
any other breach or default theretofore or thereafter occurring. All remedies,
either under this Agreement, or by law or otherwise afforded to any holder,
shall be cumulative and not alternative.
5.6. Notices. Any notice required or permitted hereunder shall be given
-------
in writing and shall be conclusively deemed effectively given (a) upon personal
delivery to the person to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (d) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as follows:
(a) If to the Company, to:
American Cellular Corporation
c/o Spectrum Equity Investors II, L.P.
245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Phone: 650/464-4600
Fax: 650/464-4601
Attn: Brion Applegate
with a copy to:
Latham & Watkins
505 Montgomery Street, Suite 1900
San Francisco, CA 94111
Phone: 415/391-0600
Fax: 415/395-8095
Attn: Scott R. Haber, Esq.
or at such other addresses as the Company shall have specified by
notice in writing to Purchasers; and
(b) If to a Purchaser, delivered to the addresses set forth on the
signature page hereto or at such other addresses as such Purchaser
shall have specified by notice in writing to the Company.
5.7. Entire Agreement; Amendment. This Agreement and the documents
---------------------------
referred to herein constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and no party
shall be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein. Neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought.
9
<PAGE>
5.8. Specific Performance. Each Purchaser and the Company acknowledges
--------------------
that any violation of this Agreement will result in irreparable injury to the
non-breaching party, the exact amount of which will be difficult to ascertain,
and that the remedies at law for any such violation would not be reasonable or
adequate compensation to the non-breaching party for such a violation.
Accordingly, each Purchaser and the Company agrees that if any of the Purchasers
and/or the Company violates any provision of this Agreement, in addition to any
other remedy which may be available at law or in equity, the non-breaching party
shall be entitled to specific performance and injunctive relief, without posting
bond or other security, and without the necessity of proving actual damages.
5.9. Severability. In the event that any provision of this Agreement
------------
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without such provision; provided that no such severability shall be effective if
it materially changes the economic benefit of this agreement to any party.
5.10. Cross-References; Titles and Subtitles. Unless expressly indicated
--------------------------------------
to the contrary, all references in this Agreement to enumerated Articles,
Sections, Schedules and Exhibits are to the respective Articles and Sections of,
and Schedules and Exhibits to, this Agreement. All such Schedules and Exhibits
are integral parts of this Agreement. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
5.11. Non-Business Days. If the last day for performance of any act or
-----------------
the exercising of any right, as provided in this Agreement, shall not be a
Business Day, such act may be performed or right exercised on the next
succeeding Business Day, with the same force and effect as if done on the
nominal day provided in this Agreement. For purposes of this Agreement,
"Business Day" means a day other than a Saturday, Sunday or legal holiday or a
- -------------
day on which banking institutions in New York City are required or authorized by
law to close.
5.12. Applicable Law. The laws of the State of Delaware shall govern the
--------------
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
5.13. Attorneys' Fees. If any legal action or any arbitration or other
---------------
proceeding is brought for the enforcement of this Agreement, the successful or
prevailing party shall be entitled to recover reasonable attorneys' fees and
other costs incurred in that action or proceeding, in addition to any other
relief to which it may be entitled.
5.14. Counterparts; Effectiveness. This Agreement may be executed in any
---------------------------
number of counterparts, each of which shall be deemed to be an original and all
of which together shall be deemed to be one and the same instrument. This
Agreement shall become a legally binding and effective obligation of each
Purchaser upon such Purchaser's execution and delivery of this Agreement and the
execution and delivery of the Merger Agreement.
10
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY:
AMERICAN CELLULAR CORPORATION,
a Delaware corporation
By: /s/Brion Applegate
------------------
Name: Brion Applegate
Title: Chairman and CEO
Address: 245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Fax: (415) 464-4601
Attention: Brion Applegate
THE STOCKHOLDERS:
SPECTRUM EQUITY INVESTORS II, L.P.,
a Delaware limited partnership
By: Spectrum Equity Associates II, L.P., its Managing General Partner
Name: /s/Brion Applegate
------------------
Title: Managing General Partner
Address: 245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Fax: (415) 464-4601
Attention: Brion Applegate
PROVIDENCE EQUITY PARTNERS L.P.,
a Delaware limited partnership
By: PROVIDENCE EQUITY PARTNERS, L.L.C.,
its general partner
By: /s/ Jonathan M. Nelson
----------------------
Name: ________________
Title: _______________
Address: 50 Kennedy Plaza
900 Fleet Center
Providence, RI 02903
Fax: (401) 751-1790
Attention: Jonathan M. Nelson
Mark Pelson
<PAGE>
TANDEM WIRELESS INVESTMENTS, L.P.,
a Delaware limited partnership
By: LIVE CYCLES HOLDINGS CO.
Its General Partner
By: /s/ Lynn McDonald
-----------------
Lynn McDonald
Title: Vice President and Secretary
By: /s/ Pierre Belanger
-------------------
Pierre Belanger
Title: President
<PAGE>
21st CENTURY COMMUNICATIONS PARTNERS, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
21st CENTURY COMMUNICATIONS T-E, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
<PAGE>
21st CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 5th Avenue, 45th Floor
New York, New York 10153
Fax:
Attention:
<PAGE>
SANDLER CAPITAL PARTNERS IV, FTE, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 5th Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
TRIUMPH PARTNERS III, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, L.P.
General Partner
By: Triumph III Advisors, Inc.
General Partner
By: /s/ Jeffrey M. Lane
-------------------
Name: Jeffrey M. Lane
Title: Managing Director
Address: 100 California Street, Suite 756
San Francisco, CA 94111
Fax: (415) 391-8222
Attention: Jeffrey M. Lane
<PAGE>
TRIUMPH III INVESTORS, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, Inc.
General Partner
By: /s/ Jeffrey M. Lane
-------------------
Name: Jeffrey M. Lane
Title: Managing Director
Address: 100 California Street, Suite 756
San Francisco, CA 94111
Fax: (415) 391-8222
Attention: Jeffrey M. Lane
TORONTO DOMINION INVESTMENTS, INC.,
a Delaware corporation
By: /s/ Christopher J. Shipman
--------------------------
Name: Christopher J. Shipman
Title: Vice President
Address: 909 Fannin Street, Suite 1700
Houston, Texas 77010
Fax: (713) 652-2647
Attention: Martha Gariepy
FIRST UNION CAPITAL PARTNERS, INC.,
a Virginia corporation
By: /s/ L.W. Hamrick III
--------------------
Name: L.W. Hamrick III
Title: Senior Vice President
Address: 301 South College Street
Charlotte, N.C. 28288
Fax: (704) 374-6711
Attention: Watts Hemrick
<PAGE>
HARBOURVEST PARTNERS V - Direct Fund L.P.,
a Delaware limited partnership
By: HVP V - Direct Associates LLC
its General Partner
By: HARBOURVEST PARTNERS, LLC
its Managing Member
By: /s/ William A. Johnston
-----------------------
Name: William A. Johnston
Title: Managing Director
Address: One Financial Center, 44th Floor
Boston, MA 0911
Fax: (617) 350-0805
Attention: William Johnston
INFORMATION ASSOCIATES, L.P.
By: TRIDENT CAPITAL MANAGEMENT, L.L.C.
its general partner
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
INFORMATION ASSOCIATES-II, L.P.
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
IA-II AFFILIATES FUND, L.L.C.
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
INFORMATION ASSOCIATES, C.V.
By: TRIDENT CAPITAL MANAGEMENT, L.L.C.
its investment general partner
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
TRIDENT CAPITAL MANAGEMENT-II, L.L.C.
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
WESTPOOL INVESTMENT TRUST,
a limited company organized under the laws
of England and Wales
By: /s/ Robert A. Rayne
-------------------
Name: Robert A. Rayne
Title: Director
Address: c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WIM5AH
Fax: 011-44-171-935-3737
Attention: Hon. Robert A. Rayne
Debra Schneider
Michael Waldron
Iain MacPhail
SG CAPITAL PARTNERS, LLC
By: /s/ Elan A. Schultz
-------------------
Name: Elan A. Schultz
Title: Managing Director
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 278-5454
Attention: Elan Schultz
<PAGE>
MERRILL LYNCH KECALP L.P. 1997,
a Delaware limited partnership
By: /s/ Edward J. Higgins
---------------------
Name: Edward J. Higgins
Title: Managing Director
Address: World Financial Center
225 Liberty Street
South Tower, 23rd Floor
New York, NY 10080-6123
Fax: (212) 236-7364
Attention: Andrew Kaufman
KECALP, INC.,
a Delaware corporation
By: /s/ Edward J. Higgins
---------------------
Name: Edward J. Higgins
Title: Managing Director
Address: World Financial Center
225 Liberty Street
South Tower, 23rd Floor
New York, NY 10080-6123
Fax: (212) 236-7364
Attention: Andrew Kaufman
<PAGE>
WEBER FAMILY TRUST dated 1/6/89,
a California family trust
By: /s/ Eugene M. Weber
-------------------
Name: Eugene M. Weber
Title: Trustee
Address: 50 California Street, Suite 3200
San Francisco, CA 94111
Fax: (415) 788-6763
Attention: Eugene M. Weber
LION INVESTMENTS LIMITED,
a limited company organized under the laws
of England and Wales
By: /s/ Robert A. Rayne
-------------------
Name: Robert A. Rayne
Title: Director
Address: c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WIM5AH
Fax: 011-44-171-935-3737
Attention: Hon. Robert A. Rayne
Debra Schneider
Michael Waldron
Iain MacPhail
<PAGE>
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
----------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
----------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
----------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
<PAGE>
GENERATION PARTNERS
By: ___________________________
Name: _____________________
Title: ______________________
Address: 600 Montgomery Street, Suite 3900
San Francisco, California 94111
(415) 646-8625
Attention: John Hawkins
By: /s/ John Fujii
--------------
Name: JOHN D. FUJII
Address: 232 East Thorndale Avenue
Roselle, IL 60172
By: /s/ Brian McTernan
------------------
Name: BRIAN McTERNAN
Address: 1201 Barclay Circle
Barrington, IL 60010
<PAGE>
AMENDMENT TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT TO STOCK PURCHASE AGREEMENT (this "Amendment"), dated as of
March 31, 1998, is made by and among American Cellular Corporation, a Delaware
corporation (the "Company"), and the parties listed on Exhibit A to this
---------
Amendment (the "Purchasers").
W I T N E S S E T H:
-------------------
WHEREAS, the Company and the Purchasers are parties to the Stock Purchase
Agreement, dated as of March 5, 1998 (the "Agreement"; to which reference is
made for the definition of all capitalized terms used herein without
definition); and
WHEREAS, the Company and the Purchasers wish to amend the Agreement to (i)
reduce the per share purchase price of each Committed Share and increase the
number of Committed Shares so that the total purchase price of all Committed
Shares remains $325,000,000 and (ii) provide for an interim purchase by the
Purchasers of $10,000,000 of the Committed Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
Company and the Purchasers each hereby agree as follows:
SECTION 1. Recitals. The second sentence in paragraph A of the Recitals
--------
is hereby deleted in its entirety and replaced with the following:
"Subject to the terms of this Agreement, the Purchasers shall initially
purchase an aggregate of 250,000 shares of Class A Common Stock (the
"Initial Shares") and shall, at the request of the Company, purchase in one
---------------
or more installments as contemplated by Section 1.4 an aggregate of
3,250,000 shares of Series A Preferred Stock (the "Committed Shares" and,
----------------
collectively with the Initial Shares, the "Shares"), in each case in the
------
respective amounts set forth opposite each Purchaser's name on Exhibit A."
---------
SECTION 2. Section 1.4. Section 1.4 of the Agreement is hereby deleted in
-----------
its entirety and replaced with the following:
"1.4. Subsequent Purchases of Committed Shares.
----------------------------------------
(a) Upon receipt by each Purchaser of written notice from the Company, such
Purchaser shall within 15 days after its receipt of such notice, purchase
at a purchase price of $100 per share, its pro rata portion of $10,000,000
of the Committed Shares, as determined in accordance with Exhibit A. For
---------
purposes of this Agreement, the purchase of $10,000,000 of Committed Shares
by all the Purchasers pursuant to this Section 1.4(a) is referred to herein
as the "Interim Purchase,"
----------------
<PAGE>
(b) Upon receipt by each Purchaser of written notice from the Company (the
"Drawdown Notice"), stating that the Company anticipates that the Merger is
---------------
reasonably expected to be consummated within 20 days, such Purchaser shall,
within 15 days after its receipt of the Drawdown Notice, purchase at a
purchase price of $100 per share, all of the Committed Shares to be
acquired by such Purchaser, as set forth on Exhibit A, less the number of
---------
Committed Shares purchased by such Purchaser in the Interim Purchase
pursuant to Section 1.4(a).
For purposes of this Agreement, the purchase of Committed Shares by all the
Purchasers pursuant to Section 1.4(b) is each referred to herein as the
"Final Purchase," and the consummation of each of the Interim Purchase and
- ---------------
the Final Purchase is individually referred to herein as a "Subsequent
----------
Closing." References to the "Subsequent Closing" in this Agreement shall
- -------
refer to the closing of the Interim Purchase and the Final Purchase with
equal effect.
SECTION 3. Section 3.4. The first sentence in Section 3.4 of the
-----------
Agreement is hereby deleted in its entirety and replaced with the following:
"The authorized capital stock of the Company consists of 500,000
shares of common stock and 5,000,000 shares of preferred stock."
SECTION 4. Exhibits. Exhibit A of the Agreement is replaced with Exhibit
-------- --------- -------
A attached hereto.
- -
SECTION 5. Reference to and Effect on the Agreement.
----------------------------------------
(a) On and after the date hereof, each reference in the Agreement to "this
Agreement", "hereunder", "hereof", "therein", or words of like import shall mean
and be a reference to the Agreement as amended hereby. No reference to this
Amendment need be made in any instrument or document at any time referring to
the Agreement, a reference to the Agreement in any of such to be deemed to be a
reference to the Agreement as amended hereby.
(b) Except as expressly amended by this Amendment, the Agreement shall
remain in full force and effect.
SECTION 6. Governing Law. This Amendment shall be governed by and
-------------
construed in accordance with the internal laws of the State of Delaware
applicable to contracts made and to be performed entirely within such State,
without regard to the conflicts of law principles of such State.
SECTION 7. Counterparts. This Amendment may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute a single instrument.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to Stock
Purchase Agreement to be executed as of the date first above written.
SPECTRUM EQUITY INVESTORS II, L.P.,
a Delaware limited partnership
By: Spectrum Equity Associates II, L.P.,
its managing general partner
By: /s/ Brion Applegate
------------------------------
Brion Applegate,
Managing General Partner
PROVIDENCE EQUITY PARTNERS L.P.,
a Delaware limited partnership
By: Providence Equity Partners, L.L.C.,
its general partner
By: /s/ Jonathan Nelson
-------------------------------
Jonathan Nelson
President
TANDEM WIRELESS INVESTMENTS, L.P.
By: Live Cycles Holding Co.,
its general partner
By: /s/ Lynn C. McDonald
------------------------------
Lynn C. McDonald,
Vice President and Secretary
By: /s/ Pierre Belanger
------------------------------
Pierre Belanger
President
3
<PAGE>
21ST CENTURY COMMUNICATIONS PARTNERS, L.P.
By: Sandler Investment Partners, L.P.,
its general partner
By: Sandler Capital Management,
its general partner
By: MJDM Corp.,
its general partner
By: /s/ Edward Grinacoff
-------------------------------
Edward Grinacoff,
President
21ST CENTURY COMMUNICATIONS T-E, L.P.
By: Sandler Investment Partners, L.P.,
its general partner
By: Sandler Capital Management,
its general partner
By: MJDM Corp.,
its general partner
By: /s/ Edward Grinacoff
-------------------------------
Edward Grinacoff,
President
4
<PAGE>
21ST CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.,
By: Sandler Investment Partners, L.P.,
its general partner
By: Sandler Capital Management,
its general partner
By: MJDM Corp.,
its general partner
By: /s/ Edward Grinacoff
-------------------------------
Edward Grinacoff,
President
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.,
its general partner
By: Sandler Capital Management,
its general partner
By: MJDM Corp.,
its general partner
By: /s/ Edward Grinacoff
-------------------------------
Edward Grinacoff,
President
SANDLER CAPITAL PARTNERS IV, FTE, L.P.
By: Sandler Investment Partners, L.P.,
its general partner
By: Sandler Capital Management,
its general partner
By: MJDM Corp.,
its general partner
By: /s/ Edward Grinacoff
-----------------------------
Edward Grinacoff,
President
5
<PAGE>
TRIUMPH PARTNERS III, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, L.P.,
its general partner
By: Triumph III Advisors, Inc.,
its general partner
By: /s/ Jeffrey M. Lane
----------------------------
Jeffrey M. Lane,
Managing Director
TRIUMPH III INVESTORS, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, Inc.,
its general partner
By: /s/ Jeffrey M. Lane
----------------------------------
Jeffrey M. Lane,
Managing Director
TORONTO DOMINION INVESTMENTS, INC.,
a Delaware corporation
By: /s/ Martha Gariepy
----------------------------------
Martha Gariepy,
Vice President
FIRST UNION CAPITAL PARTNERS, INC.,
a Virginia corporation
By: /s/ L.W. Hamrick III
---------------------------------------
L.W. Hamrick III,
Senior Vice President
6
<PAGE>
HARBOURVEST PARTNERS V - DIRECT FUND L.P.,
a Delaware limited partnership
By: HVP V - Direct Associates, LLC,
its general partner
By: HarbourVest Partners, LLC,
its managing member
By: /s/ William A. Johnston
---------------------------
William A. Johnston,
Managing Director
INFORMATION ASSOCIATES, L.P.
By: Trident Capital Management, L.L.C.,
its general partner
By: /s/ Donald R. Dixon
---------------------------------
Donald R. Dixon,
President
INFORMATION ASSOCIATES-II, L.P.
By: Trident Capital Management, L.L.C.,
its general partner
By: /s/ Donald R. Dixon
---------------------------------
Donald R. Dixon,
President
IA-II AFFILIATES FUND, L.L.C.
By: Trident Capital Management, L.L.C.,
its general partner
By: /s/ Donald R. Dixon
--------------------------------
Donald R. Dixon,
President
7
<PAGE>
INFORMATION ASSOCIATES, C.V.
By: Trident Capital Management, L.L.C.,
its general partner
By: /s/ Donald R. Dixon
----------------------------
Donald R. Dixon,
President
TRIDENT CAPITAL MANAGEMENT-II, L.L.C.
By: Trident Capital Management, L.L.C.,
its general partner
By: /s/ Donald R. Dixon
----------------------------
Donald R. Dixon,
President
WESTPOOL INVESTMENT TRUST, a limited liability
company organized under the laws of England and
Wales
By: /s/ Robert A. Rayne
---------------------------------
Robert A. Rayne,
Director
LION INVESTMENT LIMITED, a limited liability
company organized under the laws of England and
Wales
By: /s/ Robert A. Rayne
---------------------------------
Robert A. Rayne,
Director
8
<PAGE>
SG CAPITAL PARTNERS, LLC
By: /s/ Elan A. Schultz
-------------------------------
Elan A. Schultz,
Managing Director
MERRILL LYNCH KECALP L.P. 1997,
a Delaware limited partnership
By: /s/ Edward J. Higgins
-------------------------------
Edward J. Higgins,
Managing Director
KECALP, INC.,
a Delaware corporation
By: /s/ Edward J. Higgins
-------------------------------
Edward J. Higgins,
Managing Director
WEBER FAMILY TRUST DATED 1/6/89,
a California family trust
By: /s/ Eugene M. Weber
-------------------------------
Eugene M. Weber,
Trustee
/s/ John Fujii
------------------------------------
JOHN FUJII,
an Individual
/s/ Brian McTernan
------------------------------------
BRIAN McTERNAN,
an Individual
9
<PAGE>
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P.,
its general partner
By: Generation Capital Company LLC,
its general partner
By: /s/ John Hawkins
----------------------------
John Hawkins,
Managing Director
GENERATION PARALLEL
MANAGEMENT PARTNERS L.P.
By: Generation Partners L.P.,
its general partner
By: Generation Capital Company LLC,
its general partner
By: /s/ John Hawkins
------------------------
John Hawkins,
Managing Director
STATE BOARD OF
ADMINISTRATION OF FLORIDA
By: Generation Partners L.P.,
its general partner
By: Generation Capital Company LLC,
its general partner
By: /s/ John Hawkins
------------------------
John Hawkins,
Managing Director
10
<PAGE>
EXHIBIT 10.10
STOCKHOLDERS AGREEMENT
THIS STOCKHOLDERS AGREEMENT (the "Agreement") dated as of March 5,
1998 is made by and among American Cellular Corporation, a Delaware corporation,
and the parties listed on Exhibit A to this Agreement (collectively, the
---------
"Stockholders").
RECITALS
--------
The parties hereto have entered into a Stock Purchase Agreement (the
"Stock Purchase Agreement") dated as of March 5, 1998 with respect to the
purchase by the Stockholders of Shares and Preferred Shares (each as defined
below). The parties hereto desire to provide for certain transfer restrictions
and rights and board election rights with respect to the shares of capital stock
of the Company (as defined below) held by the Stockholders, as well as certain
other matters, all according to the terms of this Agreement.
AGREEMENT
---------
NOW, THEREFORE, the parties to this Agreement, intending to be legally
bound hereby, agree as follows:
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Affiliate" shall mean, with respect to any Person, a Person
directly or indirectly controlling, controlled by, or under common control with,
such Person. For the purposes of such definitions, "control" when used with
respect to any Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
(b) "Board" shall mean the board of directors of the Company.
(c) "Change of Control" shall mean (i) any sale, Transfer or other
conveyance, whether direct or indirect, of a majority of the fair market value
of the assets of the Company, in one transaction or a series of related
transactions, to any "person" or "group" (as such terms are used for purposes of
Section 13(d) of the Exchange Act, whether or not applicable), (ii) any "person"
or "group" (as such terms are used for purposes of Section 13(d) of the Exchange
Act, whether or not applicable) is or becomes the "beneficial owner," directly
or indirectly, of more than 50% of the total equity in the aggregate of all
classes of capital stock of the Company then outstanding normally entitled to
vote in elections of directors, or (iii) during any period of 12 consecutive
months after an Initial Public Offering, individuals who at the beginning of any
such 12-month period constituted the Board (together with any new directors
whose election by such Board or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority of the
directors then still in office who were either directors at the beginning of
such period or whose
<PAGE>
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board then in office. The Merger shall
not constitute a Change of Control.
(d) "Charter Documents" shall mean the Company's Certificate of
Incorporation and Bylaws.
(e) "Company" shall mean American Cellular Corporation, a Delaware
corporation, and any corporation into which it is merged or consolidated,
including the surviving corporation in the Merger.
(f) "Convertible Securities" shall mean (i) any indebtedness or
securities of the Company, convertible into or exchangeable for Shares, and (ii)
any rights, warrants or options to subscribe for or purchase Shares.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Initial Public Offering" shall mean the initial sale of shares of
the Company's Common Stock to the public pursuant to a registration statement
under the Securities Act which has been declared effective by the Securities and
Exchange Commission (other than a registration statement on Form S-8 or Form S-4
or any successor to such Form, or any other similar form) which results in an
active trading market in shares of Common Stock.
(i) "Merger" shall mean the merger of the Company with and into
PriCellular Corporation, a Delaware corporation ("PCC"), pursuant to the Merger
Agreement.
(j) "Merger Agreement" shall mean the Agreement and Plan of Merger to
be entered into between the Company and PCC, which provides, among other things,
for a merger price of $14.00 per share of the common stock of PCC.
(k) "New Securities" shall mean any Shares or Convertible Securities,
whether now authorized or not; provided that "New Securities" shall not include:
--------
(i) Shares issuable upon exercise or conversion of any previously issued
options, warrants, rights or securities convertible or exchangeable for Shares;
(ii) securities offered by the Company to the public generally pursuant to a
registration statement under the Securities Act; (iii) securities issued
pursuant to the acquisition of a business, whether pursuant to a merger,
consolidation, the purchase of assets or otherwise; (iv) any securities issued
to the officers, directors, employees or consultants of the Company as approved
by the Board (other than any officer, director or employer who is an affiliate
of any Stockholder); (v) Shares issued in connection with any stock split,
reclassification, recapitalization or stock dividend of the Company; (vi) Shares
or Convertible Securities issued to commercial lenders, investment banking firms
or other institutions for services rendered in connection with a debt financing
for the Company or it Affiliates.
2
<PAGE>
(l) "Outstanding Voting Shares" shall mean, with respect to a
particular matter, the aggregate of all shares of the Company's capital stock
outstanding from time to time which pursuant to the Charter Documents are
entitled to vote on such matter.
(m) "Permitted Transfer" shall mean (i) a Stockholder's Transfer to
the Company of Shares or Preferred Shares or a direct or indirect interest in
Shares or Preferred Shares pursuant to a contractual right of repurchase granted
by the Company at the time such Shares or Preferred Shares were issued; (ii) a
Stockholder's Transfer of all or a portion of its Shares or Preferred Shares to
any Affiliate of such Stockholder or any Person that is a successor to such
Stockholder by merger, consolidation, reorganization or transfer of all, or
substantially all, of its assets; or (iii) if a Stockholder is a partnership,
such Stockholder's Transfer of all or a portion of its Shares or Preferred
Shares to any of its partners.
(n) "Person" shall mean any individual, partnership, limited liability
company, corporation, joint venture, trust, unincorporated organization, or any
other entity, or a government or any department, agency or political subdivision
thereof.
(o) "Preferred Shares" shall mean the shares of Series A Preferred
Stock of the Company.
(p) "Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
(q) "Shares" means shares of Class A Common Stock, par value $0.01 per
share, of the Company.
(r) "Transfer" means any direct or indirect transfer, sale,
assignment, pledge, hypothecation or other disposition.
2. Right of Co-Sale.
----------------
2.1. Definition. In the event that a Stockholder or Stockholders holding
----------
Shares or Preferred Shares which represent a majority of the Shares (or
Preferred Shares) then held by all Stockholders (the "Transferor") proposes to,
directly or indirectly, Transfer (in a single transaction or a series of related
transactions) a direct or indirect interest in Shares (or Preferred Shares)
owned by such Stockholders (the "Transferor Securities") to any Person or group
(as such term is used for purposes of Section 13(d) of the Exchange Act) for
value (the "Transferee"), each remaining Stockholders (a "Remaining
Stockholder") shall have a right of co-sale (the "Right of Co-Sale") to sell the
amount equal to a fraction, the numerator of which is the number of Shares (or
Preferred Shares) owned by such Remaining Stockholder and the denominator of
which is the aggregate number of Shares (or Preferred Shares) owned by all the
Stockholders, multiplied by the number of Shares (or Preferred
Shares)represented by the Transferor Securities (such product, the "Right of Co-
Sale Amount") on the same terms and at the same time as the Transferor, all as
described in this Section 2.
3
<PAGE>
2.2. Right of Co-Sale Amount. Each Remaining Stockholder shall have the
-----------------------
right to sell that number of Shares (or Preferred Shares) held by such
Stockholder to the Transferee (or, upon the unwillingness of any Transferee to
purchase directly from such Stockholder, to the Transferor simultaneously with
the closing of the sale by the Transferor to the Transferee) up to its
respective Right of Co-Sale Amount determined as of the date the Transfer Notice
(as defined below) is delivered to the such Stockholder, upon the terms and
subject to the conditions pursuant to which the Transferor sells its Transferor
Securities to the Transferee.
2.3. Mechanics of Sale.
-----------------
(a) Exercise by the Stockholders.
----------------------------
If the Transferor proposes to Transfer any Transferor Securities in a
transaction subject to this Section 2, then it shall promptly notify, or cause
to be notified, the Remaining Stockholders, in writing, of each such proposed
Transfer (the "Transfer Notice"). Such Transfer Notice shall set forth: (i) the
name of the Transferee and the number of Transferor Securities proposed to be
Transferred, and (ii) the proposed amount and form of consideration and terms
and conditions of payment offered by the Transferee (the "Transferee Terms").
The Right of Co-Sale may be exercised by the Remaining Stockholders delivering a
written notice to the Transferor (the "Co-Sale Notice") within thirty (30)
calendar days following receipt of the Transfer Notice. The Co-Sale Notice
shall state the number of Shares (or Preferred Shares) that each Remaining
Stockholder wishes to include in such Transfer to the Transferee, which number
may not exceed its Right of Co-Sale Amount. Upon the giving of a Co-Sale
Notice, a Stockholder shall be irrevocably obligated to sell the number of
Shares or (Preferred Shares) set forth in its Co-Sale Notice to the Transferee
(or the Transferor, if applicable) on the Transferee Terms.
(b) Assignment of Interest.
----------------------
If a Stockholder exercises its respective Co-Sale Rights, then the
Transferor shall assign to such Stockholder as much of its interest in the
agreement of sale with the Transferee as such Stockholder shall be entitled to,
and such Stockholder shall be obligated to provide the representations,
warranties and covenants to the Transferee reasonably equivalent to those
provided by the Transferor under such agreement of sale. To the extent that any
Transferee prohibits such assignment or otherwise refuses to purchase Shares (or
Preferred Shares) from a Stockholder exercising its Right of Co-Sale hereunder,
then the Transferor shall not sell to such Transferee any Transferor Securities
unless and until, simultaneously with such sale, the Transferor shall purchase
such Shares (or Preferred Shares) from such Stockholder for the same
consideration per share and on the same terms and subject to the same conditions
as the proposed Transfer described in the Transfer Notice.
(c) Failure to Exercise Right of Co-Sale; Additional Transfers.
----------------------------------------------------------
If no Stockholder elects to exercise its Right of Co-Sale, then the
Transferor may, not later than 60 calendar days following delivery to the
Remaining Stockholders of the Transfer Notice, conclude a Transfer of not less
than all of the Transferor Securities covered by the
4
<PAGE>
Transfer Notice on terms and subject to conditions not more favorable to the
Transferor than those described in the Transfer Notice. Any proposed Transfer of
more securities by the Transferor shall again be subject to the Right of Co-Sale
and shall require compliance by the Transferor with the procedures described in
this Section 2.
2.4. Exceptions to Right of Co-Sale. The Right of Co-Sale shall not apply
------------------------------
to Permitted Transfers.
3. Drag-Along Right.
----------------
3.1. In the event that a Stockholder or Stockholders holding Shares or
Preferred Shares which represent a majority of the Shares (or Preferred Shares)
then held by all Stockholders (the "Majority Stockholders") desire to pursue
discussions with any third party regarding a potential Transfer of all of the
Shares (or Preferred Shares) then held by the Majority Stockholders to such
third party at any time, the Majority Stockholders shall, prior to pursuing such
discussions, disclose to the Board their intentions with respect thereto.
3.2. In the event that the Majority Stockholders shall agree to Transfer,
in a bona fide arm's length transaction for value (either in a single
transaction or a series of related transactions), a direct or indirect interest
in all of the Shares (or Preferred Shares) owned by the Majority Stockholders to
any Person or "group" (as such term is used for purposes of Section 13(d) of the
Exchange Act) (the "Buyer"), which Buyer desires also to purchase all of the
Shares (or Preferred Shares) then owned by the Remaining Stockholders or their
successors or assigns for the same price per share as the Buyer contemplates
purchasing the Majority Stockholders' Shares (or Preferred Shares), the Majority
Stockholders shall notify the Remaining Stockholders and the Company in writing
(such notice, a "Drag-Along Notice") of its intention to effectuate such
contemplated transaction, setting forth in such Drag-Along Notice the identity
of the Buyer, the aggregate purchase price which the Buyer shall pay for all of
the Shares or Preferred Shares and the intended date on which such transaction
shall close; and the Remaining Stockholders shall, on the basis of such
notification, fully cooperate in such transaction and sell all of their Shares
or Preferred Shares to such Buyer, for the same price and otherwise in
accordance with identical terms and conditions as those on which the Majority
Stockholders shall sell their Shares or Preferred Shares to such Buyer. The
Drag-Along Notice shall be delivered no more than 90 nor fewer than 15 days
prior to the intended date of the closing of such transaction, and such
transaction shall not, in fact, close more than 270 calendar days after the
delivery of the Drag-Along Notice.
3.3. Exceptions to Drag-Along Right. The drag-along rights set forth in
------------------------------
this Article 3 shall not apply to Permitted Transfers.
4. Transfer Rights.
---------------
4.1. General. Transfers of Shares and Preferred Shares are strictly
-------
prohibited, except for (i) Permitted Transfers and (ii) Transfers consummated in
accordance with Section 2 or Section 3 hereof. Any attempt to Transfer any
Shares or Preferred Shares not in accordance with this Agreement shall be null
and void and neither the Company nor any transfer agent of such securities shall
give any effect to such attempted Transfer
5
<PAGE>
in its records. Prior to consummation of any Transfer permitted under the first
sentence of this Section 4.1, the transferor shall cause the transferee to
execute an agreement in form and substance reasonably satisfactory to the Board,
providing that such transferee shall be bound by all the terms and provisions
of, and entitled (subject to Section 7.1) to all the rights and benefits under,
this Agreement, which are or theretofore had been applicable to the transferor
of the securities in question.
4.2. Legend. Any certificate representing outstanding Shares or Preferred
------
Shares which are held by a party to this Agreement or otherwise subject to the
terms hereof shall bear the following legend, in addition to any other legend
required by law or otherwise:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE BLUE SKY LAWS OF ANY JURISDICTION. NO SALE OR
TRANSFER OF THESE SHARES MAY BE MADE WITHOUT REGISTRATION UNDER SAID ACT OR
COMPLIANCE WITH EXEMPTIONS THEREFROM AND COMPLIANCE WITH APPLICABLE BLUE SKY
LAWS OR EXEMPTIONS THEREFROM."
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE GOVERNED BY THE
TERMS OF THAT CERTAIN STOCKHOLDERS AGREEMENT (THE "STOCKHOLDERS AGREEMENT")
DATED AS OF MARCH 5, 1998, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
COMPANY. ANY ATTEMPT TO TRANSFER OR ENCUMBER ANY INTEREST IN THE SHARES
REPRESENTED BY THIS CERTIFICATE NOT IN ACCORDANCE WITH SUCH STOCKHOLDERS
AGREEMENT SHALL BE NULL AND VOID AND NEITHER THE COMPANY NOR ANY TRANSFER AGENT
OF SUCH SECURITIES SHALL GIVE ANY EFFECT TO SUCH ATTEMPTED TRANSFER OR
ENCUMBRANCE IN ITS SHARE RECORDS. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE
OF IT, AGREES TO BE BOUND BY THE TERMS OF THE STOCKHOLDERS AGREEMENT."
5. Management of the Company; Voting.
---------------------------------
5.1. Board Composition.
-----------------
(a) Subject to the provisions of this Section 5, each Stockholder
agrees to take such action as may be necessary, in its capacity as a stockholder
of the Company, to nominate and recommend to the stockholders of the Company as
the proposed members of the Board, at any annual or special meeting of
stockholders called for the purpose of voting on the election of directors, or
by consensual action of stockholders with respect to the election of directors,
as follows: (i) John D. Fujii; (ii) Brian McTernan; (iii) two (2) individuals
designated in writing to the Company by Spectrum Equity Investors II, L.P., (iv)
two (2) individuals designated in writing to the Company by Providence Equity
Partners L.P., (v) one (1) individual designated in writing to the Company by
Sandler Capital Management and (vi) one (1) individual designated in writing to
the Company by Triumph Partners III, L.P. The individuals to be designated
initially by the foregoing entities are set forth on Schedule 5.1. The right to
------------
designate nominees shall be reduced as follows:
6
<PAGE>
(A) From and after such time as any entity having the right to
designate two (2) nominees owns, together with its Affiliates, less than 75% of
the Shares purchased by such entity and its Affiliates pursuant to the Stock
Purchase Agreement, such entity shall forfeit its respective right to designate
one (1) nominee for election to the Board of Directors (excluding for purposes
hereof any decrease due to a reverse stock split, Transfer, or other change
affecting all Stockholders on a substantially proportionate basis). This clause
(A), if applicable, shall apply to the exclusion of clause (B) below.
(B) From and after such time as any entity having the right to
designate one nominees owns, together with its Affiliates, less than 50% of the
Shares purchased by such entity and its Affiliates pursuant to the Stock
Purchase Agreement, such entity shall forfeit its respective right to designate
any individual for election to the Board of Directors (excluding for purposes
hereof any decrease due to a reverse stock split, Transfer, or other change
affecting all Stockholders on a substantially proportionate basis).
(b) Except as otherwise provided in this Section 5, each of the
Stockholders further agrees (i) to appear in person or by proxy at any annual or
special meeting of stockholders of the Company for the purpose of obtaining a
quorum and to vote all voting securities of the Company now or hereafter
directly or beneficially owned by such Stockholder, either in person or by
proxy, at any such meeting of the stockholders of the Company called for the
purpose of voting on the election of directors, and (ii) to execute a written
consent pursuant to any consensual action with respect to the election of
directors (to the extent permitted by law), in each case (1) in favor of the
election of the directors nominated in accordance with designations made
pursuant to Section 5.1(a), 5.2 or 5.4 and (2) in favor of the removal of any
director required to be removed in accordance with Section 5.3.
5.2. Filling Vacancies. If, at any time during which Stockholders are
-----------------
entitled to designate directors pursuant to Section 5.1, a vacancy is created on
the Board by the death, removal or resignation of any one of the directors
designated by a Stockholder pursuant to Section 5.1(a)(iii)-(a)(vi), then the
Stockholder that had designated such director, if then entitled to designate
such director pursuant to Section 5.1, shall designate another individual to be
elected to the Board, and the Stockholders shall take such action as may be
necessary to cause, within ten (10) days after such designation occurs, the
election of such designated individual to the Board.
5.3. Removal of Directors Designated by Stockholder Entitled to Designate
--------------------------------------------------------------------
Directors. The Stockholders shall take such action as may be necessary to
- ---------
cause any director to be removed from the Board for any reason at the request of
the Stockholder that had designated such individual to be a director pursuant to
this Section 5. No Stockholder shall vote its voting securities of the Company
to remove any director designated by a Stockholder except as requested in
writing by the Stockholder who designated that director.
5.4. Replacement Nominees; Regulatory Restrictions.
---------------------------------------------
(a) If, prior to an individual's election to the Board pursuant to
Section 5.1 or 5.2, any individual designated by a Stockholder to serve as a
director shall be unable or
7
<PAGE>
unwilling to serve as a director, the Stockholder who nominated any such
individual to serve as a director shall be entitled to nominate a replacement
and the Stockholders shall take all necessary action to elect such nominee to
the Board.
(b) Each Stockholder holding the right to designate a director
pursuant to Section 5.1 shall nominate an individual who, to the best of such
Stockholder's knowledge, does not have any attributable interests in any Person
who then owns or operates property subject to regulation by the Federal
Communications Commission ("Regulated Property") which would likely prohibit the
Company from acquiring or operating any interest in any Regulated Property. If
circumstances should change subsequent to a designee's election to the Board
such that maintaining such designee as a director would likely prohibit the
Company from acquiring or operating any interest in any Regulated Property, the
Stockholder who designated any such individual for election to the Board shall
promptly request the director's removal in accordance with Section 5.3 and
nominate a replacement designee in accordance with Section 5.2.
5.5. Voting of Board.
---------------
(a) The vote of the majority of the directors shall decide any matter
brought before the Board, unless the matter is one upon which by express
provision of law, the Charter Documents or this Agreement, a different vote is
required, in which case such express provision shall govern and control.
(b) Notwithstanding the provisions of Section 5.5(a), the affirmative
vote of each director designated by a Stockholder (as set forth on Schedule 5.1
or any replacement director designated in accordance with this Section), shall
be required for the Company to take, and each such Stockholder shall exercise
all voting rights and other powers of control available to it in relation to the
Company and the directors so as to ensure that the Company shall not without
such approval take, the following actions:
(i) authorize the execution, delivery and performance of the Merger
Agreement by the Company; and
(ii) waive any material condition in, or authorize any material
modification or amendment of the Merger Agreement by the Company (provided that
the Board of Directors may not approve any amendment to the Merger Agreement
which would raise the merger price above $14.00 per share).
The Stockholders referenced in the first sentence of this Section 5.5(b) shall
exercise all voting rights and other powers of control available to them in
relation to the Company and the directors to cause the directors to authorize
the delivery of a Drawdown Notice at such time as such Stockholders have a
reasonable basis to expect that the conditions to the Company's obligation to
consummate the Merger and the transactions contemplated by the Merger Agreement
will be satisfied or waived and the delivery of such Drawdown Notice is then
necessary to allow for the timely funding of the purchase of the Committed
Shares (as defined in the Stock Purchase Agreement).
8
<PAGE>
(c) Notwithstanding the provisions of Section 5.5(a) and even if a
vote of the Board may not be required under applicable law for any of the
following, the affirmative vote (or the prior written consent) of five directors
shall be required for the Company to take, and the Stockholders shall exercise
all voting rights and other powers of control available to them in relation to
the Company and the directors so as to ensure that the Company shall not without
such approval take, the following actions:
(i) the disposition of assets (in a single transaction or a
series of related transactions) in an amount in excess of $5,000,000;
(ii) the entry into any transaction which would result in a
Change of Control;
(iii) subject to Section 7.3, the approval of the dissolution or
liquidation of the Company;
(iv) the declaration or payment of any dividends on, or the
incurrence of any obligation to make any other distribution in respect of,
outstanding equity interests of the Company;
(v) the incurring of, entry into or commitment to any
indebtedness, in an aggregate principal amount in excess of $5,000,000 (except
for incurrence of indebtedness to finance the Merger) in a single transaction or
series of related transactions;
(vi) any acquisition of assets (in a single transaction or a
series of related transactions) in an amount in excess of $5,000,000;
(vii) any amendment to the Charter Documents;
(viii) the repurchase or redemption of the Company's capital
stock from a Stockholder in an amount not equal to such Stockholder's pro rata
ownership of such capital stock;
(ix) any change in the number of directors;
(x) the removal or appointment of any senior executives,
including the Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer;
(xi) any issuance of additional shares of capital stock of the
Company or any rights, options, warrants or other instruments convertible or
exchangeable therefor, other than the issuance of shares of capital stock
contemplated by the Stock Purchase Agreement;
(xii) any transaction with an Affiliate with a value in excess
of $250,000;
(xiii) entering into any other contract or arrangement material
to the Company; and
9
<PAGE>
(xiv) any amendment to Schedule 3.11 of the Stock Purchase
-------------
Agreement.
5.6. Voting of Stockholders.
----------------------
(a) The vote of the holders of a majority of the Outstanding Voting
Shares entitled to vote shall decide any matters brought before any meeting of
Stockholders, unless the matter is one upon which by express provision of law,
the Charter Documents or this Agreement, a different vote is required, in which
case such express provision shall govern and control.
(b) Notwithstanding the provisions of Section 5.6(a) and even if a
vote of the Stockholders may not be required under applicable law for any of the
following, the vote or prior written consent of Stockholders then holding
Outstanding Voting Shares representing 66-2/3% of the Outstanding Voting Shares
held by all Stockholders shall be required before the Company may take, and the
Stockholders shall exercise all voting rights and other powers of control
available to them in relation to the Company and the directors so as to ensure
that the Company shall not without such approval take, the following actions:
(i) the sale of all or substantially all of the assets of the
Company by sale, assignment, merger, reorganization, or by any other manner;
(ii) the entry into any transaction which would result in a
Change of Control; and
(iii) any amendment to the Company's Charter Documents.
5.7. Approval of Merger. Notwithstanding any provision herein to the
------------------
contrary, upon approval by the Board of the Merger and the Merger Agreement,
each Stockholder shall vote, or act by written consent, and hereby gives its
written consent (subject only to such Board approval), in favor of the approval
and authorization of the Merger, the Merger Agreement and the transactions
contemplated thereby and shall execute all documents requested by the Board
necessary to effectuate such approval and authorization. Each Stockholder
agrees that it will not exercise, and hereby waives, any and all rights that it
may have to dissent or seek appraisal, arising from the Merger under the
Delaware General Corporation Law or any other principle of law with respect to
any of its shares of capital stock of the Company.
5.8. Officers of the Company. Each Stockholder agrees to cause its
-----------------------
nominees to the Board to take such action as may be necessary to appoint Brion
Applegate as Chairman, Chief Executive Officer and Treasurer, and Jonathan
Nelson as President and Secretary of the Company effective on or about the date
hereof. Effective upon consummation of the Merger, Brion Applegate and Jonathan
Nelson shall resign from their respective officer positions. Effective upon
consummation of the Merger, each Stockholder agrees to cause its nominees to the
Board to take such action as may be necessary to appoint John D. Fujii and Brian
McTernan as Officers of the Company.
10
<PAGE>
5.8.1. Board Observer. During such time as a Stockholder holds
--------------
Shares and Preferred Shares for which such Stockholder paid, or has committed to
pay, at least $10 million pursuant to the Stock Purchase Agreement (and has not
defaulted with respect to any such payment obligations), such Stockholder shall
have the right to designate one representative as a Board observer and as an
observer of any committee of the Board. In addition, each such Stockholder
shall have the right to designate one representative as an observer of the board
of directors of any wholly-owned subsidiary ("Subsidiary") of the Company which
does not consist solely of employees of the Company or its Subsidiaries and any
committees thereof. The Company shall provide notice of board and committee
meetings to any duly designated observer at such time and in such manner as it
provides notice to directors and such observer shall have the right to attend
such board and committee meetings. The observer shall be entitled to receive
written materials distributed to the relevant board or committee members. The
Company shall cause each Subsidiary subject to this Section 5.8.1 to comply with
the aforementioned notice and information requirements. Except for the rights
described herein, the observer shall not have any other rights of a board or
committee member, including the right to vote as a member thereof, and shall not
represent to any party that he is a director. The Company and each Subsidiary
subject hereto shall have the right to require any board or committee observer
to execute a confidentiality agreement as a precondition to his being a board or
committee observer.
5.9. Inspection Rights. During such time as a Stockholder shall have the
-----------------
right to appoint a designee for election to the Board pursuant to Section 5.1 or
to designate a Board observer pursuant to Section 5.9, such Stockholder shall
have the right to inspect the books, records and premises of the Company during
normal business hours upon reasonable notice.
6. Right of First Refusal on Issuance of New Securities by the Company.
-------------------------------------------------------------------
6.1. Generally. The Company hereby grants to each Stockholder the right
---------
of first refusal to purchase such Stockholder's pro rata share of New Securities
which the Company may from time to time propose to sell and issue. For purposes
of this right of first refusal, a Stockholder's pro rata share (the "Section 6
Pro Rata Share") shall be that proportion which the number of shares of Shares
then held by such Stockholder bears to the aggregate number of Shares then held
by all Stockholders.
6.2. Notice of New Issues. In the event the Company proposes to undertake
--------------------
an issuance of New Securities, it shall give each Stockholder written notice
(the "Section 6 Notice") of its intention, describing the type of New
Securities, the price, and the principal terms upon which the Company proposes
to issue the same. Each Stockholder shall have twenty (20) days from the
delivery date of any Section 6 Notice to agree, irrevocably, to purchase up to
the Stockholder's Section 6 Pro Rata Share of such New Securities for the price
and upon the terms specified in the Section 6 Notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
6.3. Failure to Exercise Right. In the event a Stockholder fails to agree
-------------------------
to purchase all of such Stockholder's Section 6 Pro Rata Share pursuant to
Section 6.2, the Company shall give a Section 6 Notice to the other Stockholders
of such failure pursuant
11
<PAGE>
to Section 6.2, and the other Stockholders shall have the right to purchase all
such shares in the manner set forth in Section 6.2. In the event any shares of
New Securities are still not purchased after the foregoing procedures have been
effected, the Company shall have ninety (90) days after the last date on which
any Stockholder's right to purchase lapsed to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within ninety (90) days from the date of said agreement) to sell the
New Securities in respect of which such Stockholder's option was not exercised,
at or above the price and upon terms not more favorable to the purchasers of
such securities than the terms specified in the initial Section 6 Notice given
in connection with such sale. In the event the Company has not sold the New
Securities or entered into an agreement to sell the New Securities within said
ninety-day period (or sold and issued New Securities in accordance with the
foregoing within ninety (90) days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities without first offering
such New Securities to the Stockholders in the manner provided in this Section
6.
6.4. Waiver. Messrs. Fujii and McTernan agree to waive their respective
------
rights of first refusal under this Section 6 if the other Stockholders shall
have waived their rights under this Section.
7. Miscellaneous.
-------------
7.1. Entire Agreement; Successors and Assigns. This Agreement constitutes
----------------------------------------
the entire agreement between the Company and the Stockholders concerning the
subject matter hereof. Any previous agreement between the Company and the
Stockholders concerning the subject matter hereof is superseded by this
Agreement. Subject to Section 4.1 hereof, the terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
executors, administrators, heirs, successors and permitted assigns of the
parties. Notwithstanding the foregoing or the definition of "Permitted
Transfers", the rights of the Stockholders set forth in Section 5.1 shall not be
transferable to any Person except to an Affiliate of a Stockholder upon a
Permitted Transfer by such Stockholder of all of its Shares to such Affiliate.
7.2. Termination. Sections 2, 3, 4.1 and 6 shall automatically terminate
-----------
upon an Initial Public Offering which raises at least $50,000,000 in proceeds to
the Company and is underwritten pursuant to a firm commitment underwriting by
nationally recognized underwriters. Section 5 shall terminate as provided
therein. Notwithstanding any provision hereof, this entire Agreement shall
terminate at such time as the Stockholders hold in the aggregate less than 20%
of the Outstanding Voting Shares.
7.3. Termination of Stock Purchase Agreements; Dissolution of the Company.
--------------------------------------------------------------------
Upon the termination of the Stock Purchase Agreement, the Board shall take all
action to effect the prompt dissolution and liquidation of the Company in
accordance with applicable law.
12
<PAGE>
7.4. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the substantive laws of the State of Delaware, without reference
to any choice of law rules that would require the application of the laws of any
other jurisdiction.
7.5. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.6. Headings. The headings of the sections of this Agreement are for
--------
convenience and shall not by themselves determine the interpretation of this
Agreement.
7.7. Notices. Any notice required or permitted hereunder shall be given
-------
in writing and shall be conclusively deemed effectively given (a) upon personal
delivery to the person to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (d) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as set forth on the signature
page of this Agreement, or at such other address as a party may designate by ten
(10) days' advance written notice to the other party.
7.8. Effectiveness; Amendment of Agreement. Any provision of this
-------------------------------------
Agreement may be amended only by a written instrument signed by Stockholders
then holding Shares representing 66-2/3% of the Shares then held by the
Stockholders; provided that Sections 2, 3, 4 and 7 (and related definitions) may
--------
be amended only by a written instrument signed by each of the Stockholders which
then hold any Shares or any Preferred Shares. In addition to the foregoing, any
amendment to Section 5 must be approved by the affirmative vote (or prior
written consent) of five directors; provided that Section 5.5(b) may be amended
--------
only by a written instrument signed by each of the Stockholders which then hold
any Shares; and, provided further, that no Stockholder shall as a result of any
-------- -------
amendment to Section 5.1 lose its right, if any, to designate a director
pursuant thereto, unless such Stockholder and its Affiliates hold less than 20%
of the Shares that such Stockholder and its affiliates purchased pursuant to the
Stock Purchase Agreement. Notwithstanding the foregoing, Exhibit A may be
---------
amended by the Company as necessary to reflect the addition of new Stockholders
pursuant to the terms hereof, or to reflect the addition of parties hereto as
contemplated by this Agreement; and further provided that no amendment which
--- ------- --------
adversely affects any Stockholder other than in the same manner that such
amendment affects each other Stockholder on a pro rata basis will be effective
without such first Stockholder's written consent.
7.9. Waiver; Severability. The waiver by one party hereto of any breach
--------------------
by the other (the "Breaching Party") of any provision of this Agreement shall
not operate or be considered as a waiver of any other (prior or subsequent)
breach by the Breaching Party, and the waiver of a breach of a provision in one
instance shall not be deemed a waiver of such provision in any other
circumstance. If any term or provision of this Agreement or the application
thereof to any Person, property or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term or provision to persons, property or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected
13
<PAGE>
thereby, and each term and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
7.10. Ownership. Each Stockholder represents and warrants that it is the
---------
sole legal and beneficial owner of those Shares and Preferred Shares it
currently holds subject to this Agreement and that no other Person has any
interest (other than a community property interest) in such Shares or Preferred
Shares.
7.11. Attorneys' Fees. In the event that any dispute among the parties to
---------------
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
7.12. Specific Performance. Each of the Stockholders and the Company
--------------------
acknowledge that any violation of this Agreement will result in irreparable
injury to the non-breaching party, the exact amount of which will be difficult
to ascertain, and that the remedies at law for any such violation would not be
reasonable or adequate compensation to the non-breaching party for such a
violation. Accordingly, the Stockholders and the Company agree that if any of
the Stockholders and/or the Company violates any provision of this Agreement, in
addition to any other remedy which may be available at law or in equity, the
non-breaching party shall be entitled to specific performance and injunctive
relief, without posting bond or other security, and without the necessity of
proving actual damages.
7.13. Regulated Stockholders. At the request of any Regulated
----------------------
Stockholder, the Company will exchange (on a share-for-share basis) shares of
voting securities of the Company held by such Regulated Stockholder, or will
issue to such Regulated Stockholder in lieu of voting securities otherwise
issuable to such Regulated Stockholder pursuant to Section 6, shares of other
securities which (a) do not have voting rights (or which have such limited
voting rights as such Regulated Stockholder may reasonably request), (b) are
convertible into such voting securities on a share-for-share basis (subject to
such limitations as such Regulated Stockholder may request), and (c) are
otherwise identical to such voting securities. Any such non-voting or limited-
voting securities will constitute "Shares" for purposes of this Agreement.
"Regulated Stockholder" means any direct or indirect majority-owned subsidiary
---------------------
of a bank holding company, or any bank holding company.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
THE COMPANY:
AMERICAN CELLULAR CORPORATION,
a Delaware corporation
By: /s/ Brion Applegate
--------------------------------
Name: Brion Applegate
Title: Chairman and CEO
Address: 245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Fax: (415) 464-4601
Attention: Brion Applegate
THE STOCKHOLDERS:
SPECTRUM EQUITY INVESTORS II, L.P.,
a Delaware limited partnership
By: Spectrum Equity Associates II, L.P., its Managing General Partner
Name: /s/ Brion Applegate
--------------------------
Title: Managing General Partner
Address: 245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Fax: (415) 464-4601
Attention: Brion Applegate
PROVIDENCE EQUITY PARTNERS L.P.,
a Delaware limited partnership
By: PROVIDENCE EQUITY PARTNERS L.L.C.,
its general partner
By: /s/ Jonathan M. Nelson
--------------------------------
Name:
---------------------------
Title:
--------------------------
Address: 50 Kennedy Plaza
900 Fleet Center
Providence, RI 02903
Fax: (401) 751-1790
Attention: Jonathan M. Nelson
Mark Pelson
<PAGE>
TANDEM WIRELESS INVESTMENTS, L.P.,
a Delaware limited partnership
By: LIVE CYCLES HOLDINGS CO.
Its General Partner
By: /s/ Lynn McDonald
-------------------------------------
Lynn McDonald
Title: Vice President and Secretary
By: /s/ Pierre Belanger
-------------------------------------
Pierre Belanger
Title: President
<PAGE>
21st CENTURY COMMUNICATIONS PARTNERS, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
---------------------------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
21st CENTURY COMMUNICATIONS T-E, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
---------------------------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
<PAGE>
21st CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
-------------------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
--------------------------
Name: Ed Grinacoff
Title: President
Address: 767 5th Avenue, 45th Floor
New York, New York 10153
Fax:
Attention:
<PAGE>
SANDLER CAPITAL PARTNERS, IV, FTE, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
---------------------
Name: Ed Grinacoff
Title President
Address: 767 5th Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
TRIUMPH PARTNERS, III, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, L.P.
General Partner
By: Triumph III Advisors, Inc.
General Partner
By: /s/ Jeffrey M. Lane
--------------------------
Name: Jeffrey M. Lane
Title: Managing Director
Address: 100 California Street, Suite 756
San Francisco, CA 94111
Fax: (415) 391-8222
Attention: Jeffrey M. Lane
<PAGE>
TRIUMPH III INVESTORS, L.P.
a Delaware limited partnership
By: Triumph III Advisors, Inc.
General Partner
By: /s/ Jeffrey M. Lane
-----------------------------
Name: Jeffrey M. Lane
Title: Managing Director
Address: 100 California Street, Suite 756
San Francisco, CA 94111
Fax: (415) 391-8222
Attention: Jeffrey M. Lane
TORONTO DOMINION INVESTMENTS, INC.
a Delaware corporation
By: /s/ Christopher J. Shipman
-----------------------------
Name: Christopher J. Shipman
Title: Vice President
Address: 909 Fannin Street, Suite 1700
Houston, Texas 77010
Fax: (713) 652-2647
Attention: Martha Gariepy
FIRST UNION CAPITAL PARTNERS, INC.,
a Virginia corporation
By: /s/ L.W. Hamrick III
-----------------------------
Name: L.W. Hamrick III
Title: Senior Vice President
Address: 301 South College Street
Charlotte, N.C. 28288
Fax: (704) 374-6711
Attention: Watts Hemrick
<PAGE>
HARBOURVEST PARTNERS V - Direct Fund L.P.,
a Delaware limited partnership
By: HVP V - Direct Associates LLC
its General Partner
By: HARBOURVEST PARTNERS, LLC
its Managing Member
By: /s/ William A. Johnston
-------------------------------
Name: William A. Johnston
Title: Managing Director
Address: One Financial Center, 44th Floor
Boston, MA 0911
Fax: (617) 350-0805
Attention: William Johnston
INFORMATION ASSOCIATES, L.P.
By: TRIDENT CAPITAL MANAGEMENT, L.L.C.
its general partner
By: /s/ Donald R. Dixon
---------------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
INFORMATION ASSOCIATES-II,L.P.
By: /s/ Donald R. Dixon
------------------------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
IA-II AFFILIATES FUND, L.L.C.
By: /s/ Donald R. Dixon
------------------------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
INFORMATION ASSOCIATES, C.V.
By: TRIDENT CAPITAL MANAGEMENT, L.L.C.
its investment general partner
By: /s/ Donald R. Dixon
------------------------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
TRIDENT CAPITAL MANAGEMENT-II,L.L.C.
By: /s/ Donald R. Dixon
------------------------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
WESTPOOL INVESTMENT TRUST,
a limited company organized under the laws
of England and Wales
By: /s/ Robert A. Rayne
---------------------------
Name: Robert A. Rayne
Title: Director
Address: c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WIM5AH
Fax: 011-44-171-935-3737
Attention: Hon. Robert A. Rayne
Debra Schneider
Michael Waldron
Iain MacPhail
SG CAPITAL PARTNERS, LLC
By: /s/ Elan A. Schultz
---------------------------
Name: Elan A. Schultz
Title: Managing Director
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 278-5454
Attention: Elan Schultz
<PAGE>
MERRILL LYNCH KECALP L.P. 1997,
a Delaware limited partnership
By: /s/ Edward J. Higgins
---------------------------
Name: Edward J. Higgins
Title: Managing Director
Address: World Financial Center
225 Liberty Street
South Tower, 23rd Floor
New York, NY 10080-6123
Fax: (212) 236-7364
Attention: Andrew Kaufman
KECALP, INC.,
a Delaware corporation
By: /s/ Edward J. Higgins
---------------------------
Name: Edward J. Higgins
Title: Managing Director
Address: World Financial Center
225 Liberty Street
South Tower, 23rd Floor
New York, NY 10080-6123
Fax: (212) 236-7364
Attention: Andrew Kaufman
<PAGE>
WEBER FAMILY TRUST dated 1/6/89,
a California family trust
By: /s/ Eugene M. Weber
-------------------------------
Name: Eugene M. Weber
Title: Trustee
Address: 50 California Street, Suite 3200
San Francisco, CA 94111
Fax: (415) 788-6763
Attention: Eugene M. Weber
LION INVESTMENTS LIMITED,
a limited company organized under the laws
of England and Wales
By: /s/ Robert A. Rayne
-------------------------------
Name: Robert A. Rayne
Title: Director
Address: c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WIM5AH
Fax: 011-44-171-935-3737
Attention: Hon. Robert A. Rayne
Debra Schneider
Michael Waldron
Iain MacPhail
<PAGE>
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
-----------------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
------------------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
------------------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
<PAGE>
GENERATION PARTNERS
By: __________________________
Name: ____________________
Title: ___________________
Address: 600 Montgomery Street, Suite 3900
San Francisco, California 94111
(415) 646-8625
Attention: John Hawkins
By: /s/ John Fujii
--------------------------
Name: JOHN D. FUJII
Address: 232 East Thorndale Avenue
Roselle, IL 60172
By: /s/ Brian McTernan
--------------------------
Name: BRIAN MCTERNAN
Address: 1201 Barclay Circle
Barrington, IL 60010
<PAGE>
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
March 5, 1998 is entered into by and among American Cellular Corporation, a
Delaware corporation (the "Company"), and each of the parties listed on Exhibit
-------
A hereto (the "Stockholders"). As used in this Agreement, the defined term
- -
"Company" shall refer to both American Cellular Corporation and any successor
entity thereto.
RECITALS
--------
A. The Stockholders own shares of the Company's common stock, par
value $.01 per share (the "Common Stock").
B. The Company and the Stockholders desire to provide for the
registration under the Securities Act of 1933, as amended, of the Registrable
Securities (as defined below), all according to the terms of this Agreement.
AGREEMENT
---------
1. Certain Definitions.
-------------------
As used in this Agreement, the following terms shall have the
following respective meanings:
(a) "Common Shares" shall mean any and all series or classes of
-------------
the Common Stock of the Company, whether voting or non-voting.
(b) "Exchange Act" shall mean the Securities Act of 1934, as
------------
amended.
(c) "Initial Public Offering" shall mean the initial sale of
-----------------------
shares of Common Shares to the public pursuant to a registration statement under
the Securities Act which has been declared effective by the SEC (other than a
registration statement on Form S-8 or Form S-4 or any successor to such Form, or
any other similar form) which results in an active trading market in the Common
Shares.
(d) "NASD" shall mean the National Association of Securities
----
Dealers, Inc.
(e) "Prospectus" shall mean the prospectus included in any
----------
Registration Statement, as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement and by all other amendments
and supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
<PAGE>
(f) The terms "Register", "Registered" and "Registration" refer
-------- ---------- ------------
to a registration effected by preparing and filing a registration statement in
compliance with the Securities Act ("Registration Statement"), and the
declaration or ordering of the effectiveness of such Registration Statement.
(g) "Registrable Securities" shall mean all Common Shares issued
----------------------
to the Stockholders and any securities of the Company which may be issued or
distributed with respect to, or in exchange or substitution for, or upon
conversion into Common Shares pursuant to a stock dividend, stock split or other
distribution, merger, consolidation, recapitalization or reclassification or
otherwise; provided, however, that any Registrable Securities shall cease to be
-------- -------
Registrable Securities when (i) a Registration Statement with respect to the
sale of such Registrable Securities has been declared effective under the
Securities Act and such Registrable Securities have been disposed of in
accordance with the plan of distribution set forth in such Registration
Statement, (ii) such Registrable Securities are distributed pursuant to Rule 144
(or any similar provision then in force) under the Securities Act, or (iii) such
Registrable Securities shall have been otherwise transferred and new
certificates for them not bearing a legend restricting further transfer under
the Securities Act shall have been delivered by the Company; and provided,
--------
further, that any securities that have ceased to be Registrable Securities
- -------
cannot thereafter become Registrable Securities and any security that is issued
or distributed in respect of securities that have ceased to be Registrable
Securities is not a Registrable Security.
(h) "Registration" shall mean a Demand Registration or a
------------
Piggyback Registration.
(i) "Registration Statement" shall mean any registration
----------------------
statement of the Company filed with the SEC which covers any of the Registrable
Securities, including the Prospectus, amendments and supplements to such
registration statement and all exhibits and all material incorporated by
reference in such registration statement.
(j) "SEC" shall mean the Securities and Exchange Commission.
---
(k) "Securities Act" shall mean the Securities Act of 1933, as
--------------
amended, or any similar federal statute, and the rules and regulations of the
SEC thereunder, all as the same shall be in effect at the time.
(l) "Stockholders Agreement" shall mean the Stockholders
----------------------
Agreement dated as of the date hereof by and among the Company and the
Stockholders.
(m) "Underwritten Registration" or "Underwritten Offering" shall
------------------------- ---------------------
mean a sale of securities of the Company to an underwriter for reoffering to the
public.
2. Demand Registration.
-------------------
(a) Right to Demand; Demand Notices. Subject to the terms of
-------------------------------
this Agreement, in the event the Company shall receive from the Stockholders
holding Common Shares representing an aggregate of at least 10% of the then
outstanding Registrable Securities (the "Initiating Holders") at any time and
from time to time commencing after an Initial Public Offering, a written request
that the Company effect a Registration (a "Demand Registration"), the
2
<PAGE>
reasonably anticipated aggregate price to the public of which would be at least
$35,000,000, the Company shall (a) promptly give written notice of the proposed
Registration to all other Stockholders, and (b) as soon as practicable, use its
best efforts to effect Registration of the Registrable Securities specified in
such request, together with any Registrable Securities of any Stockholder
joining in such request as are specified in a written request given within
twenty (20) days after written notice from the Company of the proposed
Registration. Notwithstanding the foregoing, the Company shall not be obligated
to take any action to effect any such Registration pursuant to this Section 2(a)
(i) unless Stockholders holding Common Shares representing an aggregate of at
least 34% of the Registrable Securities then outstanding elect to participate in
such Demand Registration, or (ii) after the Company has effected three (3) such
Registrations pursuant to this Section 2(a) and such Registrations have been
declared effective; provided, however, that one Stockholder may not request more
than one Demand Registration that is effected.
(b) Company's Right to Defer Registration. If the Company is
-------------------------------------
requested to effect a Demand Registration and the Company furnishes to the
Initiating Holder a copy of a Board resolution certified by the secretary of the
Company stating that in the good faith judgment of the Board it would be adverse
to the Company and its Stockholders for such registration statement to be filed
on or before the date such filing would otherwise be required under this Section
2, the Company shall have the right to defer such filing for a period of not
more than ninety (90) days after the Company receives the registration request
from the Initiating Holder. If the Company so postpones the filing of a
registration statement, and if the Initiating Holder within thirty (30) days
after receipt of the notice of postponement advises the Company in writing that
it has determined to withdraw such request for Demand Registration, then such
Demand Registration shall be deemed to be withdrawn and such request shall be
deemed not to have been exercised for purposes of determining whether the
Initiating Holder has exhausted its single permitted request.
(c) Registration Statement Form. Registrations under this
---------------------------
Section 2 shall be on an appropriate SEC registration form (i) that is selected
by the Company and is reasonably acceptable to the Initiating Holder and (ii)
that permits the disposition of such Registrable Securities in accordance with
the intended method or methods of disposition specified in the Initiating
Holder's request for such Demand Registration.
(d) Effective Registration Statement. The Company shall be
--------------------------------
deemed to have effected a Demand Registration if: (i) the SEC declares effective
the Registration Statement relating to such Demand Registration; provided,
--------
however, that no Demand Registration shall be deemed to have been effected if
- -------
(x) such registration, after it has become effective, is interfered with by any
stop order, injunction or other order or requirement of the SEC or other
governmental agency or court by reason of an act or omission by the Company or
(y) the conditions to closing specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are not
satisfied because of an act or omission by the Company (other than a failure of
the Company or any of its representatives to execute or deliver any closing
certificate by reason of facts or circumstances not within the control of the
Company or such representatives); or (ii) at any time after an Initiating Holder
requests a Demand Registration and prior to the effectiveness of the
Registration Statement, the preparation of such Registration Statement is
discontinued or such Registration Statement is withdrawn or
3
<PAGE>
abandoned at the request of the holders of a majority of Registrable Securities
sought to be registered in such Registration Statement (unless such Stockholders
have paid to the Company in full the Registration Expenses, defined in Section
6, in connection with such Registration Statement).
(e) Priority on Demand Registrations. If the managing
--------------------------------
underwriter or agent, if any, of a Demand Registration (or, in the case of a
Demand Registration not being underwritten, the Initiating Holder), advises the
Company in writing that in its opinion the number of securities requested to be
included in such Demand Registration exceeds the number which can be sold in the
offering covered by such Demand Registration without a significant adverse
effect on the price, timing or distribution of the securities offered, the
Company shall include in such registration only the number of securities that,
in the opinion of such underwriter or agent (or the Initiating Holder, as the
case may be), can be sold without a significant adverse effect on the price,
timing or distribution of the securities offered, selected pro rata among the
--- ----
Stockholders which have requested to be included in such Demand Registration
based upon their relative ownership of Registrable Securities prior to such
Registration, to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount recommended by such underwriters
or agent, if any (or the Initiating Holder, as the case may be). The Company and
other Stockholders may also include securities in such Registration if, but only
if, such underwriter or agent (or the Initiating Holder, as the case may be)
concludes that such inclusion will not interfere with the successful marketing
of all the Registrable Securities requested to be included in such registration.
(f) Selection of Underwriters. If any offering pursuant to a
-------------------------
Demand Registration involves an Underwritten Offering, the Initiating Holder
shall have the right to select the managing underwriter or underwriters to
administer the offering. Any managing underwriter must be a firm of nationally
recognized standing and reasonably satisfactory to the Company.
3. Piggyback Registrations.
-----------------------
(a) Participation. Subject to paragraph (b) and (e) below and
-------------
Section 9, if at any time after the date of this Agreement the Company files a
Registration Statement (other than a "universal shelf" Registration Statement
on Form S-3, registration on Form S-4 or S-8 or any successor to such forms, or
any other registration of securities as it relates to an offering and sale to
management of the Company pursuant to any employee stock plan or other employee
benefit plan arrangement) with respect to an offering that includes any shares
of Common Stock, then the Company shall give prompt notice (the "Piggyback
Notice") to the Stockholders, and the Stockholders shall be entitled to include
in such Registration Statement any or all of the Registrable Securities held by
them (the "Piggyback Registration"). The Piggyback Notice shall offer the
Stockholders the opportunity to register such number of shares of Registrable
Securities as each Stockholder may request and shall set forth (i) the
anticipated filing date of such Registration Statement and (ii) the number of
shares of Common Stock that is proposed to be included in such Registration
Statement. The Company shall include in such Registration Statement any shares
of Registrable Securities for which it has received written requests to register
such shares within fifteen (15) days after the Piggyback Notice has been given.
4
<PAGE>
(b) Underwriter's Cutback. Notwithstanding the foregoing, if a
---------------------
Piggyback Registration pursuant to this Section 3 involves an Underwritten
Offering and the managing underwriter or underwriters of such proposed
Underwritten Offering delivers an opinion to the Stockholders that the total or
kind of securities which such Stockholders and any other persons or entities
intend to include in such offering would be reasonably likely to adversely
affect the price, timing or distribution of the securities offered in such
offering, then the Company shall include in such Piggyback Registration (i)
first, 100% of the securities the Company proposes to sell, and (ii) second, to
the extent of the amount of securities which all other Stockholders have
requested to be included in such Piggyback Registration, which, in the opinion
of the managing underwriter or underwriters, can be sold without the adverse
effect referred to above, such amount to be allocated pro rata among all other
--- ----
Stockholders based upon their relative ownership of Registrable Securities prior
to such Registration.
(c) Company Control. The Company may decline to file a
---------------
Registration Statement after giving the Piggyback Notice, or withdraw a
Registration Statement after filing and after such Piggyback Notice (but prior
to the effectiveness of the Registration Statement), provided that the Company
shall promptly notify each Stockholder in writing of any such action and
provided further that the Company shall bear all reasonable expenses incurred by
the Stockholders or otherwise in connection with the withdrawn Registration
Statement.
(d) No Effect on Demand Registrations. No Piggyback Registration
---------------------------------
effected under this Section 3 shall be deemed to have been effected pursuant to
Section 2 or shall relieve the Company of its obligation to effect any Demand
Registration upon request under Section 2.
(e) Initial Public Offering. No Stockholder shall be entitled to
-----------------------
include any Registrable Securities in a Registration Statement relating to the
Initial Public Offering unless at least (x) five members of the Board of
Directors of the Company, or (y) a majority of such Board of Directors,
whichever is greater, shall approve the inclusion.
4. Restrictions on Public Sale by the Company
------------------------------------------
The Company agrees not to effect any public sale or distribution of
any securities the same as or similar to those being registered by the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, during the seven (7) day period prior to, and during the ninety (90)
day period (or such longer period of up to 180 days as may be required by such
underwriter) beginning with, the effective date of a Registration Statement
filed under Section 2 or 3 or the commencement of the public distribution of
securities to the extent timely notified in writing by a Stockholder or the
managing underwriters (except as part of such registration, if permitted, or
pursuant to a "universal shelf" Registration Statement, registrations on Forms
S-4 or S-8 or any successor to such forms, or any other registration of
securities for offering and sale to management of the Company pursuant to any
employee stock plan or other employee benefit plan arrangement).
5. Registration Procedures. In connection with the Company's
-----------------------
Registration obligations pursuant to Sections 2 and 3, the Company shall use its
best efforts to effect such Registration to permit the sale of such Registrable
Securities in accordance with the
5
<PAGE>
intended method or methods of distribution thereof. The Company shall as
expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement or
Registration Statements relating to the applicable Demand Registration or
Piggyback Registration, including all exhibits and financial statements required
by the SEC to be filed therewith, and use its best efforts to cause such
Registration Statement to become effective; provided that before filing a
--------
Registration Statement or Prospectus or any amendments or supplements thereto,
the Company will furnish to the holders of Registrable Securities covered by
such Registration Statement and their counsel and to each underwriter or agent,
if any, copies of such Registration Statement or Prospectus substantially in the
form proposed to be filed at least five (5) business days, with respect to any
Demand Registration, or two (2) business days, with respect to any Piggyback
Registration, prior to the filing date and copies of any amendments or
supplements substantially in the form proposed to be filed with respect to a
Demand Registration at least two (2) business days prior to the filing date,
which documents will be subject to the reasonable review of such Stockholders
and underwriter or agent and their respective counsel, and the Company will not
file any Registration Statement or Prospectus or, with respect to any Demand
Registration, any amendment or supplement thereto (including such documents
incorporated by reference) to which the majority of the Stockholders covered by
such Registration Statement shall reasonably object; and provided, further, that
-------- -------
the Company will furnish copies of any amendments or supplements in the form
filed with respect to any Piggyback Registration, simultaneously with the filing
of such amendments or supplements;
(b) prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be necessary to keep
the Registration Statement effective for a period of not less than 180 days (or
such shorter period which will terminate when all Registrable Securities covered
by such Registration Statement have been sold or withdrawn), or, if such
Registration Statement relates to an Underwritten Offering, such longer period
as in the opinion of counsel for the underwriters a Prospectus is required by
law to be delivered in connection with sales of Registrable Securities by an
underwriter or dealer; cause the 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,
the Exchange Act, and the rules and regulations promulgated thereunder 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;
(c) notify the selling Stockholders and the managing underwriters,
if any, and (if requested) confirm such advice in writing, as soon as
practicable after notice thereof is received by the Company: (i) when the
Registration Statement or any amendment thereto has been filed or becomes
effective, the Prospectus or any amendment or supplement to the Prospectus has
been filed, and, to furnish such selling Stockholders and managing underwriters
with copies thereof, (ii) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or any order preventing or
suspending the use of any preliminary Prospectus or Prospectus or the initiation
or threatening of any proceedings for such purposes, (iv) if at any time the
representations and
6
<PAGE>
warranties of the Company contemplated by paragraph (m) below cease to be true
and correct and (v) of the receipt by the Company of any notification with
respect to the suspension of the qualification of the Registrable Securities for
offering or sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose;
(d) promptly notify the selling Stockholders and the managing
underwriters, if any, at any time prior to nine months after the time of issue
of the Prospectus, when the Company becomes aware of the happening of any event
as a result of which the Prospectus included in such Registration Statement (as
then in effect) contains any untrue statement of a material fact or omits to
state a material fact necessary to make the statements therein (in the case of
the Prospectus and any preliminary Prospectus, in light of the circumstances
under which they were made) when such Prospectus was delivered not misleading
or, if for any other reason it shall be necessary during such time period to
amend or supplement the Prospectus in order to comply with the Securities Act
and, in either case as promptly as practicable thereafter, prepare and file with
the SEC, and furnish without charge to the selling Stockholders and the managing
underwriters, if any, a supplement or amendment to such Prospectus which will
correct such statement or omission or effect such compliance;
(e) make every reasonable effort to obtain the withdrawal of any
stop order or other order suspending the use of any preliminary Prospectus or
Prospectus or suspending any qualification of the Registrable Securities;
(f) 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 with respect to 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;
(g) furnish to each selling Stockholder and each managing
underwriter, without charge, one executed copy and as many conformed copies as
they may reasonably request, of the Registration Statement and any post-
effective amendment thereto, including financial statements and schedules, all
documents incorporated therein by reference and all exhibits (including those
incorporated by reference);
(h) deliver to each selling Stockholder 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 Persons
may reasonably request (it being understood that the Company consents to the use
of the Prospectus or any amendment or supplement thereto by each of the selling
Stockholders and the underwriters, if any, in connection with the offering and
sale of the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto) and such other documents as such selling Stockholder
7
<PAGE>
may reasonably request in order to facilitate the disposition of the Registrable
Securities by such Stockholder;
(i) on or prior to the date on which the Registration Statement
is declared effective, use its best efforts to register or qualify, and
cooperate with the selling Stockholder, the managing underwriter or agent, 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 each state and other jurisdiction of the United
States as any such seller, underwriter or agent, if any, reasonably requests in
writing and do any and all other acts or things reasonably necessary or
advisable to keep such registration or qualification in effect for so long as
such Registration Statement remains in effect and so as to permit the
continuance of sales and dealings therein for as long as may be necessary to
complete the distribution of the Registrable Securities covered by the
Registration Statement; provided that the Company will not be required to
--------
qualify generally to do business in any jurisdiction where it is not then so
qualified or to take any action which would subject it to general service of
process in any such jurisdiction where it is not then so subject;
(j) cooperate with the selling Stockholders and the managing
underwriter or agent, if any, to facilitate the timely preparation and delivery
of certificates representing Registrable Securities to be sold and not bearing
any restrictive legends; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters may
request at least two business days prior to any sale of Registrable Securities
to the underwriters;
(k) use its best efforts to cause the Registrable Securities
covered by the applicable Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(l) not later than the effective date of the applicable
Registration, provide a CUSIP number for all Registrable Securities and provide
the applicable trustee or transfer agent with printed certificates for the
Registrable Securities which are in a form eligible for deposit with the
transfer agent selected by the Company;
(m) make such representations and warranties to the Stockholders
of Registrable Securities being registered, and the underwriters or agents, if
any, in form, substance and scope as are customarily made by issuers in primary
underwritten public offerings;
(n) enter into such customary agreements (including an
underwriting agreement) and take all such other actions as the majority of the
Stockholders of any Registrable Securities being sold or the managing
underwriter or agent, if any, reasonably request in order to expedite or
facilitate the Registration and disposition of such Registrable Securities;
(o) obtain for delivery to the Stockholders of Registrable
Securities being registered and to the underwriter or agent, if any, an opinion
or opinions from counsel for the Company, upon consummation of the sale of such
Registrable Securities to the underwriters (the "Closing Date") in customary
form and in form, substance and scope reasonably satisfactory
8
<PAGE>
to such Stockholders, underwriters or agents and their counsel;
(p) obtain for delivery to the Company and the underwriter or
agent, if any, with copies to the Stockholders, a cold comfort letter from the
Company's independent public accountants in customary form and covering such
matters of the type customarily covered by cold comfort letters as the managing
underwriter or the Stockholders of a majority of the Registrable Securities
being sold reasonably request, dated the effective date of the Registration
Statement and brought down to the Closing Date;
(q) cooperate with each seller of Registrable Securities and each
underwriter or agent, if any, participating in the disposition of such
Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD;
(r) make available for inspection by a representative of the
Stockholders of a majority of the Registrable Securities, any underwriter
participating in any disposition pursuant to such Registration, and any attorney
or accountant retained by such Stockholders or underwriter, all financial and
other records, pertinent corporate documents and properties of the Company, 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; provided that any records,
--------
information or documents that are designated by the Company in writing as
confidential shall be kept confidential by such Persons unless disclosure of
such records, information or documents is required by law;
(s) use its best efforts to comply with all applicable rules and
regulations of the SEC and make generally available to its security holders, as
soon as reasonably practicable (but not more than eighteen months) after the
effective date of the Registration Statement, an earnings statement satisfying
the provisions of Section 11(a) of the Securities Act and the rules and
regulations promulgated thereunder;
(t) as promptly as practicable after filing with the SEC of any
document which is incorporated by reference into the Registration Statement or
the Prospectus, provide copies of such document to counsel for the selling
Stockholders and to the managing underwriters, if any;
(u) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such Registration Statement
from and after a date not later than the effective date of such Registration
Statement; and
(v) use its best efforts to list (if such Registrable Securities
are not already listed) all Registrable Securities covered by such Registration
Statement on The New York Stock Exchange, the American Stock Exchange or the
NASDAQ National Market.
The Company may require each seller of Registrable Securities as
to which any Registration is being effected to furnish to the Company any
information regarding the distribution of such securities and any other
information relating to such Stockholder and its ownership of Registrable
Securities as the Company may from time to time reasonably request in writing.
Each Stockholder agrees to furnish such information to the Company and to
cooperate
9
<PAGE>
with the Company as necessary to enable the Company to comply with the
provisions of this Agreement.
Each Stockholder 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 paragraph (d), such Stockholder will
forthwith discontinue disposition of Registrable Securities pursuant to such
Registration Statement until such Stockholder's receipt of the copies of the
supplemented or amended Prospectus contemplated by paragraph (d), or until it is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in the Prospectus, and, if so directed by the Company,
such Stockholder will deliver to the Company (at the Company's expense) all
copies, other than permanent file copies then in such Stockholder's possession,
of the Prospectus covering such Registrable Securities current at the time of
receipt of such notice.
6. Registration Expenses. Except as provided in Section 2(d), the
---------------------
Company shall bear all expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation (a) all
registration and filing fees, and any other fees and expenses associated with
filings required to be made with any stock exchange, the SEC and the NASD
(including, if applicable, the fees and expenses of any "qualified independent
underwriter" and its counsel as may be required by the rules and regulations of
the NASD), (b) all fees and expenses of compliance with state securities or blue
sky laws (including fees and disbursements of counsel for the underwriters or
selling Stockholders in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters or the
majority of the Stockholders of the Registrable Securities being sold may
designate), (c) all printing and related messenger and delivery expenses
(including expenses of printing certificates for the Registrable Securities in a
form eligible for deposit with the transfer agent selected by the Company and of
printing prospectuses), (d) all fees and disbursements of counsel for the
Company and of all independent certified public accountants of the Company
(including the expenses of any special audit and "cold comfort" letters required
by or incident to such performance), (e) Securities Act liability insurance if
the Company so desires or the underwriters so require, (f) all fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange and all rating agency fees, (g) all reasonable fees and
disbursements of one counsel selected by the Stockholders holding a majority of
the Registrable Securities being registered to represent such Stockholders in
connection with such registration, (h) all fees and disbursements of
underwriters customarily paid by the issuers or sellers of securities (excluding
underwriting discounts and commissions and transfer taxes, if any, that are
attributable to the Stockholders), and fees and disbursements of counsel to
underwriters (other than such fees and disbursements incurred in connection with
any registration or qualification of Registrable Securities under the securities
or blue sky laws of any state), and (i) fees and expenses of other Persons
retained by the Company (all such expenses being herein called "Registration
Expenses"), regardless of whether the Registration Statement becomes effective
(except as provided in Section 2(d)). The Company shall, in any event, pay its
internal expenses (including, without limitation, all salaries and expenses of
its officers and employees performing
10
<PAGE>
legal or accounting duties), the expense of any audit and the fees and expenses
of any Person, including special experts, retained by the Company.
7. Indemnification.
---------------
(a) Indemnification by Company. The Company agrees to indemnify
--------------------------
and hold harmless, to the full extent permitted by law, each Stockholder, its
officers, directors and employees and each Person who controls such Stockholder
(within the meaning of the Securities Act) against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Stockholder expressly
for use therein; provided, however, that the Company shall not be liable in any
-------- -------
such case to the extent that any such loss, claim, damage, liability or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any such preliminary Prospectus if (i)
such Stockholder failed to deliver or cause to be delivered a copy of the
Prospectus to the Person asserting such loss, claim, damage, liability or
expense after the Company had furnished such Stockholder with a sufficient
number of copies of the same and (ii) the Prospectus completely corrected in a
timely manner such untrue statement or omission; and provided, further, that the
-------- -------
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission in the
Prospectus, if such untrue statement or alleged untrue statement, omission or
alleged omission is completely corrected in an amendment or supplement to the
Prospectus and the Stockholder thereafter fails to deliver such Prospectus as so
amended or supplemented prior to or concurrently with the sale of the
Registrable Securities to the Person asserting such loss, claim, damage,
liability or expense after the Company had furnished such Stockholder with a
sufficient number of copies of the same. The Company will also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each Person who controls such Persons (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the Stockholders, if requested.
(b) Indemnification by Selling Stockholder of Underlying
----------------------------------------------------
Securities. In connection with each Registration, each selling Stockholder shall
- ----------
furnish to the Company in writing such information and affidavits as the Company
reasonably requests for use in connection with any Registration Statement or
Prospectus and agrees to indemnify and hold harmless, to the full extent
permitted by law, the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages or liabilities and expenses resulting from any untrue
statement of a material fact or any omission of a material fact required to be
stated in the Registration Statement or Prospectus or preliminary Prospectus or
necessary to make the statements therein not misleading, to the extent, but only
to the extent, that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by such selling Stockholder to
the Company specifically for inclusion in such Registration Statement or
Prospectus and has not been corrected in a subsequent writing prior to or
concurrently with the sale of the Registrable Securities to the
11
<PAGE>
Person asserting such loss, claim, damage, liability or expense. In no event
shall the liability of any selling Stockholder under this Section 7 be greater
in amount than the dollar amount of the proceeds received by such Stockholder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
(c) Conduct of Indemnification Proceedings. Any Person entitled
--------------------------------------
to indemnification under this Section 7 shall (i) give prompt (but in any event
within 30 days after such Person has actual knowledge of the facts constituting
the basis for indemnification) written notice to the indemnifying party of any
claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any delay or
-------- -------
failure to so notify the indemnifying party shall relieve the indemnifying party
of its obligations under this Section 7 only to the extent, if at all, that it
is prejudiced by reason of such delay or failure; provided, further however,
-------- ------- -------
that any Person entitled to indemnification under this Section 7 shall have the
right to select and employ separate counsel and to participate in the defense of
such claim, but the fees and expenses of such counsel shall be at the expense of
such Person unless (a) the indemnifying party has agreed in writing to pay such
fees or expenses, or (b) the indemnifying party shall have failed to assume the
defense of such claim within a reasonable time after receipt of notice of such
claim from the Person entitled to indemnification under this Section 7 and
employ counsel reasonably satisfactory to such Person or (c) in the reasonable
judgment of any such Person, based upon advice of its counsel, a conflict of
interest may exist between such Person and the indemnifying party with respect
to such claims (in which case, if the Person notifies the indemnifying party in
writing that such Person elects to employ separate counsel at the expense of the
indemnifying party, the indemnifying party shall not have the right to assume
the defense of such claim on behalf of such Person). If such defense is not
assumed by the indemnifying party, the indemnifying party will not be subject to
any liability for any settlement made without its consent (but such consent will
not be unreasonably withheld), provided that an indemnified party shall not be
--------
required to consent to any settlement involving the imposition of equitable
remedies or involving the imposition of any material obligations on such
indemnified party other than financial obligations for which such indemnified
party will be indemnified under this Section 7. No indemnifying party will be
required to consent to entry of any judgment or enter into any settlement which
does not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
to such claim or litigation. Whenever the indemnified party or the indemnifying
party receives a firm offer to settle a claim for which indemnification is
sought under this Section 7, it shall promptly notify the other of such offer.
If the indemnifying party refuses to accept such offer within 20 business days
after receipt of such offer (or of notice thereof), such claim shall continue to
be contested and, if such claim is within the scope of the indemnifying party's
indemnity contained herein, the indemnified party shall be indemnified pursuant
to the terms of this Section 7. If the indemnifying party notifies the
indemnified Party in writing that the indemnifying party desires to accept such
offer, but the indemnified party refuses to accept such offer within 20 business
days after receipt of such notice, the indemnified party may continue to contest
such claim and, in such event, the total maximum liability of the indemnifying
party to indemnify or otherwise
12
<PAGE>
reimburse the indemnified party under this Section 7 with respect to such claim
shall be limited to and shall not exceed the amount of such offer, plus
reasonable out-of-pocket costs and expenses (including reasonable attorneys'
fees and disbursements) to the date of notice that the indemnifying party
desires to accept such offer, provided that this sentence shall not apply to any
--------
settlement of any claim involving the imposition of equitable remedies or to any
settlement imposing any material obligations on such indemnified party other
than financial obligations for which such indemnified party will be indemnified
under this Section 7. An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the written opinion of
counsel to the indemnified party, reasonably satisfactory to the indemnifying
party, use of one counsel would be expected to give rise to a conflict of
interest between such indemnified party and any other of such indemnified
parties with respect to such claim, in which event the indemnifying party shall
be obligated to pay the fees and expenses of one such additional counsel.
(d) Other Indemnification. Indemnification similar to that
---------------------
specified in this Section 7) (with appropriate modifications) shall be given by
the Company and each seller of Registrable Securities with respect to any
required registration or other qualification of securities under federal or
state law or regulation of governmental authority other than the Securities Act.
(e) Contribution. If for any reason the indemnification provided
------------
for in the preceding paragraphs (a) and (b) is unavailable to an indemnified
party or insufficient to hold it harmless as contemplated by the preceding
paragraphs (a) and (b), then the indemnifying party shall contribute to the
amount paid or payable by the indemnified party as a result of such loss, claim,
damage or liability 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 selling
Stockholder shall be required to contribute in an amount greater than the dollar
amount of the proceeds received by such selling Stockholder or the amount it
would have been required to contribute pursuant to Section 7(a) above had it
been enforceable, with respect to the sale of any securities. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
8. Participation in Underwritten Registrations.
-------------------------------------------
No Person may participate in any Underwritten Registration under this
Section 8 unless such Person (a) agrees to sell such Person's securities on the
basis provided in any underwriting arrangements approved by the Persons entitled
to approve such arrangements, and (b) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements. Nothing in this
Section 8 shall be construed to create any additional rights regarding the
Registration of Registrable Securities in any Person other than as set forth in
this Agreement.
9. Market Stand-off.
----------------
The Stockholders hereby agree that, if so requested by the Company or
the
13
<PAGE>
managing underwriter or agent, if any, the Stockholders shall not sell or
otherwise transfer any Registrable Securities or other securities of the Company
during the seven (7) day period prior to, and during the 180 day period
following the effective date of a Registration Statement of the Company filed
under the Securities Act with respect to the Company's Initial Public Offering,
and during the period specified by the managing underwriter or agent, if any,
(not to exceed 90 days) following the effective date of a Registration Statement
of the Company filed under the Securities Act with respect to any subsequent
primary offering by the Company or a Demand Registration (except in either case
as part of such underwritten registration), in each case without the prior
written consent of the managing underwriter or agent, if any, for such offering;
provided that all officers of the Company enter into similar agreements.
10. Miscellaneous.
-------------
(a) Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the Company and the Stockholders relative to the subject
matters hereof. Any previous agreement between the Company and the Stockholders
concerning Registration rights in connection with the Registrable Securities is
superseded by this Agreement.
(b) Consent. From and after the date of this Agreement, the
-------
Company shall not, without the consent of holders of a majority of the then
outstanding Registrable Securities, enter into any agreement granting any holder
or prospective holder of any securities of the Company registration rights with
respect to such securities unless such new registration rights, including
standoff obligations, are on a pari passu basis with, or are subordinate to, the
---- -----
rights of the holders hereunder.
(c) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Delaware without regard to
its conflict of law principles or rules.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Headings. The headings of the Sections of this Agreement are
--------
for convenience and shall not by themselves determine the interpretation of this
Agreement.
(f) Notices. Any notice required or permitted hereunder shall be
-------
given in writing and shall be conclusively deemed effectively given (a) upon
personal delivery to the person to be notified, (b) when sent by confirmed
facsimile if sent during normal business hours of the recipient; if not, then on
the next business day, (c) five (5) days after deposit in the United States
mail, by registered or certified mail, postage prepaid, or (d) one (1) day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt addressed as set forth on the
signature page of this Agreement, or at such other address as a party may
designate by ten (10) days' advance written notice to the other party.
(g) Amendment of Agreement. Any provision of this Agreement may
----------------------
be amended, modified or waived only by a written instrument signed by the
Company and the holders of at least sixty-six and two-thirds percent (66-2/3%)
of the then outstanding Registrable
14
<PAGE>
Securities; provided that no amendment which adversely affects any Stockholder
other than in the same manner that such amendment affects each other Stockholder
on a pro rata basis will be effective without such first Stockholder's written
consent. Exhibit A may be amended by the Company as necessary to reflect the
---------
addition of parties hereto consistent with Section 10(b) or reflect assignments
permitted by Section 10(h).
(h) Assignment; Successors and Assigns. Except as set forth
----------------------------------
herein, this Agreement is not assignable by the parties hereto without the
written consent of the other parties. The rights to cause the Company to
register Registrable Securities pursuant to Section 2 and 3 may be assigned by a
Stockholder to a transferee or assignee of Registrable Securities which (a) is a
subsidiary, parent, general partner, limited partner or retired partner, member
or retired member of a Stockholder or (b) is a Stockholder's family member or
trust for the benefit of an individual Stockholder, provided, however, (i) the
transferor shall, at least 10 days prior to such transfer, furnish to the
Company written notice of the name and address of such transferee or assignee
and the securities with respect to which such registration rights are being
assigned and (ii) such transferee shall agree to be subject to all restrictions
set forth in this Agreement.
Except as otherwise expressly provided for herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors, and administrators of the parties hereto and shall
inure to the benefit of and be enforceable by each person who shall be a holder
of Registrable Securities from time to time; provided, however, that prior to
the receipt by the Company of adequate written notice of the transfer of any
Registrable Securities specifying the full name and address of the transferee,
the Company may deem and treat the person listed as the holder of such
Registrable Securities in its records as the absolute owner and holder of such
Registrable Securities for all purposes.
(i) Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstance is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
(j) Attorney's Fees. In any action or proceeding brought to
---------------
enforce any provision of this Agreement, the successful party shall be entitled
to recover reasonable attorney's fees in addition to any other available remedy.
15
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THE COMPANY:
AMERICAN CELLULAR CORPORATION,
a Delaware corporation
By: /s/Brion Applegate
------------------
Name: Brion Applegate
Title: Chairman and CEO
Address: 245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Fax: (415) 464-4601
Attention: Brion Applegate
THE STOCKHOLDERS:
SPECTRUM EQUITY INVESTORS II, L.P.,
a Delaware limited partnership
By: Spectrum Equity Associates II, L.P., its Managing General Partner
Name: /s/Brion Applegate
------------------
Title: Managing General Partner
Address: 245 Lytton Avenue, Suite 175
Palo Alto, CA 94301
Fax: (415) 464-4601
Attention: Brion Applegate
PROVIDENCE EQUITY PARTNERS L.P.,
a Delaware limited partnership
By: PROVIDENCE EQUITY PARTNERS, L.L.C.,
its general partner
By: /s/ Jonathan M. Nelson
----------------------
Name: ________________
Title: _______________
Address: 50 Kennedy Plaza
900 Fleet Center
Providence, RI 02903
Fax: (401) 751-1790
Attention: Jonathan M. Nelson
Mark Pelson
<PAGE>
TANDEM WIRELESS INVESTMENTS, L.P.,
a Delaware limited partnership
By: LIVE CYCLES HOLDINGS CO.
Its General Partner
By: /s/ Lynn McDonald
-----------------
Lynn McDonald
Title: Vice President and Secretary
By: /s/ Pierre Belanger
-------------------
Pierre Belanger
Title: President
<PAGE>
21st CENTURY COMMUNICATIONS PARTNERS, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
21st CENTURY COMMUNICATIONS T-E, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
<PAGE>
21st CENTURY COMMUNICATIONS FOREIGN PARTNERS, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 Fifth Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 5th Avenue, 45th Floor
New York, New York 10153
Fax:
Attention:
<PAGE>
SANDLER CAPITAL PARTNERS IV, FTE, L.P.
By: Sandler Investment Partners, L.P.
General Partner
By: Sandler Capital Management
General Partner
By: MJDM CORP., a General Partner
By: /s/ Ed Grinacoff
----------------
Name: Ed Grinacoff
Title: President
Address: 767 5th Avenue, 45th Floor
New York, New York 10153
Fax: (212) 826-0280
Attention: Michael Marocco
Douglas Schimmel
TRIUMPH PARTNERS III, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, L.P.
General Partner
By: Triumph III Advisors, Inc.
General Partner
By: /s/ Jeffrey M. Lane
-------------------
Name: Jeffrey M. Lane
Title: Managing Director
Address: 100 California Street, Suite 756
San Francisco, CA 94111
Fax: (415) 391-8222
Attention: Jeffrey M. Lane
<PAGE>
TRIUMPH III INVESTORS, L.P.,
a Delaware limited partnership
By: Triumph III Advisors, Inc.
General Partner
By: /s/ Jeffrey M. Lane
-------------------
Name: Jeffrey M. Lane
Title: Managing Director
Address: 100 California Street, Suite 756
San Francisco, CA 94111
Fax: (415) 391-8222
Attention: Jeffrey M. Lane
TORONTO DOMINION INVESTMENTS, INC.,
a Delaware corporation
By: /s/ Christopher J. Shipman
--------------------------
Name: Christopher J. Shipman
Title: Vice President
Address: 909 Fannin Street, Suite 1700
Houston, Texas 77010
Fax: (713) 652-2647
Attention: Martha Gariepy
FIRST UNION CAPITAL PARTNERS, INC.,
a Virginia corporation
By: /s/ L.W. Hamrick III
--------------------
Name: L.W. Hamrick III
Title: Senior Vice President
Address: 301 South College Street
Charlotte, N.C. 28288
Fax: (704) 374-6711
Attention: Watts Hemrick
<PAGE>
HARBOURVEST PARTNERS V - Direct Fund L.P.,
a Delaware limited partnership
By: HVP V - Direct Associates LLC
its General Partner
By: HARBOURVEST PARTNERS, LLC
its Managing Member
By: /s/ William A. Johnston
-----------------------
Name: William A. Johnston
Title: Managing Director
Address: One Financial Center, 44th Floor
Boston, MA 0911
Fax: (617) 350-0805
Attention: William Johnston
INFORMATION ASSOCIATES, L.P.
By: TRIDENT CAPITAL MANAGEMENT, L.L.C.
its general partner
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
INFORMATION ASSOCIATES-II, L.P.
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
IA-II AFFILIATES FUND, L.L.C.
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
INFORMATION ASSOCIATES, C.V.
By: TRIDENT CAPITAL MANAGEMENT, L.L.C.
its investment general partner
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
TRIDENT CAPITAL MANAGEMENT-II, L.L.C.
By: /s/ Donald R. Dixon
-------------------
Name: Donald R. Dixon
Title: President
Address: 2480 Sand Hill Road
Menlo Park, CA 94025
Fax: (650) 233-4333
Attention: Don Dixon
<PAGE>
WESTPOOL INVESTMENT TRUST,
a limited company organized under the laws
of England and Wales
By: /s/ Robert A. Rayne
-------------------
Name: Robert A. Rayne
Title: Director
Address: c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WIM5AH
Fax: 011-44-171-935-3737
Attention: Hon. Robert A. Rayne
Debra Schneider
Michael Waldron
Iain MacPhail
SG CAPITAL PARTNERS, LLC
By: /s/ Elan A. Schultz
-------------------
Name: Elan A. Schultz
Title: Managing Director
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: (212) 278-5454
Attention: Elan Schultz
<PAGE>
MERRILL LYNCH KECALP L.P. 1997,
a Delaware limited partnership
By: /s/ Edward J. Higgins
---------------------
Name: Edward J. Higgins
Title: Managing Director
Address: World Financial Center
225 Liberty Street
South Tower, 23rd Floor
New York, NY 10080-6123
Fax: (212) 236-7364
Attention: Andrew Kaufman
KECALP, INC.,
a Delaware corporation
By: /s/ Edward J. Higgins
---------------------
Name: Edward J. Higgins
Title: Managing Director
Address: World Financial Center
225 Liberty Street
South Tower, 23rd Floor
New York, NY 10080-6123
Fax: (212) 236-7364
Attention: Andrew Kaufman
<PAGE>
WEBER FAMILY TRUST dated 1/6/89,
a California family trust
By: /s/ Eugene M. Weber
-------------------
Name: Eugene M. Weber
Title: Trustee
Address: 50 California Street, Suite 3200
San Francisco, CA 94111
Fax: (415) 788-6763
Attention: Eugene M. Weber
LION INVESTMENTS LIMITED,
a limited company organized under the laws
of England and Wales
By: /s/ Robert A. Rayne
-------------------
Name: Robert A. Rayne
Title: Director
Address: c/o London Merchant Securities plc
Carlton House
33 Robert Adam Street
London, England WIM5AH
Fax: 011-44-171-935-3737
Attention: Hon. Robert A. Rayne
Debra Schneider
Michael Waldron
Iain MacPhail
<PAGE>
GENERATION CAPITAL PARTNERS L.P.
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
----------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
STATE BOARD OF ADMINISTRATION OF FLORIDA
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
----------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
GENERATION PARALLEL MANAGEMENT PARTNERS L.P.
By: Generation Partners L.P.,
its General Partner
By: Generation Capital Company LLC
its General Partner
By: /s/ John Hawkins
----------------
John Hawkins
Managing Director
600 Montgomery Street, Suite 3900
San Francisco, California 94111
Fax: (415) 646-8625
Attention: John Hawkins
<PAGE>
GENERATION PARTNERS
By: ___________________________
Name: _____________________
Title: ______________________
Address: 600 Montgomery Street, Suite 3900
San Francisco, California 94111
(415) 646-8625
Attention: John Hawkins
By: /s/ John Fujii
--------------
Name: JOHN D. FUJII
Address: 232 East Thorndale Avenue
Roselle, IL 60172
By: /s/ Brian McTernan
------------------
Name: BRIAN McTERNAN
Address: 1201 Barclay Circle
Barrington, IL 60010
<PAGE>
EXHIBIT 10.12
AMERICAN CELLULAR CORPORATION
EXECUTIVE AGREEMENT
THIS EXECUTIVE AGREEMENT is made as of June 22, 1998 by and between
--
American Cellular Corporation, a Delaware corporation (the "Company"), and
-------
Brian McTernan ("Executive").
- -------------- ---------
WHEREAS, the Company, Executive and certain other investors have entered
into (i) that certain Stock Purchase Agreement dated as of March 5, 1998, as
amended effective March 31, 1998 (the "Stock Purchase Agreement"), with respect
------------------------
to the purchase of certain shares of Class A Common Stock of the Company, par
value $0.01 per share ("Class A Common Stock"), and certain shares of Series A
--------------------
Preferred Stock of the Company, par value $0.01 per share ("Preferred Stock"),
---------------
(ii) that certain Stockholders Agreement dated as of March 5, 1998 (the
"Stockholders Agreement"), and (iii) that certain Registration Rights Agreement
- -----------------------
dated as of March 5, 1998 (the "Registration Rights Agreement");
-----------------------------
WHEREAS, the Stock Purchase Agreement and Stockholders Agreement were
entered into in connection with the execution of that certain Agreement and Plan
of Merger dated as of March 6, 1998, as amended (the "Merger Agreement"),
----------------
between the Company and PriCellular Corporation, a Delaware corporation
("PriCellular"), in contemplation of the cash merger of the Company with and
- -------------
into PriCellular (the "Merger"). PriCellular shall be the surviving corporation
------
in the Merger and shall operate under the name "American Cellular Corporation."
by operation of law, PriCellular shall assume the obligations of the Company
hereunder. the date of the merger is referred to herein as the "Effective
---------
Date";
- ----
WHEREAS, concurrently with the consummation of the Merger, the Company
desires to engage executive as the [Chief Executive Officer][President] of the
Company and the Executive desires to serve in such capacity on the terms and
conditions of this Agreement;
WHEREAS, as contemplated by Schedule 3.11 to the Stock Purchase Agreement,
in connection with his employment with the Company Executive desires to purchase
from the Company, and the Company desires to issue and sell to Executive,
certain shares of non-voting Class B Common Stock of the Company, par value
$0.01 per share ("Class B Common Stock"); and
--------------------
WHEREAS, pursuant to the Stock Purchase Agreement, on or prior to the date
hereof Executive, directly or indirectly, has purchased 1,250 shares of Class A
Common Stock, at a price of $100.00 per share, and 16,250 shares of Preferred
Stock, at a price of $100.00 per share, and the company has agreed to make a
secured loan to Executive of up to $999,900 in respect of his purchase of shares
of Preferred Stock;
<PAGE>
NOW, THEREFORE, the parties agree as follows:
1. Employment; Base Salary; and Term.
---------------------------------
(a) Employment. The Company hereby employs Executive and
----------
Executive hereby accepts such employment, effective as of the date the Merger is
consummated pursuant to the Merger Agreement (the "Effective Date"), upon the
terms and conditions hereinafter set forth.
(b) Position. Executive will serve as [Chief Executive
--------
Officer][President] of the Company and will discharge such duties and
responsibilities, and enjoy such authorities, as are customary for such
position. Executive will use his best efforts to perform his duties and
discharge his responsibilities pursuant to this Agreement competently, carefully
and faithfully.
(c) Devotion of Time. Executive will not enter the employ or
----------------
serve as a consultant to, or in any way perform any services with or without
compensation for, any other person, business or organization, or engage in any
other business activity, where such conduct would substantially detract from the
number of normal working hours sufficient to carry out his duties under this
Agreement, without the prior written consent of the Board of Directors of the
Company; provided, that Executive may engage in the activities which exist as of
--------
the date of the Merger with respect to the entities set forth on Schedule 1(c)
-------------
hereto and make passive investments in the securities of any entity.
(d) Salary. The Company shall pay Executive an annual base salary
------
of at least $375,000, which may be adjusted upward annually by the Board of
Directors (or the Compensation Committee) of the Company. The Company shall pay
Executive his salary in equal installments no less frequently than monthly.
(e) At-Will Relationship. Executive acknowledges and agrees that
--------------------
his employment with the Company is an at-will employment relationship and
Executive will be engaged as an employee at the discretion of the Board of
Directors.
(f) Other Benefits. Executive shall be entitled during his
--------------
employment and at the discretion of the Company's Board of Directors (or any
Compensation Committee thereof) to participate in any stock option, vacation,
pension, insurance or other benefit plan that is maintained at that time by the
Company for executive employees, including programs of life and medical
insurance and reimbursement of membership fees in professional organizations.
2. Confidentiality.
---------------
(a) Ownership. The Executive acknowledges that such Confidential
---------
Information (as defined in (c) below) as is acquired and used by the Company is
a special, valuable and unique asset of the Company. Executive further
acknowledges and agrees that all copyrights, works, inventions, innovations,
improvements, developments, patents, trademarks and all similar or related
information which relate to the actual or anticipated business of the Company
and which are
2
<PAGE>
conceived, developed or made by Executive while employed by the Company belong
to the Company, and all records, files and other materials obtained by Executive
in the course of his employment with the Company shall remain the property of
the Company. Executive shall perform all actions reasonably requested by the
Company to establish and confirm such ownership at the Company's expense
(including without limitation assignments, consents, powers of attorney and
other instruments).
(b) Use. Executive shall not use Confidential Information or
---
other property of the Company for his own benefit or the benefit of any person
or entity with which he may be associated. Except in connection with the
discharge of his duties hereunder, Executive shall not disclose any Confidential
Information to any person, firm, corporation, association or other entity. The
obligations of this Section 2(b) shall not apply to information that enters the
public domain without a breach of this Agreement by Executive.
(c) Confidential Information. As used in this Agreement,
------------------------
"Confidential Information" shall mean information that is not known to the
------------------------
public and that is developed or obtained by the Company after the date hereof in
connection with its business, including but not limited to (i) products or
services, (ii) fees, costs and pricing structures, (iii) designs, (iv) computer
software, including operating systems, applications and program listings, (v)
flow charts, manuals and documentation, (vi) data bases, (vii) accounting and
business methods, (viii) inventions, devices, new developments, methods and
processes, whether patentable or unpatentable and whether or not reduced to
practice, (ix) market reports, customers, clients, customer investigations and
customer or client lists, (x) other copyrightable works, (xi) all technology and
trade secrets, (xii) internal management reports and (xiii) all similar and
related information in whatever form that is proprietary information of the
Company. Notwithstanding the foregoing, information known to Executive prior to
the date hereof shall not be deemed to be Confidential Information for purposes
of this Agreement.
3. Non-Competition. In consideration of and in connection with
---------------
Executive's purchase of shares of Class A Common Stock, Class B Common Stock and
Preferred Stock, and the Company's obligations in respect of such shares, and in
order to protect the goodwill of the Company, as long as Executive is employed
by the Company and owns shares of Class A Common Stock, Class B Common Stock or
Preferred Stock, Executive shall not, unless acting in accordance with the
Company's prior written consent (which consent may be withheld in the Company's
sole and absolute discretion), directly or indirectly, own, manage, join,
operate or control, or participate in the ownership, management, operation or
control of, or be connected as a director, officer, employer, employee, partner,
consultant, independent contractor or otherwise with, or permit his name to be
used by or in connection with, any profit or non-profit business or organization
which directly or indirectly engages in wireless communications activities, in
any part of the United States or other region of the world; provided, that
--------
notwithstanding the foregoing, Executive may engage in the activities which
exist as of the date of the Merger with respect to the entities set forth on
Schedule 1(c). The parties agree that the foregoing shall not limit Executive
from making passive investments in the securities of any entity.
If any provision of this Section 3 is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other provision of
this Section 3 or any other
3
<PAGE>
part of this Agreement, the application of such provision in any other
circumstances or the validity or enforceability of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the geographic area covered thereby, the parties
agree that the court making such determination will have the power to reduce the
duration and/or geographic area of such provision, and/or to delete specific
words or phrases, and in its reduced form such provision will then be
enforceable and will be enforced.
4. Effects of Termination.
----------------------
(a) Put Right. If Executive is terminated by the Company as an
---------
officer, employee or director for any reason other than "cause" (as defined in
subsection (f) below), or if his termination is due to death or disability,
Executive or his executor shall be entitled to serve written notice on the
Company (the "Put Notice") stating that the Company shall thereby be required to
----------
purchase all, but not less than all, of the equity securities in the Company
(including shares of Class A Common Stock, Preferred Stock and Class B Common
Stock) then owned by Executive or any Related Persons (as defined in subsection
(g)) (the "Put Shares"); provided, however, that Put Shares shall not include
---------- -------- -------
(i) any Unreleased Shares (as defined in Section 8), and (ii) after the Initial
Public Offering (as defined in the Stockholders Agreement), any shares of Class
A Common Stock or Class B Common Stock. Executive may exercise the foregoing put
right by delivering an irrevocable written notice to the Company within 20 days
after Executive is terminated by the Company. Executive shall not have any put
right if he voluntarily ceases to serve as an officer and/or director of the
Company or if he is terminated for "cause."
(b) Purchase Price. The purchase price to be paid by the Company
--------------
to the Executive or his Related Persons for the Put Shares shall equal (i) with
respect to shares of Preferred Stock, the face value thereof and accrued
dividends thereon and (ii) with respect to shares of Class A Common Stock and
Class B Common Stock, the pro rata ownership share of Executive and his Related
Persons (determined (A) with respect to the ownership interest represented by
the Put Shares constituting common stock and (B) on a fully-diluted basis) of
the fair market value of the Company as of the termination date. The fair market
value of the Company shall be determined as follows:
(i) Within 15 days after the Put Notice is received by the
Company, the Company shall select an appraiser (the "Company Appraiser") to
-----------------
determine the fair market value as of the termination date. The Company
Appraiser shall submit its written determination to the Company and Executive
within 30 days after its engagement. Such appraisal shall be binding upon the
parties, unless the Executive finds it unsatisfactory, in which event the
provisions set forth in clause (ii) below shall be invoked.
(ii) If the appraisal made by the Company Appraiser is
unsatisfactory to Executive, then within 15 days after the Company Appraiser's
report is delivered to Executive, Executive shall engage an appraiser (the
"Executive Appraiser") to determine the fair market value as of the termination
-------------------
date. The Executive Appraiser shall submit its written determination to the
Company and Executive within 30 days after its engagement. Such appraisal shall
be binding upon the parties, unless the Company finds it unsatisfactory, in
which event the provisions set forth in clause (iii) below shall be invoked.
4
<PAGE>
(iii) If the appraisal prepared by the Executive Appraiser is
unsatisfactory to the Company, then within 15 days after the Executive
Appraiser's report is delivered to the Company, the Company Appraiser and the
Executive Appraiser shall mutually select a third appraiser to determine the
fair market value of the Company as of the termination date, and such third
appraiser shall submit its written determination to the parties within 30 days
after its engagement, which determination shall be binding upon the parties.
(c) Costs. The Company shall bear the reasonable costs and
-----
expenses of all appraisers engaged pursuant to Section 4(b).
(d) Standards. All appraisers selected pursuant to Section 4(b)
---------
shall be associated with firms that are nationally recognized as appraisers of
businesses of the size and type of the Company.
(e) Closing; Form of Consideration; Treatment of Note; Release.
----------------------------------------------------------
The Company shall consummate the repurchase of the Put Shares from Executive or
his Related Persons (the "Put Closing") not more than 30 days after the date the
-----------
applicable appraiser has delivered its binding appraisal report to the parties
under paragraph (b)(i), (ii) or (iii), as applicable. The purchase price shall
be paid in cash; provided, however, that the Company shall have the option to
-------- -------
pay the following amounts to Executive or his Related Persons in the form of
shares of Preferred Stock, equal to the face value of such shares: (i) the
excess amount, if any, by which the purchase price for shares of Class A Common
Stock and Class B Common Stock due from the Company hereunder exceeds the price
initially paid by Executive or his Related Persons to the Company and (ii) the
amount of accrued dividends on shares of Preferred Stock. If the Company elects
to issue shares of Preferred Stock to satisfy any of its obligations under this
Section 4, Executive or his Related Persons shall retain such number of shares
of Preferred Stock issued to them prior to exercise of the put right equal to
the number of new shares to be issued under this Section 4, and such shares of
Preferred Stock shall be treated as redeemed and reissued.
If at the time of the Put Closing Executive has not repaid his
borrowing under the Note (as defined in Section 20), then at the Put Closing:
(i) Executive shall return to the Company that number of shares of Preferred
Stock that have an aggregate face value equal to the principal balance of the
Note (and Executive shall forfeit any accrued dividends with respect to such
returned shares); (ii)the Company shall return the Note, marked "cancelled", to
Executive; (iii) the Security Agreement (as defined in Section 20) shall be
terminated; and (iv) the cash and other property payable pursuant to the
immediately preceding paragraph in respect of any shares of Preferred Stock
(other than the shares referenced in clause (i)) held by the Company in
connection with the Security Agreement shall be delivered to Executive.
The closing of the repurchase shall be subject to the execution by the
parties hereto of a mutual release and waiver with respect to all obligations of
the parties hereunder (other than Sections 2 and 3) and the transactions related
hereto.
(f) Cause. "Cause" shall mean (i) the conviction of a felony or of
-----
a crime involving moral turpitude; (ii) the material breach of Executive's
obligation to provide his services as the President of the Company, which breach
is not
5
<PAGE>
corrected within a 30-day period following his receipt of written notice from
the Board of Directors of the Company, specifying with particularity the
circumstances which would, if uncorrected, justify such termination; or (iii)
the commission of a willful act resulting in a material financial harm to the
Company.
(g) Related Persons. "Related Persons" shall mean any revocable
---------------
or irrevocable trust or custodianship the beneficiaries of which may include
only Executive, his spouse and/or his lineal descendants by blood or adoption,
or a corporation, partnership or limited liability company of which Executive,
his spouse and/or his lineal descendants by blood or adoption are the sole
direct or indirect owners.
5. Sale of Class B Stock. The Company hereby agrees to sell to
---------------------
Executive, and Executive hereby agrees to purchase, an aggregate of 6,793.5
shares of Class B Common Stock (the "Shares"), at a purchase price of $10.00 per
------
share, in cash, for an aggregate purchase price of $67,935.00. The Company and
Executive agree that the Shares shall be registered as follows: [2,264.5 Shares
in the name of the McTernan Family Trust and 4,529 Shares in the name of
Executive][all 6,793.5 Shares in the name of the Fujii Family Partnership L.P.,
the general partner of which is Fujii Family Corp., all the stock of which is
owned by Executive]. Executive represents to the Company that he is authorized
to execute this Agreement on behalf of such Related Person, and the Company and
Executive agree that Executive's signature on the signature page hereof shall
indicate that such Related Person agrees to be bound by the terms and conditions
of this Agreement (other than Sections 1, 2, 3 and 4) as if such Related Person
were "Executive" hereunder.
6. Closing. Executive shall deliver the funds necessary to
-------
consummate such purchase to the Company on or prior to June 23, 1998, and the
closing of the purchase and sale of the Shares shall take place
contemporaneously with the Subsequent Closing (as defined in the Stock Purchase
Agreement) relating to the Final Purchase (as defined in the Stock Purchase
Agreement).
7. Repurchase Option. Subject to the provisions of Section 9 below,
-----------------
in the event of any voluntary or involuntary termination of Executive's
employment by, or services to, the Company for any reason (other than by reason
of death or disability) before all of the Shares are released from the Company's
Repurchase Option (as defined below), the Company shall, upon the date of such
termination (as reasonably fixed and determined by the Company), have an
irrevocable, exclusive option, but not the obligation, for a period of 90 days
from such date to repurchase all or any portion of the Unreleased Shares (as
defined below in Section 8) at such time (the "Repurchase Option") at the
-----------------
original purchase price per share (the "Repurchase Price"). The Repurchase
----------------
Option shall be exercisable by the Company by written notice to Executive and
shall be exercisable, at the Company's option, (i) by delivery to Executive with
such notice of a check in the amount of the purchase price for the Shares being
repurchased, or (ii) by cancellation by the Company of an amount of Executive's
indebtedness, if any, to the Company equal to the purchase price for the Shares
being repurchased, or (iii) by a combination of (i) and (ii) so that the
combined payment and cancellation of indebtedness equals the Repurchase Price
times the number of Unreleased Shares to be repurchased (the "Aggregate
---------
Repurchase Price"). Upon delivery of such notice and the payment of the
- ----------------
Aggregate Repurchase Price in any of the
6
<PAGE>
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interests therein or relating
thereto, and the Company shall have the right to retain and transfer to its own
name the number of Shares being repurchased by the Company. The Repurchase
Option may be assigned by the Company in whole or in part in its sole
discretion.
8. Vesting and Release of Shares From Repurchase Option.
----------------------------------------------------
(a) Any of the Shares which, from time to time, have not yet
vested and been released from the Repurchase Option are referred to herein as
"Unreleased Shares."
- ------------------
(b) The Shares shall vest and be released from the Company's
Repurchase Option pursuant to the following schedule: 25% of the Shares shall be
vested and automatically convert into shares of Class A Common Stock in
accordance with Section 11 on each anniversary of the Effective Date such that
100% of the Shares shall have vested on the fourth anniversary of the Effective
Date; provided, however, that all Shares shall immediately vest, and
-------- -------
automatically convert into shares of Class A Common Stock, in accordance with
Section 11, upon the death or disability of Executive. For purposes hereof,
"disability" shall mean Executive's inability to perform his duties of
----------
employment as a result of physical or mental illness for a period of three
consecutive months or an aggregate of six months during any twelve-month period.
(c) The Shares which have been released from the Repurchase Option
shall be delivered to Executive in accordance with Section 11.
(d) EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO THIS SECTION 8 IS EARNED ONLY BY CONTINUING
SERVICE AS AN ACTIVE EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). EXECUTIVE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE REPURCHASE
OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE
OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE EXECUTIVE'S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Vesting on Change in Control. In the event of a Change in Control
----------------------------
(as defined in the Stockholders Agreement), then the Repurchase Option shall
lapse as to all Unreleased Shares, which shall automatically convert into shares
of Class A Common Stock in accordance with Section 11, and any successor to the
Company prior to or upon the consummation of such Change in Control shall
confirm in writing to Executive such successor's obligation to deliver to
Executive any Unreleased Shares (and any securities, cash or other property
deliverable in respect thereof). The Company shall not effect a Change in
Control unless the successor entity (if other than the Company) resulting from
such Change in Control shall have assumed by a written instrument executed and
mailed by certified mail or delivered to
7
<PAGE>
Executive at his last address appearing on the books of the Company, stating the
obligation of such successor to deliver to Executive such shares of stock,
securities or assets which Executive is entitled to receive. Upon the delivery
of a Drag-Along Notice (as defined in the Stockholders Agreement), Executive
shall convert all of his Shares into Class A Common Stock, after giving effect
to any lapse of the Repurchase Option provided for in this Section 9, whereupon
such shares of Class A Common Stock shall be subject to the provisions of the
Stockholders Agreement as provided in Section 17.
10. Escrow of Shares. All Unreleased Shares shall be held by the
----------------
Company along with a stock assignment executed by Executive (and/or any Related
Person taking delivery of any Shares) in blank in the form attached hereto as
Exhibit A.
- ---------
11. Conversion. Shares which are no longer Unreleased Shares shall
----------
automatically convert into fully-paid and non-assessable shares of Class A
Common Stock on a one-for-one basis. The Company shall at all times reserve and
keep available out of its authorized but unissued Class A Common Stock the
number of shares of Class A Common Stock deliverable upon conversion of the
Shares and shall, at its own expense, take all such actions and obtain all such
permits and orders as may be necessary to enable the Company lawfully to issue
such Class A Common Stock. The Company shall as soon as reasonably practicable
after conversion of the Shares pursuant to this Section 11 (and in any event,
within 20 days after Executive has so requested) cause to be issued and
delivered to Executive certificates for the number of shares of Class A Common
Stock to which Executive shall be entitled hereunder, and the certificates
representing the Shares so converted shall be cancelled. Such conversion shall
be deemed to have been made as of the date of vesting of the Shares, and the
person or persons entitled to receive the Class A Common Stock issuable upon
such automatic conversion shall be treated for all purposes as the record holder
or holders of such Class A Common Stock on such date.
12. Adjustment for Stock Split. All references to numbers of shares
--------------------------
of securities of the Company and the purchase price therefor in this Agreement
shall be appropriately adjusted to reflect any stock split, reverse stock split
or stock dividend or other similar change in such securities which may be made
by the Company after the date of this Agreement.
13. Investment Representations. In connection with the purchase of
--------------------------
the Shares, Executive hereby makes the representations to the Company set forth
in Article II of the Stock Purchase Agreement, which representations are
incorporated herein by reference.
14. Stock Certificate Legends. The share certificate evidencing the
-------------------------
Shares issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
8
<PAGE>
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(c) Any legend required by any applicable state securities laws.
15. Tax Consequences. Executive has reviewed with Executive's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Executive is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. Executive understands that Executive (and not
the Company) shall be responsible for Executive's own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement. Executive understands that Section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), taxes as ordinary income the difference
----
between the amount paid for the Shares and the fair market value of the Shares
as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to its Repurchase Option. In the event the Company has a class of equity
securities registered under the Exchange Act, "restriction" with respect to
officers, directors and 10% shareholders also means the period after the
purchase of the Shares during which such officers, directors and 10%
shareholders could be subject to suit under Section 16(b) of the Exchange Act.
Executive understands that Executive may elect to be taxed at the time the
Shares are purchased rather than when and as the Company's repurchase option or
Section 16(b) period expires by filing an election under Section 83(b) of the
Code with the Internal Revenue Service within 30 days from the date of purchase.
EXECUTIVE ACKNOWLEDGES THAT IT IS EXECUTIVE'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF
EXECUTIVE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
EXECUTIVE'S BEHALF.
16. [Reserved.]
17. Stockholders Agreement. The Company and Executive agree that (i)
----------------------
the shares of Class A Common Stock into which any Shares are converted
constitute "Shares" for purposes of Section 2 (Right of Co-Sale), Section 5
(Management of the Company; Voting), Section 6 (Right of First Refusal on
Issuance of New Securities by the Company) and Section 7 (Miscellaneous) of the
Stockholders Agreement, and (ii) the Shares and the shares of Class A Common
Stock into which the Shares are converted shall all constitute "Shares" for
purposes of Section 3 (Drag-Along Right) and Section 4 (Transfer Rights) of the
Stockholders Agreement.
18. Registration Rights. The Company and Executive hereby
-------------------
acknowledge and agree that the shares of Class A Common Stock into which the
Shares are convertible
9
<PAGE>
constitute "Registrable Securities" (and "Common Shares") under the Registration
Rights Agreement and shall therefore bear the rights and privileges, and are
subject to the obligations, that attach to Registrable Securities and the
holders thereof, as set forth in the Registration Rights Agreement.
19. Additional Shares of Class B Common Stock. If the Company
-----------------------------------------
determines to issue additional shares of Class B Common Stock or rights to
acquire such shares to any person other than Executive, [Fujii/McTernan] or
employees designated by Executive or [Fujii/McTernan], which sale or sales will
or could result in the Company issuing more than 21,739 shares of Class B Common
Stock, the Company shall give Executive 30 days prior written notice of such
intention, which notice shall specify the number of shares of Class B Common
Stock or rights to be issued, the manner of the proposed sale, the name of the
proposed purchaser, if known, the proposed sale price and all other material
terms and conditions of the proposed sale. Executive shall have the right, for
a period of 30 days after receipt of such notice to purchase, on a pro rata
basis in proportion to their holdings of shares of Class B Common Stock, the
additional shares of Class B Common Stock or right to purchase such shares that
the Company proposes to issue; provided, however, that if Executive has not
-------- -------
exercised wholly or in part his right to purchase such additional shares of
Class B Common Stock within the prescribed 30-day period, the Company may sell
any unsold shares or rights to the proposed purchaser upon substantially the
same terms as contained in the notice provided such sale occurs within 30 days
following the expiration of the 30-day period during which Executive had the
right to purchase such shares or rights.
20. Loan and Pledge Agreement in respect of Preferred Stock Shares.
--------------------------------------------------------------
(a) On or prior to the Subsequent Closing relating to the Final
Purchase, the Company hereby agrees to make a loan to Executive of $999,900 to
enable Executive to consummate his purchase of Preferred Stock (the "Loan"),
----
which Loan shall be secured by the shares of Preferred Stock purchased with the
proceeds thereof and other shares of Preferred Stock purchased by Executive at
the Subsequent Closing (as defined in Section 6) (i.e., in the aggregate, 15,750
shares of Preferred Stock shall secure the Loan). Executive agrees to evidence
such Loan by delivering a secured promissory note to the Company (the "Note") in
----
the form of Exhibit B hereto, and to enter into a Security Agreement (the
---------
"Security Agreement") with the Company in the form of Exhibit C hereto. The
- ------------------- ---------
Company shall indemnify Executive, on an after-tax basis, for the interest
payable on the Note when payable or otherwise waive such payments (in which case
the Company will also indemnify Executive for any tax effects relating to such
waiver).
(b) Notwithstanding anything set forth in the Note, if Acme Paging,
L.P. ("Acme") is not sold prior to March 9, 1999, Executive's obligations under
----
the Note shall be evidenced by a new promissory note, payable to the order of
the Company, with interest, and such new note shall be subject to a new security
agreement, provided that the terms of such new promissory note and security
agreement shall comply with the restrictions set forth in the Company's debt
instruments. Subject to the foregoing, (i) the new promissory note shall be
non-recourse (other than to the shares of Preferred Stock purchased with the
proceeds thereof) and shall bear interest at a rate equal to the prime rate
published in the Wall Street Journal, (ii) interest shall be calculated on the
basis of a 360-day year for the actual number of days elapsed
10
<PAGE>
and (iii) the entire principal balance and all accrued but unpaid interest on
the new note, if any, shall be due and payable upon the consummation of the
liquidation of Acme.
21. General Provisions.
------------------
(a) This Agreement, the Stock Purchase Agreement, the
Stockholders Agreement and the Registration Rights are the complete, final and
exclusive statements of the agreement between the parties with respect to the
subject matter hereof and thereof and supersede all prior or contemporaneous
agreements, negotiations, representations, understandings and discussions
between the parties and/or their respective representatives with respect to the
subject matter covered hereby. This Agreement shall supersede Schedule 3.11 of
the Stock Purchase Agreement.
(b) Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively given (a) upon personal
delivery to the person to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (d) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as set forth on the signature
page of this Agreement, or at such other address as a party may designate by ten
(10) days' advance written notice to the other party.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns (including PriCellular). The rights and
obligations of Executive under this Agreement may only be assigned with the
prior written consent of the Company and any purported transfer otherwise shall
be null and void, except as permitted by the Stockholders Agreement.
(d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. Any amendment or waiver of any
provisions hereof shall be set forth in writing and shall be executed by both
parties hereto. The rights granted both parties herein are cumulative and shall
not constitute a waiver of either party's right to assert all other remedies
available to it under the circumstances.
(e) Executive agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) Executive has reviewed this Agreement in its entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
11
<PAGE>
(g) References in this Agreement to the Stock Purchase Agreement,
Stockholders Agreement and Registration Rights Agreement shall include any
amendments thereto effected from time to time in accordance with the respective
terms of such agreements; provided, however, that no such amendment shall alter
-------- -------
any obligation of the Company under this Agreement in a manner adverse to
Executive unless Executive consents in writing thereto.
(SIGNATURE PAGE FOLLOWS)
12
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Executive
Agreement as of the day and year first set forth above.
AMERICAN CELLULAR CORPORATION EXECUTIVE:
a Delaware corporation
By: /s/ Brion Applegate /s/ Brian McTernan
---------------------------- ------------------------------
Name: Brion Applegate Name: Brian McTernan
Title: Chief Executive Officer (Prior to the
Merger)
Address: Address: 1201 Barclay Circle
Barrington, IL 60010
1336 Basswood Street
Suite F
Schaumburg, IL 60173
<PAGE>
Schedule 1(c)
Acme Paging, L.P.
MLC Industries, Inc.
MB Cellular, Inc.
A-1 Wireless, L.P.
Rescue 2000
SMC Partners, L.P.
<PAGE>
CONSENT OF SPOUSE
-----------------
I, ______________________________, spouse of __________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of American Cellular Corporation as set forth in
the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to
the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the laws of the State of Illinois
(or other state of our residence) relating to marital property in effect as of
the date of the signing of the foregoing Agreement.
Dated:__________, 1998
____________________________________
(Signature of Spouse)
15
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _______________, hereby sell, assign and transfer
unto _______________________________________________________ (__________) shares
of the Class B Common Stock of American Cellular Corporation standing in my name
of the books of said corporation represented by Certificate No. _____ herewith
and do hereby irrevocably constitute and appoint _______________, attorney-in-
fact, to transfer the said stock on the books of the within named corporation
with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with Executive
Agreement between American Cellular Corporation and the undersigned dated June
___, 1998.
Dated: _______________, _____
________________________________
Executive
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of Executive.
<PAGE>
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1998
2. The property with respect to which the election is made is described as
follows: __________________shares (the "Shares") of the Class B Common
Stock of American Cellular Corporation (the "Company").
3. The date on which the property was transferred is: June _____, 1998.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the
Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is approximately: $______ per share.
6. The amount (if any) paid for such property is:_______________________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________, 1998 _________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ______________, 1998 _________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT B
---------
SECURED PROMISSORY NOTE
$999,900 Schaumburg, Illinois
June , 1998
For value received, the undersigned, _________________ ( "Borrower"),
promises to pay to American Cellular Corporation, a Delaware corporation, and
its successors and assigns ("Lender"), the principal sum of NINE HUNDRED NINETY
NINE THOUSAND NINE HUNDRED DOLLARS ($999,900) (the "Principal"), together with
interest on the Principal at the rate equal to 6.00% per year. Payments will be
allocated first to accrued and unpaid interest and then to principal.
The entire Principal balance and all accrued but unpaid interest
thereon, if any, shall be due and payable upon the earliest to occur of (i)
March 9, 1999, (ii) the consummation of the liquidation of Acme Paging, L.P. and
(iii) thirty (30) days after the voluntary termination of employment of Borrower
or termination of Borrower by Lender with cause (as defined in that certain
Executive Agreement between Borrower and Lender dated as of June __, 1998 (the
"Executive Agreement")).
- --------------------
In the event (i) Borrower defaults in the payment of Principal or
interest when due pursuant to the terms hereof, (ii) any representation or
warranty of Borrower contained in this Note or any other agreement or instrument
executed in connection with the loan described herein proves to have been false
or misleading in any material respect, or (iii) Borrower defaults in Borrower's
obligation to pay any indebtedness evidenced by any other promissory note
executed by Borrower and payable to Lender or there occurs any other default
under any deed of trust, mortgage or other document securing repayment of such
indebtedness, then unless otherwise prohibited by law, Lender shall have the
option, without demand or notice, to declare the entire Principal balance of
this Note, together with all accrued and unpaid interest, to be immediately due
and payable. In connection with any occurrence of an event described in clauses
(i) - (iii) above, Lender shall have a right of set-off with respect to any sums
owing to Borrower by Lender for any reason and any sums owing to Lender
hereunder.
This Note is secured by certain personal property of Borrower (the
"Property"), as more fully detailed in the Security Agreement by and between
- ---------
Lender and Borrower of even date herewith. This Note shall be subject to the
applicable terms of the Executive Agreement.
This Note is a non-recourse note.
If an action is instituted for collection of this Note, Borrower
agrees to pay court costs and reasonable attorneys' fees incurred by the holder
hereof.
This Note may be amended or modified, and provisions hereof may be
waived, only by the written agreement of Borrower and Lender. No delay or
failure by Lender in exercising any right, power or remedy hereunder shall
operate as a waiver of such right, power or remedy, and a waiver of any right,
power or remedy on any one occasion shall not operate as a
<PAGE>
bar or waiver of any such right, power or remedy on any other occasion. Without
limiting the generality of the foregoing, the delay or failure by Lender for any
period of time to enforce collection of any amounts due hereunder shall not be
deemed to be a waiver of any rights of Lender under contract or under law. The
rights of Lender under this Note and under the Security Agreement are in
addition to any other rights and remedies which Lender may have.
The Principal may be prepaid without penalty, in whole or in part, at
any time. All amounts payable hereunder shall be payable in lawful money of the
United States of America.
Borrower hereby acknowledges that Lender has not made any
representation or warranty to Borrower concerning the income tax consequences of
the loan to Borrower, and Borrower shall be solely responsible for ascertaining
and bearing such tax consequences. Borrower further acknowledges that (i)
Lender may, in its sole discretion, determine that it is required under the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
----
regulations promulgated by the Internal Revenue Service ("IRS") thereunder, to
---
impute interest on the Principal of this Note at the rate set by the IRS, (ii)
the amount of any such imputed interest would be deemed to be compensation
income to Borrower which would be subject to tax withholding, and (iii) if so
determined by Lender, Lender would report and withhold the required amount out
of the current compensation paid to Borrower in accordance with the Code and the
rules and regulations promulgated thereunder.
THIS NOTE AND ALL RELATED DOCUMENTATION ARE EXECUTED VOLUNTARILY AND
WITHOUT ANY DURESS OR UNDUE INFLUENCE ON THE PART OR BEHALF OF THE PARTIES
HERETO, WITH THE FULL INTENT OF CREATING THE OBLIGATIONS AND SECURITY INTERESTS
DESCRIBED HEREIN AND THEREIN. THE PARTIES ACKNOWLEDGE THAT: (a) THEY HAVE READ
SUCH DOCUMENTATION; (b) THEY HAVE BEEN REPRESENTED IN THE PREPARATION,
NEGOTIATION AND EXECUTION OF SUCH DOCUMENTATION BY LEGAL COUNSEL OF THEIR OWN
CHOICE OR THAT THEY HAVE VOLUNTARILY DECLINED TO SEEK SUCH COUNSEL; (c) THEY
UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS NOTE AND ALL RELATED DOCUMENTATION
AND THE OBLIGATIONS THEY CREATE; AND (d) THEY ARE FULLY AWARE OF THE LEGAL AND
BINDING EFFECT OF THIS NOTE AND THE OTHER DOCUMENTS CONTEMPLATED BY THIS
AGREEMENT.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of Illinois
applicable to contracts made and to be entirely performed therein.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned executes this Note as of the date
first written above.
BORROWER:
_______________________________________________
Name: _________________________________________
(Please Print)
3
<PAGE>
EXHIBIT C
---------
SECURITY AGREEMENT
This Security Agreement is made as of June __, 1998 between American
Cellular Corporation, a Delaware corporation ("Pledgee"), and
-------
____________("Pledgor").
-------
Recitals
--------
Pursuant to Pledgee's extension of a loan of $999,900 to Pledgor (the
"Loan") under that certain Promissory Note of even date herewith (the "Note"),
---- ----
Pledgee and Pledgor have agreed to enter into this Security Agreement to provide
for a security interest in certain personal property of Pledgor in order to
secure the Note.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. As security for the
---------------------------------------------
payment and performance of all obligations of the Pledgor on the Note, including
the payment of principal and interest, Pledgor hereby pledges, delivers and
assigns to Pledgee 15,750 shares of the Series A Preferred Stock of Pledgor, par
value .01 per share (the "Property").
---------
The Property (together with an executed blank stock assignment in the
form attached hereto as Exhibit A for use in transferring all or a portion of
---------
the to Pledgee if, as and when required pursuant to this Security Agreement)
shall be held by Pledgee as security for the repayment of the Note, and any
extensions or renewals thereof, to be executed by Pledgor and Pledgee.
The Property shall also include all securities, certificates and
instruments representing or evidencing ownership of the Property and all
proceeds and products of any Property including without limitation stock, cash,
property or other dividends, securities, rights and other property now or
hereafter at any time or from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all of such
Property, and all new stock or other securities or property so acquired by
Pledgor as it relates to the Property shall be immediately delivered to Pledgee,
to be held under the terms of this Security Agreement in the same manner as the
Property initially pledged.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
<PAGE>
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
-----------------------
the Note secured hereby, together with interest thereon, if any, at the time and
in the manner provided in the Note.
(b) Encumbrances. Except as may be provided in the Stock Purchase
------------
Agreement dated as of March 5, 1998 between Pledgor and Pledgee and the other
parties thereto, as amended, and in the Stockholders Agreement dated as of March
5, 1998 between Pledgor and Pledgee and the other parties thereto, the Property
is free of all encumbrances, defenses and liens, and Pledgor will not further
encumber the Property without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock
------------------
becomes margin-listed by the Federal Reserve Board subsequent to the execution
of this Security Agreement, and Pledgee is classified as a "lender" within the
meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
------------
any amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Default. Subject to the provisions of Section 20 of that certain
-------
Executive Agreement dated as of June __, 1998 between Pledgor and Pledgee,
Pledgor shall be deemed to be in default of the Note and of this Security
Agreement in the event:
(a) Payment of principal or interest on the Note, if any, shall be
delinquent for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in this
Security Agreement for a period of 10 days after written notice thereof from
Pledgee.
In the case of an event of default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies.
4. Withdrawal or Substitution of Collateral. Pledgee shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Property without the prior written consent of Pledgor.
5. Term. The within pledge of Property shall continue until the payment
----
or forgiveness of all indebtedness secured hereby.
6. Pledgee Liability. In the absence of willful or gross negligence,
-----------------
Pledgee shall not be liable to any party for any of his acts, or omissions to
act, as Pledgee.
7. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
-----------------------------------
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
2
<PAGE>
8. Successors or Assigns. Pledgor and Pledgee agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
9. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the laws of the State of Illinois.
[THIS SPACE LEFT BLANK INTENTIONALLY]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the day and year first above written.
"PLEDGOR" ____________________________________________
Address: ________________________________
________________________________
"PLEDGEE" AMERICAN CELLULAR CORPORATION,
a Delaware corporation
By: _________________________________________
Name:
Title:
4
<PAGE>
EXHIBIT A TO SECURITY AGREEMENT
-------------------------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, hereby sell, assign and transfer unto
_________________ ___________ ___________________________________ (________)
shares of the Series A Preferred Stock of American Cellular Corporation standing
in my name of the books of said corporation represented by Certificate No._____
herewith and do hereby irrevocably constitute and appoint _____
__________________________________________________ to transfer said stock on the
books of the within-named corporation with full power of substitution in the
premises.
Dated: ________________, _____.
Signature:
________________________________
This Assignment Separate from Certificate was executed in conjunction with the
terms of a Security Agreement between the above assignor and American Cellular
Corporation. dated as of June __, 1998.
<PAGE>
EXHIBIT 10.13
AMERICAN CELLULAR CORPORATION
EXECUTIVE AGREEMENT
THIS EXECUTIVE AGREEMENT is made as of June 22, 1998 by and between
American Cellular Corporation, a Delaware corporation (the "Company"), and
-------
John Fujii ("Executive").
---------
WHEREAS, the Company, Executive and certain other investors have entered
into (i) that certain Stock Purchase Agreement dated as of March 5, 1998, as
amended effective March 31, 1998 (the "Stock Purchase Agreement"), with respect
------------------------
to the purchase of certain shares of Class A Common Stock of the Company, par
value $0.01 per share ("Class A Common Stock"), and certain shares of Series A
--------------------
Preferred Stock of the Company, par value $0.01 per share ("Preferred Stock"),
---------------
(ii) that certain Stockholders Agreement dated as of March 5, 1998 (the
"Stockholders Agreement"), and (iii) that certain Registration Rights Agreement
- -----------------------
dated as of March 5, 1998 (the "Registration Rights Agreement");
-----------------------------
WHEREAS, the Stock Purchase Agreement and Stockholders Agreement were
entered into in connection with the execution of that certain Agreement and Plan
of Merger dated as of March 6, 1998, as amended (the "Merger Agreement"),
----------------
between the Company and PriCellular Corporation, a Delaware corporation
("PriCellular"), in contemplation of the cash merger of the Company with and
- -------------
into PriCellular (the "Merger"). PriCellular shall be the surviving corporation
------
in the Merger and shall operate under the name "American Cellular Corporation."
by operation of law, PriCellular shall assume the obligations of the Company
hereunder. the date of the merger is referred to herein as the "Effective
---------
Date";
- ----
WHEREAS, concurrently with the consummation of the Merger, the Company
desires to engage executive as the [Chief Executive Officer][President] of the
Company and the Executive desires to serve in such capacity on the terms and
conditions of this Agreement;
WHEREAS, as contemplated by Schedule 3.11 to the Stock Purchase Agreement,
in connection with his employment with the Company Executive desires to purchase
from the Company, and the Company desires to issue and sell to Executive,
certain shares of non-voting Class B Common Stock of the Company, par value
$0.01 per share ("Class B Common Stock"); and
--------------------
WHEREAS, pursuant to the Stock Purchase Agreement, on or prior to the date
hereof Executive, directly or indirectly, has purchased 1,250 shares of Class A
Common Stock, at a price of $100.00 per share, and 16,250 shares of Preferred
Stock, at a price of $100.00 per share, and the company has agreed to make a
secured loan to Executive of up to $999,900 in respect of his purchase of shares
of Preferred Stock;
<PAGE>
NOW, THEREFORE, the parties agree as follows:
1. Employment; Base Salary; and Term.
---------------------------------
(a) Employment. The Company hereby employs Executive and
----------
Executive hereby accepts such employment, effective as of the date the Merger is
consummated pursuant to the Merger Agreement (the "Effective Date"), upon the
terms and conditions hereinafter set forth.
(b) Position. Executive will serve as [Chief Executive
--------
Officer][President] of the Company and will discharge such duties and
responsibilities, and enjoy such authorities, as are customary for such
position. Executive will use his best efforts to perform his duties and
discharge his responsibilities pursuant to this Agreement competently, carefully
and faithfully.
(c) Devotion of Time. Executive will not enter the employ or
----------------
serve as a consultant to, or in any way perform any services with or without
compensation for, any other person, business or organization, or engage in any
other business activity, where such conduct would substantially detract from the
number of normal working hours sufficient to carry out his duties under this
Agreement, without the prior written consent of the Board of Directors of the
Company; provided, that Executive may engage in the activities which exist as of
--------
the date of the Merger with respect to the entities set forth on Schedule 1(c)
-------------
hereto and make passive investments in the securities of any entity.
(d) Salary. The Company shall pay Executive an annual base salary
------
of at least $375,000, which may be adjusted upward annually by the Board of
Directors (or the Compensation Committee) of the Company. The Company shall pay
Executive his salary in equal installments no less frequently than monthly.
(e) At-Will Relationship. Executive acknowledges and agrees that
--------------------
his employment with the Company is an at-will employment relationship and
Executive will be engaged as an employee at the discretion of the Board of
Directors.
(f) Other Benefits. Executive shall be entitled during his
--------------
employment and at the discretion of the Company's Board of Directors (or any
Compensation Committee thereof) to participate in any stock option, vacation,
pension, insurance or other benefit plan that is maintained at that time by the
Company for executive employees, including programs of life and medical
insurance and reimbursement of membership fees in professional organizations.
2. Confidentiality.
---------------
(a) Ownership. The Executive acknowledges that such Confidential
---------
Information (as defined in (c) below) as is acquired and used by the Company is
a special, valuable and unique asset of the Company. Executive further
acknowledges and agrees that all copyrights, works, inventions, innovations,
improvements, developments, patents, trademarks and all similar or related
information which relate to the actual or anticipated business of the Company
and which are
2
<PAGE>
conceived, developed or made by Executive while employed by the Company belong
to the Company, and all records, files and other materials obtained by Executive
in the course of his employment with the Company shall remain the property of
the Company. Executive shall perform all actions reasonably requested by the
Company to establish and confirm such ownership at the Company's expense
(including without limitation assignments, consents, powers of attorney and
other instruments).
(b) Use. Executive shall not use Confidential Information or
---
other property of the Company for his own benefit or the benefit of any person
or entity with which he may be associated. Except in connection with the
discharge of his duties hereunder, Executive shall not disclose any Confidential
Information to any person, firm, corporation, association or other entity. The
obligations of this Section 2(b) shall not apply to information that enters the
public domain without a breach of this Agreement by Executive.
(c) Confidential Information. As used in this Agreement,
------------------------
"Confidential Information" shall mean information that is not known to the
------------------------
public and that is developed or obtained by the Company after the date hereof in
connection with its business, including but not limited to (i) products or
services, (ii) fees, costs and pricing structures, (iii) designs, (iv) computer
software, including operating systems, applications and program listings, (v)
flow charts, manuals and documentation, (vi) data bases, (vii) accounting and
business methods, (viii) inventions, devices, new developments, methods and
processes, whether patentable or unpatentable and whether or not reduced to
practice, (ix) market reports, customers, clients, customer investigations and
customer or client lists, (x) other copyrightable works, (xi) all technology and
trade secrets, (xii) internal management reports and (xiii) all similar and
related information in whatever form that is proprietary information of the
Company. Notwithstanding the foregoing, information known to Executive prior to
the date hereof shall not be deemed to be Confidential Information for purposes
of this Agreement.
3. Non-Competition. In consideration of and in connection with
---------------
Executive's purchase of shares of Class A Common Stock, Class B Common Stock and
Preferred Stock, and the Company's obligations in respect of such shares, and in
order to protect the goodwill of the Company, as long as Executive is employed
by the Company and owns shares of Class A Common Stock, Class B Common Stock or
Preferred Stock, Executive shall not, unless acting in accordance with the
Company's prior written consent (which consent may be withheld in the Company's
sole and absolute discretion), directly or indirectly, own, manage, join,
operate or control, or participate in the ownership, management, operation or
control of, or be connected as a director, officer, employer, employee, partner,
consultant, independent contractor or otherwise with, or permit his name to be
used by or in connection with, any profit or non-profit business or organization
which directly or indirectly engages in wireless communications activities, in
any part of the United States or other region of the world; provided, that
--------
notwithstanding the foregoing, Executive may engage in the activities which
exist as of the date of the Merger with respect to the entities set forth on
Schedule 1(c). The parties agree that the foregoing shall not limit Executive
from making passive investments in the securities of any entity.
If any provision of this Section 3 is adjudged by a court to be
invalid or unenforceable, the same will in no way affect any other provision of
this Section 3 or any other
3
<PAGE>
part of this Agreement, the application of such provision in any other
circumstances or the validity or enforceability of this Agreement. If any such
provision, or any part thereof, is held to be unenforceable because of the
duration of such provision or the geographic area covered thereby, the parties
agree that the court making such determination will have the power to reduce the
duration and/or geographic area of such provision, and/or to delete specific
words or phrases, and in its reduced form such provision will then be
enforceable and will be enforced.
4. Effects of Termination.
----------------------
(a) Put Right. If Executive is terminated by the Company as an
---------
officer, employee or director for any reason other than "cause" (as defined in
subsection (f) below), or if his termination is due to death or disability,
Executive or his executor shall be entitled to serve written notice on the
Company (the "Put Notice") stating that the Company shall thereby be required to
----------
purchase all, but not less than all, of the equity securities in the Company
(including shares of Class A Common Stock, Preferred Stock and Class B Common
Stock) then owned by Executive or any Related Persons (as defined in subsection
(g)) (the "Put Shares"); provided, however, that Put Shares shall not include
---------- -------- -------
(i) any Unreleased Shares (as defined in Section 8), and (ii) after the Initial
Public Offering (as defined in the Stockholders Agreement), any shares of Class
A Common Stock or Class B Common Stock. Executive may exercise the foregoing put
right by delivering an irrevocable written notice to the Company within 20 days
after Executive is terminated by the Company. Executive shall not have any put
right if he voluntarily ceases to serve as an officer and/or director of the
Company or if he is terminated for "cause."
(b) Purchase Price. The purchase price to be paid by the Company
--------------
to the Executive or his Related Persons for the Put Shares shall equal (i) with
respect to shares of Preferred Stock, the face value thereof and accrued
dividends thereon and (ii) with respect to shares of Class A Common Stock and
Class B Common Stock, the pro rata ownership share of Executive and his Related
Persons (determined (A) with respect to the ownership interest represented by
the Put Shares constituting common stock and (B) on a fully-diluted basis) of
the fair market value of the Company as of the termination date. The fair market
value of the Company shall be determined as follows:
(i) Within 15 days after the Put Notice is received by the
Company, the Company shall select an appraiser (the "Company Appraiser") to
-----------------
determine the fair market value as of the termination date. The Company
Appraiser shall submit its written determination to the Company and Executive
within 30 days after its engagement. Such appraisal shall be binding upon the
parties, unless the Executive finds it unsatisfactory, in which event the
provisions set forth in clause (ii) below shall be invoked.
(ii) If the appraisal made by the Company Appraiser is
unsatisfactory to Executive, then within 15 days after the Company Appraiser's
report is delivered to Executive, Executive shall engage an appraiser (the
"Executive Appraiser") to determine the fair market value as of the termination
-------------------
date. The Executive Appraiser shall submit its written determination to the
Company and Executive within 30 days after its engagement. Such appraisal shall
be binding upon the parties, unless the Company finds it unsatisfactory, in
which event the provisions set forth in clause (iii) below shall be invoked.
4
<PAGE>
(iii) If the appraisal prepared by the Executive Appraiser is
unsatisfactory to the Company, then within 15 days after the Executive
Appraiser's report is delivered to the Company, the Company Appraiser and the
Executive Appraiser shall mutually select a third appraiser to determine the
fair market value of the Company as of the termination date, and such third
appraiser shall submit its written determination to the parties within 30 days
after its engagement, which determination shall be binding upon the parties.
(c) Costs. The Company shall bear the reasonable costs and
-----
expenses of all appraisers engaged pursuant to Section 4(b).
(d) Standards. All appraisers selected pursuant to Section 4(b)
---------
shall be associated with firms that are nationally recognized as appraisers of
businesses of the size and type of the Company.
(e) Closing; Form of Consideration; Treatment of Note; Release.
----------------------------------------------------------
The Company shall consummate the repurchase of the Put Shares from Executive or
his Related Persons (the "Put Closing") not more than 30 days after the date the
-----------
applicable appraiser has delivered its binding appraisal report to the parties
under paragraph (b)(i), (ii) or (iii), as applicable. The purchase price shall
be paid in cash; provided, however, that the Company shall have the option to
-------- -------
pay the following amounts to Executive or his Related Persons in the form of
shares of Preferred Stock, equal to the face value of such shares: (i) the
excess amount, if any, by which the purchase price for shares of Class A Common
Stock and Class B Common Stock due from the Company hereunder exceeds the price
initially paid by Executive or his Related Persons to the Company and (ii) the
amount of accrued dividends on shares of Preferred Stock. If the Company elects
to issue shares of Preferred Stock to satisfy any of its obligations under this
Section 4, Executive or his Related Persons shall retain such number of shares
of Preferred Stock issued to them prior to exercise of the put right equal to
the number of new shares to be issued under this Section 4, and such shares of
Preferred Stock shall be treated as redeemed and reissued.
If at the time of the Put Closing Executive has not repaid his
borrowing under the Note (as defined in Section 20), then at the Put Closing:
(i) Executive shall return to the Company that number of shares of Preferred
Stock that have an aggregate face value equal to the principal balance of the
Note (and Executive shall forfeit any accrued dividends with respect to such
returned shares); (ii)the Company shall return the Note, marked "cancelled", to
Executive; (iii) the Security Agreement (as defined in Section 20) shall be
terminated; and (iv) the cash and other property payable pursuant to the
immediately preceding paragraph in respect of any shares of Preferred Stock
(other than the shares referenced in clause (i)) held by the Company in
connection with the Security Agreement shall be delivered to Executive.
The closing of the repurchase shall be subject to the execution by the
parties hereto of a mutual release and waiver with respect to all obligations of
the parties hereunder (other than Sections 2 and 3) and the transactions related
hereto.
(f) Cause. "Cause" shall mean (i) the conviction of a felony or of
-----
a crime involving moral turpitude; (ii) the material breach of Executive's
obligation to provide his services as the Chief Executive Officer of the
Company, which breach is not
5
<PAGE>
corrected within a 30-day period following his receipt of written notice from
the Board of Directors of the Company, specifying with particularity the
circumstances which would, if uncorrected, justify such termination; or (iii)
the commission of a willful act resulting in a material financial harm to the
Company.
(g) Related Persons. "Related Persons" shall mean any revocable
---------------
or irrevocable trust or custodianship the beneficiaries of which may include
only Executive, his spouse and/or his lineal descendants by blood or adoption,
or a corporation, partnership or limited liability company of which Executive,
his spouse and/or his lineal descendants by blood or adoption are the sole
direct or indirect owners.
5. Sale of Class B Stock. The Company hereby agrees to sell to
---------------------
Executive, and Executive hereby agrees to purchase, an aggregate of 6,793.5
shares of Class B Common Stock (the "Shares"), at a purchase price of $10.00 per
------
share, in cash, for an aggregate purchase price of $67,935.00. The Company and
Executive agree that the Shares shall be registered as follows: [2,264.5 Shares
in the name of the McTernan Family Trust and 4,529 Shares in the name of
Executive][all 6,793.5 Shares in the name of the Fujii Family Partnership L.P.,
the general partner of which is Fujii Family Corp., all the stock of which is
owned by Executive]. Executive represents to the Company that he is authorized
to execute this Agreement on behalf of such Related Person, and the Company and
Executive agree that Executive's signature on the signature page hereof shall
indicate that such Related Person agrees to be bound by the terms and conditions
of this Agreement (other than Sections 1, 2, 3 and 4) as if such Related Person
were "Executive" hereunder.
6. Closing. Executive shall deliver the funds necessary to
-------
consummate such purchase to the Company on or prior to June 23, 1998, and the
closing of the purchase and sale of the Shares shall take place
contemporaneously with the Subsequent Closing (as defined in the Stock Purchase
Agreement) relating to the Final Purchase (as defined in the Stock Purchase
Agreement).
7. Repurchase Option. Subject to the provisions of Section 9 below,
-----------------
in the event of any voluntary or involuntary termination of Executive's
employment by, or services to, the Company for any reason (other than by reason
of death or disability) before all of the Shares are released from the Company's
Repurchase Option (as defined below), the Company shall, upon the date of such
termination (as reasonably fixed and determined by the Company), have an
irrevocable, exclusive option, but not the obligation, for a period of 90 days
from such date to repurchase all or any portion of the Unreleased Shares (as
defined below in Section 8) at such time (the "Repurchase Option") at the
-----------------
original purchase price per share (the "Repurchase Price"). The Repurchase
----------------
Option shall be exercisable by the Company by written notice to Executive and
shall be exercisable, at the Company's option, (i) by delivery to Executive with
such notice of a check in the amount of the purchase price for the Shares being
repurchased, or (ii) by cancellation by the Company of an amount of Executive's
indebtedness, if any, to the Company equal to the purchase price for the Shares
being repurchased, or (iii) by a combination of (i) and (ii) so that the
combined payment and cancellation of indebtedness equals the Repurchase Price
times the number of Unreleased Shares to be repurchased (the "Aggregate
---------
Repurchase Price"). Upon delivery of such notice and the payment of the
- ----------------
Aggregate Repurchase Price in any of the
6
<PAGE>
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interests therein or relating
thereto, and the Company shall have the right to retain and transfer to its own
name the number of Shares being repurchased by the Company. The Repurchase
Option may be assigned by the Company in whole or in part in its sole
discretion.
8. Vesting and Release of Shares From Repurchase Option.
----------------------------------------------------
(a) Any of the Shares which, from time to time, have not yet
vested and been released from the Repurchase Option are referred to herein as
"Unreleased Shares."
- ------------------
(b) The Shares shall vest and be released from the Company's
Repurchase Option pursuant to the following schedule: 25% of the Shares shall be
vested and automatically convert into shares of Class A Common Stock in
accordance with Section 11 on each anniversary of the Effective Date such that
100% of the Shares shall have vested on the fourth anniversary of the Effective
Date; provided, however, that all Shares shall immediately vest, and
-------- -------
automatically convert into shares of Class A Common Stock, in accordance with
Section 11, upon the death or disability of Executive. For purposes hereof,
"disability" shall mean Executive's inability to perform his duties of
----------
employment as a result of physical or mental illness for a period of three
consecutive months or an aggregate of six months during any twelve-month period.
(c) The Shares which have been released from the Repurchase Option
shall be delivered to Executive in accordance with Section 11.
(d) EXECUTIVE ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO THIS SECTION 8 IS EARNED ONLY BY CONTINUING
SERVICE AS AN ACTIVE EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). EXECUTIVE FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE REPURCHASE
OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE
OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE EXECUTIVE'S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Vesting on Change in Control. In the event of a Change in Control
----------------------------
(as defined in the Stockholders Agreement), then the Repurchase Option shall
lapse as to all Unreleased Shares, which shall automatically convert into shares
of Class A Common Stock in accordance with Section 11, and any successor to the
Company prior to or upon the consummation of such Change in Control shall
confirm in writing to Executive such successor's obligation to deliver to
Executive any Unreleased Shares (and any securities, cash or other property
deliverable in respect thereof). The Company shall not effect a Change in
Control unless the successor entity (if other than the Company) resulting from
such Change in Control shall have assumed by a written instrument executed and
mailed by certified mail or delivered to
7
<PAGE>
Executive at his last address appearing on the books of the Company, stating the
obligation of such successor to deliver to Executive such shares of stock,
securities or assets which Executive is entitled to receive. Upon the delivery
of a Drag-Along Notice (as defined in the Stockholders Agreement), Executive
shall convert all of his Shares into Class A Common Stock, after giving effect
to any lapse of the Repurchase Option provided for in this Section 9, whereupon
such shares of Class A Common Stock shall be subject to the provisions of the
Stockholders Agreement as provided in Section 17.
10. Escrow of Shares. All Unreleased Shares shall be held by the
----------------
Company along with a stock assignment executed by Executive (and/or any Related
Person taking delivery of any Shares) in blank in the form attached hereto as
Exhibit A.
- ---------
11. Conversion. Shares which are no longer Unreleased Shares shall
----------
automatically convert into fully-paid and non-assessable shares of Class A
Common Stock on a one-for-one basis. The Company shall at all times reserve and
keep available out of its authorized but unissued Class A Common Stock the
number of shares of Class A Common Stock deliverable upon conversion of the
Shares and shall, at its own expense, take all such actions and obtain all such
permits and orders as may be necessary to enable the Company lawfully to issue
such Class A Common Stock. The Company shall as soon as reasonably practicable
after conversion of the Shares pursuant to this Section 11 (and in any event,
within 20 days after Executive has so requested) cause to be issued and
delivered to Executive certificates for the number of shares of Class A Common
Stock to which Executive shall be entitled hereunder, and the certificates
representing the Shares so converted shall be cancelled. Such conversion shall
be deemed to have been made as of the date of vesting of the Shares, and the
person or persons entitled to receive the Class A Common Stock issuable upon
such automatic conversion shall be treated for all purposes as the record holder
or holders of such Class A Common Stock on such date.
12. Adjustment for Stock Split. All references to numbers of shares
--------------------------
of securities of the Company and the purchase price therefor in this Agreement
shall be appropriately adjusted to reflect any stock split, reverse stock split
or stock dividend or other similar change in such securities which may be made
by the Company after the date of this Agreement.
13. Investment Representations. In connection with the purchase of
--------------------------
the Shares, Executive hereby makes the representations to the Company set forth
in Article II of the Stock Purchase Agreement, which representations are
incorporated herein by reference.
14. Stock Certificate Legends. The share certificate evidencing the
-------------------------
Shares issued hereunder shall be endorsed with the following legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
8
<PAGE>
SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(b) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED
ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY
AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF
THE COMPANY.
(c) Any legend required by any applicable state securities laws.
15. Tax Consequences. Executive has reviewed with Executive's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Executive is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. Executive understands that Executive (and not
the Company) shall be responsible for Executive's own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement. Executive understands that Section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), taxes as ordinary income the difference
----
between the amount paid for the Shares and the fair market value of the Shares
as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to its Repurchase Option. In the event the Company has a class of equity
securities registered under the Exchange Act, "restriction" with respect to
officers, directors and 10% shareholders also means the period after the
purchase of the Shares during which such officers, directors and 10%
shareholders could be subject to suit under Section 16(b) of the Exchange Act.
Executive understands that Executive may elect to be taxed at the time the
Shares are purchased rather than when and as the Company's repurchase option or
Section 16(b) period expires by filing an election under Section 83(b) of the
Code with the Internal Revenue Service within 30 days from the date of purchase.
EXECUTIVE ACKNOWLEDGES THAT IT IS EXECUTIVE'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF
EXECUTIVE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
EXECUTIVE'S BEHALF.
16. [Reserved.]
17. Stockholders Agreement. The Company and Executive agree that (i)
----------------------
the shares of Class A Common Stock into which any Shares are converted
constitute "Shares" for purposes of Section 2 (Right of Co-Sale), Section 5
(Management of the Company; Voting), Section 6 (Right of First Refusal on
Issuance of New Securities by the Company) and Section 7 (Miscellaneous) of the
Stockholders Agreement, and (ii) the Shares and the shares of Class A Common
Stock into which the Shares are converted shall all constitute "Shares" for
purposes of Section 3 (Drag-Along Right) and Section 4 (Transfer Rights) of the
Stockholders Agreement.
18. Registration Rights. The Company and Executive hereby
-------------------
acknowledge and agree that the shares of Class A Common Stock into which the
Shares are convertible
9
<PAGE>
constitute "Registrable Securities" (and "Common Shares") under the Registration
Rights Agreement and shall therefore bear the rights and privileges, and are
subject to the obligations, that attach to Registrable Securities and the
holders thereof, as set forth in the Registration Rights Agreement.
19. Additional Shares of Class B Common Stock. If the Company
-----------------------------------------
determines to issue additional shares of Class B Common Stock or rights to
acquire such shares to any person other than Executive, [Fujii/McTernan] or
employees designated by Executive or [Fujii/McTernan], which sale or sales will
or could result in the Company issuing more than 21,739 shares of Class B Common
Stock, the Company shall give Executive 30 days prior written notice of such
intention, which notice shall specify the number of shares of Class B Common
Stock or rights to be issued, the manner of the proposed sale, the name of the
proposed purchaser, if known, the proposed sale price and all other material
terms and conditions of the proposed sale. Executive shall have the right, for
a period of 30 days after receipt of such notice to purchase, on a pro rata
basis in proportion to their holdings of shares of Class B Common Stock, the
additional shares of Class B Common Stock or right to purchase such shares that
the Company proposes to issue; provided, however, that if Executive has not
-------- -------
exercised wholly or in part his right to purchase such additional shares of
Class B Common Stock within the prescribed 30-day period, the Company may sell
any unsold shares or rights to the proposed purchaser upon substantially the
same terms as contained in the notice provided such sale occurs within 30 days
following the expiration of the 30-day period during which Executive had the
right to purchase such shares or rights.
20. Loan and Pledge Agreement in respect of Preferred Stock Shares.
--------------------------------------------------------------
(a) On or prior to the Subsequent Closing relating to the Final
Purchase, the Company hereby agrees to make a loan to Executive of $999,900 to
enable Executive to consummate his purchase of Preferred Stock (the "Loan"),
----
which Loan shall be secured by the shares of Preferred Stock purchased with the
proceeds thereof and other shares of Preferred Stock purchased by Executive at
the Subsequent Closing (as defined in Section 6) (i.e., in the aggregate, 15,750
shares of Preferred Stock shall secure the Loan). Executive agrees to evidence
such Loan by delivering a secured promissory note to the Company (the "Note") in
----
the form of Exhibit B hereto, and to enter into a Security Agreement (the
---------
"Security Agreement") with the Company in the form of Exhibit C hereto. The
- ------------------- ---------
Company shall indemnify Executive, on an after-tax basis, for the interest
payable on the Note when payable or otherwise waive such payments (in which case
the Company will also indemnify Executive for any tax effects relating to such
waiver).
(b) Notwithstanding anything set forth in the Note, if Acme Paging,
L.P. ("Acme") is not sold prior to March 9, 1999, Executive's obligations under
----
the Note shall be evidenced by a new promissory note, payable to the order of
the Company, with interest, and such new note shall be subject to a new security
agreement, provided that the terms of such new promissory note and security
agreement shall comply with the restrictions set forth in the Company's debt
instruments. Subject to the foregoing, (i) the new promissory note shall be
non-recourse (other than to the shares of Preferred Stock purchased with the
proceeds thereof) and shall bear interest at a rate equal to the prime rate
published in the Wall Street Journal, (ii) interest shall be calculated on the
basis of a 360-day year for the actual number of days elapsed
10
<PAGE>
and (iii) the entire principal balance and all accrued but unpaid interest on
the new note, if any, shall be due and payable upon the consummation of the
liquidation of Acme.
21. General Provisions.
------------------
(a) This Agreement, the Stock Purchase Agreement, the
Stockholders Agreement and the Registration Rights are the complete, final and
exclusive statements of the agreement between the parties with respect to the
subject matter hereof and thereof and supersede all prior or contemporaneous
agreements, negotiations, representations, understandings and discussions
between the parties and/or their respective representatives with respect to the
subject matter covered hereby. This Agreement shall supersede Schedule 3.11 of
the Stock Purchase Agreement.
(b) Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively given (a) upon personal
delivery to the person to be notified, (b) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (c) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (d) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as set forth on the signature
page of this Agreement, or at such other address as a party may designate by ten
(10) days' advance written notice to the other party.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns (including PriCellular). The rights and
obligations of Executive under this Agreement may only be assigned with the
prior written consent of the Company and any purported transfer otherwise shall
be null and void, except as permitted by the Stockholders Agreement.
(d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. Any amendment or waiver of any
provisions hereof shall be set forth in writing and shall be executed by both
parties hereto. The rights granted both parties herein are cumulative and shall
not constitute a waiver of either party's right to assert all other remedies
available to it under the circumstances.
(e) Executive agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) Executive has reviewed this Agreement in its entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
11
<PAGE>
(g) References in this Agreement to the Stock Purchase Agreement,
Stockholders Agreement and Registration Rights Agreement shall include any
amendments thereto effected from time to time in accordance with the respective
terms of such agreements; provided, however, that no such amendment shall alter
-------- -------
any obligation of the Company under this Agreement in a manner adverse to
Executive unless Executive consents in writing thereto.
(SIGNATURE PAGE FOLLOWS)
12
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Executive
Agreement as of the day and year first set forth above.
AMERICAN CELLULAR CORPORATION EXECUTIVE:
a Delaware corporation
By: /s/ Brion Applegate /s/ John Fujii
---------------------------- ------------------------------
Name: Brion Applegate Name: John Fujii
Title: Chief Executive Officer (Prior to the
Merger)
Address: Address:
1336 Basswood Street 232 East Thorndale Ave.
Suite F Roselle, IL 60172
Schaumburg, IL 60173
<PAGE>
Schedule 1(c)
Acme Paging, L.P.
MLC Industries, Inc.
MB Cellular, Inc.
A-1 Wireless, L.P.
Rescue 2000
SMC Partners, L.P.
North American Microcomputer Systems, Inc.
14
<PAGE>
CONSENT OF SPOUSE
-----------------
I, ______________________________, spouse of __________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of American Cellular Corporation as set forth in
the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to
the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the laws of the State of Illinois
(or other state of our residence) relating to marital property in effect as of
the date of the signing of the foregoing Agreement.
Dated:__________, 1998
____________________________________
(Signature of Spouse)
15
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _______________, hereby sell, assign and transfer
unto _______________________________________________________ (__________) shares
of the Class B Common Stock of American Cellular Corporation standing in my name
of the books of said corporation represented by Certificate No. _____ herewith
and do hereby irrevocably constitute and appoint _______________, attorney-in-
fact, to transfer the said stock on the books of the within named corporation
with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with Executive
Agreement between American Cellular Corporation and the undersigned dated June
___, 1998.
Dated: _______________, _____
________________________________
Executive
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of Executive.
<PAGE>
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1998
2. The property with respect to which the election is made is described as
follows: __________________shares (the "Shares") of the Class B Common
Stock of American Cellular Corporation (the "Company").
3. The date on which the property was transferred is: June _____, 1998.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the
Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is approximately: $______ per share.
6. The amount (if any) paid for such property is:_______________________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________, 1998 _________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ______________, 1998 _________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT B
---------
SECURED PROMISSORY NOTE
$999,900 Schaumburg, Illinois
June , 1998
For value received, the undersigned, _________________ ( "Borrower"),
promises to pay to American Cellular Corporation, a Delaware corporation, and
its successors and assigns ("Lender"), the principal sum of NINE HUNDRED NINETY
NINE THOUSAND NINE HUNDRED DOLLARS ($999,900) (the "Principal"), together with
interest on the Principal at the rate equal to 6.00% per year. Payments will be
allocated first to accrued and unpaid interest and then to principal.
The entire Principal balance and all accrued but unpaid interest
thereon, if any, shall be due and payable upon the earliest to occur of (i)
March 9, 1999, (ii) the consummation of the liquidation of Acme Paging, L.P. and
(iii) thirty (30) days after the voluntary termination of employment of Borrower
or termination of Borrower by Lender with cause (as defined in that certain
Executive Agreement between Borrower and Lender dated as of June __, 1998 (the
"Executive Agreement")).
- --------------------
In the event (i) Borrower defaults in the payment of Principal or
interest when due pursuant to the terms hereof, (ii) any representation or
warranty of Borrower contained in this Note or any other agreement or instrument
executed in connection with the loan described herein proves to have been false
or misleading in any material respect, or (iii) Borrower defaults in Borrower's
obligation to pay any indebtedness evidenced by any other promissory note
executed by Borrower and payable to Lender or there occurs any other default
under any deed of trust, mortgage or other document securing repayment of such
indebtedness, then unless otherwise prohibited by law, Lender shall have the
option, without demand or notice, to declare the entire Principal balance of
this Note, together with all accrued and unpaid interest, to be immediately due
and payable. In connection with any occurrence of an event described in clauses
(i) - (iii) above, Lender shall have a right of set-off with respect to any sums
owing to Borrower by Lender for any reason and any sums owing to Lender
hereunder.
This Note is secured by certain personal property of Borrower (the
"Property"), as more fully detailed in the Security Agreement by and between
- ---------
Lender and Borrower of even date herewith. This Note shall be subject to the
applicable terms of the Executive Agreement.
This Note is a non-recourse note.
If an action is instituted for collection of this Note, Borrower
agrees to pay court costs and reasonable attorneys' fees incurred by the holder
hereof.
This Note may be amended or modified, and provisions hereof may be
waived, only by the written agreement of Borrower and Lender. No delay or
failure by Lender in exercising any right, power or remedy hereunder shall
operate as a waiver of such right, power or remedy, and a waiver of any right,
power or remedy on any one occasion shall not operate as a
<PAGE>
bar or waiver of any such right, power or remedy on any other occasion. Without
limiting the generality of the foregoing, the delay or failure by Lender for any
period of time to enforce collection of any amounts due hereunder shall not be
deemed to be a waiver of any rights of Lender under contract or under law. The
rights of Lender under this Note and under the Security Agreement are in
addition to any other rights and remedies which Lender may have.
The Principal may be prepaid without penalty, in whole or in part, at
any time. All amounts payable hereunder shall be payable in lawful money of the
United States of America.
Borrower hereby acknowledges that Lender has not made any
representation or warranty to Borrower concerning the income tax consequences of
the loan to Borrower, and Borrower shall be solely responsible for ascertaining
and bearing such tax consequences. Borrower further acknowledges that (i)
Lender may, in its sole discretion, determine that it is required under the
Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
----
regulations promulgated by the Internal Revenue Service ("IRS") thereunder, to
---
impute interest on the Principal of this Note at the rate set by the IRS, (ii)
the amount of any such imputed interest would be deemed to be compensation
income to Borrower which would be subject to tax withholding, and (iii) if so
determined by Lender, Lender would report and withhold the required amount out
of the current compensation paid to Borrower in accordance with the Code and the
rules and regulations promulgated thereunder.
THIS NOTE AND ALL RELATED DOCUMENTATION ARE EXECUTED VOLUNTARILY AND
WITHOUT ANY DURESS OR UNDUE INFLUENCE ON THE PART OR BEHALF OF THE PARTIES
HERETO, WITH THE FULL INTENT OF CREATING THE OBLIGATIONS AND SECURITY INTERESTS
DESCRIBED HEREIN AND THEREIN. THE PARTIES ACKNOWLEDGE THAT: (a) THEY HAVE READ
SUCH DOCUMENTATION; (b) THEY HAVE BEEN REPRESENTED IN THE PREPARATION,
NEGOTIATION AND EXECUTION OF SUCH DOCUMENTATION BY LEGAL COUNSEL OF THEIR OWN
CHOICE OR THAT THEY HAVE VOLUNTARILY DECLINED TO SEEK SUCH COUNSEL; (c) THEY
UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS NOTE AND ALL RELATED DOCUMENTATION
AND THE OBLIGATIONS THEY CREATE; AND (d) THEY ARE FULLY AWARE OF THE LEGAL AND
BINDING EFFECT OF THIS NOTE AND THE OTHER DOCUMENTS CONTEMPLATED BY THIS
AGREEMENT.
This Note shall be construed and enforced in accordance with, and the
rights of the parties shall be governed by, the laws of the State of Illinois
applicable to contracts made and to be entirely performed therein.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned executes this Note as of the date
first written above.
BORROWER:
_______________________________________________
Name: _________________________________________
(Please Print)
3
<PAGE>
EXHIBIT C
---------
SECURITY AGREEMENT
This Security Agreement is made as of June __, 1998 between American
Cellular Corporation, a Delaware corporation ("Pledgee"), and
-------
____________("Pledgor").
-------
Recitals
--------
Pursuant to Pledgee's extension of a loan of $999,900 to Pledgor (the
"Loan") under that certain Promissory Note of even date herewith (the "Note"),
---- ----
Pledgee and Pledgor have agreed to enter into this Security Agreement to provide
for a security interest in certain personal property of Pledgor in order to
secure the Note.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. As security for the
---------------------------------------------
payment and performance of all obligations of the Pledgor on the Note, including
the payment of principal and interest, Pledgor hereby pledges, delivers and
assigns to Pledgee 15,750 shares of the Series A Preferred Stock of Pledgor, par
value .01 per share (the "Property").
---------
The Property (together with an executed blank stock assignment in the
form attached hereto as Exhibit A for use in transferring all or a portion of
---------
the to Pledgee if, as and when required pursuant to this Security Agreement)
shall be held by Pledgee as security for the repayment of the Note, and any
extensions or renewals thereof, to be executed by Pledgor and Pledgee.
The Property shall also include all securities, certificates and
instruments representing or evidencing ownership of the Property and all
proceeds and products of any Property including without limitation stock, cash,
property or other dividends, securities, rights and other property now or
hereafter at any time or from time to time received, receivable or otherwise
distributed or distributable in respect of or in exchange for any or all of such
Property, and all new stock or other securities or property so acquired by
Pledgor as it relates to the Property shall be immediately delivered to Pledgee,
to be held under the terms of this Security Agreement in the same manner as the
Property initially pledged.
2. Pledgor's Representations and Covenants. To induce Pledgee to enter
---------------------------------------
into this Security Agreement, Pledgor represents and covenants to Pledgee, its
successors and assigns, as follows:
<PAGE>
(a) Payment of Indebtedness. Pledgor will pay the principal sum of
-----------------------
the Note secured hereby, together with interest thereon, if any, at the time and
in the manner provided in the Note.
(b) Encumbrances. Except as may be provided in the Stock Purchase
------------
Agreement dated as of March 5, 1998 between Pledgor and Pledgee and the other
parties thereto, as amended, and in the Stockholders Agreement dated as of March
5, 1998 between Pledgor and Pledgee and the other parties thereto, the Property
is free of all encumbrances, defenses and liens, and Pledgor will not further
encumber the Property without the prior written consent of Pledgee.
(c) Margin Regulations. In the event that Pledgee's Common Stock
------------------
becomes margin-listed by the Federal Reserve Board subsequent to the execution
of this Security Agreement, and Pledgee is classified as a "lender" within the
meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
------------
any amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Default. Subject to the provisions of Section 20 of that certain
-------
Executive Agreement dated as of June __, 1998 between Pledgor and Pledgee,
Pledgor shall be deemed to be in default of the Note and of this Security
Agreement in the event:
(a) Payment of principal or interest on the Note, if any, shall be
delinquent for a period of 10 days or more; or
(b) Pledgor fails to perform any of the covenants set forth in this
Security Agreement for a period of 10 days after written notice thereof from
Pledgee.
In the case of an event of default, as set forth above, Pledgee shall have
the right to accelerate payment of the Note upon notice to Pledgor, and Pledgee
shall thereafter be entitled to pursue its remedies.
4. Withdrawal or Substitution of Collateral. Pledgee shall not sell,
----------------------------------------
withdraw, pledge, substitute or otherwise dispose of all or any part of the
Property without the prior written consent of Pledgor.
5. Term. The within pledge of Property shall continue until the payment
----
or forgiveness of all indebtedness secured hereby.
6. Pledgee Liability. In the absence of willful or gross negligence,
-----------------
Pledgee shall not be liable to any party for any of his acts, or omissions to
act, as Pledgee.
7. Invalidity of Particular Provisions. Pledgor and Pledgee agree that
-----------------------------------
the enforceability or invalidity of any provision or provisions of this Security
Agreement shall not render any other provision or provisions herein contained
unenforceable or invalid.
2
<PAGE>
8. Successors or Assigns. Pledgor and Pledgee agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
9. Governing Law. This Security Agreement shall be interpreted and
-------------
governed under the laws of the State of Illinois.
[THIS SPACE LEFT BLANK INTENTIONALLY]
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Security
Agreement as of the day and year first above written.
"PLEDGOR" ____________________________________________
Address: ________________________________
________________________________
"PLEDGEE" AMERICAN CELLULAR CORPORATION,
a Delaware corporation
By: _________________________________________
Name:
Title:
4
<PAGE>
EXHIBIT A TO SECURITY AGREEMENT
-------------------------------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, hereby sell, assign and transfer unto
_________________ ___________ ___________________________________ (________)
shares of the Series A Preferred Stock of American Cellular Corporation standing
in my name of the books of said corporation represented by Certificate No._____
herewith and do hereby irrevocably constitute and appoint _____
__________________________________________________ to transfer said stock on the
books of the within-named corporation with full power of substitution in the
premises.
Dated: ________________, _____.
Signature:
________________________________
This Assignment Separate from Certificate was executed in conjunction with the
terms of a Security Agreement between the above assignor and American Cellular
Corporation. dated as of June __, 1998.
<PAGE>
EXHIBIT 10.14
AMERICAN CELLULAR CORPORATION
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made as of June 25, 1998, by and between
American Cellular Corporation, a Delaware corporation (the "Company"), and James
-------
Walter, Jr. ("Purchaser").
---------
WHEREAS, Purchaser is Vice President of Finance of the Company; and
WHEREAS, Purchaser desires to purchase from the Company, and the Company
desires to issue and sell to Purchaser, certain shares of non-voting Class B
Common Stock of the Company, par value $0.01 per share ("Class B Common Stock");
--------------------
NOW, THEREFORE, the parties agree as follows:
1. Sale of Class B Stock. The Company hereby agrees to sell to
---------------------
Purchaser, and Purchaser hereby agrees to purchase, an aggregate of 1,000 shares
of Class B Common Stock (the "Shares"), at a purchase price of $10.00 per share,
------
in cash.
2. Closing. Purchaser shall deliver to the Company the funds
-------
necessary to consummate the purchase of the Shares on or prior to the date
hereof, and the closing of the purchase and sale of the Shares shall take place
concurrently with such delivery and the execution of this Agreement.
3. Repurchase Option for Unreleased Shares. In the event of any
---------------------------------------
voluntary or involuntary termination of Purchaser's employment with the Company
for any reason (other than death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company), have an irrevocable, exclusive option (the "Repurchase Option"),
-----------------
but not the obligation, for a period of 90 days from such date to repurchase all
or any portion of the Unreleased Shares (as defined below in Section 4) at such
time at the original purchase price per share (the "Repurchase Price"). The
----------------
Repurchase Option shall be exercisable by the Company by written notice to
Purchaser and shall be exercisable, at the Company's option, (i) by delivery to
Purchaser with such notice of a check in the amount of the purchase price for
the Shares being repurchased, or (ii) by cancellation by the Company of an
amount of Purchaser's indebtedness, if any, to the Company equal to the purchase
price for the Shares being repurchased, or (iii) by a combination of (i) and
(ii) so that the combined payment and cancellation of indebtedness equals the
Repurchase Price times the number of Unreleased Shares to be repurchased (the
"Aggregate Repurchase Price"). Upon delivery of such notice and the payment of
- ---------------------------
the Aggregate Repurchase Price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
<PAGE>
4. Vesting and Release of Shares From Repurchase Option.
----------------------------------------------------
(a) Any of the Shares which, from time to time, have not yet
vested and been released from the Repurchase Option are referred to herein as
"Unreleased Shares."
- ------------------
(b) The Shares shall vest and be released from the Company's
Repurchase Option pursuant to the following schedule: 25% of the Shares shall be
vested and automatically convert into shares of Class A Common Stock in
accordance with Section 6 on each anniversary of the Effective Date (as defined
below) such that 100% of the Shares shall have vested on the fourth anniversary
of the Effective Date; provided, however, that all Shares shall immediately
-------- -------
vest, and automatically convert into shares of Class A Common Stock, in
accordance with Section 7, upon the death or disability of Purchaser. For
purposes hereof, "disability" shall mean Purchaser's inability to perform his
----------
duties of employment as a result of physical or mental illness for a period of
three consecutive months or an aggregate of six months during any twelve-month
period and "Effective Date" shall mean June 25, 1998.
--------------
(c) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE
REPURCHASE OPTION PURSUANT TO THIS SECTION 4 IS EARNED ONLY BY CONTINUING
SERVICE AS AN ACTIVE EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED OR PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE REPURCHASE
OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE
OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
5. Vesting on Change in Control. In the event of a Change in Control
----------------------------
(as defined in that certain Stockholders Agreement among the Company and the
investors party thereto dated as of March 5, 1998 (as amended from time to time
in accordance with the terms thereof, the "Stockholders Agreement")), then the
----------------------
Repurchase Option shall lapse as to all Unreleased Shares, which shall
automatically convert into shares of Class A Common Stock in accordance with
Section 7, and any successor to the Company prior to or upon the consummation of
such Change in Control shall confirm in writing to Purchaser such successor's
obligation to deliver to Purchaser any Unreleased Shares (and any securities,
cash or other property deliverable in respect thereof). The Company shall not
effect a Change in Control unless the successor entity (if other than the
Company) resulting from such Change in Control shall have assumed by a written
instrument executed and mailed by certified mail or delivered to Purchaser at
his last address appearing on the books of the Company, stating the obligation
of such successor to deliver to Purchaser such shares of stock, securities or
assets which Purchaser is entitled to receive.
2
<PAGE>
6. Escrow of Shares. All Unreleased Shares shall be held by the
----------------
Company along with a stock assignment executed by Purchaser in blank in the form
attached hereto as Exhibit A.
---------
7. Conversion. Shares which are no longer Unreleased Shares shall
----------
automatically convert into fully-paid and non-assessable shares of Class A
Common Stock on a one-for-one basis. The Company shall at all times reserve and
keep available out of its authorized but unissued Class A Common Stock the
number of shares of Class A Common Stock deliverable upon conversion of the
Shares and shall, at its own expense, take all such actions and obtain all such
permits and orders as may be necessary to enable the Company lawfully to issue
such Class A Common Stock. The Company shall as soon as reasonably practicable
after conversion of the Shares pursuant to this Section 7 (and in any event,
within 20 days after Purchaser has so requested) cause to be issued and
delivered to Purchaser certificates for the number of shares of Class A Common
Stock to which Purchaser shall be entitled hereunder, and the certificates
representing the Shares so converted shall be canceled. Such conversion shall be
deemed to have been made as of the date of vesting of the Shares, and the person
or persons entitled to receive the Class A Common Stock issuable upon such
automatic conversion shall be treated for all purposes as the record holder or
holders of such Class A Common Stock on such date.
8. Adjustment for Stock Split. All references to numbers of shares
--------------------------
of securities of the Company and the purchase price therefor in this Agreement
shall be appropriately adjusted to reflect any stock split, reverse stock split
or stock dividend or other similar change in such securities which may be made
by the Company after the date of this Agreement.
9. Registration Rights. The shares of Class A Common Stock into
-------------------
which the Shares are convertible shall constitute "Registrable Securities" under
the Registration Rights Agreement among the Company and the investors party
thereto dated as of March 5, 1998 (as amended from time to time in accordance
with the terms thereof, the "Registration Rights Agreement")), and Purchaser
-----------------------------
shall be deemed a "Stockholder" under the Registration Rights Agreement and bear
all rights and be subject to all obligations of a "Stockholder" thereunder.
10. Transfer Restrictions.
---------------------
(a) Definitions. For purposes of this Agreement:
-----------
(i) "Initial Public Offering" means the initial sale of shares
-----------------------
of the Company's Common Stock to the public pursuant to a registration statement
under the Securities Act of 1933, as amended (together with the rules and
regulations promulgated thereunder, the "Act"), which has been declared
---
effective by the Securities and Exchange Commission (other than a registration
statement on Form S-8 or Form S-4 or any successor to such Form, or any other
similar form) which results in an active trading market in shares of Common
Stock.
3
<PAGE>
(ii) "Permitted Transfer" means (A) Purchaser's Transfer to
------------------
the Company of shares of Class A Common Stock or shares of Class B Common Stock
hereunder; or (B) Purchaser's Transfer of all or a portion of its shares of
Class A Common Stock to any Related Person (as defined in Section 12(h)).
(iii) "Transfer" means any direct or indirect transfer, sale,
--------
assignment, pledge, hypothecation or other disposition.
(b) Transfer. Transfers of Shares and shares of Class A Common
--------
Stock issued upon the conversion thereof are strictly prohibited, except for
Permitted Transfers and Transfers consummated in accordance with Section 10(c)
hereof. Any attempt to Transfer any such shares not in accordance with this
Agreement shall be null and void and neither the Company nor any transfer agent
of such securities shall give any effect to such attempted Transfer in its
records. Prior to consummation of any Transfer permitted under the first
sentence of this Section 10(b), Purchaser shall cause the transferee to execute
an agreement in form and substance reasonably satisfactory to the Company
providing that such transferee shall be bound by all the terms and provisions
of, and entitled to all the rights and benefits under, this Agreement, which are
or theretofore had been applicable to Purchaser with respect to the shares in
question.
(c) Drag Along Obligation. Purchaser shall be subject to Section
---------------------
3 of the Stockholders Agreement with respect to all of Purchaser's Shares and
any shares of Class A Common Stock issued upon the conversion thereof.
(d) Termination. The restrictions on Transfer imposed by this
-----------
Section 10 (including the drag along obligation) shall automatically terminate
upon an Initial Public Offering which raises at least $50,000,000 in proceeds to
the Company and is underwritten pursuant to a firm commitment underwriting by
nationally recognized underwriters.
11. Investment Representations. In connection with the purchase of
--------------------------
the Shares, Purchaser hereby makes the following representations to the Company
with respect to the Shares and the shares of Class A Common Stock issued upon
the conversion thereof (collectively, the "Securities"):
----------
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities.
(b) Purchaser is purchasing the Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Act.
(c) Purchaser understands that (i) the Securities have not been
registered under the Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed herein; (ii) the Securities must be held
indefinitely unless they are subsequently registered under the Act or an
exemption from such registration is available; (iii) the Company is under no
4
<PAGE>
obligation to register the Securities; (iv) a transfer of any of the Securities
will not be valid unless a Registration Statement under the Act is in effect as
to such transfer or in the opinion of counsel satisfactory to the Company such
registration is unnecessary in order for such transfer to comply with the Act;
and (v) the share certificates evidencing the Securities shall be endorsed with
the following legends:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH,
THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE
EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO
OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(iii) Any legend required by any applicable state securities
laws.
The Company will remove the restrictive legends referenced above upon
request of Purchaser provided that the restrictions described in such legends
are no longer applicable and Purchaser has provided the Company with evidence
satisfactory to it that the conditions to the termination of such restrictions
have been met.
12. Effects of Termination on Shares Released from Repurchase Option.
----------------------------------------------------------------
(a) Put Right. If prior to the Initial Public Offering Purchaser
---------
is terminated by the Company as an employee for any reason other than "cause"
(as defined in subsection (g) below), or if his termination is due to death or
disability, Purchaser or his executor shall be entitled to serve written notice
on the Company (the "Put Notice") stating that the Company shall thereby be
----------
required to purchase all, but not less than all, of the shares of Class A Common
Stock then owned by Purchaser or any Related Persons (as defined in subsection
(h) below) (the "Put Shares"), it being expressly understood that Put Shares
----------
shall not include any Unreleased Shares. Purchaser may exercise the foregoing
put right by delivering an irrevocable written notice to the Company within 20
days after Purchaser is terminated by the Company. Purchaser shall not have any
put right if he voluntarily ceases to serve as an employee of the Company or if
he is terminated for "cause" (as defined below).
(b) Call Right. If at any time Purchaser is terminated by the
----------
Company as an employee for any reason, or if his termination is due to death or
disability, the Company shall be entitled to serve written notice on Purchaser
or his executor (the "Call Notice") stating that Purchaser or his executor shall
-----------
thereby be required to sell all or a portion of the shares of
5
<PAGE>
Class A Common Stock then owned by Purchaser or any Related Persons that had
been received by Purchaser upon conversion of vested Shares (the "Call Shares").
-----------
The Company may exercise the foregoing call right by delivering an irrevocable
written notice to Purchaser or his executor within 20 days after Purchaser is
terminated by the Company.
(c) Purchase Price. The purchase price to be paid by the
--------------
Company to Purchaser or his Related Persons for the Put Shares or Call Shares,
as the case may be, shall equal the pro rata ownership share of the fair market
value of the Company as of the termination date represented by the Put Shares or
Call Shares, as applicable (determined on a fully-diluted basis). The fair
market value of the Company shall be determined as follows: Within 15 days after
the Put Notice is received by the Company or the Call Notice is delivered by the
Company, as applicable, the Company shall select an appraiser to determine the
Company's fair market value as of the termination date. The appraiser shall
submit its written determination to the Company and Purchaser within 30 days
after the appraiser's engagement, and such appraisal shall be binding upon the
parties.
(d) Costs. The Company shall bear the reasonable costs and
-----
expenses of the appraiser engaged pursuant to Section 12(c).
(e) Standards. The appraiser selected pursuant to Section 12(c)
---------
shall be associated with firm that is nationally recognized as an appraiser of
businesses of the size and type of the Company.
(f) Closing. The Company shall consummate the repurchase of the
-------
Put Shares or Call Shares, as applicable, from Purchaser or his Related Persons
not more than 30 days after the date the appraiser has delivered its binding
appraisal report to the parties under paragraph (c). The purchase price shall be
paid in cash; provided, however, that with respect to the excess amount, if any,
-------- -------
by which the purchase price for shares of Class A Common Stock due from the
Company hereunder exceeds the price initially paid by Purchaser to the Company,
the Company shall have the option to pay such excess amount in the form of
shares of Series A Preferred Stock of the Company, $0.01 par value per share,
valuing such shares by their stated value ($100 as of the date hereof). The
closing of the repurchase of Put Shares shall be subject to the execution by the
parties hereto of a mutual release and waiver with respect to all obligations of
the parties hereunder and the transactions related hereto.
(g) Cause. "Cause" means (i) the conviction of a felony or of a
----- -----
crime involving moral turpitude; (ii) the material breach of Purchaser's
obligation to provide his required services to the Company, which breach is not
corrected within a 30-day period following his receipt of written notice from
the Board of Directors of the Company, specifying with particularity the
circumstances which would, if uncorrected, justify such termination; or (iii)
the commission of a willful act resulting in a material financial harm to the
Company.
(h) Related Persons. "Related Persons" means any revocable or
--------------- ---------------
irrevocable trust or custodianship the beneficiaries of which may include only
Purchaser, his spouse and/or his lineal descendants by blood or adoption, or a
corporation, partnership or
6
<PAGE>
limited liability company of which Purchaser, his spouse and/or his lineal
descendants by blood or adoption are the sole direct or indirect owners.
13. Tax Consequences. Purchaser has reviewed with Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. Purchaser understands that Purchaser (and not
the Company) shall be responsible for Purchaser's own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement. Purchaser understands that Section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), taxes as ordinary income the difference
----
between the amount paid for the Shares and the fair market value of the Shares
as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to its Repurchase Option. In the event the Company has a class of equity
securities registered under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
--------
Act"), "restriction" with respect to officers, directors and 10% shareholders
- ---
also means the period after the purchase of the Shares during which such
officers, directors and 10% shareholders could be subject to suit under Section
16(b) of the Exchange Act. Purchaser understands that Purchaser may elect to be
taxed at the time the Shares are purchased rather than when and as the Company's
repurchase option or Section 16(b) period expires by filing an election under
Section 83(b) of the Code with the Internal Revenue Service within 30 days from
the date of purchase.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF
PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
PURCHASER'S BEHALF.
14. General Provisions.
------------------
(a) This Agreement (including references herein to the
Stockholders Agreement and Registration Rights Agreement) contains the complete,
final and exclusive statements of the agreement between the parties with respect
to the subject matter hereof and supersedes all prior or contemporaneous
agreements, negotiations, representations, understandings and discussions
between the parties and/or their respective representatives with respect to the
subject matter covered hereby.
(b) Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively given (i) upon personal
delivery to the person to be notified, (ii) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (iii) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as set forth on the signature
page of this Agreement, or at such other address as a party may designate by ten
(10) days' advance written notice to the other party.
7
<PAGE>
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company and any purported transfer otherwise shall be null and void, except as
permitted by Section 10 hereof.
(d) Either party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. Any amendment or waiver of any
provisions hereof shall be set forth in writing and shall be executed by both
parties hereto. The rights granted both parties herein are cumulative and shall
not constitute a waiver of either party's right to assert all other remedies
available to it under the circumstances.
(e) Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) Purchaser has reviewed this Agreement in its entirety, has
had an opportunity to obtain the advice of counsel prior to executing this
Agreement and fully understands all provisions of this Agreement.
(SIGNATURE PAGE FOLLOWS)
8
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Subscription
Agreement as of the day and year first set forth above.
AMERICAN CELLULAR CORPORATION PURCHASER:
a Delaware Corporation
By: /s/ Brian McTernan /s/ James Walter, Jr.
------------------------ ---------------------------
Name: Brian McTernan Name: James Walter, Jr.
Title: President
Address: Address:
1336 Basswood Street 625 Hillside Drive
Suite F Hinsdale, IL 60521
Schaumburg, IL 60173
<PAGE>
CONSENT OF SPOUSE
-----------------
I, ______________________________, spouse of __________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of American Cellular Corporation as set forth in
the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to
the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as I may have any rights in said Agreement
or any shares issued pursuant thereto under the laws of the State of Illinois
(or other state of our residence) relating to marital property in effect as of
the date of the signing of the foregoing Agreement.
Dated:______________, 1998
_____________________________________________
(Signature of Spouse)
10
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _______________, hereby sell, assign and
transfer unto ____________________________________________________ (__________)
shares of the Class B Common Stock of American Cellular Corporation standing in
my name of the books of said corporation represented by Certificate No. _____
herewith and do hereby irrevocably constitute and appoint _______________,
attorney-in-fact, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the
Subscription Agreement between American Cellular Corporation and the undersigned
dated ____________, 1998.
Dated: _______________, _____
________________________________
Purchaser
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of Purchaser.
<PAGE>
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1998
2. The property with respect to which the election is made is described as
follows: __________________shares (the "Shares") of the Class B Common
Stock of American Cellular Corporation (the "Company").
3. The date on which the property was transferred is: ____________, 1998.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the
Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is approximately: $______ per share.
6. The amount (if any) paid for such property is:_______________________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________, 1998 _________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ______________, 1998 _________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT 10.15
AMERICAN CELLULAR CORPORATION
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT is made as of June 25, 1998 by and between
American Cellular Corporation, a Delaware corporation (the "Company"), and
-------
Janice Mercer ("Purchaser").
---------
WHEREAS, Purchaser is E.V.P. - Operations of the Company; and
WHEREAS, Purchaser desires to purchase from the Company, and the Company
desires to issue and sell to Purchaser, certain shares of non-voting Class B
Common Stock of the Company, par value $0.01 per share ("Class B Common Stock");
--------------------
NOW, THEREFORE, the parties agree as follows:
1. Sale of Class B Stock. The Company hereby agrees to sell to
---------------------
Purchaser, and Purchaser hereby agrees to purchase, an aggregate of 1,500 shares
of Class B Common Stock (the "Shares"), at a purchase price of $10.00 per share,
------
in cash.
2. Closing. Purchaser shall deliver to the Company the funds
-------
necessary to consummate the purchase of the Shares on or prior to the date
hereof, and the closing of the purchase and sale of the Shares shall take place
concurrently with such delivery and the execution of this Agreement.
3. Repurchase Option for Unreleased Shares. In the event of any
---------------------------------------
voluntary or involuntary termination of Purchaser's employment with the Company
for any reason (other than death or disability) before all of the Shares are
released from the Company's Repurchase Option (as defined below), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company), have an irrevocable, exclusive option (the "Repurchase Option"),
-----------------
but not the obligation, for a period of 90 days from such date to repurchase all
or any portion of the Unreleased Shares (as defined below in Section 4) at such
time at the original purchase price per share (the "Repurchase Price"). The
----------------
Repurchase Option shall be exercisable by the Company by written notice to
Purchaser and shall be exercisable, at the Company's option, (i) by delivery to
Purchaser with such notice of a check in the amount of the purchase price for
the Shares being repurchased, or (ii) by cancellation by the Company of an
amount of Purchaser's indebtedness, if any, to the Company equal to the purchase
price for the Shares being repurchased, or (iii) by a combination of (i) and
(ii) so that the combined payment and cancellation of indebtedness equals the
Repurchase Price times the number of Unreleased Shares to be repurchased (the
"Aggregate Repurchase Price"). Upon delivery of such notice and the payment of
- ---------------------------
the Aggregate Repurchase Price in any of the ways described above, the Company
shall become the legal and beneficial owner of the Shares being repurchased and
all rights and interests therein or relating thereto, and the Company shall have
the right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
<PAGE>
4. Vesting and Release of Shares From Repurchase Option.
----------------------------------------------------
(a) Any of the Shares which, from time to time, have not yet vested
and been released from the Repurchase Option are referred to herein as
"Unreleased Shares."
- ------------------
(b) The Shares shall vest and be released from the Company's Repurchase
Option pursuant to the following schedule: 25% of the Shares shall be vested
and automatically convert into shares of Class A Common Stock in accordance with
Section 6 on each anniversary of the Effective Date (as defined below) such that
100% of the Shares shall have vested on the fourth anniversary of the Effective
Date; provided, however, that all Shares shall immediately vest, and
-------- -------
automatically convert into shares of Class A Common Stock, in accordance with
Section 7, upon the death or disability of Purchaser. For purposes hereof,
"disability" shall mean Purchaser's inability to perform her duties of
- -----------
employment as a result of physical or mental illness for a period of three
consecutive months or an aggregate of six months during any twelve-month period
and "Effective Date" shall mean June 25, 1998.
--------------
(c) PURCHASER ACKNOWLEDGES AND AGREES THAT THE LAPSING OF THE REPURCHASE
OPTION PURSUANT TO THIS SECTION 4 IS EARNED ONLY BY CONTINUING SERVICE AS AN
ACTIVE EMPLOYEE OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE REPURCHASE
OPTION SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE
OF CONTINUED ENGAGEMENT AS AN EMPLOYEE FOR SUCH PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH THE COMPANY'S RIGHT TO TERMINATE PURCHASER'S
EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.
5. Vesting on Change in Control. In the event of a Change in Control
----------------------------
(as defined in that certain Stockholders Agreement among the Company and the
investors party thereto dated as of March 5, 1998 (as amended from time to time
in accordance with the terms thereof, the "Stockholders Agreement")), then the
----------------------
Repurchase Option shall lapse as to all Unreleased Shares, which shall
automatically convert into shares of Class A Common Stock in accordance with
Section 7, and any successor to the Company prior to or upon the consummation of
such Change in Control shall confirm in writing to Purchaser such successor's
obligation to deliver to Purchaser any Unreleased Shares (and any securities,
cash or other property deliverable in respect thereof). The Company shall not
effect a Change in Control unless the successor entity (if other than the
Company) resulting from such Change in Control shall have assumed by a written
instrument executed and mailed by certified mail or delivered to Purchaser at
her last address appearing on the books of the Company, stating the obligation
of such successor to deliver to Purchaser such shares of stock, securities or
assets which Purchaser is entitled to receive.
2
<PAGE>
6. Escrow of Shares. All Unreleased Shares shall be held by the
----------------
Company along with a stock assignment executed by Purchaser in blank in the form
attached hereto as Exhibit A.
---------
7. Conversion. Shares which are no longer Unreleased Shares shall
----------
automatically convert into fully-paid and non-assessable shares of Class A
Common Stock on a one-for-one basis. The Company shall at all times reserve and
keep available out of its authorized but unissued Class A Common Stock the
number of shares of Class A Common Stock deliverable upon conversion of the
Shares and shall, at its own expense, take all such actions and obtain all such
permits and orders as may be necessary to enable the Company lawfully to issue
such Class A Common Stock. The Company shall as soon as reasonably practicable
after conversion of the Shares pursuant to this Section 7 (and in any event,
within 20 days after Purchaser has so requested) cause to be issued and
delivered to Purchaser certificates for the number of shares of Class A Common
Stock to which Purchaser shall be entitled hereunder, and the certificates
representing the Shares so converted shall be canceled. Such conversion shall be
deemed to have been made as of the date of vesting of the Shares, and the person
or persons entitled to receive the Class A Common Stock issuable upon such
automatic conversion shall be treated for all purposes as the record holder or
holders of such Class A Common Stock on such date.
8. Adjustment for Stock Split. All references to numbers of shares
--------------------------
of securities of the Company and the purchase price therefor in this Agreement
shall be appropriately adjusted to reflect any stock split, reverse stock split
or stock dividend or other similar change in such securities which may be made
by the Company after the date of this Agreement.
9. Registration Rights. The shares of Class A Common Stock into
-------------------
which the Shares are convertible shall constitute "Registrable Securities" under
the Registration Rights Agreement among the Company and the investors party
thereto dated as of March 5, 1998 (as amended from time to time in accordance
with the terms thereof, the "Registration Rights Agreement")), and Purchaser
-----------------------------
shall be deemed a "Stockholder" under the Registration Rights Agreement and bear
all rights and be subject to all obligations of a "Stockholder" thereunder.
10. Transfer Restrictions.
---------------------
(a) Definitions. For purposes of this Agreement:
-----------
(i) "Initial Public Offering" means the initial sale of
-----------------------
shares of the Company's Common Stock to the public pursuant to a registration
statement under the Securities Act of 1933, as amended (together with the rules
and regulations promulgated thereunder, the "Act"), which has been declared
---
effective by the Securities and Exchange Commission (other than a registration
statement on Form S-8 or Form S-4 or any successor to such Form, or any other
similar form) which results in an active trading market in shares of Common
Stock.
3
<PAGE>
(ii) "Permitted Transfer" means (A) Purchaser's Transfer to
------------------
the Company of shares of Class A Common Stock or shares of Class B Common Stock
hereunder; or (B) Purchaser's Transfer of all or a portion of its shares of
Class A Common Stock to any Related Person (as defined in Section 12(g)).
(iii) "Transfer" means any direct or indirect transfer, sale,
--------
assignment, pledge, hypothecation or other disposition.
(b) Transfer. Transfers of Shares and shares of Class A Common
--------
Stock issued upon the conversion thereof are strictly prohibited, except for
Permitted Transfers and Transfers consummated in accordance with Section 10(c)
hereof. Any attempt to Transfer any such shares not in accordance with this
Agreement shall be null and void and neither the Company nor any transfer agent
of such securities shall give any effect to such attempted Transfer in its
records. Prior to consummation of any Transfer permitted under the first
sentence of this Section 10(b), Purchaser shall cause the transferee to execute
an agreement in form and substance reasonably satisfactory to the Company
providing that such transferee shall be bound by all the terms and provisions
of, and entitled to all the rights and benefits under, this Agreement, which are
or theretofore had been applicable to Purchaser with respect to the shares in
question.
(c) Drag Along Obligation. Purchaser shall be subject to Section
---------------------
3 of the Stockholders Agreement with respect to all of Purchaser's Shares and
any shares of Class A Common Stock issued upon the conversion thereof.
(d) Termination. The restrictions on Transfer imposed by this
-----------
Section 10 (including the drag along obligation) shall automatically terminate
upon an Initial Public Offering which raises at least $50,000,000 in proceeds to
the Company and is underwritten pursuant to a firm commitment underwriting by
nationally recognized underwriters.
11. Investment Representations. In connection with the purchase of
--------------------------
the Shares, Purchaser hereby makes the following representations to the Company
with respect to the Shares and the shares of Class A Common Stock issued upon
the conversion thereof (collectively, the "Securities"):
----------
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the Securities.
(b) Purchaser is purchasing the Securities for investment for
Purchaser's own account only and not with a view to, or for resale in connection
with, any "distribution" thereof within the meaning of the Act.
(c) Purchaser understands that (i) the Securities have not been
registered under the Act by reason of a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Purchaser's
investment intent as expressed
4
<PAGE>
herein; (ii) the Securities must be held indefinitely unless they are
subsequently registered under the Act or an exemption from such registration is
available; (iii) the Company is under no obligation to register the Securities;
(iv) a transfer of any of the Securities will not be valid unless a Registration
Statement under the Act is in effect as to such transfer or in the opinion of
counsel satisfactory to the Company such registration is unnecessary in order
for such transfer to comply with the Act; and (v) the share certificates
evidencing the Securities shall be endorsed with the following legends:
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
(iii) Any legend required by any applicable state securities laws.
The Company will remove the restrictive legends referenced above upon
request of Purchaser provided that the restrictions described in such legends
are no longer applicable and Purchaser has provided the Company with evidence
satisfactory to it that the conditions to the termination of such restrictions
have been met.
12. Effects of Termination on Shares Released from Repurchase Option.
----------------------------------------------------------------
(a) Call Right. If at any time Purchaser is terminated by the
----------
Company as an employee for any reason, or if her termination is due to death or
disability, the Company shall be entitled to serve written notice on Purchaser
or her executor (the "Call Notice") stating that Purchaser or her executor shall
-----------
thereby be required to sell all or a portion of the shares of Class A Common
Stock then owned by Purchaser or any Related Persons (as defined in subsection
(f)) that had been received by Purchaser upon conversion of vested Shares (the
"Call Shares"). The Company may exercise the foregoing call right by delivering
- ------------
an irrevocable written notice to Purchaser or her executor within 20 days after
Purchaser is terminated by the Company.
(b) Purchase Price. The purchase price to be paid by the
--------------
Company to Purchaser or her Related Persons for the Call Shares shall equal the
pro rata ownership share of the fair market value of the Company as of the
termination date represented by the Call Shares
5
<PAGE>
(determined on a fully-diluted basis). The fair market value of the Company
shall be determined as follows: Within 15 days after the Call Notice is
delivered by the Company, the Company shall select an appraiser to determine the
Company's fair market value as of the termination date. The appraiser shall
submit its written determination to the Company and Purchaser within 30 days
after the appraiser's engagement, and such appraisal shall be binding upon the
parties.
(c) Costs. The Company shall bear the reasonable costs and
-----
expenses of the appraiser engaged pursuant to Section 12(b).
(d) Standards. The appraiser selected pursuant to Section 12(b)
---------
shall be associated with firm that is nationally recognized as an appraiser of
businesses of the size and type of the Company.
(e) Closing. The Company shall consummate the repurchase of the
-------
Call Shares from Purchaser or her Related Persons not more than 30 days after
the date the appraiser has delivered its binding appraisal report to the parties
under paragraph (c). The purchase price shall be paid in cash; provided,
--------
however, that with respect to the excess amount, if any, by which the purchase
- -------
price for shares of Class A Common Stock due from the Company hereunder exceeds
the price initially paid by Purchaser to the Company, the Company shall have the
option to pay such excess amount in the form of shares of Series A Preferred
Stock of the Company, $0.01 par value per share, valuing such shares by their
stated value ($100 as of the date hereof).
(f) Related Persons. "Related Persons" means any revocable or
--------------- ---------------
irrevocable trust or custodianship the beneficiaries of which may include only
Purchaser, her spouse and/or her lineal descendants by blood or adoption, or a
corporation, partnership or limited liability company of which Purchaser, her
spouse and/or her lineal descendants by blood or adoption are the sole direct or
indirect owners.
13. Tax Consequences. Purchaser has reviewed with Purchaser's own
----------------
tax advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement. Purchaser is
relying solely on such advisors and not on any statements or representations of
the Company or any of its agents. Purchaser understands that Purchaser (and not
the Company) shall be responsible for Purchaser's own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement. Purchaser understands that Section 83 of the Internal Revenue Code
of 1986, as amended (the "Code"), taxes as ordinary income the difference
----
between the amount paid for the Shares and the fair market value of the Shares
as of the date any restrictions on the Shares lapse. In this context,
"restriction" includes the right of the Company to buy back the Shares pursuant
to its Repurchase Option. In the event the Company has a class of equity
securities registered under the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "Exchange
--------
Act"), "restriction" with respect to officers, directors and 10% shareholders
- ---
also means the period after the purchase of the Shares during which such
officers, directors and 10% shareholders could be subject to suit under Section
16(b) of the
6
<PAGE>
Exchange Act. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased rather than when and as the Company's repurchase
option or Section 16(b) period expires by filing an election under Section 83(b)
of the Code with the Internal Revenue Service within 30 days from the date of
purchase.
PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND
NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b), EVEN IF
PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON
PURCHASER'S BEHALF.
14. General Provisions.
------------------
(a) This Agreement (including references herein to the
Stockholders Agreement and Registration Rights Agreement) contains the complete,
final and exclusive statements of the agreement between the parties with respect
to the subject matter hereof and supersedes all prior or contemporaneous
agreements, negotiations, representations, understandings and discussions
between the parties and/or their respective representatives with respect to the
subject matter covered hereby.
(b) Any notice required or permitted hereunder shall be given in
writing and shall be conclusively deemed effectively given (i) upon personal
delivery to the person to be notified, (ii) when sent by confirmed facsimile if
sent during normal business hours of the recipient; if not, then on the next
business day, (iii) five (5) days after deposit in the United States mail, by
registered or certified mail, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt addressed as set forth on the signature
page of this Agreement, or at such other address as a party may designate by ten
(10) days' advance written notice to the other party.
(c) The rights and benefits of the Company under this Agreement
shall be transferable to any one or more persons or entities, and all covenants
and agreements hereunder shall inure to the benefit of, and be enforceable by
the Company's successors and assigns. The rights and obligations of Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company and any purported transfer otherwise shall be null and void, except as
permitted by Section 10 hereof.
(d) Either party's failure to enforce any provision or
provisions of this Agreement shall not in any way be construed as a waiver of
any such provision or provisions, nor prevent that party thereafter from
enforcing each and every other provision of this Agreement. Any amendment or
waiver of any provisions hereof shall be set forth in writing and shall be
executed by both parties hereto. The rights granted both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other remedies available to it under the circumstances.
7
<PAGE>
(e) Purchaser agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this
Agreement.
(f) Purchaser has reviewed this Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement.
(SIGNATURE PAGE FOLLOWS)
8
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Subscription
Agreement as of the day and year first set forth above.
AMERICAN CELLULAR CORPORATION PURCHASER:
a Delaware corporation
By: /s/ Brian McTernan /s/ Janice Mercer
-------------------------- ---------------------------------
Name: Brian McTernan Name: Janice Mercer
Title: President
Address: Address:
1336 Basswood Street 2450 Estates Parkway
Suite F Lucas, TX 75002
Schaumburg, IL 60173
<PAGE>
CONSENT OF SPOUSE
-----------------
I, ______________________________, spouse of __________, have read and
approve the foregoing Agreement. In consideration of granting of the right to
my spouse to purchase shares of American Cellular Corporation as set forth in
the Agreement, I hereby appoint my spouse as my attorney-in-fact in respect to
the exercise of any rights under the Agreement and agree to be bound by the
provisions of the Agreement insofar as i may have any rights in said Agreement
or any shares issued pursuant thereto under the laws of the State of Illinois
(or other state of our residence) relating to marital property in effect as of
the date of the signing of the foregoing Agreement.
Dated: , 1998
---------
------------------------------------------
(Signature of Spouse)
10
<PAGE>
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, _______________, hereby sell, assign and
transfer unto ___________________________________________________ (__________)
shares of the Class B Common Stock of American Cellular Corporation standing in
my name of the books of said corporation represented by Certificate No. _____
herewith and do hereby irrevocably constitute and appoint _______________,
attorney-in-fact, to transfer the said stock on the books of the within named
corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the
Subscription Agreement between American Cellular Corporation and the undersigned
dated ____________, 1998.
Dated: _______________, _____
________________________________
Purchaser
INSTRUCTIONS: Please do not fill in the blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
"Repurchase Option," as set forth in the Agreement, without requiring additional
signatures on the part of Purchaser.
<PAGE>
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to the above-referenced Federal
Tax Code, to include in taxpayer's gross income for the current taxable year,
the amount of any compensation taxable to taxpayer in connection with his
receipt of the property described below
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS: :
IDENTIFICATION NO.: SPOUSE:
TAXABLE YEAR: 1998
2. The property with respect to which the election is made is described as
follows: __________________shares (the "Shares") of the Class B Common
Stock of American Cellular Corporation (the "Company").
3. The date on which the property was transferred is: _____________, 1998.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, on
certain events. This right lapses with regard to a portion of the
Shares over time.
5. The fair market value at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms
will never lapse, of such property is approximately: $______ per share.
6. The amount (if any) paid for such property is: _____________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________, 1998 _________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ______________, 1998 _________________________________
Spouse of Taxpayer
<PAGE>
Exhibit 10.16
ASSET PURCHASE AGREEMENT
dated as of
October 31, 1997
among
KYLE CELLULAR CORPORATION,
PRICELLULAR CORPORATION,
and
TENNESSEE 04 PARTNERS, L.P.
as amended by
Amendment No. 1 thereto
dated as of
March 27, 1998
<PAGE>
TABLE OF CONTENTS
-------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1 DEFINITIONS
---------------------
<S> <C>
Section 1.01. Definitions.................................................. 1
-
ARTICLE 2 PURCHASE AND SALE
---------------------------
Section 2.01. Purchase and Sale............................................. 9
-
Section 2.02. Assumption of Liabilities..................................... 9
-
Section 2.03. Excluded Liabilities..........................................10
--
Section 2.04. Assignments of Contracts and Rights...........................11
--
Section 2.05. Closing.......................................................11
--
Section 2.06. Determination of Current Assets, Adjusted Accounts
Receivable.............................................................12
--
Section 2.07. Allocation of Purchase Price..................................13
--
Section 2.08. Cut-off and Prorations........................................14
--
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF SELLER
--------------------------------------------------
Section 3.01. Existence and Power...........................................15
--
Section 3.02. Authorization.................................................16
--
Section 3.03. Governmental Authorization....................................16
--
Section 3.04. Non-contravention.............................................16
--
Section 3.05. Required Consents.............................................17
--
Section 3.06. Absence of Certain Changes....................................17
--
Section 3.07. Insurance.....................................................18
--
Section 3.08. Properties....................................................18
--
Section 3.09. Sufficiency of the Purchased Assets..........................20
--
Section 3.10. No Undisclosed Liabilities....................................20
--
Section 3.11. Litigation....................................................20
--
Section 3.12. Material Contracts............................................20
--
Section 3.13. Licenses and Operations.......................................22
--
Section 3.14. Compliance with Law...........................................22
--
Section 3.15. No Brokers....................................................23
--
Section 3.16. Inventories...................................................23
--
Section 3.17. Accuracy of Statements........................................23
--
Section 3.18. Environmental Compliance......................................24
--
Section 3.19. Financial Statements..........................................25
--
Section 3.20. Rate Plans....................................................25
--
Section 3.21. FCC and Other Governmental Reports............................26
--
Section 3.22. Subscribers...................................................26
--
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 3.23. Books and Records.............................................26
--
Section 3.24. Qualifications................................................26
--
Section 3.25. Deposits......................................................26
--
Section 3.26. Insolvency Proceedings........................................27
--
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
-------------------------------------------------
Section 4.01. Organization and Existence....................................27
--
Section 4.02. Authorization.................................................27
--
Section 4.03. Governmental Authorization....................................27
--
Section 4.04. Non-contravention.............................................28
--
Section 4.05. No Brokers....................................................28
--
Section 4.06. Accuracy of Statements........................................28
--
Section 4.07. Financing; Qualifications.....................................28
--
Section 4.08. Litigation....................................................28
--
Section 4.09. Additional Representation.....................................29
--
ARTICLE 5 COVENANTS OF SELLER
-----------------------------
Section 5.01. Changes in Charter Documents..................................29
--
Section 5.02. No Change in Representations and Warranties...................29
--
Section 5.03. Cooperation in Obtaining Approvals............................29
--
Section 5.04. Access........................................................30
--
Section 5.05. Conduct of Business...........................................30
--
Section 5.06. Notice of Certain Events......................................31
--
Section 5.07. Exclusive Dealing.............................................32
--
Section 5.08. Seller Financial Statements...................................32
--
ARTICLE 6 COVENANTS OF ACQUIRING COMPANIES
------------------------------------------
Section 6.01. Access........................................................32
--
Section 6.02. No Change in Representations and Warranties...................33
--
ARTICLE 7 COVENANTS OF ALL PARTIES
----------------------------------
Section 7.01. Regulatory Approval...........................................33
--
Section 7.02. Confidentiality...............................................33
--
Section 7.03. Best Efforts; Further Assurances..............................34
--
Section 7.04. Public Announcements..........................................35
--
Section 7.05. GTE Switching Services Agreement..............................35
--
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
ARTICLE 8 TAX MATTERS
---------------------
<S> <C>
Section 8.01. Tax Matters...................................................35
--
Section 8.02. Tax Cooperation; Allocation of Taxes..........................36
--
ARTICLE 9 CONDITIONS TO CLOSING
-------------------------------
Section 9.01. Conditions to the Obligations of Each Party...................37
--
Section 9.02. Conditions to the Obligations of the Acquiring Companies......38
--
Section 9.03. Conditions to the Obligations of Seller.......................40
--
ARTICLE 10 SURVIVAL; INDEMNIFICATION
------------------------------------
Section 10.01. Survival......................................................41
--
Section 10.02. Indemnification...............................................42
--
Section 10.03. Procedures....................................................43
--
Section 10.04. Escrow........................................................45
--
ARTICLE 11 TERMINATION
----------------------
Section 11.01. Termination...................................................46
--
ARTICLE 12 OBLIGATIONS OF PRICELLULAR
-------------------------------------
Section 12.01. Guaranty by PriCellular of Buyer's Obligations................47
--
Section 12.02. Representations and Warranties of PriCellular.................48
--
ARTICLE 13 MISCELLANEOUS
------------------------
Section 13.01. Expenses......................................................49
--
Section 13.02. Notices.......................................................50
--
Section 13.03. Counterparts..................................................51
--
Section 13.04. Amendments and Waivers........................................51
--
Section 13.05. Entire Agreement..............................................51
--
Section 13.06. Invalidity of Any Provision...................................51
--
Section 13.07. Successors and Assigns........................................51
--
Section 13.08. Governing Law.................................................52
--
Section 13.09. Captions......................................................52
--
</TABLE>
iii
<PAGE>
SCHEDULE and EXHIBITS
---------------------
<TABLE>
<S> <C>
Schedule 1.01(a) - Excluded Assets
Schedule 1.01(b) - Purchased Assets
Schedule 2.02(a) - Assumed Liabilities
Schedule 3.05 - Required Consents
Schedule 3.06 - Absence of Certain Changes
Schedule 3.08 - Permitted Liens with Respect to Real Property
Schedule 3.10 - Undisclosed Liabilities
Schedule 3.11 - Litigation
Schedule 3.12 - Material Contracts
Schedule 3.13 - Licenses
Schedule 3.18 - Environmental Matters
Schedule 3.22 - Subscriber Agreements
EXHIBIT A - Form of Assignment and Assumption Agreement
</TABLE>
iv
<PAGE>
ASSET PURCHASE AGREEMENT
AGREEMENT (the "AGREEMENT") dated as of October 31,1997 among Kyle Cellular
Corporation, a Delaware corporation ("BUYER"), PriCellular Corporation, a
Delaware corporation of which Buyer is a wholly-owned subsidiary ("PRICELLULAR"
and, together with Buyer, the "ACQUIRING COMPANIES"), and Tennessee 04 Partners,
L.P., a Delaware limited partnership ("SELLER").
WHEREAS, Seller is the licensee of the non-wireline cellular operating
license (Call Sign KNKN526) and any associated microwave licenses (collectively,
the "FCC LICENSE") granted by the Federal Communications Commission with respect
to Rural Service Area No. 4 in the State of Tennessee (Market No. 646A) ("TN-
4"), and owns or has the right to use all real property, leases, cell sites,
towers, radio equipment, antenna and related equipment and all other assets used
in connection with the provision of cellular mobile telephone service to TN-4
and operates the non-wireline cellular mobile telephone system in TN-4 (the
"SYSTEM"); and
WHEREAS, PriCellular owns all of the issued and outstanding capital stock
of Buyer;
NOW, THEREFORE, in consideration of the mutual representations, warranties,
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) The following terms, as used herein, shall
have the following meanings:
"ACQUISITION AGREEMENTS" means this Agreement and the Sales Agreement.
"AFFILIATE" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under common control with such other
Person. For the purposes of this definition, "control" when used with respect
to any Person means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"AFFILIATED COMPANY" means each Affiliate of Seller, and every corporation
or trade or business, whether or not incorporated, which is from time to time a
member of a controlled group or a group under common control with Seller within
the meaning of Section 414 of the Code or Section 4000(b)(1) of ERISA.
<PAGE>
"BALANCE SHEET" as of any date means the Income Tax Basis statement of
assets, liabilities and partners' deficit of Seller as of such date.
"BALANCE SHEET DATE" means September 30, 1997.
"BENEFIT ARRANGEMENT" means any employment, severance or similar contract,
arrangement or policy, or any plan or arrangement (whether or not written)
providing for severance benefits, insurance coverage (including any self-insured
arrangements), workers' compensation, disability benefits, supplemental
unemployment benefits, vacation benefits, retirement benefits, deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights
or other forms of incentive compensation or post-retirement insurance,
compensation or benefits that (i) is not an Employee Benefit Plan, (ii) is
entered into or maintained, as the case may be, by Seller or an Affiliated
Company and (iii) covers any employee or former employee of Seller.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on which
commercial banks in the City of New York are authorized or required by law or
executive order to close.
"CERCLA" means the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended.
"CLOSING STATEMENT" means the statement of Current Assets and Current
Liabilities as delivered by Seller prior to the Closing under Section 2.06 and
thereafter adjusted in accordance with Section 2.06.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended, and
any successor statute enacted, and the rules, regulations and written decisions
and policies promulgated thereunder.
"CONTRACTS" has the meaning set forth in clause (c) of the definition of
Purchased Assets.
"CURRENT ASSETS" means the following current assets of Seller: accounts
receivable, inventory (but only recent-model telephones purchased in the six
months prior to Closing that are unused and in their original packaging) and
earnest money deposits.
"CURRENT LIABILITIES" means the following current liabilities of Seller:
customer deposits and unearned revenue.
"EFFECTIVE DATE" means (i) January 1, 1998, if the Closing occurs on or
before January 16, 1998 or (ii) the Closing Date, if the Closing occurs after
January 16, 1998.
"EMPLOYEE BENEFIT PLANS" means all employee benefit plans within the meaning
of Section 3(3) of ERISA, whether or not any such Employee Benefit Plans are
otherwise exempt from the provisions of ERISA, if any, established, maintained
or contributed to by Seller or any Affiliated Company which cover any employee
or former employee of Seller.
2
<PAGE>
"ENVIRONMENTAL LAWS" means any and all applicable federal, state and local
statutes, laws, regulations, codes, licenses, permits, governmental
restrictions, orders, decrees, judgments or injunctions each as now in effect
relating to the protection of the environment or public health and safety or to
Releases of Hazardous Substances into the environment, including, but not
limited to, ambient air, surface water, groundwater or land, or otherwise
relating to the presence, manufacture, processing, distribution, use, operation,
treatment, storage, disposal, transport or handling of Hazardous Substances or
wastes or the clean-up or other remediation thereof.
"ENVIRONMENTAL LIABILITIES" means any and all liabilities of or relating to
Seller, the System, System Operations, the Real Estate or the Purchased Assets,
whether vested or unvested, contingent or fixed, actual or potential, known or
unknown, which (i) arise under or relate to matters covered by Environmental
Laws (including without limitation any matters disclosed or required to be
disclosed on Schedule 3.18 attached hereto) and (ii) relate to actions occurring
or conditions arising during the period of Seller's ownership and operation of
the System, System Operations, Real Estate or the Purchased Assets.
"ESCROW AGENT" means Morgan Guaranty Trust Company of New York (or some
other bank reasonably acceptable to Seller).
"ESCROW AGREEMENT" means the agreement among Buyer, Seller and the Escrow
Agent as mutually agreed by the parties thereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"EXCLUDED ASSETS" means (i) cash, cash equivalents and marketable securities
of Seller, (ii) software which is readily replaceable or immaterial to the
operation of the system and which Seller does not have the right to assign,
(iii) subject to Section 7.05, the GTE Switching Services Agreement, (iv) the
equipment at two of Seller's sites and the rights to use 38 GHz licenses that
are currently owned by or licensed to, as applicable, Bachow Communications Inc.
and described on Schedule 101 hereto, (v) other assets and properties listed in
Schedule 1.01(a), (vi) any asset of Seller sold or otherwise disposed of in the
ordinary course of business and not in violation of any provisions of this
Agreement, (vii) inventory not included in the Purchased Assets and (viii) the
organizational and partnership records of Seller.
"FAA" means the Federal Aviation Administration.
"FCC" means the Federal Communications Commission or any successor
governmental entity or entities that have jurisdiction over matters which as of
the date hereof are within the jurisdiction of the Federal Communications
Commission.
"FINAL ORDER" means an action by the FCC, state regulatory authority or a
court of competent jurisdiction as to which (i) no request for stay by the FCC,
state regulatory authority or a court of competent jurisdiction, as applicable,
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 or application for review of the
action is pending
3
<PAGE>
before the FCC, state regulatory authority or court of competent jurisdiction,
as applicable, and the time for filing any such application or petition has
passed; (iii) the FCC, state regulatory authority or court of competent
jurisdiction, as applicable, does not have the action under reconsideration on
its own motion and the time for such reconsideration has passed; and (iv) no
appeal to a court of competent jurisdiction, or request for stay by a court of
competent jurisdiction, of the FCC's, the state regulatory authority's or the
court'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, such
deadline has passed, or if challenged, such action shall have been reaffirmed or
upheld and the applicable period for seeking further administrative or judicial
review shall have expired without the filing of any action, petition or request
for further review.
"GTE SWITCHING SERVICES AGREEMENT" means that agreement dated August 28,
1991 between Seller and Contel Cellular, Inc. (as amended on September 14, 1993,
January 10, 1994 and by an undated Letter Addendum relating to software).
"HAZARDOUS SUBSTANCES" means any pollutant, contaminant, chemical or
hazardous, toxic, radioactive or corrosive substance or waste or any substance
having any constituent elements displaying any of the foregoing characteristics,
including without limitation, petroleum, its derivatives, by-products and
hydrocarbons and any substance regulated under or defined by any Environmental
Laws.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
"INCOME STATEMENT" for any period means the Income Tax Basis statement of
changes in partners' deficit, of revenues and expenses and of cash flows for the
years then ended.
"INCOME TAX BASIS" means the basis of accounting followed for United States
federal income tax reporting purposes.
"INTERIM STATEMENTS" means the unaudited Balance Sheet and the related
Income Statements (excluding the statement of changes in partners' deficit) of
Seller for the periods ended on March 31, 1997, June 30, 1997 and September 30,
1997, as well as any subsequent monthly financial statements delivered pursuant
to Section 5.08.
"LICENSES" means all franchises, licenses (including the FCC License),
permits, certificates and other authorizations required under applicable law,
ordinance or regulation of any governmental authority, federal, state or local.
"LIEN" means, with respect to any property or asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or other adverse claim of any
kind in respect of such property or asset. For the purposes of this Agreement
and without limiting the foregoing, a Person shall be deemed to own subject to a
Lien, any property or asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such property or asset.
4
<PAGE>
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the Purchased
Assets taken as a whole or on the business, assets, financial condition or
results of operations of the System Operations taken as a whole.
"1996 STATEMENTS" means the Balance Sheet as of December 31, 1996 and the
Income Statement for the twelve-month period ended December 31, 1996, together
with accompanying notes thereto, prepared on an Income Tax Basis.
"1996 BALANCE SHEET" means the Balance Sheet as of December 31, 1996, as set
forth in the 1996 Statements.
"PERMITTED LIENS" means Liens consisting of zoning or planning restrictions,
easements, permits or other restrictions or limitations on the use of the Real
Estate or irregularities in title thereto which do not materially detract from
the value of, or materially impair the current use of, such Real Estate in the
operation of the System, tax liens for amounts not yet due, and other matters of
record, provided that any Liens securing the payment of money shall be removed
of record at or prior to Closing.
"PERSON" means any individual, partnership, corporation, estate, trust,
unincorporated organization, limited liability company, association, private
foundation, joint stock company, joint venture or other entity or a government,
agency, political subdivision, instrumentality or division thereof.
"POST-CLOSING TAX PERIOD" means any Tax period (or portion thereof)
beginning on or after the Effective Date.
"PRE-CLOSING TAX PERIOD" means any Tax period (or portion thereof) ending
before the Effective Date.
"PURCHASE PRICE" means an amount equal to (i) $73,000,000, (ii) plus the
amount of Current Assets as of the Effective Date, as determined pursuant to
Section 206 hereof, (iii) less the amount of Current Liabilities as of the
Effective Date, as determined pursuant to Section 2.06 hereof, and (iv) plus an
amount equal to the product of (x) $8,000 and (y) the number of days, if any,
from (and including) the Effective Date to (but excluding) the Closing Date.
"PURCHASED ASSETS" means all of the assets, properties and business, of
every kind and description (other than the Excluded Assets), wherever located,
real, personal or mixed, tangible or intangible whether now owned or held by
Seller or hereafter acquired by Seller on or prior to the Closing Date and used
in connection with the System or the System Operations, including, without
limitation, the assets shown on Schedule 1.01(b) attached hereto as owned by
Seller and:
(a) all transmitters, switching and receiving equipment, technical
facilities, towers, microwave equipment, antennas, generators, power supply
equipment, office equipment and supplies, computers and software, telephone
units, inventory and other tangible personal property now owned by Seller
or hereafter acquired by Seller on or prior to the Closing Date and used in
connection with the System or the System Operations;
5
<PAGE>
(b) all Real Estate now owned by Seller or hereafter acquired by
Seller on or prior to the Closing Date and used in connection with the
System or the System Operations;
(c) all rights of Seller under all contracts, agreements, leases,
non-governmental licenses, commitments, sales and purchase orders and other
instruments which relate to the Purchased Assets, the Real Estate, the
System or the System Operations, (collectively, the "CONTRACTS");
(d) all prepaid expenses, including but not limited to ad valorem
taxes, leases and rentals;
(e) all of Seller's rights, claims, credits, causes of action or
rights of set-off against third parties which constitute Current Assets or
offset Current Liabilities and relate to the Purchased Assets, the System
or the System Operations, including, without limitation, unliquidated
rights under manufacturers' and vendors' warranties;
(f) all licenses, permits or other governmental authorizations
relating to any of the Purchased Assets, the System or the System
Operations, including without limitation the FCC License;
(g) all books, records, files and papers (including tax records),
whether in hard copy or computer format, relating to any of the Purchased
Assets, the System or the System Operations, including without limitation
(i) customer contracts and books and records relating to the purchase of
materials and supplies, invoices, customer lists, personnel records and
subscriber information, (ii) public file materials, logs and engineering
records, (iii) plans, diagrams, blueprints, schematics, filings with
governmental agencies and executed copies of all contracts and subscriber
agreements and (iv) billing records (for a minimum of one year prior to
closing), billing and service contracts and related information; and
(h) all accounts, notes and other receivables.
"REAL ESTATE" means the real property and all buildings, fixtures and
improvements owned, leased or licensed by Seller or otherwise used or held
principally in connection with the System Operations.
"REGULATED ENVIRONMENTAL ACTIVITY" means any generation, treatment, storage,
recycling, transportation or disposal of any Hazardous Substances.
"RELEASE" means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, dumping, deposit, disposal, discharge, dispersal, leaching
or migration into the environment or into or out of any property, including the
movement of Hazardous Substances through or in the air, soil, surface water,
groundwater or property.
"SALES AGREEMENT" means the Assignment and Assumption Agreement by and among
Buyer and Seller in the form of Exhibit A attached hereto.
6
<PAGE>
"SYSTEM OPERATIONS" means any and all business operations of Seller.
"TAX" means (i) any net income, alternative or add-on minimum tax, gross
income, gross receipts, sales, use, ad valorem, value added, transfer,
registration, recording, documentary, conveyancing, gains, franchise, capital,
paid-up capital, profits, greenmail, license, withholding, payroll, employment,
excise, severance, stamp, occupation, premium, property, environmental or
windfall profit tax, custom, duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amount imposed by any governmental
authority (domestic or foreign) responsible for the imposition of any such tax
or (ii) liability for the payment of any amounts of the type described in (i) as
a result of being party to any agreement or any express or implied obligation to
indemnify any other Person.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<S> <C>
Acquiring Companies preamble
Adjusted Accounts Receivable 2.07
Agreement preamble
Allocation Statement 2.07
Apportioned Obligations 8.02
Assumed Liabilities 2.02
Buyer preamble
Buyer Obligations 12.01
Closing 2.05
Closing Date 2.05
Closing Deposit Liabilities 2.02
Closing Unearned
Revenue Liabilities 2.02
Excluded Liabilities 2.03
FCC License recitals
Interim Statements 5.08
Loss 10.02
PriCellular preamble
Required Consents 3.05
Seller preamble
System recitals
TN-4 recitals
Transfer Taxes 8.02
</TABLE>
7
<PAGE>
ARTICLE 2
PURCHASE AND SALE
Section 2.01. Purchase and Sale. Except as otherwise provided below, upon
the terms and subject to the conditions of this Agreement, on the Closing Date,
Buyer agrees to purchase from Seller and Seller agrees to sell, convey,
transfer, assign and deliver, or cause to be sold, conveyed, transferred,
assigned and delivered, to Buyer all of Seller's right, title and interest in,
to and under the Purchased Assets (including good and marketable title to owned
Real Estate), free and clear of all Liens other than Permitted Liens.
SECTION 2.02.
Assumption of Liabilities. Upon the terms and subject to
the conditions of this Agreement, Buyer agrees, effective on the Effective Date,
to assume the following liabilities and obligations of Seller (the "ASSUMED
LIABILITIES"):
(a) all liabilities and obligations of Seller arising with respect to
post-Closing periods under (i) the Contracts listed on Schedule 2.02(a) attached
hereto, (ii) Contracts entered into by Seller with subscribers in the ordinary
course of business prior to the Closing and (iii) any other Contracts entered
into by Seller with the consent of Buyer (which consent is not to be
unreasonably withheld or delayed) in the ordinary course of business prior to
the Closing (but excluding in all of the foregoing cases any liabilities or
obligations attributable to any failure by Seller to comply with the terms
thereof);
(b) liabilities set forth on the Closing Statement to refund the security
deposits to the customers who are entitled to receive same in accordance with
the terms of their service contract, provided that the aggregate amount of
liabilities assumed hereunder does not exceed the aggregate liability for such
amount set forth in the Closing Statement ("CLOSING DEPOSIT LIABILITIES");
(c) liabilities set forth on the Closing Statement for unearned revenue,
provided that the aggregate amount of liabilities assumed hereunder does not
exceed the aggregate liability for such amount set forth in the Closing
Statement ("CLOSING UNEARNED REVENUE LIABILITIES");
(d) liabilities which relate to periods on or after the Effective Date in
respect of which prorations are made under Section 2.08 and liabilities which
relate to periods prior to the Effective Date for which Seller has paid Buyer;
and
(e) subject to Section 8.02, any liability or obligation for Taxes arising
from or with respect to the Purchased Assets, the System or the System
Operations which is incurred in or attributable to any Post-Closing Tax Period.
Section 2.03. Excluded Liabilities. Notwithstanding any provision in this
Agreement or any other writing to the contrary, Buyer is assuming only the
Assumed Liabilities and is not assuming any
8
<PAGE>
other liability or obligation of Seller of whatever nature, whether presently in
existence or arising hereafter. All such other liabilities and obligations shall
be retained by and remain obligations and liabilities of Seller (all such
liabilities and obligations not being assumed being herein referred to as the
"EXCLUDED LIABILITIES"), and, notwithstanding anything to the contrary in this
Agreement and without limiting the foregoing, none of the following shall be
Assumed Liabilities for the purposes of this Agreement but rather shall be
Excluded Liabilities:
(a) subject to Section 8.02, any liability or obligation for Taxes arising
from or with respect to the Purchased Assets, the System or the System
Operations which is incurred in or attributable to any Pre-Closing Tax Period;
(b) any liability or obligation of Seller or any Affiliated Company
relating to current and former employees, Employee Benefit Plans or Benefit
Arrangements (including, without limitation, liabilities and obligations under
ERISA, the Code and any other applicable statutes, orders, rules and
regulations);
(c) any liability or obligation relating to any asset that is an Excluded
Asset or is otherwise not a Purchased Asset;
(d) any Environmental Liability;
(e) any liability or obligation relating to any brokerage commissions,
finder's fees or similar fees directly or indirectly related to the transactions
contemplated by this Agreement based in any way on any arrangements, agreements
or understandings made by or on behalf of Seller, including any such payments
due to Daniels & Associates, L.P.; and
(f) liabilities for (i) customer deposits other than the Closing Deposit
Liabilities and (ii) unearned revenue other than the Closing Unearned Revenue
Liabilities.
Section 2.04.
Assignments of Contracts and Rights. Anything in this Agreement to the contrary
notwithstanding, this Agreement shall not constitute an agreement to assign any
Purchased Asset or any claim or right or any benefit arising thereunder or
resulting therefrom if an attempted assignment thereof, without the consent of a
third party thereto, would constitute a breach or other contravention thereof or
in any way adversely affect the rights of Buyer or Seller thereunder. Seller and
Buyer will use their best efforts (but without any payment of money by Seller or
Buyer, except that Buyer will make reasonable prepayments if required by the
consenting party) to obtain the consent of the other parties to any such
Purchased Asset or any claim or right or any benefit arising thereunder for the
assignment thereof to Buyer as Buyer may request. If such consent is not
obtained, or if an attempted assignment thereof would be ineffective or would
materially adversely affect the rights of Buyer thereunder so that Buyer would
not in fact receive all such rights, Seller and Buyer will cooperate in a
mutually agreeable arrangement under which Buyer would obtain the benefits and
assume the obligations thereunder in accordance with this Agreement, including
sub-contracting, sub-licensing, or sub-leasing to Buyer, or under which Seller
would enforce for the benefit of Buyer,
9
<PAGE>
with Buyer assuming Seller's obligations, any and all rights of Seller against a
third party thereto. Seller will promptly pay to Buyer when received all monies
received after the Closing by Seller with respect to any Purchased Asset
(including all Current Assets) or any claim or right or any benefit arising
thereunder, except to the extent the same represents an Excluded Asset. In such
event, Seller and Buyer shall, to the extent the material benefits therefrom and
obligations thereunder have not been provided by alternate arrangements
satisfactory to Buyer and Seller, negotiate in good faith an adjustment in the
consideration paid by Buyer for the Purchased Assets, to the extent not
otherwise adjusted pursuant to Section 2.06 hereof.
Section 2.05.
Closing. The closing of the transactions contemplated herein (the "CLOSING")
will take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York beginning at 10:00 A.M. local time on the later of (i)
January 2, 1998 and (ii) the first business day following the date on which the
conditions to Closing under Sections 9.01(a) and 9.01(d) shall have been
satisfied (such date, the "CLOSING DATE"). At the Closing:
(a) Seller shall deliver to Buyer:
(i) the Sales Agreement executed by Seller;
(ii) a Special Warranty Deed or assignment of lease, as applicable,
in form and substance reasonably satisfactory to Buyer, for each parcel of real
estate included in the Purchased Assets;
(iii) all of the documents and instruments to be delivered pursuant to
Section 9.02 hereof;
(iv) all licenses and other agreements relating to Seller's right,
title and interest in, and operation of, the Purchased Assets; and
(v) such further instruments and documents, in form and content
reasonably satisfactory to Buyer, as may be reasonably necessary or appropriate
to consummate the transactions contemplated by this Agreement and convey the
Purchased Assets to Buyer.
(b) The Acquiring Companies shall deliver to Seller:
(i) immediately available funds by wire transfer to accounts
designated by Seller by notice to Buyer no later than two (2) Business Days
before the Closing Date, in an amount equal to the Purchase Price (using the
estimate of Current Assets and Current Liabilities as determined pursuant to
Section 2.06(a)) minus the Initial Escrow Amount, which payment shall, subject
to adjustment pursuant to Section 2.06 hereof, constitute payment of the
Purchase Price due hereunder;
(ii) the Sales Agreement executed by Buyer;
10
<PAGE>
(iii) all of the documents and instruments required to be delivered
pursuant to Section 9.03 hereof; and
(iv) such further instruments and documents, in form and content
reasonably satisfactory to Seller, as may be reasonably necessary or appropriate
to consummate the transactions contemplated by this Agreement.
(c) The Acquiring Companies shall deliver to the Escrow Agent $7,500,000
(the "INITIAL ESCROW AMOUNT") in immediately available funds by wire transfer
for deposit pursuant to the Escrow Agreement.
Section 2.06. Determination of Current Assets, Adjusted Accounts
Receivable. (a) No later than five (5) Business Days prior to the Closing Date,
Seller shall make a good faith estimate of the Current Assets and Current
Liabilities as of the Effective Date. Such estimate shall be used for purposes
of calculating the Purchase Price. In connection therewith, (i) Seller shall
make available to Buyer such documentation, back-up, invoices and books and
records of Seller as Buyer may reasonably request and (ii) prior to Closing,
Seller and Buyer shall jointly conduct a physical count of the Inventory to be
included in the Current Assets.
(b) As soon as reasonably possible after the Closing Date and prior to
the sixtieth (60th) day after the Closing, Seller shall determine the Current
Assets and Current Liabilities as of the Effective Date, and present its
determination to Buyer, together with such documentation, back-up, invoices and
books and records of Seller as Buyer may reasonably request. Buyer shall
cooperate with Seller in its determination, may (but shall not be obligated to)
participate at its own expense in such determination and shall make the books
and records of Buyer pertaining to such determination available to
representatives of Seller during normal business hours to enable the completion
of such determination. Seller and Buyer shall negotiate in good faith during
the fifteen (15) day period after presentment to reconcile any discrepancies
which may arise in connection with the determination of the Current Assets and
Current Liabilities. If Seller and Buyer are unable to reconcile such
determination, Buyer shall have fifteen (15) days from presentment by Seller to
notify Seller if Buyer wishes to have Seller's determination examined. If Buyer
elects to have Seller's determination examined, it shall be examined by a firm
of nationally recognized independent public accountants mutually acceptable to
Seller and Buyer pursuant to such special auditing procedures as may be agreed
upon by Seller and Buyer (and in the absence of an agreement, pursuant to the
same procedures applied to current assets, current liabilities and accounts
receivable in the 1996 Statements), the cost of such examination to be paid 50%
by Seller and 50% by Buyer. The determination by Seller shall be final and
binding on the parties unless Buyer elects to have an examination as provided
above, in which case the results of the examination shall be final and binding
on the parties.
(c) To the extent the final determination of the difference between
Current Assets and Current Liabilities is less than the Closing estimate
thereof, Seller shall immediately pay the difference in cash to Buyer. In the
event the final determination is greater than the Closing estimate, Buyer shall
immediately pay such excess in cash to Seller.
11
<PAGE>
(d) For the purposes of calculating Current Assets, (i) Seller's
accounts receivable on the Effective Date shall be discounted as follows
("ADJUSTED ACCOUNTS RECEIVABLE"): (w) no discount for outcollect roaming
receivables or for receivables aged up to 30 days; (x) 15% discount for
receivables aged between 31 and 60 days; (y) 35% discount for receivables aged
between 61 and 90 days; and (z) 100% discount for receivables aged 91 days or
more, and (ii) Seller's Inventory included in Current Assets will be valued at
Seller's cost. Seller represents that the System's billing cycles are monthly.
Section 2.07. Allocation of Purchase Price. (a) As soon as practicable after
the date hereof, Seller shall deliver to Buyer a statement (the "ALLOCATION
STATEMENT") setting forth the allocation of the Purchase Price (together with
the Assumed Liabilities) among the Purchased Assets in accordance with Section
1060 of the Code.
(b) Buyer shall have a period of fifteen (15) days after the delivery of
the Allocation Statement to present in writing to Seller notice of any
objections Buyer may have to the allocation set forth in the Allocation
Statement. Unless Buyer timely objects, the Allocation Statement shall be
binding on the parties without further adjustment.
(c) If Buyer shall raise any objections within the 15 day period, Buyer
and Seller shall negotiate in good faith and use their best efforts to resolve
such dispute. If the parties fail to agree within five (5) days after the
delivery of the notice, then the parties may each allocate the Purchase Price as
they determine.
(d) Any payment made pursuant to Section 2.06(c) hereof shall be
allocated among the Class I and Class II assets (as defined in Section 1.1060-
1T(d)(2) of the Treasury Regulations) to which such payment relates.
(e) Seller and Buyer agree to (i) report, and to cause their Affiliates
to report, an allocation of such Purchase Price among the Purchased Assets in a
manner entirely consistent with the Allocation Statement if it is agreed upon
(including any adjustment made pursuant to Section 2.07(d) hereof), (ii) act,
and to cause their Affiliates to act, in accordance with such Allocation
Statement in the preparation of financial statements and filing of all tax
returns (including, without limitation, filing Form 8594 with its Federal income
tax return for the taxable year that includes the date of the Closing) and in
the course of any tax audit, tax review, or tax litigation relating thereto and
(iii) take no position and cause their Affiliates to take no position
inconsistent with the Allocation Statement if it is finally agreed upon
(including any adjustment made pursuant to Section 2.07(d) hereof) for all tax
and accounting purposes.
(f) Not later than ten (10) days prior to the filing of their respective
Form 8594 relating to this transaction, each party shall deliver to the other
party a copy of its Form 8594.
Section 2.08. Cut-off and Prorations. (a) The parties agree to establish a
financial accounting cut-off for the transaction as of the Effective Date.
Accordingly, upon the occurrence of the Closing the parties will make
appropriate financial and accounting adjustments as of the Effective Date.
12
<PAGE>
(b) (i) Seller will be entitled to receive all revenues, and will be
responsible for paying (or otherwise fully discharging) all costs, expenses,
charges or other fees, relating to the Purchased Assets prior to the Effective
Date and to the Excluded Liabilities, and (ii) Buyer will be entitled to receive
all revenues, and will be responsible for paying (or otherwise fully
discharging) all costs, expenses, charges or other fees, relating to the
Purchased Assets on and after the Effective Date and to the Assumed Liabilities.
(c) Revenues and current liabilities that are attributable to periods
that begin before, and end after, the Effective Date (other than Apportioned
Obligations as defined in Section 8.02(b) hereof) shall be apportioned between
Seller and Buyer as of the Effective Date based on the number of days prior to
and after the Effective Date. Seller shall have the right to receive, or be
liable for, the proportionate amount that is attributable to the period prior to
the Effective Date, and Buyer shall have the right to receive, or be liable for,
the proportionate amount that is attributable to the period on and after the
Effective Date.
(d) Seller shall be solely liable for any amounts owed in respect of any
911 Emergency Service fees, contributions required to be made to the Universal
Service Fund or the Telecommunications Relay Service, as well as, consistent
with the other provisions of this Section 2.08, other FCC regulatory fees, and
any and all similar payments required by federal or state laws and regulations,
to the extent that such amounts relate to periods prior to the Effective Date.
In the event that Buyer is billed after the Effective Date for any such amounts,
Seller shall promptly pay to Buyer the amount for which Seller is liable.
(e) The limitation in Section 10.02(e) will not apply to lease payments,
roaming settlement payments, taxes and similar liabilities incurred in the
ordinary course of business that would be classified as current liabilities in
the 1996 Statements. Buyer will send to Seller for direct payment any bills
received by Buyer that relate exclusively to a period prior to the Effective
Date. If such bill remains unpaid 60 days after it has been forwarded to
Seller, and Buyer reasonably believes such bill should be paid, Buyer may pay
such bill and make a claim for indemnification for such payment in accordance
with Section 10.03(b)(ii).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller hereby represents and warrants to Buyer as of the date hereof and as
of the Closing Date that:
Section 3.01.
Existence and Power. Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
all partnership power and all material governmental licenses, authorizations,
permits, consents and approvals required to own its property
13
<PAGE>
and carry on its business as now conducted. Seller is duly qualified or licensed
to do business as a foreign limited partnership and is in good standing in each
jurisdiction where such qualification is necessary, except for those
jurisdictions where failure to be so qualified would not, individually or in the
aggregate, have a Material Adverse Effect. A true, correct and complete copy of
the agreement of limited partnership of Seller as in effect has been delivered
to Buyer. Except for the sale of the Purchased Assets to Buyer as contemplated
hereunder, no proceeding for the dissolution, merger, consolidation or
liquidation of Seller or for the sale of all or substantially all of the assets
of Seller is pending or threatened, and no such proceeding is contemplated by
Seller, except that after the Closing the Seller may be liquidated. The general
partner of Seller is Bachtel TN-04, L.P.
Section 3.02.
Authorization. Seller has full partnership power and authority to execute,
deliver and perform its obligations under the Acquisition Agreements and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of the Acquisition Agreements and the consummation of
all transactions contemplated hereby and thereby have been duly authorized and
approved by all necessary partnership action on the part of Seller. This
Agreement is and, upon execution and delivery, the Sales Agreement will be, a
valid and binding obligation of Seller, enforceable against Seller in accordance
with its terms, except as the enforceability hereof and thereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and except for limitations imposed
by general principles of equity.
Section 3.03.
Governmental Authorization. The execution, delivery and performance by Seller of
the Acquisition Agreements require no action by or in respect of, or filing
with, any governmental body, agency or official other than (i) the filings with
and approval of the FCC necessary to consummate the transactions contemplated
hereby and (ii) compliance with any applicable requirements of the HSR Act.
Section 3.04.
Non-contravention. The execution, delivery and performance by Seller of the
Acquisition Agreements do not and will not (i) violate the agreement of limited
partnership of Seller; (ii) assuming compliance with the matters referred to in
Section 303 hereof, violate any applicable law, rule, regulation, judgment,
injunction, order or decree; (iii) assuming the obtaining of all Required
Consents, constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of Seller or to a loss
of any benefit relating to the System or the System Operations to which Seller
is entitled under any provision of any agreement, contract or other instrument
binding upon Seller or binding or affecting the Purchased Assets, the System or
the System Operations, or any License; (iv) result in the creation or imposition
of any Lien on any Purchased Asset, other than Permitted Liens; or (v) create,
constitute or result in an act of bankruptcy, preference, insolvency or
fraudulent conveyance under any bankruptcy law or other law for the protection
of debtors generally.
14
<PAGE>
Section 3.05.
Required Consents. Other than those disclosed in Schedule 3.05, there are no
agreements, contracts or other instruments binding upon Seller or binding or
affecting the Purchased Assets, the System or the System Operations (whether or
not Seller is a party), or any License, requiring a consent as a result of the
execution, delivery and/or performance of the Acquisition Agreements, except
such consents as would not, individually or in the aggregate, have a Material
Adverse Effect if not received (each such consent, a "REQUIRED CONSENT").
Section 3.06.
Absence of Certain Changes. Since the Balance Sheet Date, except as described in
Schedule 3.06, the Purchased Assets, the System and the System Operations have
been conducted in the ordinary course consistent with past practices, and there
has not been:
(a) any event or occurrence which has had or could reasonably be
expected to have a Material Adverse Effect other than events or occurrences
affecting the cellular telephone industry generally or the non-wireline segment
of the cellular telephone industry;
(b) any incurrence, assumption or guarantee by Seller of any
indebtedness for borrowed money with respect to or affecting the System or the
System Operations or any Purchased Asset other than in the ordinary course of
business and in amounts and on terms consistent with past practices;
(c) any creation or other incurrence of any Lien on any Purchased Asset
other than in the ordinary course of business consistent with past practices;
(d) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the System or the System Operations or any
Purchased Asset which, individually or in the aggregate, has had or could
reasonably be expected to have a Material Adverse Effect;
(e) any transaction or commitment made, or any contract or agreement
entered into, by Seller relating to the System or the System Operations or any
Purchased Asset (including the acquisition or disposition of any assets) or any
relinquishment by Seller of any contract or other right, in either case, other
than transactions and commitments in the ordinary course of business consistent
with past practices and those contemplated by this Agreement or the Sales
Agreement;
(f) any change in any method of accounting or accounting principle or
practice by Seller with respect to Seller, the System, any Purchased Asset or
any Assumed Liability;
(g) any (i) employment, deferred compensation, severance, retirement or
other similar agreement entered into with any director, officer or employee of
Seller or other Person providing services to or on behalf of the System (or any
amendment to any such existing agreement), (ii grant of any severance or
termination pay to any such Person or (ii change in compensation or other
benefits payable to any such Person pursuant to any severance or retirement
plans or policies thereof,
15
<PAGE>
other than in the ordinary course of business consistent with past practice,
provided that nothing herein shall restrict Seller from hereafter entering into
severance arrangements so long as any amounts payable thereunder are paid by
Seller;
(h) any labor dispute, other than routine individual grievances, or any
activity or proceeding by a labor union or representative thereof to organize
any employees of the System, or any lockouts, strikes, slowdowns, work stoppages
or threats thereof by or with respect to such employees (but excluding disputes,
activities, proceedings or other actions that arise out of a similar dispute,
activity, proceeding or action involving PriCellular or its Affiliates).
Section 3.07.
Insurance. Seller maintains, or causes to be maintained for its benefit (and in
the event of damage or loss to any Purchased Assets or the System prior to the
Effective Date (if the Closing occurs) any recovery thereunder shall be for the
benefit of Buyer unless used by Seller to repair or replace the Purchased Assets
or the System to pre-loss condition), insurance against physical damage to its
real and personal property for the full replacement value thereof and
comprehensive general liability insurance providing for a minimum coverage of at
least $1 million per occurrence and $2 million in the aggregate with responsible
insurance companies rated "A" or better by A.M. Best Company. There are no
outstanding material unpaid claims under any such policies with respect to any
of the Purchased Assets or the System.
Section 3.08.
Properties. (a) The portion of Schedule 1.01(b) attached hereto captioned "Real
Estate" correctly lists all real property (including leases thereof), and only
such real property, used or held for use principally in connection with the
System or the System Operations, except the Real Estate, if any, acquired by
Seller after the date hereof.
(b) Schedule 1.01(b) attached hereto includes certain of the personal
property, used or held for use principally in connection with the System or the
System Operations, except for such personal property acquired by Seller after
the date hereof.
(c) (i) Seller has good and marketable (subject to Permitted Liens) fee simple
title (in the case of real property that is not leased) to, or in the case of
leased real property has a valid leasehold interest in, all Purchased Assets.
(ii) All leases of real property or personal property included in the
Purchased Assets are valid, binding and enforceable in accordance with their
respective terms, and there does not exist under any such lease of real property
or personal property any material default by Seller (or to the knowledge of
Seller, the lessor) or any event which with notice or lapse of time or both
could reasonably be expected to constitute a material default by Seller.
(iii) The buildings, structures, equipment and any other real property
and tangible personal property (in each case, whether owned or leased) included
in the Purchased Assets are in
16
<PAGE>
operating condition and repair, and have been reasonably maintained, in each
case consistent with standards generally followed in the industry (giving due
account to the age and length of use of same, ordinary wear and tear excepted),
are suitable for their present uses and, in the case of buildings and other
structures, are, to Seller's knowledge, structurally sound.
(iv) To Seller's knowledge, none of the material structures on the real
property included in the Purchased Assets encroaches upon real property of
another person, and no structure of any other person encroaches upon any of the
real property constituting part of the Purchased Assets.
(d) No Purchased Asset is subject to any Lien other than Permitted Liens
and Liens listed on Schedule 3.08.
(e) No violation of any law, regulation or ordinance (including, without
limitation, laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) currently exists with respect to Seller, the
Purchased Assets, the System or the System Operations, except for violations
which have not had and would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect. There are no developments or
circumstances affecting any of the Purchased Assets pending or, to the best
knowledge of Seller threatened, which might materially adversely affect the
Purchased Assets taken as a whole, except for developments or circumstances
affecting the cellular telephone industry generally or the non-wireline segment
of such industry.
(f) Seller was organized as a Delaware limited partnership in March,
1991 and has conducted no business other than in connection with holding the
License and operating the System. Seller has had the right to use the License,
and has operated the System (as the same were constituted from time to time),
since September, 1991.
Section 3.09. Sufficiency of the Purchased Assets. The Purchased Assets
constitute, and on the Closing Date will constitute, all of the assets or
property principally used or held for use by Seller or its Affiliates in the
System and the System Operations (except for the Excluded Assets), and the
Purchased Assets constitute all of the assets or property necessary to operate
the System as it is now operated (except for the Excluded Assets) plus any
capital additions thereto prior to the Closing.
Section 3.10.
No Undisclosed Liabilities. There are no liabilities of Seller relating to or
affecting the Purchased Assets or the System of any kind whatsoever, whether
accrued, contingent, absolute, determined, determinable or otherwise, other
than:
(a) liabilities reflected on the most recent Interim Statements or
disclosed in the notes thereto;
(b) liabilities disclosed on Schedule 310 or any other Schedule attached
hereto;
17
<PAGE>
(c) liabilities affecting the cellular telephone industry generally or
the non-wireline segment of the cellular telephone industry; and
(d) other undisclosed liabilities incurred in the ordinary course of
business as a result of System Operations and in the aggregate not exceeding
$100,000.
Section 3.11. Litigation. Except as disclosed on Schedule 3.11 and other
than actions, suits, investigations or proceedings affecting the non-wireline
cellular telephone industry or the cellular telephone industry generally, there
is no action, suit, investigation or proceeding pending against, or to the
knowledge of Seller, threatened against or affecting, Seller, the System, the
System Operations or any Purchased Asset before any court or arbitrator or any
governmental body, agency or official which, if determined or resolved adversely
in accordance with the plaintiff's demands, could reasonably be expected to have
a Material Adverse Effect or which in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated hereby.
Section 3.12.
Material Contracts. (a) Except for the Contracts disclosed in Schedule 3.12
attached hereto, with respect to the System, the System Operations or any
Purchased Assets, Seller is not a party to or bound by:
(i) any lease (whether of real or personal property) providing for
annual rentals of $25,000 or more;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets providing for either (A) annual payments by
Seller of $25,000 or more or (B) aggregate payments by Seller of $50,000 or
more;
(iii) any sales, distribution or other similar agreement providing for
the sale by Seller of materials, supplies, goods, services, equipment or other
assets that provides for either (A) annual payments to Seller of $25,000 or more
or (B) aggregate payments to Seller of $50,000 or more;
(iv) any partnership, joint venture or other similar agreement or
arrangement (other than the agreement of limited partnership of Seller);
(v) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether incurred, assumed,
guaranteed or secured by any asset), except any such agreement (A) with an
aggregate outstanding principal amount not exceeding $25,000 and which may be
prepaid on not more than 30 days notice without the payment of any penalty and
(B) entered into subsequent to the date of this Agreement as permitted by
Section 306 hereof;
(vi) any option, license, franchise or similar agreement;
18
<PAGE>
(vii) any agency, dealer, sales representative, marketing or other
similar agreement;
(viii) any agreement that limits the freedom of Seller to compete in
any line of business or with any Person or in any area or to own, operate,
sell, transfer, pledge or otherwise dispose of or encumber any Purchased
Asset or which would so limit the freedom of Buyer after the Closing Date;
(ix) any agreement with or for the benefit of any Affiliate of Seller;
or
(x) any other agreement, commitment, arrangement or plan not made
in the ordinary course of business which is material to the System or the
Purchased Assets taken as a whole.
(b) Each Contract disclosed in any schedule to this Agreement or
required to be disclosed pursuant to this Section 3.12 is a valid and binding
agreement of Seller and is in full force and effect, and neither Seller nor, to
the knowledge of Seller, any other party thereto is in default or breach in any
material respect under the terms of any such Contract, nor, to the knowledge of
Seller, has any event or circumstance occurred that, with notice or lapse of
time or both, would constitute any event of default thereunder. No waiver,
indulgence or postponement of any material obligations under any lease has been
granted by Seller or, to the knowledge of Seller, by any other Person. Seller
has been and presently is in peaceable possession under all such leases since
acquiring its interest in the leasehold. True and complete copies of each such
written Contract have been delivered to Buyer.
Section 3.13. Licenses and Operations. The Licenses set forth on Schedule 3.13
attached hereto are all of the licenses, permits, and other authorizations used
to operate the System as it is now operated and are validly issued in the name
of Seller, except to the extent that the absence of any requisite license (other
than the FCC License), permit or other authorization could not reasonably be
expected to have a Material Adverse Effect. Without limiting the foregoing,
Seller has submitted all necessary FCC tower registrations and received all
necessary licenses, permits or other authorizations from the FAA and local
zoning authorities for all existing towers which are part of the System and for
any facilities the construction of which has been approved by the FCC or of
which applications or notifications have been filed for such approval. The
Licenses are in full force and effect, are unimpaired by any acts or omissions
of Seller or its Affiliates and are free and clear of any restrictions or
limitations which might limit the full operation of the System. Except as
disclosed in Schedule 3.13 hereof, there are no modifications, amendments,
applications, revocations or other proceedings, or complaints pending or, to
Seller's knowledge, threatened, with respect to the FCC License (other than
proceedings that apply to the cellular industry generally), or with respect to
any of the other licenses (except the FCC License) which may have a Material
Adverse Effect. All fees due and payable to governmental authorities pursuant to
the Communications Act 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 thereof. Seller has in operation, or has timely
filed appropriate applications with the FCC with respect to, adequate cellular
base stations required to provide 32 dBu contour Cellular Geographic Service
Area coverage , as calculated under the formula prescribed by the FCC in 47
C.F.R. (S)22.911, to all areas of TN-4 except for coverage gaps that are less
than 50 contiguous square miles in size. Seller is in
19
<PAGE>
compliance with the terms of the FCC License and System Operations have been
conducted in accordance with all applicable provisions of the FCC License and
the Communications Act, except where the failure to so comply could not
reasonably be expected to have a Material Adverse Effect.
Section 3.14.
Compliance with Law. Seller is, and the System is operated,
in compliance with all applicable federal, state, local and foreign laws,
regulations, orders, judgments and decrees, including, without limitation,
matters relating to anti-competitive practices, discrimination and employment,
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect. Seller has complied and is in compliance with, and the
System has been operated in compliance with, the Communications Act and the
rules, regulations, policies and orders of the FAA, including, without
limitation, regulatory fee payments, TRS payments, USF filings and payments,
tower registrations, and the time and coverage requirements of 47 C.F.R.
(S)(S)22.142, 22.911, 22.912 and 22.946, except where the failure to so comply
could not reasonably be expected to have a Material Adverse Effect. Seller has
not received any notice to the effect, or otherwise been advised, that it is not
in compliance with any of such statutes, regulations, orders, ordinances or
other laws, and to Seller's knowledge there are no presently existing
circumstances that are reasonably likely to result in violations of any such
laws, statutes, orders ordinances and regulations, which could reasonably be
expected to have a Material Adverse Effect. Seller is not in default under, and
no condition exists that with notice or lapse of time or both would constitute a
default under, any agreement or other instrument binding upon Seller or relating
to or affecting the System, the FCC License, application or notification or any
other license, franchise, permit or similar authorization held by Seller or
relating to or affecting the System which could reasonably be expected to have a
Material Adverse Effect. The representations in this Section 3.14 are all
qualified by the disclosure in Schedule 3.13.
Section 3.15.
No Brokers. Other than Daniels & Associates, L.P., no agent, broker, investment
banker, Person or firm is or will be entitled to any broker's or finder's fee or
any other commission or similar fee directly or indirectly in connection with
the transactions contemplated by this Agreement based in any way on any
arrangements, agreements or understandings made by or on behalf of Seller.
Seller shall be solely responsible for any brokerage commissions or other
compensation or payments due to Daniels & Associates, L.P. in connection with
the subject matter of this Agreement.
Section 3.16.
Inventories. The inventories included in the Purchased Assets will be recent-
model telephones purchased in the six months prior to Closing that are unused
and in their original packaging.
Section 3.17.
Accuracy of Statements. No statement, representation or warranty made by, and no
document, certificate or instrument furnished or to be furnished by, Seller to
either Acquiring Company or to their respective advisors or Affiliates pursuant
to this Agreement or after the execution of the letter
20
<PAGE>
of intent on September 25, 1997 knowingly contains or will knowingly contain any
untrue statement of a material fact, or knowingly omits or will knowingly omit
to state any material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which such statements were made, not
misleading.
Section 3.18.
Environmental Compliance. Except as set forth on Schedule 3.18 attached hereto
and described with reasonable specificity in any report prepared pursuant to
Section 5.04(b):
(a) No Hazardous Substance including, without limitation, polychlorinated
biphenyls, radioactive material, urea formaldehyde, lead, asbestos or
underground storage tanks, has been Released by Seller, or to Seller's
knowledge, by any other person, or to Seller's knowledge has been or is present
at, on or under (i) any property now or previously owned, leased or operated by
Seller or (ii the Real Estate, except in each of the foregoing cases for any
Releases or presences which individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect;
(b) No written notice, notification, demand, request for information,
citation, summons, complaint or order has been received by Seller, and no
complaint has been filed against, no penalty has been assessed against, and no
investigation, review, litigation or proceeding is pending against or in
connection with, or to Seller's knowledge, threatened against or in connection
with, Seller or the Purchased Assets by any Person with respect to any (i)
actual or alleged violation of any Environmental Law or liability thereunder,
(ii actual or alleged failure to have any permits or licenses required by any
Environmental Law, (ii Regulated Environmental Activity, (iv Release of
Hazardous Substances or (v) Liens under any Environmental Law, in each case,
which, if determined or resolved adversely, could reasonably be expected to have
a Material Adverse Effect or which in any manner challenges or seeks to prevent,
enjoin or materially adversely delay the transactions contemplated hereby;
(c) Seller has not engaged in any Regulated Environmental Activity and to
Seller's knowledge no Regulated Environmental Activity has occurred at or on (i)
any property now or previously owned, leased or operated by Seller or (ii) the
Real Estate, except for maintenance and cleaning in the lawful operation of
Seller's System, System Operations, Real Estate, or the Purchased Assets,
provided that such maintenance and cleaning was performed in compliance with all
Environmental Laws;
(d) None of (i) any property now or previously owned, leased or operated by
Seller, (ii) the Real Estate, (iii) any property to which Seller has, directly
or indirectly, transported or arranged for the transportation of Hazardous
Substances or (iv) any property on which Hazardous Substances resulting from the
use of any of the Purchased Assets are located, is listed or, to Seller's
knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, CERCLIS (as defined in CERCLA) or any similar federal, state
or local list of sites requiring investigation or clean-up;
21
<PAGE>
(e) No basis or condition has been created by Seller or to the knowledge
of Seller otherwise exists in connection with the Purchased Assets or at any
property now or previously owned, leased or operated by Seller which would give
rise to any liability under any Environmental Law which could reasonably be
expected to exceed $100,000;
(f) Seller (i) has obtained all permits, licenses, registrations,
identification numbers and other approvals and authorizations required under
applicable Environmental Laws, except to the extent that the absence of any
requisite permit, license, registration, number, approval or authorization could
not reasonably be expected to have a Material Adverse Effect, (ii has made or
filed all reports and notifications required under applicable Environmental
Laws, and (ii is in compliance with all Environmental Laws except to the extent
that any such noncompliance could not reasonably be expected to have a Material
Adverse Effect; and
(g) Except with respect to the report to be prepared pursuant to Section
5.04(b) hereof, there has been no environmental investigation, study, audit,
test, review or other analysis conducted of which Seller has knowledge and
possession thereof in relation to the current or prior business of Seller, any
property or facility now or previously owned, leased or operated by Seller or
any of the Purchased Assets, which has not been delivered to Buyer at least five
days prior to the date hereof.
Section 3.19. Financial Statements. The 1996 Statements which have
previously been delivered to Buyer (i) have been prepared from, and are in
accordance with, the books and records of Seller as of the dates set forth
therein and (ii) present fairly in all material respects the results of
operations, cash flows and financial position of Seller as of and for the
periods set forth therein on the Income Tax Basis. The Interim Statements which
have previously been delivered to Buyer have been prepared from, and are in
accordance with, the books and records of Seller as of the dates set forth
therein, and present fairly in all material respects (subject to normal year end
audit adjustments) the results of operations, cash flows and financial position
of Seller as of and for the periods set forth therein on the Income Tax Basis,
applied on a basis consistent with the 1996 Statements, except for the treatment
of sales commissions and agent and dealer commissions.
Section 3.20.
Rate Plans. Seller has furnished Buyer with the rates charged to subscribers of
Seller and the roamer rates charged to subscribers of other cellular operators
who utilize the System. No action to change, alter or rescind any of said rates
is pending or, to the knowledge of Seller, required or under consideration.
Section 3.21.
FCC and Other Governmental Reports. All material reports required by the
Communications Act or required to be filed with the FCC by Seller and/or any of
its Affiliates with respect to the System have been timely filed and are
accurate and complete in all material respects. All material reports required to
be filed with all other governmental or administrative authorities, federal,
state and local, by Seller and/or any of its Affiliates with respect to Seller
or the System have been timely filed and are accurate and complete in all
material respects.
22
<PAGE>
Section 3.22.
Subscribers. (a) As of September 30, 1997, Seller had 12,100 bona fide
unaffiliated and revenue-generating subscribers of Seller or the System whose
accounts were not past due by more than sixty (60) days at such time.
(b) Copies of all written subscriber agreements to which Seller is a
party and which relate to the System are contained in the books and records
included in the Purchased Assets. Except as provided on Schedule 3.22, Seller
has not entered into any subscriber agreements with respect to the Systems
outside the ordinary course of business or for consideration other than cash or
barter transactions provided for in the financial statements described in
Section 3.19. To Seller's knowledge, none of Seller's suppliers has threatened
to terminate or change in a material and adverse way its relationship with
Seller.
Section 3.23. Books and Records. The books and records of Seller included
in the Purchased Assets are correct and complete in all material respects and,
to the knowledge of Seller, the signatures appearing on all documents contained
therein are the true signatures of the Persons purporting to have signed the
same.
Section 3.24.
Qualifications. Seller has not to the knowledge of Seller engaged in any course
of conduct which would impair the ability of Buyer to be the holder of the
Licenses and Seller has not received any written notice that (i) the Licenses
subject to expiration might not be renewed in the ordinary course, (ii) any of
the Licenses might be revoked, or (iii) any pending applications and
notifications will not be approved. Without limiting the generality of the
foregoing, to the knowledge of Seller, no adverse finding has been made, no
consent decree entered, no adverse action has been approved by any court or
other administrative body, and no admission of liability has been made with
respect to Seller or any management employee of Seller or the System concerning
any civil or criminal suit, action or proceeding brought under the provisions of
any federal, state, territorial or local law relating to any of the following:
any felony; unlawful restraint of trade or monopoly; unlawful combination;
contract or agreement in restraint of trade; the use of unfair methods of
competition; fraud; unfair labor practice; or discrimination.
Section 3.25.
Deposits. Promptly following the Closing Date, Seller will provide Buyer with a
complete and accurate list of all customer deposits held by Seller relating to
the System as of the Effective Date. Except as provided for in the Closing
Statement, on the Effective Date there will be no customer deposit liabilities
relating to the Purchased Assets.
Section 3.26.
Insolvency Proceedings. No insolvency proceedings of any character, including
without limitation, bankruptcy, receivership, reorganization, composition or
arrangement with creditors, voluntary or
23
<PAGE>
involuntary, directly affecting Seller or any of the Purchased Assets, are
pending or, to the best of Seller's knowledge, threatened. Seller has not made
an assignment for the benefit of creditors, or taken any action with a view to,
or which would constitute a valid basis for, the institution of any such
insolvency proceedings.
ARTICLE 4
Representations and Warranties of Buyer
Buyer hereby represents and warrants to Seller as of the date hereof and as
of the Closing Date that:
Section 4.01.
Organization and Existence. Buyer is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware and has
all corporate powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted. True, correct and complete copies of the certificate of incorporation
and bylaws of Buyer as the same are in effect have been delivered to Seller.
Section 4.02.
Authorization. Buyer has full power and authority to execute, deliver and
perform its obligations under the Acquisition Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of the Acquisition Agreements and all transactions contemplated
hereby and thereby have been duly authorized and approved by all necessary
corporate action on the part of Buyer. This Agreement is, and upon execution and
delivery the Sales Agreement will be, a valid and binding obligation of Buyer,
enforceable against it in accordance with its terms, except as the
enforceability hereof and thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the rights of
creditors generally and except for limitations imposed by general principles of
equity.
Section 4.03.
Governmental Authorization. The execution, delivery and performance by the
Acquiring Companies of the Acquisition Agreements require no action by or in
respect of, or filing with, any governmental body, agency or official other than
(i) the filings with and approval of the FCC necessary to consummate the
transactions contemplated hereby; (ii) compliance with any applicable
requirements of the HSR Act; and (iii) compliance with the disclosure
requirements of the Securities Exchange Act of 1934, as amended.
Section 4.04.
24
<PAGE>
Non-contravention. The execution, delivery and performance by Buyer of the
Acquisition Agreements do not and will not (i) violate the certificate of
incorporation or bylaws of Buyer or (ii assuming compliance with the matters
referred to in Section 4.03 hereof, violate any applicable law, rule,
regulation, judgment, injunction, order or decree. Buyer is not a party to or
bound by any contract prohibiting the consummation of the transactions
contemplated hereby nor any contract or contracts that either separately or in
the aggregate materially and adversely affect Buyer's ability to consummate the
transactions contemplated by the Acquisition Agreements.
Section 4.05.
No Brokers. No agent, broker, investment banker, person or firm is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
directly or indirectly in connection with the transactions contemplated by this
Agreement based in any way on any arrangements, agreements or understandings
made by or on behalf of either Acquiring Company.
Section 4.06. Accuracy of Statements. No statement, representation or
warranty made by, and no document, certificate or instrument furnished or to be
furnished by, either Acquiring Company to Seller or to Seller's advisors or
Affiliates pursuant to this Agreement or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary to make the
statements contained herein or therein, in light of the circumstances in which
such statements were made, not misleading.
Section 4.07.
Financing; Qualifications. Buyer has, or will have prior to the Closing,
sufficient cash, available lines of credit or other sources of immediately
available funds to enable it to purchase the Purchased Assets. Buyer has no
knowledge of any fact that would, under existing law, disqualify Buyer as an
assignee of the FCC License.
Section 4.08.
Litigation. There is no action, suit, investigation or proceeding pending
against, or to Buyer's knowledge, threatened against or affecting, either
Acquiring Company before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated hereby.
Section 4.09.
Additional Representation. Buyer acknowledges that its authorized
representatives have enjoyed access to the Seller's books, records and
facilities and that Seller has cooperated with the Buyer to the end that the
Buyer has been able to conduct due diligence with respect to the transactions
contemplated by this Agreement. To Buyer's knowledge, Seller's representations,
warranties and covenants contained herein are true and accurate. Buyer further
represents that, other than the
25
<PAGE>
representations, warranties and covenants expressly set forth herein, neither
Seller nor any of its representatives has made any further additional
representations, warranties or covenants or provided any inducements of any
kind.
ARTICLE 5
Covenants of Seller
Seller covenants and agrees that:
Section 5.01.
Changes in Charter Documents. From the date hereof until the Closing Date, there
shall be no change in the agreement of limited partnership of Seller which could
reasonably be expected to have a Material Adverse Effect or which would be
likely to prevent, enjoin, alter or materially delay the transactions
contemplated hereby. Seller shall maintain its partnership existence and powers
through the Closing Date.
Section 5.02.
No Change in Representations and Warranties. From the date hereof until the
Closing Date, except with the prior written consent of Buyer, Seller shall not
knowingly and intentionally (a) take or agree or commit to take any action that
would make any representation or warranty of Seller hereunder inaccurate in any
material respect at, or as of any time prior to, the Closing Date or (b) omit or
agree or commit to omit to take any commercially reasonable action necessary to
prevent any such representation or warranty from being inaccurate in any
material respect at any such time.
Section 5.03.
Cooperation in Obtaining Approvals. From the date hereof until the Closing Date,
Seller shall execute and file or join in the execution and filing of any
applications or other documents (in form reasonably satisfactory to Seller)
which may be reasonably necessary in order to obtain the authorizations,
approvals or consents of the FCC and each other governmental body or third party
which may be required or which Buyer may reasonably request in connection with
the execution of the Acquisition Agreements or the consummation of the
transactions contemplated hereby or thereby. As soon as practicable, Seller
shall use its reasonable best efforts to assist Buyer in obtaining the
authorizations, approvals or consents of the FCC to the transactions
contemplated hereby.
Section 5.04.
Access. (a) From the date hereof until the Closing Date, Seller shall provide
Buyer, its attorneys, auditors, agents and representatives with such information
and permit reasonable access during
26
<PAGE>
normal business hours to the Purchased Assets and to the books and records of
Seller (including information relating to customers and employees) relating to
the Purchased Assets, the System, the System Operations and the Assumed
Liabilities as Buyer from time to time reasonably requests, provided that such
access does not unreasonably interfere with the conduct of the business of
Seller.
(b) Without limiting the foregoing, Buyer may conduct an environmental
investigation of Seller, including the hiring of an environmental consultant,
the cost of which shall be shared equally by Buyer and Seller until such cost
totals $3,500, after which Buyer alone shall bear the remaining cost; provided
that any consultant so retained shall be reasonably acceptable to Seller and
Buyer shall seek Seller's consent before conducting any invasive sampling or
testing, which consent shall not be unreasonably withheld. Buyer agrees to
inform Seller of the results of any environmental review so conducted and
provide a copy of any environmental reports generated as a result of such
activities.
Section 5.05. Conduct of Business. From the date hereof until the Closing
Date, except as otherwise expressly contemplated hereby, Seller shall:
(a) subject to Section 5.05(c) hereof, continue to own the Purchased
Assets;
(b) continue to operate the System in the ordinary course of business
consistent with past practices (except that Seller shall not be required to
engage in construction activity not required to satisfy the statutory and
regulatory provisions referred to in Section 3.13 hereof);
(c) not enter into or permit to be entered into any contract to purchase,
sell, mortgage, lease or otherwise encumber any of the Purchased Assets, except
for the purchase, sale or rental of inventory or the purchase or sale of
cellular telephone equipment, and/or sale of cellular service, in each case in
the ordinary course of business consistent with past practice;
(d) not create or permit to be created any Lien on the Purchased Assets,
other than Permitted Liens;
(e) not incur any material liabilities except in the ordinary course of
business consistent with past practices;
(f) maintain the Licenses in full force and effect;
(g) maintain its books, accounts and records in the usual, regular and
ordinary manner on a basis consistent with prior years and in accordance with
Income Tax Basis consistently applied throughout the periods covered by such
statements;
(h) not cancel any material insurance policy or other material contract
or agreement and, in any event, maintain in effect such insurance covering the
Purchased Assets, the System and the System Operations as is customary in the
industry; and
27
<PAGE>
(i) not modify, amend, supplement or waive any rights under any of the
Contracts or other obligations that are to be assumed by Buyer pursuant to
Section 2.02(a) hereof except in the ordinary course of business consistent with
past practices; provided that (x) in no event shall any such action be taken if
it would materially impair any of the Acquiring Companies' intended benefits
under any such Contract and (y) Seller shall not modify, amend, supplement or
waive any rights pursuant to this clause (i) which, individually or in the
aggregate, would increase the liabilities to be assumed by Buyer pursuant to
Section 2.02(a) hereof by $25,000 or more, and in any event, Seller shall
promptly notify Buyer of the occurrence of any incurrence, modification,
amendment, supplement or waiver.
Section 5.06. Notice of Certain Events. Seller shall promptly notify Buyer
of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the transactions
contemplated by this Agreement;
(b) any material notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement, or related to the System, the System Operations or the
Purchased Assets;
(c) any actions, suits, claims, investigations or proceedings commenced
or, to Seller's knowledge threatened against, relating to or involving or
otherwise affecting Seller, the System, System Operations or the Purchased
Assets that, if pending on the date of this Agreement, would have been required
to have been disclosed pursuant to Section 3.11 hereof or that relate to the
consummation of the transactions contemplated by this Agreement; and
(d) the damage or destruction by fire or other casualty of any material
Purchased Asset or material part thereof or in the event that any Purchased
Asset or part thereof becomes the subject of any proceeding or, to the knowledge
of Seller, threatened proceeding for the taking thereof or any part thereof or
of any right relating thereto by condemnation, eminent domain or other similar
governmental action.
Section 5.07. Exclusive Dealing. During the period from the date of this
Agreement to the earlier of the Closing Date or termination of this Agreement,
Seller (and any Person controlling Seller) shall refrain from taking any action
to, directly or indirectly, encourage, initiate or engage in discussions or
negotiations with, or provide any information to, any Person other than Buyer
concerning any purchase of any of the Purchased Assets, or any merger, sale of
substantial assets or similar transaction (other than as contemplated by this
Agreement) involving Seller or the System.
Section 5.08.
Seller Financial Statements. (a) Promptly following October 31, 1997 and any
other month end between the date hereof and the Closing Date, Seller shall
promptly arrange for delivery to Buyer of the unaudited monthly financial
statements of Seller prepared in the ordinary course of business consistent with
past practices (the "Interim Statements").
28
<PAGE>
(b) Promptly following the Closing, Seller shall arrange for delivery to
Buyer of Seller's audited financial statements for the period from January 1,
1997 to the Closing Date prepared on an Income Tax Basis, the report thereon by
an independent certified public accounting firm, and the consent by such firm,
each to be used in a registration statement under the Securities Act of 1933.
The cost of conducting such audit and preparing such statements shall be paid by
Buyer.
ARTICLE 6
Covenants of Acquiring Companies
The Acquiring Companies covenant and agree that:
Section 6.01.
Access. On and after the Closing Date, Buyer will afford promptly to Seller and
its agents reasonable access to its properties, books, records, employees and
auditors to the extent necessary to permit Seller to determine any matter
relating to its rights and obligations hereunder or to any period ending on or
before the Closing Date; provided that any such access by Seller shall not
unreasonably interfere with the conduct of the business of Buyer.
Section 6.02.
No Change in Representations and Warranties. From the date hereof until the
Closing Date, except with the prior written consent of Seller, the Acquiring
Companies shall not, if it would either separately or in the aggregate
materially and adversely affect Buyer's ability to consummate the transactions
contemplated by the Acquisition Agreements (a) take or agree or commit to take
any action that would make any representation or warranty of either Acquiring
Company hereunder inaccurate in any material respect at, or as of any time prior
to, the Closing Date or (b) omit or agree or commit to omit to take any action
necessary to prevent any such representation or warranty from being inaccurate
in any material respect at any such time.
ARTICLE 7
Covenants of All Parties
Section 7.01.
Regulatory Approval. As promptly as practicable following the execution hereof
by Buyer and Seller, but in no event later than ten (10) Business Days
hereafter, to the extent not already prepared and/or filed, Seller and Buyer
shall prepare and file with any required governmental authorities such
applications or other filings as may be necessary to transfer the Purchased
Assets as contemplated by this Agreement. Seller and Buyer shall cooperate and
use their reasonable best efforts to
29
<PAGE>
promptly obtain all such required regulatory approvals. Seller and Buyer will
share equally the costs of any governmental filing fees required in connection
with the proposed transaction.
Section 7.02.
Confidentiality. Prior to the Closing Date and after any termination of this
Agreement, all parties hereto and their respective Affiliates will hold, and
will use their best efforts to cause their respective officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless required to disclose by judicial or administrative process or
by other requirements of law (including without limitation the requirements of
the Communications Act, the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended), (a) in the case of Buyer and its
Affiliates, all confidential documents and information concerning the System,
the System Operations, the Purchased Assets, the Assumed Liabilities or the
Seller furnished to Buyer or its Affiliates; and (b) in the case of Seller and
their respective Affiliates, all confidential documents and information
concerning Buyer and its Affiliates and their respective businesses furnished to
Seller or its Affiliates, in connection with the transactions contemplated
hereby, except to the extent that such information can be shown to have been (i)
previously known on a non-confidential basis by such party or its Affiliates,
(ii in the public domain through no fault of such party or its Affiliates or (ii
later lawfully acquired by such party or its Affiliates from sources other than
a party hereto or its Affiliates; provided that such party or its Affiliates may
disclose such information to its officers, directors, employees, accountants,
counsel, consultants, advisors and agents in connection with the transactions
contemplated by this Agreement so long as such Persons are informed by such
party or its Affiliates of the confidential nature of such information and are
directed by such party or its Affiliates to treat such information
confidentially. If this Agreement is terminated, each party hereto will, and
will use its best efforts to cause its Affiliates, officers, directors,
employees, accountants, counsel, consultants, advisors and agents to, destroy
all documents and other materials, and all copies thereof, obtained by such
party or its Affiliates or on their behalf from any other party hereto (and upon
request, shall deliver such materials to such other party) in connection with
this Agreement that are subject to such confidence.
Section 7.03.
Best Efforts; Further Assurances. (a) Subject to the terms and conditions of
this Agreement, each of the Acquiring Companies and Seller will use its
reasonable best efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things reasonably necessary or desirable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement. Seller and the Acquiring Companies each agree to execute and deliver
such other documents, certificates, agreements and other writings and to take
such other commercially reasonable actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated by
this Agreement and to vest in Buyer good and marketable title to the Purchased
Assets and to prevent Buyer from having any obligation or responsibility with
respect to the liabilities of Seller other than Assumed Liabilities.
(b) Seller hereby constitutes and appoints, effective as of the Closing
Date, Buyer and its successors and assigns as the true and lawful attorney of
such Seller with full power of substitution
30
<PAGE>
in the name of Buyer or in the name of such Seller, but for the benefit of Buyer
(i) to collect for the account of Buyer any items of Purchased Assets and (ii)
to institute and prosecute all proceedings which Buyer may in its sole
discretion deem proper in order to assert or enforce any right, title or
interest in, to or under the Purchased Assets, and to defend or compromise any
and all actions, suits or proceedings in respect of the Purchased Assets;
provided that Buyer will be responsible for any new liabilities of Seller that
result from such actions and Buyer will indemnify and hold harmless Seller from
any such liabilities and from any other Losses arising out of or related to
actions of Buyer under this paragraph. Buyer shall be entitled to retain for its
own account any amounts collected pursuant to the foregoing powers, including
any amounts payable as interest in respect thereof.
Section 7.04. Public Announcements. The parties agree to consult with each
other and provide each other a copy of any proposed press release before issuing
any press release or making any public statement with respect to this Agreement
or the transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national securities exchange,
will not issue any such press release or make any such public statement prior to
such consultation.
Section 7.05.
GTE Switching Services Agreement. (a) Seller acknowledges that promptly after
the date of this Agreement Buyer shall have the right to discuss with GTE Mobile
Communications and/or Contel Cellular, Inc. the terms of the GTE Switching
Services Agreement. Seller shall have the right to participate in such
discussions and Buyer shall not taken any action prior to Closing that would
adversely affect Seller's ability to operate under the GTE Switching Services
Agreement.
(b) From and after the Closing, Buyer shall either (i) assume Seller's
obligations under the GTE Switching Services Agreement, or (ii indemnify Seller
and hold it harmless for any costs and expenses (including reasonable attorney's
fees) associated with the GTE Switching Services Agreement, including the
termination thereof. Buyer shall notify Seller as to whether or not it will
assume the GTE Switching Services Agreement no later that the Closing Date. The
consent to the assignment of the GTE Switching Services Agreement shall not be a
Required Consent and if such consent is not obtained, Buyer shall indemnify
Seller and hold Seller harmless in accordance with clause (b)(ii).
ARTICLE 8
Tax Matters
Section 8.01.
Tax Matters. Seller hereby represents and warrants to Buyer that:
31
<PAGE>
(a) Seller has timely paid or will timely pay all Taxes due thereon and
payable by it for all Pre-Closing Tax Periods which will have been required to
be paid prior to the Effective Date, the non-payment of which would result in a
Lien on any Purchased Asset, would otherwise adversely affect the System or the
System Operations or would result in Buyer becoming liable or responsible
therefor.
(b) Seller has established, in accordance with principles of the Income
Tax Basis, applied on a basis consistent with that of preceding periods,
adequate reserves for the payment of, and will timely pay all Tax liabilities,
assessments, interest and penalties which arise from or with respect to the
Purchased Assets, the System or the System Operations and are incurred in or
attributable to the Pre-Closing Tax Period, the non-payment of which would
result in a Lien on any Purchased Asset, would otherwise adversely affect the
System or the System Operations or would result in Buyer becoming liable
therefor.
Section 8.02. Tax Cooperation; Allocation of Taxes. (a) The Acquiring
Companies and Seller agree to furnish or cause to be furnished to each other,
upon request, as promptly as practicable, such information and assistance
relating to the Purchased Assets, the System and the System Operations
(including, without limitation, access to books and records) as is reasonably
necessary for the filing of all Tax returns, and making of any election related
to Taxes, the preparation for any audit by any taxing authority, and the
prosecution or defense of any claim, suit or proceeding relating to any Tax.
The Acquiring Companies and Seller shall retain all books and records with
respect to Taxes pertaining to the Purchased Assets, the System and the System
Operations for a period of at least six years following the Closing Date.
Seller and the Acquiring Companies shall cooperate with each other in the
conduct of any audit or other proceeding related to Taxes involving the System
or the System Operations and each shall execute and deliver such documents as
are necessary to carry out the intent of this Section 8.02(a).
(b) All real property taxes, personal property taxes and similar ad
valorem obligations levied with respect to the Purchased Assets for a taxable
period which includes (but does not end on) the Effective Date (collectively,
the "APPORTIONED OBLIGATIONS") shall be apportioned between Seller and Buyer as
of the Effective Date based on the number of days of such taxable period
included in the Pre-Closing Tax Period and the number of days of such taxable
period included in the Post-Closing Tax Period. Seller shall be liable for the
proportionate amount of such taxes that is attributable to the Pre-Closing Tax
Period, and Buyer shall be liable for the proportionate amount of such taxes
that is attributable to the Post-Closing Tax Period. Within 90 days after the
Closing Date, each of Seller and Buyer shall present a statement to the other
setting forth the amount of reimbursement to which each is entitled under this
Section 8.02(b) together with such supporting evidence as is reasonably
necessary to calculate the proration amount. The proration amount shall be paid
by the party owing it to the other within 10 days after delivery of such
statement. Thereafter, Seller shall notify Buyer upon receipt of any bill for
real or personal property taxes relating to the Purchased Assets, part or all of
which are attributable to the Post-Closing Tax Period, and shall promptly
deliver such bill to Buyer who shall pay the same to the appropriate taxing
authority, provided that if such bill covers the Pre-Closing Tax Period, Seller
shall also remit prior to the due date of assessment to Buyer payment for the
proportionate amount of such bill that is attributable to the Pre-Closing Tax
Period. In the event that Seller or Buyer shall thereafter make a payment for
32
<PAGE>
which it is entitled to reimbursement under this Section 8.02(b), the other
party shall make such reimbursement promptly but in no event later than 30 days
after the presentation of a statement setting forth the amount of reimbursement
to which the presenting party is entitled along with such supporting evidence as
is reasonably necessary to calculate the amount of reimbursement. Any payment
required under this Section 802 and not made within 10 days of delivery of the
statement shall bear interest at the rate per annum determined, from time to
time, under the provisions of Section 6621(a)(2) of the Code for each day until
paid.
(c) All excise, sales, use, value added, registration stamp, recording,
documentary, conveyancing, property, transfer, gains and similar Taxes, levies,
charges and fees (collectively, "TRANSFER TAXES") incurred in connection with
the transactions contemplated by the Acquisition Agreements shall be borne 50%
by Seller and 50% by Buyer. Buyer and Seller shall cooperate in providing each
other with any appropriate resale exemption certifications and other similar
documentation. The party that is required by applicable law to make the filings,
reports, or returns with respect to any applicable Transfer Taxes shall do so,
and the other party shall cooperate with respect thereto as necessary.
ARTICLE 9
Conditions to Closing
Section 9.01.
Conditions to the Obligations of Each Party. The obligations
of the Acquiring Companies and Seller to consummate the Closing are subject to
the satisfaction of the following conditions:
(a) Any applicable waiting period under the HSR Act (including any
extension thereof) relating to the transactions contemplated hereby shall have
expired or been terminated.
(b) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing.
(c) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any Person before any court,
arbitrator or governmental body, agency or official and be pending.
(d) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of the
Closing shall have occurred or been made, and, if applicable to such actions or
filings, shall have become Final Orders. In the case of the required FCC
approvals of the assignment of the FCC microwave licenses, Buyer shall deem
either initial FCC approvals or special temporary authority to satisfy this
condition and in such case, upon receipt of either the initial FCC approvals or
special temporary authority, each party shall be obligated hereunder as though a
Final Order had been received.
33
<PAGE>
(e) Buyer and Seller shall have received duly executed copies of the
Escrow Agreement.
Section 9.02.
Conditions to the Obligations of the Acquiring Companies. The obligations of the
Acquiring Companies to consummate the Closing are subject to the satisfaction of
the following further conditions:
(a) (i) Seller shall have performed in all material respects all of its
obligations hereunder required to be performed by it on or prior to the Closing
Date and (ii the representations and warranties of Seller contained in this
Agreement and in any certificate delivered by Seller pursuant hereto shall be
true and correct disregarding all qualifications and exceptions contained
therein relating to materiality (with only such exceptions as would not in the
aggregate reasonably be expected to have a Material Adverse Effect) on and as of
the Closing Date, as if made on and as of such date unless the representation or
warranty is made as of a specific date only.
(b) Buyer shall have received opinions of counsel (including, without
limitation, FCC counsel) to Seller dated the Closing Date to the effect
specified in Sections 3.01, 3.02, 3.03, 3.04, 3.05 and 3.11, it being agreed
that the opinion as to enforceability may assume that Pennsylvania law applies.
In rendering such opinions, such counsel may rely upon certificates of officers
of the Seller, copies of which certificates shall be contemporaneously delivered
to Buyer.
(c) There shall not have occurred any event or occurrence that has had, or
could reasonably be expected to have, a Material Adverse Effect, except that the
following shall not be a basis for not closing:
(i) an event or occurrence affecting the cellular telephone industry
generally or the non-wireline segment of such industry;
(ii) events or occurrences resulting or arising out of the Acquiring
Companies not having approved actions proposed to be taken by Seller
between signing and Closing; and/or
(iii) events or occurrences resulting or arising out of actions or
omissions of Buyer or its Affiliates.
(d) There shall be no provision of applicable law or regulation, and no
order, decree, injunction or judgment of any court or governmental authority of
competent jurisdiction that would, and there shall not be threatened or pending
by any governmental authority any litigation or investigation that seeks to (i)
prohibit or enjoin consummation of the transactions contemplated hereby, (ii)
restrain the ownership or operation by Buyer or any of its Affiliates of all or
any material portion of the assets or business of the System or to compel Buyer
or any of its Affiliates to dispose of all or any material portion of the
business or assets of either (x) the System or (y) Buyer or any of its
Affiliates or (iii) impose or confirm limitations on the ability of Buyer
effectively to exercise
34
<PAGE>
full rights and privileges of ownership of the System, other than limitations
affecting the cellular telephone industry generally or the non-wireline segment
of such industry.
(e) Seller shall have received all Required Consents, in each case in form
and substance reasonably satisfactory to Buyer, and, if applicable to such
Required Consents, they shall have become Final Orders, provided that Buyer may,
at its option, deem receipt of either initial FCC approvals or special temporary
authority of the assignment of the FCC microwave licenses the equivalent of
receipt of a Final Order for purposes of this condition.
(f) Seller shall have delivered to Buyer:
(i) a copy of the resolutions adopted by Seller's general partner,
certified as of the Closing Date by such general partner's Secretary,
approving the execution and delivery of the Acquisition Agreements and the
performance of Seller's obligations hereunder and thereunder;
(ii) the Sales Agreement, duly executed by Seller, and no default
thereunder by Seller shall have occurred and be continuing;
(iii) a certificate, dated as of the Closing Date and executed by the
general partner of Seller certifying that the conditions set forth in
Sections 9.02(a), 9.02(c) and 9.02(e) hereof have been satisfied;
(iv) such other instruments of sale, assignment and transfer in form
and substance reasonably satisfactory to Buyer and effective to transfer to
Buyer, free and clear of all Liens other than Permitted Liens, sole
ownership of the Purchased Assets and all other documentation relating to
the Purchased Assets, the System or the System Operations which is owned by
Seller or in Seller's possession on the Closing Date and which relate to or
affect the period after Closing;
(v) all documents reasonably requested by the Acquiring Companies
with respect to the existence of Seller, the authority for the Acquisition
Agreements, and Seller's compliance with the Communications Act and the
Licenses, in form and substance reasonably acceptable to Buyer; and
(vi) a certificate stating that Seller is not a "foreign person" as
defined in Section 1445 of the Code.
Section 9.03. Conditions to the Obligations of Seller. The obligation of
Seller to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) (i) The Acquiring Companies shall have performed in all material
respects all of their obligations hereunder required to be performed by them on
or prior to the Closing Date and (ii the representations and warranties of the
Acquiring Companies contained in this Agreement and in any certificate delivered
by the Acquiring Companies pursuant hereto (x) that are qualified as to
35
<PAGE>
materiality shall be true and correct and (y) that are not so qualified as to
materiality shall be true in all material respects, in each case on and as of
the Closing Date, as if made on and as of such date.
(b) The Acquiring Companies shall have delivered to Seller:
(i) a copy of the resolutions adopted by Buyer's Board of Directors,
certified as of the Closing Date by Buyer's Secretary, approving the
execution and delivery of the Acquisition Agreements and the performance of
Buyer's obligations hereunder and thereunder;
(ii) the Sales Agreement, duly executed by Buyer, and no default
thereunder by Buyer shall have occurred and be continuing;
(iii) a certificate, dated as of the Closing Date and executed by the
President and Chief Executive Officer of Buyer certifying that the
conditions set forth in Section 9.03(a) hereof (with respect to Buyer) have
been satisfied;
(iv) a certificate, dated as of the Closing Date and executed by the
President of PriCellular certifying that the conditions set forth in
Section 903 hereof (with respect to PriCellular) have been satisfied;
(v) an opinion of Davis Polk & Wardwell, special counsel to the
Acquiring Companies, dated the Closing Date to the effect specified in
Sections 4.01, 4.02, 4.03, 4.04, and 4.08. In rendering such opinion, such
counsel may rely upon certificates of officers of the Acquiring Companies,
copies of which certificates shall be contemporaneously delivered to
Seller; and
(vi) all documents reasonably requested by Seller with respect to the
existence of the Acquiring Companies and the authority for the Acquisition
Agreements, in form and substance reasonably acceptable to Seller.
ARTICLE 10
Survival; Indemnification
Section 10.01.
Survival. (a) The representations and warranties of the Seller which are
contained in this Agreement or in any certificate delivered pursuant hereto
shall terminate on the Closing Date. No claim for indemnification in accordance
with this Article 10 based on a misrepresentation or breach of warranty by the
Seller shall be brought after the Closing Date.
36
<PAGE>
(b) The covenants and agreements of the Seller contained herein shall
terminate on the Closing Date. No claim for indemnification in accordance with
this Article 10 based on a breach of a covenant by the Seller shall be brought
after the Closing Date.
(c) The representations and warranties of the Buyer and PriCellular which
are contained in this Agreement or in any certificate delivered pursuant hereto
shall survive the Closing for a period of eighteen (18) months after the Closing
Date, or in the case of the representations and warranties contained in Article
8 hereof, until the third anniversary of the Closing Date. Any claim for
indemnification in accordance with this Article 10 based on a misrepresentation
or breach of warranty by Buyer or PriCellular may only be brought within such
survival period.
(d) The covenants and agreements of Buyer and PriCellular contained herein
shall survive the execution, delivery and performance of this Agreement for a
period of eighteen (18) months after the Closing Date, except that covenants and
agreements of Buyer as to the assumption by Buyer of the Assumed Liabilities and
the covenant to indemnify and hold harmless Seller under Sections 7.03(b), 7.05
and 10.02(b)(ii) and (iii) shall survive until the expiration of the applicable
statute of limitations. Any claim for indemnification in accordance with this
Article 10 based on a breach of a covenant by Buyer and PriCellular may only be
brought within such survival period.
Section 10.02.
Indemnification. (a) Seller hereby indemnifies Buyer and its Affiliates against
and agrees to hold each of them harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation (including any by engineers, environmental consultants and similar
technical personnel) and reasonable attorneys' fees and expenses in connection
with any action, suit or proceeding) (collectively, "LOSS") incurred or suffered
by Buyer or any of its Affiliates arising out or in connection with:
(i) any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by Seller pursuant to this Agreement; and
(ii) any Excluded Liability.
(b) Buyer hereby indemnifies Seller and its Affiliates against and agrees
to hold each of them harmless from any and all Loss incurred or suffered by
Seller or any of its Affiliates arising out or in connection with:
(i) any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by either of the Acquiring Companies
pursuant to this Agreement;
(ii) any Assumed Liability; and
37
<PAGE>
(iii) the ownership and operation of the Purchased Assets and the
System from and after Closing.
(c) The aggregate amount of indemnification payments from Seller under
this Section 10.02 shall not exceed $7,500,000.
(d) Buyer's sole recourse under this Section is to the amounts held by the
Escrow Agent pursuant to the Escrow Agreement. No partner of Seller shall be
personally liable for any amounts owed to Buyer pursuant to this Section.
(e) In no event shall the indemnification payments from Seller under this
Agreement include consequential damages of any nature (including without
limitation lost profits or lost opportunity), Buyer agreeing that its damages
shall be limited to actual damages it suffers.
(f) Seller will not be liable for any Loss under Section 10.02 in respect
to a misrepresentation or breach of warranty or covenant except if, and to the
extent, the aggregate amount of such Loss and other Losses hereunder (determined
without regard to any materiality qualification contained in any representation,
warranty or covenant giving rise to the claim for indemnity hereunder) exceeds
$500,000. For purposes of this Section 10.02, Buyer may not make a claim for a
Loss under Article 10 unless the amount of the Loss arising from such claim (or
series of related claims) exceeds $25,000. For the avoidance of doubt, such
limitations will not apply to the Excluded Liabilities enumerated in paragraphs
(a) through (f) of Section 2.03.
Section 10.03. Procedures. (a) The indemnification provided under Section
10.02 shall be the exclusive remedy of the parties hereto for any breach or non-
compliance with any of the terms of this Agreement.
(b) All claims for indemnification under Section 10.02 hereof shall be
asserted and resolved as follows:
(i) In the event that any claim for which a party (the "INDEMNIFYING
PARTY") may be liable to the other party (the "INDEMNIFIED PARTY")
hereunder is asserted against an Indemnified Party by a third party, the
Indemnified Party shall with reasonable promptness notify the Indemnifying
Party of such claim, specifying the nature of such claim and the amount or
the estimated amount thereof to the extent then feasible (which estimate
shall not be conclusive of the final amount of such claim) (the "CLAIM
NOTICE"). The Indemnifying Party shall have 30 days from the receipt of the
Claim Notice (the "NOTICE PERIOD") to notify the Indemnified Party (i)
whether or not the Indemnifying Party disputes the Indemnifying Party's
liability to the Indemnified Party hereunder with respect to such claim and
(ii) whether or not the Indemnifying Party desires, at the sole cost and
expense of the Indemnifying Party, to defend against such claim. In the
event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that the Indemnifying Party desires to defend the Indemnified
Party against such claim, the Indemnifying Party shall have the right to
defend by appropriate proceedings, which proceedings shall be promptly
settled or prosecuted by the Indemnifying Party to a final conclusion. The
Indemnifying Party may
38
<PAGE>
not settle any claim without the consent of the Indemnified Party, which
consent may not be unreasonably withheld or delayed. If the Indemnified
Party desires to participate in, but not control, any such defense or
settlement the Indemnified Party may do so at the Indemnified Party's sole
cost and expense. If the Indemnifying Party elects not to defend the
Indemnified Party against such claim, whether by not giving the Indemnified
Party timely notice as provided above or otherwise, then the Indemnified
Party, without waiving any rights against the Indemnifying Party, may
settle or defend against any such claim in the Indemnified Party's sole
discretion, and if it is ultimately determined that the Indemnifying Party
is responsible therefor under Section 10.02, then the Indemnified Party
shall be entitled to recover from the Indemnifying Party the amount of any
settlement or judgment and all indemnifiable costs and expenses of the
Indemnified Party with respect thereto. If the Indemnifying Party has
defended or settled any such claim and it is ultimately determined that the
Indemnifying Party is not responsible therefor under Section 10.02, the
Indemnified Party shall promptly pay to the Indemnifying Party the amount
of the judgment or settlement paid by the Indemnifying Party.
(ii) In the event the Indemnified Party should have an
indemnification claim against the Indemnifying Party hereunder which does
not involve a claim being asserted against or sought to be collected by a
third party, the Indemnified Party shall with reasonable promptness after
learning of the basis for such claim send a Claim Notice with respect to
such claim to the Indemnifying Party. If the Indemnifying Party does not
notify the Indemnified Party within the Notice Period that the Indemnifying
Party disputes such indemnification claim, the amount of such
indemnification claim shall be conclusively deemed a liability of the
Indemnifying Party hereunder. If the Indemnifying Party does timely notify
Indemnified Party that it disputes such claim, the parties shall attempt to
resolve such dispute within 30 days and if not so resolved, the Indemnified
Party must bring an action to determine liability for indemnification
within 60 days thereafter or shall lose its rights to indemnification,
provided that the Indemnified Party will not be required to bring any such
action prior to the earlier of (i) the date on which such claim would
expire pursuant to Section 10.01 and (ii) the date on which the aggregate
amount of liquidated Losses that are the subject of unresolved Claims
Notices exceeds $500,000 prior to eighteen months after the Closing Date,
and $300,000 thereafter.
(iii) The Indemnifying Party shall have no liability for
indemnification for a claim unless the Indemnifying Party agrees to same or
is found to be liable by a court (or arbitration panel) of competent
jurisdiction.
(iv) In connection with any indemnification claim, the Indemnified
Party shall give the Indemnifying Party reasonable access to the books,
records and assets of the Indemnified Party which relate to the act,
omission or occurrence giving rise to such claim and the right, upon prior
notice during normal business hours, to interview any appropriate personnel
of the Indemnified Party with respect thereto and Indemnified Party
otherwise shall cooperate with Indemnifying Party (and with its insurance
company, if applicable) in defending a third party claim.
39
<PAGE>
(c) In computing the amount to be paid pursuant to the indemnification
provisions of Section 10.02, the indemnification shall be for the net amount of
a loss after giving effect to anything which mitigates the loss (and the
Indemnified Party agrees to use its reasonable best efforts to mitigate such
loss), and after taking into account insurance proceeds or any other recovery
resulting from the loss. If, after the payment of any indemnification hereunder,
the amount of a loss shall be reduced beyond the amount that an indemnification
obligation has previously been reduced pursuant to the preceding sentence, then
the amount of such additional reduction in loss (less any expenses incurred in
connection with such reduction) shall promptly be repaid to the party that made
the payment to which the reduction relates.
(d) Neither Seller nor either of the Acquiring Companies shall take any
action outside the ordinary course of business with the sole intent of creating
a right to indemnification under this Agreement that would not otherwise exist
but for such action.
(e) The parties agree to arbitrate disputes hereunder as provided in the
Escrow Agreement or pursuant to any other mutually agreeable procedure.
Section 10.04.
Escrow. (a) Pursuant to Section 2.05 hereof, at Closing Buyer shall pay to the
Escrow Agent the Initial Escrow Amount, to be held and applied by the Escrow
Agent in accordance with the terms of this Section 10.04 and the Escrow
Agreement. The Escrow Agreement shall provide that the amounts deposited with
the Escrow Agent shall be used to satisfy Seller's liability to Buyer, if any,
under Article 10 hereof. The administrative costs of the Escrow Agent will be
shared equally by each of Buyer and Seller.
(b) On the fifth business day after the six-month period following the
Closing Date, the Escrow Agent shall release to Seller an amount such that the
remaining balance in the Escrow Account shall equal the sum of (i) $5,000,000
and (ii) the amount of any claims made by Buyer pursuant to Section 1003 hereof
in respect of which Seller either (x) disputes its liability and there has been
no resolution of such dispute pursuant to Section 10.03(b) hereof or (y) does
not dispute its liability but for any reason has not yet paid Buyer, or directed
Escrow Agent to pay Buyer, the amount owed in respect of such claim ("UNRESOLVED
CLAIM"), provided that no amounts will be added for Unresolved Claims if they
are less than $500,000 in the aggregate.
(c) On the fifth business day after the eighteen-month period following
the Closing Date, the Escrow Agent shall release to Seller an amount such that
the remaining balance in the Escrow Account shall equal the sum of (i)
$3,000,000 and (ii) the amount of any Unresolved Claims, provided that no
amounts will be added for Unresolved Claims if they are less than $300,000 in
the aggregate.
(d) On the fifth business day after the three-year period following the
Closing Date, the Escrow Agent shall release to Seller the amount remaining in
the Escrow Account, minus the amount of any then Unresolved Claims.
40
<PAGE>
(e) If any Unresolved Claim is paid by Seller, or there is a resolution of
the dispute pursuant to Section 10.03(b) with regards to such Unresolved Claim,
the Escrow Agent shall promptly thereafter release to Seller the amount
previously withheld in respect of such Unresolved Claim pursuant to this Section
10.04, minus any amounts to be paid by Escrow Agent to Buyer or other parties
pursuant to such resolution.
ARTICLE 11
Termination
Section 11.01.
Termination.
(a) Notwithstanding anything in this Agreement to the contrary, this
Agreement may be terminated and the transactions contemplated hereby abandoned
at any time prior to the Closing:
(i) By agreement of the parties in writing;
(ii) By Buyer within 35 days after the date of this Agreement if any
environmental investigation conducted by Buyer pursuant to Section 5.04
hereof shall have revealed any condition or state of facts that, in the
opinion of Strata Environmental or another nationally recognized
environmental consultant, could reasonably be expected to require cleanup
or other remedial action, or to result in a liability, under Environmental
Laws that could reasonably be expected to exceed $100,000 (a "PROJECTED
ENVIRONMENTAL EXPENSE "); provided that Buyer shall not have the right to
terminate the Agreement if Seller promptly and to the reasonable
satisfaction of Buyer conducts all cleanup or other remedial action
required to eliminate completely such Projected Environmental Expense;
(iii) Buyer or Seller if the Closing has not occurred by 12:01 A.M.
on July 1, 1998; and
(iv) By Buyer or Seller, by written notice to the other if there has
been a material misrepresentation or breach on the part of the other party
of the representations, warranties, covenants or agreements set forth in
this Agreement which has not been cured within 15 days after the
terminating party has given written notice to the other party requesting
that such cure be effected.
(b) If this Agreement is terminated and the transactions contemplated
hereby are not concluded as described above, this Agreement will become void and
of no further force and effect, provided that (i) the obligations of the parties
described in Sections 7.02, 7.04 and 13.01 will survive any such termination,
(ii) no such termination will relieve the Seller or Acquiring Companies from
liability for any misrepresentation or breach of any representation, warranty,
covenant or agreement set forth in this Agreement prior to such termination and
(iii) any claim by a party against another
41
<PAGE>
party for monetary damages resulting from such other party's misrepresentation
or breach of any representation, warranty, covenant or agreement set forth in
this Agreement prior to such termination (x) shall be made under and in
accordance with Article 10 hereof (which Article shall survive such termination)
and (y) shall be brought within six months of such termination. Notwithstanding
any other provision of this Agreement, Seller or the Acquiring Companies as the
case may be, may waive in writing any default or breach of any other party
hereto (the Acquiring Companies being considered one party for purposes of this
sentence) and demand specific performance hereunder; provided, that the party
seeking specific performance has fully complied with the terms of this
Agreement.
ARTICLE 12
Obligations of PriCellular
Section 12.01.
Guaranty by PriCellular of Buyer's Obligations.
(a) PriCellular agrees to take all action necessary or appropriate to
cause and enable Buyer to perform all of its covenants, agreements and
obligations under the Acquisition Agreements. In addition, PriCellular hereby
irrevocably and unconditionally guarantees to Seller the prompt and full
discharge by Buyer of all of Buyer's covenants, agreements, obligations and
liabilities under the Acquisition Agreements including, without limitation, the
due and punctual payment of all amounts which are or may become due and payable
by Buyer hereunder when and as the same shall become due and payable
(collectively, the "BUYER OBLIGATIONS"), in accordance with the terms hereof.
PriCellular acknowledges and agrees that, with respect to all Buyer Obligations
to pay money, such guaranty shall be a guaranty of payment and performance and
not of collection and shall not be conditioned or contingent upon the pursuit of
any remedies against Buyer. If Buyer shall default in the due and punctual
performance of any Buyer Obligation, including the full and timely payment of
any amount due and payable pursuant to any Buyer Obligation, PriCellular will
forthwith perform or cause to be performed such Buyer Obligation and will
forthwith make full payment of any amount due with respect thereto at its sole
cost and expense.
(b) The obligations of PriCellular hereunder shall be unconditional and
absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or release
in respect of any Buyer Obligation under this Agreement, by operation of
law or otherwise;
(ii) any modification or amendment of or supplement to this
Agreement;
42
<PAGE>
(iii) any change in the corporate existence, structure or ownership
of Buyer, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting Buyer or its assets or any resulting release or
discharge of any Buyer Obligation;
(iv) the existence of any claim, set-off or other rights which
PriCellular may have at any time against Buyer, Seller or any other Person,
whether in connection herewith or any unrelated transactions, provided that
nothing herein shall prevent the assertion of any such claim by separate
suit or compulsory counterclaim;
(v) any invalidity or unenforceability relating to or against Buyer
for any reason of this Agreement; or
(vi) any other act or omission to act or delay of any kind by Buyer,
Seller or any other Person or any other circumstance whatsoever which
might, but for the provisions of this Section 12.01(b), constitute a legal
or equitable discharge of or defense to PriCellular's obligations
hereunder.
Section 12.2. Representations and Warranties of PriCellular. (a)
Organization and Existence. PriCellular is a corporation duly incorporated,
validly existing and in good standing under the laws of Delaware and has all
corporate powers and all material governmental licenses, authorizations,
permits, consents and approvals required to carry on its business as now
conducted. True, correct and complete copies of the certificate of
incorporation and bylaws of PriCellular as the same are in effect have been
delivered to Seller.
(b) Authorization. PriCellular has full power and authority to execute,
deliver and perform its obligations under the Acquisition Agreements and to
consummate the transactions contemplated hereby and thereby. The execution,
delivery and performance of the Acquisition Agreements and all transactions
contemplated hereby and thereby have been duly authorized and approved by all
necessary corporate action on the part of PriCellular. This Agreement is a
valid and binding obligation of PriCellular, enforceable against it in
accordance with its terms, except as the enforceability hereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the rights of creditors generally and except for limitations imposed
by general principles of equity.
(c) Governmental Authorization. The execution, delivery and performance
by PriCellular of the Acquisition Agreements require no action by or in respect
of, or filing with, any governmental body, agency or official other than filings
described in Section 4.03 hereof.
(d) Non-Contravention. The execution, delivery and performance by the
Acquiring Companies of the Acquisition Agreements do not and will not (i)
violate the certificate of incorporation or bylaws of PriCellular or (ii)
assuming compliance with the matters referred to in Section 4.03 hereof, violate
any applicable law, rule, regulation, judgment, injunction, order or decree.
PriCellular is not a party to or bound by any contract prohibiting the
consummation of the transactions contemplated hereby nor any contract or
contracts that either separately or in the
43
<PAGE>
aggregate materially and adversely affect PriCellular's ability to consummate
the transactions contemplated by the Acquisition Agreements.
(e) No Knowledge with Respect to Buyer Representations and Warranties.
PriCellular does not have knowledge of any facts or circumstances which, if
known by Buyer, would make any of Buyer's representations or warranties
contained herein untrue and to PriCellular's best knowledge, each of Buyer's
representations and warranties are true and correct.
ARTICLE 13
Miscellaneous
Section 13.01.
Expenses. Regardless of whether or not the transactions contemplated hereby are
consummated, Seller and the Acquiring Companies will pay, except as otherwise
provided herein, their own expenses, income and other taxes, and costs
(including, without limitation, the fees, disbursements and expenses of their
attorneys, accountants and consultants) incurred by each of them in negotiating,
preparing, closing, and carrying out this Agreement and the transactions
contemplated by this Agreement.
Section 13.02.
Notices. Notices hereunder must be in writing and must be sent by overnight
delivery, and will be effective on the date such notice is delivered if sent as
follows:
Notices to Seller:
Tennessee 04 Partners, L.P.
3 Bala Plaza East
Suite 502
Bala Cynwyd, PA 19004
Fax: (610) 660-4930
Attn: Paul Bachow and Sal Grasso
with a copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Fax: (215) 988-2757
Attn: Howard A. Blum
44
<PAGE>
Notices to either Acquiring Company:
Kyle Cellular Corporation
c/o PriCellular Corporation
711 Westchester Avenue
White Plains, New York 10604
Fax: (914) 422-3939
Attn: Steven Price and Stuart Rosenstein
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Fax: (212) 450-4800
Attn: John Buttrick
Any party may change the address to which notices are to be addressed by giving
the other parties notice in the manner herein set forth.
Section 13.03. Counterparts. This Agreement may be executed in two or
more counterparts, each of which will be deemed an original, but all of which
together shall constitute but one and the same instrument.
Section 13.04.
Amendments and Waivers. (a) Any provision of this Agreement may be amended or
waived prior to the Closing Date if, but only if, such amendment or waiver is in
writing and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the waiver is
to be effective
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 13.05. Entire Agreement. This Agreement and the Schedules and
Exhibits hereto contain the entire agreement between the parties hereto with
respect to their subject matter and supersede all negotiations, prior
discussions, agreements, arrangements and understandings, written or oral,
relating to the subject matter of this Agreement and the Schedules and Exhibits
hereto.
Section 13.06.
45
<PAGE>
Invalidity of Any Provision. In case any provision of this Agreement not
material to the benefits intended to be conferred hereby is held to be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions will not in any way be affected or impaired thereby.
Section 13.07.
Successors and Assigns. The provisions of this Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns; provided that no party may assign, delegate or otherwise transfer
any of its rights or obligations under this Agreement without the consent of
each other party hereto, except that (i) Buyer may transfer or assign, in whole
or from time to time in part, to one or more of its Affiliates, the right to
purchase all or a portion of the Purchased Assets, but no such transfer or
assignment will relieve either Acquiring Company of its obligations hereunder,
and (ii) the rights of Buyer hereunder may be collaterally assigned to any of
Buyer's lenders. No provision of this Agreement is intended to confer upon any
Person other than the parties hereto and their successors and permitted assigns
any rights or remedies hereunder.
Section 13.08.
Governing Law. This Agreement shall be governed by and construed in accordance
with the law of the State of New York, without regard to the conflicts of law
rules of such state.
Section 13.09.
Captions. The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
KYLE CELLULAR CORPORATION
By: /s/ Steven Price
-----------------------------------
Name: Steven Price
Title: President
PRICELLULAR CORPORATION
By: /s/ Steven Price
-----------------------------------
Name: Steven Price
Title: President
TENNESSEE 04 PARTNERS, L.P.
By: Bachtel TN-04, L.P.
its general partner
By: Bachtel Investment GP, Inc.
its general partner
By: /s/ Paul S. Bachow
-----------------------------------
Name: Paul S. Bachow
Title: President
47
<PAGE>
ASSIGNMENT AND ASSUMPTION AGREEMENT
ASSIGNMENT AND ASSUMPTION AGREEMENT, dated as of January 15, 1998 by and among
Kyle Cellular Corporation, a Delaware corporation ("BUYER") and Tennessee 04
Partners, L.P., a Delaware limited partnership ("SELLER").
W I T N E S S E T H
WHEREAS, Buyer, Seller and certain other parties have concurrently herewith
consummated the purchase by Buyer of the Purchased Assets pursuant to the terms
and conditions of the Asset Purchase Agreement dated as of October 31, 1997 by
and among the Acquiring Companies and Seller (the "ASSET PURCHASE AGREEMENT";
terms defined in the Asset Purchase Agreement and not otherwise defined herein
being used herein as therein defined);
WHEREAS, pursuant to the Asset Purchase Agreement, Buyer has agreed to
assume certain liabilities and obligations of Seller with respect to the
Purchased Assets and the System;
NOW THEREFORE, in consideration of the sale of the Purchased Assets and in
accordance with the terms of the Asset Purchase Agreement, Buyer and Seller
agree as follows:
(1) (a) Seller does hereby sell, transfer, assign and deliver to Buyer all
of the right, title and interest of Seller in, to and under the Purchased
Assets; provided that no sale, transfer, assignment or delivery shall be made of
any or any material portion of any of the Contracts or Licenses if an attempted
sale, assignment, transfer or delivery, without the consent of a third party,
would constitute a breach or other contravention thereof or in any way adversely
affect the rights of Buyer or Seller thereunder.
(b) Buyer does hereby accept all the right, title and interest of Seller
in, to and under all of the Purchased Assets (except as aforesaid) and Buyer
assumes and agrees to pay, perform and discharge promptly and fully when due all
of the Assumed Liabilities and to perform all of the obligations of Seller to be
performed under the Contracts.
(2) This Agreement shall be governed by and construed in accordance with
the law of the State of New York, without regard to the conflicts of law rules
of such state.
(3) This Agreement may be executed in one 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, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
KYLE CELLULAR CORPORATION
By: /s/ Stuart Rosenstein
-----------------------------------
Name: Stuart Rosenstein
Title: Vice President
PRICELLULAR CORPORATION
By: /s/ Stuart Rosenstein
-----------------------------------
Name: Stuart Rosenstein
Title: Executive Vice President
TENNESSEE 04 PARTNERS, L.P.
By: Bachtel TN-04, L.P.
its general partner
By: Bachtel Investment GP, Inc.
its general partner
By: /s/ Salvatore A. Grasso
-----------------------------------
Name: Salvatore A. Grasso
Title: Vice President
2
<PAGE>
EXHIBIT 10.18
PLEDGE AND ESCROW
AGREEMENT
Dated as of May 13, 1998
from
AMERICAN CELLULAR CORPORATION
as Pledgor
----------
to
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
as Trustee
----------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. Definitions...................................................................... 2
SECTION 2. Security Interest................................................................ 5
2.1 Pledge and Grant of Security Interest.................................................. 5
2.2 Secured Obligations.................................................................... 7
SECTION 3. Establishment and Maintenance of Initial Escrow and Pledge Account;
Investment and Liquidation of Funds in the Initial Escrow and Pledge
Account.......................................................................... 7
3.1 Delivery of Initial Collateral......................................................... 7
3.2 Maintaining the Initial Escrow and Pledge Account...................................... 7
3.3 Allowable Investments.................................................................. 8
3.4 Interest............................................................................... 9
SECTION 4. Disposition of Initial Collateral Upon Certain Events............................ 9
4.1 Transfer of Funds for the Merger....................................................... 9
4.2 Conditions to Release of Funds.........................................................10
4.3 Release of Security Interest...........................................................10
4.4 Special Mandatory Redemption...........................................................11
SECTION 5. Deposit of Subsequent Funds; Deposit and Investment; Cash Collateral
Account; Subsequent Collateral Investments.......................................11
5.1 Deposit of Subsequent Funds...........................................................11
5.2 Maintaining the Cash Collateral Account...............................................12
5.3 Investing of Amounts in the Cash Collateral Account...................................12
5.4 Delivery of Subsequent Collateral.....................................................13
SECTION 6. Disbursements of Subsequent Collateral...........................................15
SECTION 7. Representations and Warranties...................................................17
SECTION 8. Further Assurances...............................................................19
SECTION 9. Covenants........................................................................20
SECTION 10. Power of Attorney................................................................20
SECTION 11. Trustee May Perform..............................................................21
SECTION 12. No Assumption of Duties; Reasonable Care.........................................21
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
SECTION 13. Indemnity.................................................................. 22
SECTION 14. Remedies upon Event of Default............................................. 22
SECTION 15. Expenses................................................................... 23
SECTION 16. Security Interest Absolute................................................. 24
SECTION 17. Miscellaneous Provisions................................................... 24
17.1 Notices.......................................................................... 24
17.2 No Adverse Interpretation of Other Agreements.................................... 25
17.3 Severability..................................................................... 25
17.4 Headings......................................................................... 26
17.5 Counterpart Originals............................................................ 26
17.6 Benefits of Pledge Agreement..................................................... 26
17.7 Amendments, Waivers and Consents................................................. 26
17.8 Interpretation of Agreement...................................................... 26
17.9 Continuing Security Interest; Termination....................................... 27
17.10 Survival Provisions............................................................. 27
17.11 Waivers......................................................................... 27
17.12 Authority of the Trustee........................................................ 27
17.13 Final Expression................................................................ 28
17.14 Rights of Holders of the Notes.................................................. 28
17.15 Governing Law; Submission to Jurisdiction; Waiver of Jury Trial; Waiver of
Damages........................................................................ 28
17.16 Consequential Damages........................................................... 29
17.17 Wire Transfers.................................................................. 30
EXHIBIT A: Form of Preliminary Release Certificate..................................... A-1
EXHIBIT B: Form of Merger Extension Notice Certificate Required
by Section 3.3.............................................................. B-1
EXHIBIT C: Form of Latham & Watkins Opinion............................................ C-1
EXHIBIT D: Form of Release Certificate................................................. D-1
EXHIBIT E: Form of Release of Security Interest........................................ E-1
EXHIBIT F: Form of Extension Certificate Required by Section 4.4....................... F-1
EXHIBIT G: Independent Public Accountants' Report...................................... G-1
EXHIBIT H: Form of Representations and Warranties Bring-down Certificate............... H-1
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
EXHIBIT I: Form of Subsequent Collateral Investments Account Letter................ I-1
EXHIBIT J: Officer's Certificate................................................... J-1
EXHIBIT K: Independent Public Accountants' Report.................................. K-1
EXHIBIT L: Wire Transfer Confirmation Contacts..................................... L-1
</TABLE>
-iii-
<PAGE>
PLEDGE AND ESCROW AGREEMENT
---------------------------
This PLEDGE AND ESCROW AGREEMENT (the "Pledge Agreement") is made and
----------------
entered into as of May 13, 1998 by and among AMERICAN CELLULAR CORPORATION, a
Delaware corporation (the "Pledgor"), having its principal office at 1336
-------
Basswood Street, Suite F, Schaumburg, Illinois 60173, and CHASE MANHATTAN BANK
AND TRUST COMPANY, NATIONAL ASSOCIATION, a trust company duly organized and
existing under the laws of the United States of America, having its principal
corporate trust office at 101 California Street, Suite 2725, San Francisco,
California 94111, as trustee (the "Trustee") for the holders (the "Holders") of
------- -------
the Notes (as defined herein) issued by the Pledgor under the Indenture referred
to below.
W I T N E S S E T H
WHEREAS, the Pledgor and the Initial Purchasers are parties to a
Purchase Agreement dated May 6, 1998 (the "Purchase Agreement"), pursuant to
------------------
which the Pledgor will issue and sell to the Initial Purchasers $285,000,000 in
aggregate principal amount of 10 1/2% Senior Notes due 2008, Series A (the
"Series A Notes") which will be exchangeable into 10 1/2% Senior Notes due 2008,
- ---------------
Series B (the "Series B Notes"), containing terms identical to the Series A
--------------
Notes in all material respects (except for references to certain interest rate
provisions, restrictions on transfers and restrictive legends) (the Series A
Notes and the Series B Notes being collectively referred to as the "Notes");
-----
WHEREAS, the Pledgor and the Trustee have entered into that certain
indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
---------
Pledgor is issuing the Notes on the date hereof;
WHEREAS, pursuant to the Indenture, simultaneously with receipt of
payment for the Series A Notes (the "Deposit Time"), (i) all of the proceeds
------------
from the sale of the Series A Notes after payment of the Initial Purchasers'
Discount and (ii) an equity contribution from the Equity Investors of $20.0
million in cash (the funds referred to in clauses (i) and (ii) being
collectively referred to as the "Initial Funds") will be deposited into a
-------------
segregated trust account in the name of Chase Manhattan Bank and Trust Company,
National Association, as Trustee, for American Cellular Corporation Senior Note
Holders (the "Initial Escrow and Pledge Account").
---------------------------------
WHEREAS, this Pledge Agreement and the Initial Collateral (as defined
below) initially secure the Initial Secured Obligations (as defined below).
-1-
<PAGE>
WHEREAS, the parties hereto desire to set forth their agreement with
regard to the administration of the Initial Escrow and Pledge Account, the
creation of a security interest in the Initial Collateral and the conditions
upon which a portion of the Initial Collateral will be released from the Initial
Escrow and Pledge Account;
WHEREAS, pursuant to the Indenture, upon release of a portion of the
Initial Collateral, the Pledgor is required to use the balance of funds (the
"Subsequent Funds") in the Initial Escrow and Pledge Account to cause the
- -----------------
Trustee to purchase and hold in the Subsequent Collateral Investment Account (as
defined below) or other account in pledge for the benefit of the Holders of the
Notes a portfolio of securities initially consisting of Government Securities
(as defined below) in an amount as will be sufficient upon receipt of scheduled
interest and principal payments of such securities, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Pledgor, to provide for payment in full of the first six scheduled interest
payments due on the Notes (unless and to the extent already paid) at the stated
rate of 10 1/2% (excluding Additional Interest, if any) (the "First Six
---------
Scheduled Interest Payments");
- ---------------------------
WHEREAS, the Pledgor will also open an interest bearing account (the
"Cash Collateral Account") with the Trustee at its office in New York, New York,
- ------------------------
which will be in the name of the Trustee for the benefit of the Pledgor but
under the sole dominion and control of the Trustee and subject to the terms of
this Pledge Agreement;
WHEREAS, this Pledge Agreement and the Subsequent Collateral (as
defined below) secures the Subsequent Secured Obligations; and
Whereas, the parties hereto desire to set forth their agreement with
regard to the administration of Cash Collateral Account, the creation and
perfection of a Security Interest in the Subsequent Collateral, the termination
of this Pledge Agreement and other matters.
Capitalized terms used but not defined herein shall have the meanings
assigned to them in the Indenture.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein contained, and
in order to induce the Holders of the Notes to purchase the Notes, the Pledgor
and the Trustee hereby agree, for the benefit of the Trustee and for the ratable
benefit of the Holders of the Notes, as follows:
SECTION 1. Definitions.
-----------
"Anticipated Merger Date" shall have the meaning specified in Section
-----------------------
3.3
-2-
<PAGE>
hereof.
"Cash Collateral Account" shall have the meaning specified in the
-----------------------
Recitals.
"Cash Equivalents" shall have the meaning specified in Section 3.3
----------------
hereof.
"Collateral" means and includes the Initial Collateral and the
----------
Subsequent Collateral, as the case may be.
"Event of Default" shall have the meaning specified in Section 14
----------------
hereof.
"Financing Condition" shall have the meaning specified in Section 4.2
-------------------
hereof.
"First Six Scheduled Interest Payments" shall have the meaning
-------------------------------------
specified in the Recitals.
"FRBNY" shall have the meaning specified in Section 5.4 hereof.
-----
"Government Securities" means direct obligations of, or obligations
---------------------
guaranteed by, the United States of America for the payment of which obligations
or guarantee the full faith and credit of the United States is pledged and which
have the remaining weighted average life to maturity of not more than the date
of the interest payment as to which such Investment in the Government Security
is intended to pay.
"Holders" shall have the meaning specified in the Recitals.
-------
"Indenture" shall have the meaning specified in the Recitals.
---------
"Initial Collateral" shall have the meaning specified in Section 2.1
------------------
hereof.
"Initial Escrow and Pledge Account" shall have the meaning specified
---------------------------------
in the Recitals.
"Initial Funds" shall have the meaning specified in the Recitals.
-------------
"Initial Secured Obligations" means all obligations and indebtedness
---------------------------
of the Pledgor, whether now or hereafter existing, under the Notes, the
Indenture and this Pledge Agreement (whether at maturity, upon acceleration or
otherwise), and including without limitation, all principal, premium and
interest (whether accrued before or after the commencement of a bankruptcy,
insolvency or other similar proceeding) on the Notes.
"Issuer Order" shall have the meaning specified in Section 6 hereof.
------------
"Marketable U.S. Securities" means: (i) Government Securities; (ii)
--------------------------
any
-3-
<PAGE>
time deposit account, money market deposit and certificate of deposit maturing
not more than 270 days after the date of acquisition issued by, or time deposit
of, an Eligible Institution; (iii) commercial paper maturing not more than 270
days after the date of acquisition issued by a corporation (other than an
Affiliate of the Pledgor) with a rating, at the time as of which any investment
therein is made, of "P-1" or higher according to Moody's Investors Service,
Inc., "A-1" or higher according to Standard & Poor's Ratings Group or "A-1" or
higher according to Duff & Phelps Credit Rating Co. (or such similar equivalent
rating by at least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act)); (iv) any banker's
acceptances or money market deposit accounts issued or offered by an Eligible
Institution; and (v) any fund investing exclusively in investment of the types
described in clauses (i) through (iv) above, including funds for which the
Trustee, its parent holding company or any affiliates or subsidiaries of the
Trustee or such holding company provide investment advisory or other management
services.
"Merger Date" shall have the meaning specified in Section 4.2 hereof.
-----------
"New Anticipated Merger Date" shall have the meaning specified in
---------------------------
Section 3.3 hereof.
"Notes" shall have the meaning specified in the Recitals.
-----
"Pledge Agreement" shall have the meaning specified in the Recitals.
----------------
"Pledgor" means the party named as such in this Pledge Agreement until
-------
a successor replaces it pursuant to the Pledge Agreement, and thereafter means
such successor.
"Pledgor Funds" shall have the meaning specified in Section 6 hereof.
-------------
"Pledgor's Designee" shall have the meaning specified in Section 6
------------------
hereof.
"Purchase Agreement" shall have the meaning specified in the Recitals.
------------------
"Release Conditions" shall have meaning specified in Section 4.1
------------------
hereof.
"Release Time" shall have the meaning specified in Section 4.3 hereof.
------------
"Secured Obligations" means and includes the Initial Secured
-------------------
Obligations and the Subsequent Secured Obligations, as the case may be.
"Series A Notes" shall have the meaning specified in the Recitals.
--------------
"Series B Notes" shall have the meaning specified in the Recitals.
--------------
-4-
<PAGE>
"Subsequent Collateral" shall have the meaning specified in Section
---------------------
2.1 hereof.
"Subsequent Collateral Investments" shall have the meaning specified
---------------------------------
in Section 5.3 hereof.
"Subsequent Collateral Investments Account" shall have the meaning
-----------------------------------------
specified in Section 5.4 hereof.
"Subsequent Funds" shall have the meaning specified in the Recitals.
----------------
"Subsequent Secured Obligations" means the Pledgor's obligations to
------------------------------
(i) pay in full the First Six Scheduled Interest Payments and (ii) repay the
principal, premium and interest (whether accrued before or after the
commencement of a bankruptcy, insolvency or other similar proceeding) on the
Notes in the event that the Notes become due and payable prior to such time as
the First Six Scheduled Interest Payments shall have been paid in full.
"Trustee" shall mean the Person named as the "Trustee" in the first
-------
paragraph of this Pledge Agreement until a successor Trustee shall have become
such, and thereafter "Trustee" shall mean the Person who is then the Trustee
hereunder
"UCC" means the Uniform Commercial Code as in effect on the date
---
hereof in New York State.
Unless otherwise defined herein or in the Indenture, terms used herein
which are defined in the UCC are used herein as therein defined.
SECTION 2. Security Interest.
-----------------
2.1 Pledge and Grant of Security Interest. The Pledgor hereby
-------------------------------------
irrevocably pledges, assigns and sets over to the Trustee, and grants to the
Trustee, for the ratable benefit of the Holders of the Notes, a first priority
continuing security interest in, all of the Pledgor's right, title and interest
to all of the Initial Collateral and all of the Subsequent Collateral, whether
now owned or existing or hereafter acquired or created.
"Initial Collateral" means and includes (whether characterized as
------------------
investment property, deposit accounts, cash or otherwise):
(a) the Initial Escrow and Pledge Account;
(b) all funds from time to time deposited or held in the
Initial Escrow and Pledge Account, including, without limitation, the Initial
Funds and all certificates and instruments, if any, from time to time,
representing or evidencing the Initial Escrow and Pledge Account or the Initial
Funds;
-5-
<PAGE>
(c) all Cash Equivalents, whether the same shall constitute
certificated securities, uncertificated securities, investment property,
instruments, general intangibles or otherwise held by or registered in the name
of the Trustee or its nominees and all certificates and instruments, if any,
from time to time representing or evidencing the Cash Equivalents;
(d) all notes, certificates of deposit, deposit accounts,
checks and other instruments from time to time hereafter delivered to or
otherwise possessed by the Trustee or its nominees;
(e) all interest, dividends, cash, instruments and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the then existing Initial
Collateral; and
(f) all proceeds of the foregoing, including, without
limitation, cash proceeds.
"Subsequent Collateral" means and includes (whether characterized as
---------------------
investment property, deposit accounts, cash or otherwise):
(a) the Cash Collateral Account, all funds from time to time deposited
or held therein and all certificates and instruments, if any, from time to time
representing or evidencing the Cash Collateral Account;
(b) all Subsequent Collateral Investments and all certificates and
instruments, if any, representing or evidencing the Subsequent Collateral
Investments, and any and all security entitlement to the Subsequent Collateral
Investments, and any and all related securities accounts in which any security
entitlement to the Subsequent Collateral Investments is carried, including,
without limitation the Subsequent Collateral Investments Account;
(c) all notes, certificates of deposit, deposit accounts, checks and
other instruments, if any, from time to time hereafter delivered to or otherwise
possessed by the Trustee or its nominees for or on behalf of the Pledgor in
substitution for or in addition to any or all the then existing Subsequent
Collateral;
(d) all interest, dividends, cash, instruments and other property from
time to time received, receivable or otherwise distributed in respect of or in
exchange for any or all of the then existing Subsequent Collateral; and
(e) all proceeds of the foregoing, including, without
limitation, cash proceeds.
-6-
<PAGE>
2.2 Secured Obligations. This Pledge Agreement, in accordance
-------------------
with its terms and the terms of the Indenture, initially secures the due and
punctual payment and performance of the Initial Secured Obligations, and after
the Release Time, secures the due and punctual payment and performance of the
Subsequent Secured Obligations.
SECTION 3. Establishment and Maintenance of Initial Escrow and Pledge
----------------------------------------------------------
Account; Investment and Liquidation of Funds in the Initial
-----------------------------------------------------------
Escrow and Pledge Account.
-------------------------
3.1 Delivery of Initial Collateral. All certificates or
------------------------------
instruments, if any, representing or evidencing the Initial Collateral shall be
held by or on behalf of the Trustee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignments in blank, all in form and substance
reasonably satisfactory to the Trustee. All securities in uncertificated or
book-entry form, if any, representing or evidencing the Initial Collateral shall
be registered in the name of the Trustee or any of its nominees by book-entry or
as otherwise appropriate so as to properly identify the interest of the Trustee
therein. In addition, the Trustee shall have the right, at any time following
the occurrence of an Event of Default, in its discretion to transfer to or to
register in the name of the Trustee or any of its nominees any or all other
Initial Collateral. Except as otherwise provided herein, all Initial Collateral
shall be deposited and held in the Initial Escrow and Pledge Account. The
Trustee shall have the right at any time to exchange certificates or instruments
representing or evidencing all or any portion of the Initial Collateral for
certificates or instruments of smaller or larger denominations in the same
aggregate amount.
3.2 Maintaining the Initial Escrow and Pledge Account.
-------------------------------------------------
(a) The Pledgor shall establish and maintain the Initial
Escrow and Pledge Account with the Trustee in New York, New York, and the
Initial Escrow and Pledge Account shall at all times remain under the exclusive
dominion and control of the Trustee.
(b) It shall be a term and condition of the Initial Escrow
and Pledge Account, notwithstanding any term or condition to the contrary in any
other agreement relating to the Initial Escrow and Pledge Account and except as
otherwise provided by the provisions of Section 4 of this Pledge Agreement, that
no amount (including, without limitation, interest on or other proceeds of the
Initial Escrow and Pledge Account or on any Cash Equivalents held therein) shall
be paid or released to or for the account of, or withdrawn by or for the account
of, the Pledgor or any other person or entity other than the Trustee or its
designated agent from the Initial Escrow and Pledge Account (other than
customary brokerage or similar fees, discounts or commissions payable in
connection with investments of funds pursuant to Section 3.3).
-7-
<PAGE>
3.3 Allowable Investments. Funds held by the Trustee in the
---------------------
Initial Escrow and Pledge Account may, at the written direction of the Pledgor
or an agent appointed by the Pledgor, be invested and reinvested in the
following ("Cash Equivalents"):
----------------
(a) Securities issued or directly and fully guaranteed or insured
by the United States of America or any agency or instrumentality
thereof (provided that the full faith and credit of the United
States of America is pledged in support thereof) in each case
maturing no later than June 15, 1998, (b) time deposits and
certificates of deposit and commercial paper issued by the parent
corporation of any domestic commercial bank of recognized
standing having capital and surplus in excess of $500 million and
commercial paper issued by others rated at least A-2 or at least
the equivalent thereof by Standard & Poor's Corporation or at
least P-2 or the equivalent thereof by Moody's Investor Service,
Inc. and in each case maturing no later than June 15, 1998, (c)
investments in money market funds substantially all of whose
assets comprise securities of the types described in clauses (a)
and (b) above, including funds for which the Trustee, its parent
holding company or any affiliates or subsidiaries of the Trustee
or such holding company provide investment advisory or other
management services, and (d) U.S. dollars.
Investment instructions from the Pledgor may instruct the Trustee to
purchase or sell specific securities to or from specific persons and/or on
specific terms negotiated by the Pledgor or its agent. If the Pledgor or such
agent fails to give written investment instructions to the Trustee by 9:00 a.m.
(New York time) on any Business Day on which there is uninvested cash and/or
maturing Cash Equivalents in the Initial Escrow and Pledge Account, the Trustee
is hereby authorized and directed to invest any such cash or the proceeds of any
maturing Cash Equivalents in Cash Equivalents maturing on the next Business Day.
The Pledgor's or such agent's failure to give such investment instructions shall
not constitute a default or an event of default hereunder. The Trustee may act
as principal or agent in the acquisition or disposition of investments. The
Trustee shall not be responsible for any loss of any investment made in
accordance herewith.
All of the Cash Equivalents in the Initial Escrow and Pledge Account
shall mature on or prior to June 15, 1998; provided, however, that if the
-------- -------
Trustee receives
-8-
<PAGE>
from the Pledgor a certificate substantially in the form of Exhibit A hereto (a
"Preliminary Release Certificate") that: (x) sets forth the date (the
-------------------------------
"Anticipated Merger Date") set for the consummation of the Merger, which shall
-----------------------
not be earlier than five (5) Business Days (unless agreed to by the Trustee)
after receipt by the Trustee of such Preliminary Release Certificate; (y) states
that the Pledgor reasonably believes that the Merger will be consummated on the
specified Anticipated Merger Date; and (z) directs the liquidation of all of the
Cash Equivalents in accordance with Section 4.1, the Trustee shall invest in
Cash Equivalents such that the funds held in the Initial Escrow and Pledge
Account will be available for release no later than 9:00 a.m. (New York time) on
the Anticipated Merger Date.
If the Pledgor determines that the Merger will not occur on or prior
to June 15, 1998 (or such later date specified in the most recent Merger
Extension Notice Certificate), the Pledgor shall deliver to the Trustee a
certificate substantially in the form of Exhibit B hereto (a "Merger Extension
----------------
Notice Certificate") stating that (1) the Merger will be consummated after June
- ------------------
15, 1998 (or such later date specified in the most recent Merger Extension
Notice Certificate), (2) the Merger will not be consummated prior to a
certain date (the "New Anticipated Merger Date") and (3) the Trustee is
---------------------------
authorized to invest the Initial Funds in Cash Equivalents that mature on or
prior to the New Anticipated Merger Date, in which each of the Cash Equivalents
in the Initial Escrow and Pledge Account shall mature on or prior to the New
Anticipated Merger Date.
3.4 Interest. All interest earned on funds invested in Cash
--------
Equivalents shall be held in the Initial Escrow and Pledge Account and
reinvested in accordance with the terms hereof and will be subject to the
security interest granted hereunder to the Trustee.
SECTION 4. Disposition of Initial Collateral Upon Certain Events.
------------------------------------------------------
4.1 Transfer of Funds for the Merger. Upon delivery by the
--------------------------------
Pledgor to the Trustee of a Preliminary Release Certificate stating the Merger
Date (as defined below), the Trustee shall liquidate, within five (5) Business
Days (or such earlier time as the Trustee may agree to) after the Trustee's
receipt of such Preliminary Release Certificate, all of the Cash Equivalents in
the Initial Escrow and Pledge Account. At the Release Time (as defined below),
the Trustee shall purchase in accordance with Section 5.3 hereof for the benefit
of the Holders of the Notes a portfolio of securities initially consisting of
Government Securities in an amount equal to the Subsequent Funds (as such amount
is verified by the report of an independent public accountant in Exhibit K
delivered to the Trustee); and on the Merger Date, upon satisfaction of the
Release Conditions (as defined below), the Trustee shall transfer the funds in
the Initial Escrow and Pledge Account in excess of the Subsequent Funds as
directed by the Pledgor by wire transfer of immediately available funds to such
entity as designated by the Pledgor, and
-9-
<PAGE>
the Trustee hereby agrees to liquidate such amount of Cash Equivalents and to
make such purchase and funds transfer.
4.2 Conditions to Release of Funds. On the date of the
consummation of the Merger (the "Merger Date"), the Pledgor shall deliver to the
-----------
Trustee (x) confirmation in writing of the amounts required to be used to
purchase securities and to be transferred by the Trustee pursuant to the second
sentence of Section 4.1, (y) an opinion of Latham & Watkins, counsel to the
Pledgor, in the form of Exhibit C hereto and addressed to the Trustee and the
Initial Purchasers and (z) a certificate substantially in the form of Exhibit D
hereto (a "Release Certificate") stating that (1) all conditions to the
-------------------
consummation of the Merger have been satisfied or waived, (2) upon consummation
of the Merger and related transactions (a) the Pledgor shall have received the
Equity Contribution of at least $350 million, (b) the Pledgor (on a consolidated
basis) shall have incurred or assumed no greater than $925 million (plus the
amount of any (I) Old Notes which have been properly defeased and (II) Equity
Contribution in excess of $350 million) and no less than $750 million of
Indebtedness under the Credit Facility and the Old Notes, and (c) the Pledgor
(on a consolidated basis) shall not have outstanding more than $25 million of
Indebtedness (other than the Notes, the Credit Facility, the Old Notes and the
Convertible Notes) (the condition in this clause (2) being referred to as the
"Financing Condition") and (3) no Event of Default (as defined in the Indenture)
-------------------
has occurred and is continuing or will occur as a result of the release of funds
contemplated hereby, and instructing the Trustee to release the appropriate
dollar amount of the Initial Collateral in accordance with Section 4.1. The
delivery of the items identified in (x) and (y) above shall be the only
conditions (the "Release Conditions") precedent to the release of funds pursuant
------------------
to Section 4.1.
4.3 Release of Security Interest. If the Release Conditions are
----------------------------
satisfied, the Trustee shall deliver to the Pledgor a release of security
interest, with respect to the funds released pursuant to the Release Certificate
at the time of release of such funds (the "Release Time"), in the form of
------------
Exhibit E hereto, duly executed by the Trustee, and the Trustee shall take all
further actions, if any, that are reasonably deemed necessary by the Pledgor to
terminate the Trustee's security interest in all funds transferred by the
Trustee in accordance with the provisions of Section 4.1 (which shall
automatically be deemed to be free and clear of the Trustee's security interest
provided herein).
4.4 Special Mandatory Redemption. Upon the earlier to occur of
----------------------------
(i) termination of the Merger Agreement or (ii) 150 days after the Issue Date if
the Initial Funds have not been released by that time (provided that the 150-day
period may be extended at the option of the Pledgor by written notice to the
Trustee up to an additional 120 days if the Pledgor delivers to the Trustee a
certificate, substantially in the form of Exhibit F hereto (an "Extension
---------
Certificate") stating that (a) the Pledgor shall have deposited an additional
- -----------
amount (to be reasonably determined by the Initial Purchasers on
-10-
<PAGE>
the same basis as the determination of the Additional Escrow Amount) in the
Initial Escrow and Pledge Account for the benefit of the holders of the Notes,
(b) the basis under which the Merger Agreement is not satisfied on such 150th
day relates to pending FCC or other governmental or regulatory approvals, (c)
the lenders under the Credit Facility shall have extended their commitment to
lend to a date no earlier than the date to which such escrow has been extended,
and (d) the Pledgor shall have issued a press release in a reasonably commercial
manner and notified the Trustee with respect to such extension of the escrow
period (clauses (a)-(d) being referred to herein as the "Extension Condition")),
-------------------
the Pledgor shall deliver a notice to the Trustee that all of the outstanding
Notes will be subject to a Special Mandatory Redemption in accordance with the
terms of the Indenture, and the Trustee shall without any further notice,
direction or authorization: (a) promptly liquidate all of the Cash Equivalents
in the Initial Escrow and Pledge Account to obtain net cash proceeds by no later
than 9:00 a.m. (New York time) on the date that is five (5) Business Days after
such date specified in clause (i) or (ii) above, as applicable, and (b) transfer
such dollar amount to the Paying Agent to be used to redeem Notes in accordance
with Section 3.8 of the Indenture, and the Trustee hereby agrees to liquidate
such investments and to make such funds transfer. Upon such date as all Initial
Funds have been released to the Paying Agent in accordance with this Section 4.4
and upon receipt of a request by the Pledgor, the Trustee shall transfer by wire
transfer of immediately available funds any funds remaining in the Initial
Escrow and Pledge Account to an account designated by the Pledgor. The Trustee
shall not be deemed to have notice of the termination of the Merger Agreement
unless it shall have received written notification thereof from the Pledgor.
SECTION 5. Deposit of Subsequent Funds; Deposit and Investment; Cash
---------------------------------------------------------
Collateral Account; Subsequent Collateral Investments.
-----------------------------------------------------
5.1 Deposit of Subsequent Funds. At the Release Time the Trustee
---------------------------
shall deposit, or cause to be deposited, all Subsequent Funds into the Cash
Collateral Account.
5.2 Maintaining the Cash Collateral Account. So long as any
---------------------------------------
Subsequent Secured Obligation shall remain unpaid:
(a) The Pledgor will maintain the Cash Collateral Account
with Chase Manhattan Bank and Trust Company, National Association; and
(b) It shall be a term and condition of the Cash Collateral
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the Cash Collateral Account, and except as otherwise
provided by the provisions of Section 5.3, Section 6 and Section 14, that no
amount (including interest on or other proceeds of the Subsequent Collateral
Investments) shall be paid or released to or for the account of, or withdrawn by
or for the account of, the Pledgor or any other Person
-11-
<PAGE>
other than the Trustee or its designated agent from the Cash Collateral Account
(other than customary, brokerage or similar fees, discounts or commissions
payable in connection with investments of funds pursuant to Section 5.3);
provided that notwithstanding the foregoing no withdrawals may be made by
- --------
Pledgor under Section 5.3, Section 6 or Section 14.
The Cash Collateral Account shall be subject to such applicable laws,
and such applicable regulations of the Board of Governors of the Federal Reserve
System and of any other appropriate banking or governmental authority, as may
now or hereafter be in effect.
5.3 Investing of Amounts in the Cash Collateral Account.
---------------------------------------------------
(a) As soon as practicable upon deposit of the Subsequent
Funds, the Trustee shall invest all amounts on deposit in the Cash Collateral
Account in such Government Securities, in the name of the Trustee, as the
Pledgor may select in an amount sufficient to pay the First Six Scheduled
Interest Payments. If requested in writing by the Pledgor, the Trustee will,
subject to the provisions of Section 6 and Section 14, from time to time (i)
invest amounts on deposit in the Cash Collateral Account in such Cash
Equivalents in the name of the Trustee as the Pledgor may select and (ii) invest
interest paid on the Cash Equivalents referred to in clause (i) above, and
reinvest other proceeds of any such Cash Equivalents that may mature or be sold,
in each case in such Cash Equivalents in the name of the Trustee, as the Pledgor
may select and the Trustee may approve (the Cash Equivalents referred to in
clauses (i) and (ii) above being collectively "Subsequent Collateral
---------------------
Investments"); provided, however, in providing directions hereunder the Pledgor
- ----------- -------- -------
shall assure that the amount on deposit in the Subsequent Collateral Investments
Account (as defined below) and the Cash Collateral Account, collectively, at any
time during the terms of this Pledge Agreement, are sufficient to provide for
the payment in full of the First Six Scheduled Interest Payments remaining
unpaid at such time on the Notes. Interest and proceeds that are not invested or
reinvested in Subsequent Collateral Investments as provided above shall be
deposited and held in the Cash Collateral Account. The Trustee may act as
principal or agent in the acquisition or disposition of investments. The Trustee
shall not be responsible for any loss of any investment made in accordance
herewith.
(b) At any time while this Pledge Agreement is in force, the
Pledgor may substitute Marketable U.S. Securities for the Government Securities
pledged as Collateral hereunder; provided, however, that the Marketable U.S.
-------- -------
Securities so substituted must have a fair market value (measured at the date of
substitution) as certified to the Trustee, in the opinion of a nationally
recognized firm of independent public accountants selected by the Pledgor in the
form of Exhibit G hereto, at least equal to 125.0% of the amount of any of the
First Six Scheduled Interest Payments that are unpaid (or the pro rata portion
of such interest payments equal to the percentage of such
-12-
<PAGE>
interest payments to be secured by such Marketable U.S. Securities) as of the
date such Marketable U.S. Securities are proposed to be substituted as
Subsequent Collateral hereunder. Concurrently with such substitution, the
Pledgor shall (i) deliver a certificate in the form of Exhibit H hereto
reaffirming the representations and warranties set forth in Section 7 hereof,
(ii) deliver an Opinion of Counsel stating that the Trustee has a perfected lien
in such Marketable U.S. Securities and (iii) deliver the accountants' opinion in
the form of Exhibit G hereto. The Pledgor hereby pledges and the Trustee shall
hold a security interest in, for the benefit of the Holders of the Notes, any
Marketable U.S. Securities received by the Trustee in the accordance with this
Section 5.3(b).
5.4 Delivery of Subsequent Collateral. (a) If and to the extent
---------------------------------
the Subsequent Collateral is represented or evidenced by certificates or
instruments, all such certificates or instruments representing or evidencing the
Subsequent Collateral, including, without limitation, amounts invested as
provided in Section 5.3, shall be delivered to and held by or on behalf of the
Trustee pursuant hereto and shall be in suitable form for transfer by delivery,
or shall be accompanied by duly executed instruments of transfer or assignment
in blank, all in form and substance sufficient to convey a valid security
interest in such Subsequent Collateral to the Trustee or shall be credited to a
securities account (the " Subsequent Collateral Investments Account") designated
-----------------------------------------
by the Trustee. For the better perfection of the Trustee's rights in and to the
Subsequent Collateral, the Pledgor shall forthwith, upon the pledge of any
Subsequent Collateral hereunder, cause all such Subsequent Collateral, including
the Subsequent Collateral Investments Account and all other accounts
representing a security entitlement to or containing any Subsequent Collateral
(including, without limitation, any Subsequent Collateral Investments) to be
registered in the name of the Trustee or such of its nominees as the Trustee
shall direct and the Pledgor shall approve (which approval shall not be
unreasonably withheld), and to be under the sole dominion and control of the
Trustee, which dominion and control shall be agreed to and acknowledged by any
securities intermediary holding any such account in an acknowledgment in the
form of Exhibit I hereto, subject only to the revocable rights specified in
Section 6. In addition, the Trustee shall have the right at any time to exchange
certificates or instruments representing or evidencing the Subsequent Collateral
for certificates or instruments of smaller or larger denominations.
(b) The Trustee shall become the holder or entitlement
holder, as the case may be, of the Subsequent Collateral Investments and of any
and all security entitlements to the Subsequent Collateral Investments, through
action by the Federal Reserve Bank of New York ("FRBNY") or another securities
-----
intermediary, as confirmed (in writing or electronically or otherwise in
accordance with standard industry practice) to the Trustee by FRBNY or such
other securities intermediary (i) indicating by book-entry that the Subsequent
Collateral Investments or a security entitlement thereto has been credited to
the Subsequent Collateral Investments Account, or (ii) acquiring the
-13-
<PAGE>
Subsequent Collateral Investments or a security entitlement thereto for the
Trustee and accepting the same for credit to the Subsequent Collateral
Investments Account.
(c) Prior to the acquisition by the Trustee of Subsequent
Collateral Investments (or acquisition by the Trustee of any security
entitlement thereto), as provided in subsection (a) or (b) of this Section 5.4,
the Trustee shall establish the Subsequent Collateral Investments Account on its
books as an account segregated from all other custodial or collateral accounts
at its office at 55 Water Street, Room 234, North Building, New York, New York
10041. Upon acquisition of the Subsequent Collateral Investments by the Trustee
(or the Trustee's acquisition of a security entitlement thereto), as confirmed
to the Trustee by FRBNY or another securities intermediary), the Trustee shall
make appropriate book entries indicating that the Subsequent Collateral
Investments and/or such security entitlement have been credited to and are held
in the Subsequent Collateral Investments Account. Subject to the other terms and
conditions of this Pledge Agreement, all Subsequent Collateral Investments held
by the Trustee pursuant to this Pledge Agreement shall be held in the Subsequent
Collateral Investments Account subject (except as expressly provided in Section
6 hereof) to the exclusive dominion and control of the Trustee and exclusively
for the benefit of the Trustee and for the ratable benefit of the Holders of the
Notes and segregated from all other funds or other property otherwise held by
the Trustee.
(d) All Subsequent Collateral shall be retained in the Cash
Collateral Account and the Subsequent Collateral Investments Account pending
disbursement pursuant to the terms hereof.
(e) On the Merger Date, the Trustee shall deliver to the
Pledgor and the Initial Purchasers a duly executed certificate, in the form of
Exhibit J hereto, of an officer of the Trustee, confirming the Trustee's
establishment and maintenance of the Cash Collateral Account and the Subsequent
Collateral Investments Account and its receipt and holding of the Subsequent
Funds and the Subsequent Collateral Investments or a security entitlement
thereto and the crediting of the Subsequent Funds and the Subsequent Collateral
Investments or such security entitlement to the Cash Collateral Account and the
Subsequent Collateral Investments Account, all in accordance with this Pledge
Agreement.
(f) On the Merger Date, the Pledgor shall deliver to the
Trustee an opinion of a nationally recognized firm of independent public
accountants, selected by the Pledgor, substantially in the form of Exhibit K
hereto.
-14-
<PAGE>
SECTION 6. Disbursements of Subsequent Collateral. The Trustee shall
--------------------------------------
hold the assets in the Cash Collateral Account and the Subsequent Collateral
Investments Account and release the same, or a portion thereof, only as follows:
(a) At least one Business Day prior to the due date of any of the
First Six Scheduled Interest Payments, the Trustee shall release from the
Cash Collateral Account and/or liquidate Subsequent Collateral in the
Subsequent Collateral Investments Account, and transfer to the Trustee, as
Paying Agent in order to pay to the Holders of the Notes proceeds
sufficient to provide for payment in full of such interest then due on the
Notes; provided that in the event Subsequent Collateral is not required to
be liquidated, the Pledgor will give the Trustee at least three Business
Days notice pursuant to written instructions executed by the Pledgor (an
"Issuer Order") The Trustee will take any action necessary to provide for
the payment of the interest on the Notes to the Holders of the Notes in
accordance with the payment provisions of the Indenture from (and to the
extent of) proceeds of the Subsequent Funds in the Cash Collateral Account
or the Subsequent Collateral Investments Account, as the case may be.
Nothing in this Section 6 shall affect the Trustee's rights to apply the
Subsequent Collateral to the payments of amounts due on the Notes upon
acceleration thereof.
(b) If the Pledgor makes any payment or portion of payment of the
First Six Scheduled Interest Payments from a source of funds other than the
Cash Collateral Account or the Subsequent Collateral Investments Account
("Pledgor Funds"), the Pledgor may, after payment in full of such interest
---------------
payment or portion thereof from proceeds of such Pledgor Funds, direct the
Trustee in writing to release to the Pledgor or to another party at the
direction of the Pledgor (the "Pledgor's Designee") proceeds from the Cash
------------------
Collateral Account or the Subsequent Collateral Investments Account in an
amount less than or equal to the amount of Pledgor Funds applied to such
interest payment. Upon receipt of an Issuer Order by the Trustee, the
Trustee shall pay over to the Pledgor or the Pledgor's Designee, as the
case may be, the requested amount from proceeds in the Cash Collateral
Account or the Subsequent Collateral Investments Account, as the case may
be. Concurrently with any release of funds requested by the Pledgor
pursuant to this Section 6(b), the Pledgor shall deliver to the Trustee a
certificate signed by an officer of the Pledgor stating that such release
has been authorized by the Pledgor and will not contravene any provision of
applicable law or the certificate of incorporation or the by-laws of the
Pledgor or any material agreement or other material instrument binding upon
the Pledgor or any of its subsidiaries or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the Pledgor
or any of its subsidiaries or result in the creation or imposition of any
Lien on any assets of the Pledgor, except for the security interest granted
under the Pledge Agreement.
-15-
<PAGE>
(c) At least one Business Day prior to the due date of any of the
First Six Scheduled Interest Payments, the Pledgor covenants to give the
Trustee (by Issuer Order) notice as to whether payment of interest will be
made pursuant to Section 6(a) or 6(b) and as to the respective amounts of
interest that will be paid pursuant to Section 6(a) or 6(b); provided that,
--------
in the event Subsequent Collateral is not required to be liquidated, the
Pledgor will give the Trustee at least three Business Days notice pursuant
to an Issuer Order. If no such notice is given, the Trustee will act
pursuant to Section 6(a) as if it had received an Issuer Order pursuant to
this paragraph for the payment in full of the interest then due.
(d) The Trustee shall liquidate Subsequent Collateral Investments
pursuant to Section 6(a) in order to make any scheduled payment of interest
or any release hereunder unless instructed to not do so by Issuer Order or
pursuant to Section 16 hereof.
(e) In the event that the Subsequent Collateral held in the Cash
Collateral Account and the Subsequent Collateral Investments Account
exceeds the amount sufficient, in the opinion of a nationally recognized
firm of independent public accountants selected by the Pledgor (an
"Accountants Opinion"), to provide for payment in full of the First Six
Scheduled Interest Payments (or, in the event an interest payment or
payments have been made, an amount sufficient to provide for payment in
full of the First Six Scheduled Interest Payments remaining unpaid at such
time, the Trustee shall release to the Pledgor at the Pledgor's and upon
receipt of an Accountant's Opinion request any such excess Subsequent
Collateral.
(f) Upon the release of any Subsequent Collateral from the Cash
Collateral Account or the Subsequent Collateral Investments Account, in
accordance with the terms of this Pledge Agreement, the security interest
evidenced by this Pledge Agreement in such released Subsequent Collateral
will automatically terminate and be of no further force and effect.
(g) Nothing contained in Section 5, this Section 6 or any other
provision of this Pledge Agreement shall (i) afford the Pledgor any right
to issue entitlement orders with respect to any security entitlement to the
Subsequent Collateral Investments or any securities account in which any
such security entitlement may be carried, or otherwise afford the Pledgor
control of any such security entitlement or (ii) otherwise give rise to any
rights of the Pledgor with respect to the Subsequent Collateral
Investments, any security entitlement thereto or any securities account in
which any such security entitlement may be carried, other than the
Pledgor's rights under this Pledge Agreement as the beneficial owner of
collateral pledged to and subject to the exclusive dominion and control
(except as expressly provided in this Section 6) of the Trustee in its
capacity as such (and not
-16-
<PAGE>
as a securities intermediary). The Pledgor acknowledges, confirms and
agrees that the Trustee holds a security entitlement to the Subsequent
Collateral Investments solely as trustee for the Holders of the Notes and
not as a securities intermediary.
SECTION 7. Representations and Warranties. The Pledgor hereby
------------------------------
represents and warrants, as of the date hereof, that:
(a) The execution and delivery by the Pledgor of, and the performance
by the Pledgor of its obligations under, this Pledge Agreement have been
duly authorized by all necessary corporate action and will not contravene
or constitute a default under any provision of applicable law or the
certificate of incorporation or the by-laws of the Pledgor or any material
agreement or other material instrument binding upon the Pledgor or any of
its subsidiaries or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition of any Lien on any
assets of the Pledgor, except for the security interests granted under this
Pledge Agreement; no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required (i) for the
performance by the Pledgor of its obligations under this Pledge Agreement,
(ii) for the pledge by the Pledgor of the Initial Collateral and the
Subsequent Collateral pursuant to this Pledge Agreement or (iii) except for
any such consents, approvals, authorizations or orders required to be
obtained by the Trustee (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by the Trustee of the
rights provided for in this Pledge Agreement or the remedies in respect of
the Initial Collateral and the Subsequent Collateral pursuant to this
Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Initial Collateral and
will be the beneficial owner of the Subsequent Collateral, free and clear
of any Lien or claims of any person or entity (except for the security
interests granted under this Pledge Agreement). No financing statement
covering the Pledgor's interest in the Initial Collateral is on file in any
public office other than any Financing Statements filed pursuant to this
Pledge Agreement and no Financing Statement covering the Pledgor's interest
in the Subsequent Collateral will be on file in any public office other
than any Financing Statement filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly executed
and delivered by the Pledgor and (assuming the due authorization and valid
execution and delivery of this Pledge Agreement by the Trustee and
enforceability of the Pledge Agreement against the Trustee in accordance
with its terms) constitutes a valid and binding agreement of the Pledgor,
enforceable against the Pledgor in accordance with its terms, except as (i)
the enforceability hereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, preference,
-17-
<PAGE>
reorganization, moratorium or similar laws now or hereafter in effect
relating to or affecting creditors' rights or remedies generally, (ii) the
availability of equitable remedies may be limited by equitable principles
of general applicability and the discretion of the court before which any
proceeding therefor may be brought, (iii) the exculpation provisions and
rights to indemnification hereunder may be limited by U.S. federal and
state securities laws and public policy considerations and (iv) the waiver
of rights and defenses contained in Section 14(b), Section 17.11 and
Section 17.15 hereof may be limited by applicable law.
(d) Upon the delivery to the Trustee of the certificates or
instruments, if any, representing or evidencing the Initial Collateral, and
the transfer and pledge to the Trustee of the Initial Collateral or the
acquisition by the Trustee of a security entitlement thereto, in accordance
with Section 2, the pledge of and grant of a security interest in the
Initial Collateral securing the payment of the Initial Secured Obligations
for the benefit of the Trustee and the Holders of the Notes will constitute
a first priority perfected security interest in such Initial Collateral
(except, with respect to proceeds, only to the extent permitted by Section
9-306 of the UCC), enforceable as such against all creditors of the Pledgor
and any persons purporting to purchase any of the Initial Collateral from
the Pledgor, except in each case as enforcement may be affected by general
equitable principles (whether considered in a proceeding in equity or at
law) and other than as permitted by the Indenture.
(e) Upon the delivery to the Trustee of the certificates or
instruments, if any, representing or evidencing the Subsequent Collateral,
and the transfer and pledge to the Trustee of the Subsequent Collateral and
the acquisition by the Trustee of a security entitlement thereto, in
accordance with Section 5.4(a), the pledge of and grant of a security
interest in the Subsequent Collateral securing the payment of the
Subsequent Secured Obligations for the benefit of the Trustee and the
Holders of the Notes will constitute a first priority perfected security
interest in such Subsequent Collateral (except, with respect to proceeds,
only to the extent permitted by Section 9-306 of the UCC), enforceable as
such against all creditors of the Pledgor and any persons purporting to
purchase any of the Subsequent Collateral from the Pledgor, except in each
case as enforcement may be affected by general equitable principles
(whether considered in a proceeding in equity or at law) and other than as
permitted by the Indenture.
(f) There are no legal or governmental proceedings pending or, to the
best of the Pledgor's knowledge, threatened to which the Pledgor or any of
its subsidiaries is a party or to which any of the properties of the
Pledgor or any of its subsidiaries is subject that would materially
adversely affect the power or ability of the Pledgor to perform its
obligations under this Pledge Agreement or to consummate the transactions
contemplated hereby.
-18-
<PAGE>
(g) The pledge of the Initial Collateral and the Subsequent Collateral
pursuant to this Pledge Agreement is not prohibited by law or governmental
regulation (including, without limitation, Regulations T, U and X of the
Board of Governors of the Federal Reserve System) applicable to the
Pledgor.
(h) No Event of Default (as defined herein) exists.
SECTION 8. Further Assurances. The Pledgor will, promptly upon
------------------
request by the Trustee (which request the Trustee may submit in its discretion
or at the direction of the Holders of a majority in principal amount of the
Notes then outstanding), execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, deliver any instruments to the Trustee and take
any other actions that are necessary or desirable to perfect, continue the
perfection of, or protect the first priority of the Trustee's security interest
in and to the Initial Collateral and the Subsequent Collateral, to protect the
Initial Collateral and the Subsequent Collateral against the rights, claims, or
interests of third persons (other than any such rights, claims or interests
created by or arising through the Trustee), or to enable the Trustee to exercise
and enforce its rights and remedies hereunder with respect to any Collateral or
to otherwise effect the purposes of this Pledge Agreement. The Pledgor also
agrees, whether or not requested by the Trustee, to take all actions that are
necessary to perfect or continue the perfection of, or to protect the first
priority of, the Trustee's security interest in and to the Initial Collateral
and the Subsequent Collateral, and to protect the Initial Collateral and the
Subsequent Collateral against the rights, claims or interests of third persons
(other than any such rights, claims or interests created by or arising through
the Trustee).
SECTION 9. Covenants. The Pledgor covenants and agrees with the
---------
Trustee and the Holders of the Notes that from and after the date of this Pledge
Agreement until the payment in full in cash of the Secured Obligations:
(a) that (i) it will not (and will not purport to) sell, assign or
otherwise dispose of, or grant any option or warrant with respect to, any
of the Initial Collateral or the Subsequent Collateral or (ii) it will not
create or permit to exist any Lien upon or with respect to any of the
Initial Collateral or the Subsequent Collateral (except for the security
interests granted under this Pledge Agreement and any Lien created by or
arising through the Trustee) and at all times will be the sole beneficial
owner of the Initial Collateral and the Subsequent Collateral; or
(b) that it will not (i) enter into any agreement or understanding
that restricts or inhibits or purports to restrict or inhibit the Trustee's
rights or remedies hereunder, including, without limitation, the Trustee's
right to sell or otherwise dispose of the Initial Collateral or the
Subsequent Collateral or (ii) fail to pay or discharge any tax, assessment
or levy of any nature with respect to the Initial
-19-
<PAGE>
Collateral or the Subsequent Collateral not later than five days prior to
the date of any proposed sale under any judgment, writ or warrant of
attachment with respect to the Initial Collateral or the Subsequent
Collateral.
SECTION 10. Power of Attorney. The Pledgor hereby irrevocably
-----------------
appoints the Trustee as the Pledgor's attorney-in-fact, coupled with an
interest, with full authority in the place and stead of the Pledgor and in the
name of the Pledgor or otherwise, from time to time in the Trustee's discretion
to take any action and to execute any instrument which the Trustee may deem
necessary or advisable to accomplish the purposes of this Pledge Agreement,
including, without limitation, to receive, endorse and collect all instruments
made payable to the Pledgor representing any interest payment, dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same, and the expenses of the Trustee incurred in connection
therewith shall be payable by the Pledgor. This power of attorney is coupled
with an interest and is irrevocable by the Pledgor.
In addition to all of the powers granted to the Trustee pursuant to
the Indenture, the Pledgor hereby appoints and constitutes the Trustee to
exercise to the fullest extent permitted by law all of the following powers upon
and at any time after the occurrence and during the continuance of an Event of
Default: (a) collection of proceeds of any Initial Collateral or Subsequent
Collateral; (b) conveyance of any item of Initial Collateral or Subsequent
Collateral to any purchaser thereof; (c) giving of any notices or recording of
any Liens under Section 8 hereof; and (d) paying or discharging taxes or Liens
levied or placed upon the Initial Collateral or the Subsequent Collateral, the
legality or validity thereof and the amounts necessary to discharge the same to
be determined by the Trustee in its sole reasonable discretion, and such
payments made by the Trustee to become part of the Initial Secured Obligations
or the Subsequent Secured Obligations of the Pledgor to the Trustee, due and
payable immediately upon demand.
The Trustee's authority under this Section 10 shall include, without
limitation, the authority to endorse and negotiate any checks or instruments
representing proceeds of the Initial Collateral and the Subsequent Collateral in
the name of the Pledgor, execute and give receipt for any certificate of
ownership or any document constituting Initial Collateral or Subsequent
Collateral, transfer title to any item of Initial Collateral or Subsequent
Collateral, sign the Pledgor's name on all financing statements (to the extent
permitted by applicable law) or any other documents deemed necessary or
appropriate by the Trustee to preserve, protect or perfect the security interest
in the Initial Collateral or the Subsequent Collateral and to file the same,
prepare, file and sign the Pledgor's name on any notice of Lien, and to take any
other actions arising from or incident to the powers granted to the Trustee in
this Pledge Agreement.
SECTION 11. Trustee May Perform. Without limiting the authority
-------------------
granted under Section 10 and except with respect to the failure of the Pledgor
to deliver
-20-
<PAGE>
investment instructions (which shall be governed by the other terms of this
Pledge Agreement), if the Pledgor fails to perform any agreement contained
herein, the Trustee may, but shall not be obligated to, itself perform, or cause
performance of, such agreement, and the expenses of the Trustee incurred in
connection therewith shall be payable by the Pledgor.
SECTION 12. No Assumption of Duties; Reasonable Care. The rights and
----------------------------------------
powers granted to the Trustee hereunder are being granted in order to preserve
and protect the security interest of the Trustee and the Holders of the Notes in
and to the Initial Collateral and the Subsequent Collateral granted hereby and
shall not be interpreted to, and shall not impose any duties on the Trustee in
connection therewith other than those expressly provided herein or imposed under
applicable law. Except as provided by applicable law or by the Indenture, the
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of the Initial Collateral and the Subsequent Collateral in its
possession if the Initial Collateral and the Subsequent Collateral is accorded
treatment substantially equal to that which the Trustee accords similar property
held by the Trustee for similar accounts, it being understood that the Trustee
in its capacity as such shall not have any responsibility for (a) ascertaining
or taking action with respect to calls, conversions, exchanges, maturities or
other matters relative to any Initial Collateral or Subsequent Collateral,
whether or not the Trustee has or is deemed to have knowledge of such matters,
(b) taking any necessary steps to preserve rights against any parties with
respect to any Initial Collateral or Subsequent Collateral, (c) investing or
reinvesting any of the Initial Collateral or the Subsequent Collateral or (d)
the validity, sufficiency or priority of the Initial Collateral or Subsequent
Collateral or the perfection or the maintenance of the perfection of any
security interest granted hereby, provided, however, that nothing contained in
this Pledge Agreement shall relieve the Trustee of any responsibilities as a
securities intermediary under applicable law. In no event shall the Trustee have
any liability to the Pledgor or any other person for investing the funds from
time to time in the Initial Escrow and Pledge Account, the Cash Collateral
Account or the Subsequent Collateral Investments Account in accordance with the
provisions of this Pledge Agreement, regardless of whether greater income or a
higher yield could have been obtained had the Trustee invested such funds in
different investments, or for any loss associated with the sale or liquidation
of such investments in accordance with the terms of this Pledge Agreement. The
rights and limits of liability afforded to the Trustee under the Indenture shall
apply to its role hereunder as if fully stated herein.
SECTION 13. Indemnity. The Pledgor shall indemnify, hold harmless
---------
and defend the Trustee and its directors, officers, agents and employees, from
and against any and all claims, actions, obligations, liabilities and expenses,
including reasonable defense costs, reasonable investigative fees and costs, and
reasonable legal fees and damages arising from the Trustee's performance as
Trustee under this Pledge Agreement, except to the extent that such claim,
action, obligation, liability or expense is directly attributable to
-21-
<PAGE>
the bad faith, gross negligence or willful misconduct of such indemnified
person. The provisions of this Section 13 shall survive termination of this
Pledge Agreement and the registration and removal of the Trustee.
SECTION 14. Remedies upon Event of Default. If any Event of Default
------------------------------
under the Indenture or default hereunder (any such Event of Default or default
being referred to in this Pledge Agreement as an "Event of Default") shall have
----------------
occurred and be continuing:
(a) The Trustee may, without notice to the Pledgor except as required
by law and at any time or from time to time, liquidate all Cash Equivalents
and transfer all funds in the Initial Escrow and Pledge Account to the
Paying Agent to apply such funds in accordance with Section 3.8 of the
Indenture.
(b) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Initial
Collateral and the Subsequent Collateral of a secured party under the UCC.
In addition, with respect to any Initial Collateral or Subsequent
Collateral that shall then be in or shall thereafter come into the
possession or custody of the Trustee, the Trustee may and, at the direction
of the Holders of a majority in principal amount of the Notes then
outstanding, shall appoint a broker or other expert to sell or cause the
same to be sold at any broker's board or at public or private sale, in one
or more sales or lots, at such price or prices such broker or other expert
may deem best, for cash or on credit or for future delivery, without
assumption of any credit risk. The purchaser of any or all of the Initial
Collateral or Subsequent Collateral so sold shall thereafter hold the same
absolutely, free from any claim, encumbrance or right of any kind
whatsoever created by or through the Pledgor. The Trustee will give the
Pledgor reasonable notice of the time and place of any public sale thereof,
or of the time after which any private sale or other intended disposition
is to be made. Any sale of the Initial Collateral or the Subsequent
Collateral conducted in conformity with reasonable commercial practices of
banks, insurance companies, commercial finance companies, or other
financial institutions disposing of property similar to the Initial
Collateral and the Subsequent Collateral shall be deemed to be commercially
reasonable. Any requirements of reasonable notice shall be met if such
notice is mailed to the Pledgor as provided in Section 17.1 hereof at least
ten (10) days before the time of the sale or disposition. The Trustee or
any Holder of Notes may, in its own name or in the name of a designee or
nominee, buy any of the Initial Collateral or the Subsequent Collateral at
any public sale and, if permitted by applicable law, at any private sale.
All expenses (including court costs and reasonable attorneys' fees,
expenses and disbursements) of, or incident to, the enforcement of any of
the provisions hereof shall be
-22-
<PAGE>
recoverable from the proceeds of the sale or other disposition of the
Initial Collateral or the Subsequent Collateral.
(c) The Pledgor further agrees to use its reasonable best efforts to
do or cause to be done all such other acts as may be necessary to make such
sale or sales of all or any portion of the Initial Collateral or the
Subsequent Collateral pursuant to this Section 14 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgor further agrees that a breach of any of the covenants contained in
this Section 14 will cause irreparable injury to the Trustee and the
Holders of the Notes, that the Trustee and the Holders of the Notes have no
adequate remedy at law in respect of such breach and, as a consequence,
that each and every covenant contained in this Section 14 shall be
specifically enforceable against the Pledgor, and the Pledgor hereby waives
and agrees not to assert any defenses against an action for specific
performance of such covenants except for a defense that no Event of Default
has occurred.
SECTION 15. Expenses. The Pledgor will upon demand pay to the
--------
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Initial Collateral or the Subsequent
Collateral, (c) the exercise or enforcement of any of the rights of the Trustee
and the Holders of the Notes hereunder or (d) the failure by the Pledgor to
perform or observe any of the provisions hereof.
SECTION 16. Security Interest Absolute. All rights of the Trustee
--------------------------
and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or any
other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Initial Secured Obligations or the
Subsequent Secured Obligations, or any other amendment or waiver of or any
consent to any departure from the Indenture;
(c) any exchange, surrender, release or non-perfection of any Liens on
any other collateral for all or any of the Initial Secured Obligations or
the Subsequent Secured Obligations; or
(d) to the extent permitted by applicable law, any other circumstance
which might otherwise constitute a defense available to, or a discharge of,
the
-23-
<PAGE>
Pledgor in respect of the Initial Secured Obligations or the Subsequent
Secured Obligations or of this Pledge Agreement.
SECTION 17. Miscellaneous Provisions.
------------------------
17.1 Notices. Any notice or communication shall be sufficiently
-------
given if in writing and delivered in person or mailed by first class mail,
commercial courier service or telecopier c ommunication, addressed as follows:
if to the Pledgor:
-----------------
American Cellular Corporation
1336 Basswood Street
Suite F
Schaumburg, Illinois 60173
Attention: Chief Financial Officer
with a copy to:
--------------
Latham & Watkins
505 Montgomery Street
Suite 1900
San Francisco, CA 94111-2562
Attention: Greg Miller, Esq.
if to the Trustee:
-----------------
Chase Manhattan Bank and Trust Company, National Association
101 California Street
Suite 2725
San Francisco, CA 94111
Attention: Corporate Trust Department
Telephone: (415) 954-9506
Fax: (415) 693-8850
with a copy to:
--------------
Lillick & Charles LLP
2 Embarcadaro Center
Suite 2700
San Francisco, California 94111
Attention: Varya Simpson
Telephone: (415) 984-8361
Fax: (415) 984-8300
-24-
<PAGE>
17.2 No Adverse Interpretation of Other Agreements. This Pledge
---------------------------------------------
Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Pledge
Agreement.
17.3 Severability. The provisions of this Pledge Agreement are
------------
severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provisions, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
17.4 Headings. The headings in this Pledge Agreement have been
--------
inserted for convenience of reference only, are not to be considered a part
thereof and shall in no way modify or restrict any of the terms or provisions
hereof.
17.5 Counterpart Originals. This Pledge Agreement may be signed
---------------------
in two or more counterparts, each of which shall be deemed an original, but all
of which shall together constitute one and the same agreement.
17.6 Benefits of Pledge Agreement. Nothing in this Pledge
----------------------------
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
17.7 Amendments, Waivers and Consents. Any amendment or waiver
--------------------------------
of any provision of this Pledge Agreement and any consent to any departure by
the Pledgor from any provision of this Pledge Agreement shall be effective only
if made or duly given in compliance with all of the terms and provisions of the
Indenture, and neither the Trustee nor any Holder of Notes shall be deemed, by
any act, delay, indulgence, omission or otherwise, to have waived any right or
remedy hereunder or to have acquiesced in any Default or Event of Default or in
any breach of any of the terms and conditions hereof. Failure of the Trustee or
any Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of the Notes of any right or remedy hereunder on any one occasion
shall not be construed as a bar to any right or remedy that the Trustee or such
Holder of Notes would otherwise have on any future occasion. The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.
17.8 Interpretation of Agreement. To the extent a term or
---------------------------
provision of this Pledge Agreement conflicts with the Indenture, the Indenture
shall control with respect to the subject matter of such term or provision.
Acceptance of or
-25-
<PAGE>
acquiescence in a course of performance rendered under this Pledge Agreement
shall not be relevant to determine the meaning of this Pledge Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
17.9 Continuing Security Interest; Termination. (a) This Pledge
-----------------------------------------
Agreement shall create a continuing security interest in and to the Initial
Collateral and the Subsequent Collateral and shall, unless otherwise provided in
the Indenture or in this Pledge Agreement, remain in full force and effect until
the payment in full in cash of the Initial Secured Obligations and the
Subsequent Secured Obligations. This Pledge Agreement shall be binding upon the
Pledgor, its transferees, successors and assigns, and shall inure, together with
the rights and remedies of the Trustee hereunder, to the benefit of the Trustee,
the Holders of the Notes and their respective successors, transferees and
assigns.
(b) This Pledge Agreement shall terminate upon the payment in
full in cash of the Subsequent Secured Obligations or the consummation of a
Special Mandatory Redemption. At such time, the Trustee shall, pursuant to an
Issuer Order, reassign and redeliver to the Pledgor all of the Subsequent
Collateral hereunder that has not been sold, disposed of, retained or applied by
the Trustee in accordance with the terms of this Pledge Agreement and the
Indenture. Such reassignment and redelivery shall be without warranty by or
recourse to the Trustee in its capacity as such, except as to the absence of any
Liens on the Subsequent Collateral created by or arising through the Trustee,
and shall be at the reasonable expense of the Pledgor.
17.10 Survival Provisions. All representations, warranties and
-------------------
covenants of the Pledgor contained herein shall survive the execution and
delivery of this Pledge Agreement, and shall terminate only upon the termination
of this Pledge Agreement. The obligations of the Pledgor under Sections 13 and
15 hereof shall survive the termination of this Pledge Agreement.
17.11 Waivers. The Pledgor waives presentment and demand for
-------
payment of any of the Initial Secured Obligations or the Subsequent Secured
Obligations, protest and notice of dishonor or default with respect to any of
the Initial Secured Obligations or the Subsequent Secured Obligations, and all
other notices to which the Pledgor might otherwise be entitled, except as
otherwise expressly provided herein or in the Indenture.
17.12 Authority of the Trustee. (a) The Trustee shall have and
------------------------
be entitled to exercise all powers hereunder that are specifically granted to
the Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Initial Collateral or the Subsequent Collateral by or though
agents or employees and shall be entitled to retain
-26-
<PAGE>
counsel and to act in reliance upon the advice of counsel concerning all such
matters. Except as otherwise expressly provided in this Pledge Agreement or the
Indenture, neither the Trustee nor any director, officer, employee, attorney or
agent of the Trustee shall be liable to the Pledgor for any action taken or
omitted to be taken by the Trustee, in its capacity as Trustee, hereunder,
except for its own bad faith, gross negligence or willful misconduct , and the
Trustee shall not be responsible for the validity, effectiveness, sufficiency or
priority hereof or of any document or security furnished pursuant hereto. The
Trustee and its directors, officers, employees, attorneys and agents shall be
entitled to rely on any communication, instrument or document believed by it or
them to be genuine and correct and to have been signed or sent by the proper
person or persons. The Trustee shall have no duty to cause any financing
statement or continuation statement to be filed in respect of the Initial
Collateral or the Subsequent Collateral.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken by the
Trustee or the exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Pledge Agreement shall, as between the Trustee and the
Holders of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Trustee and the Pledgor, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so to
act or refrain from acting, and the Pledgor shall not be obligated or entitled
to make any inquiry respecting such authority.
17.13 Final Expression. This Pledge Agreement, together with
----------------
the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Pledge Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
17.14 Rights of Holders of the Notes. No Holder of Notes shall
------------------------------
have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 6.8 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
- --------
Trustee under the Notes or the Indenture.
17.15 Governing Law; Submission to Jurisdiction; Waiver of Jury
---------------------------------------------------------
Trial; Waiver of Damages.
------------------------
(a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT
OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN
-27-
<PAGE>
CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. NOTWITHSTANDING
THE FOREGOING: THE MATTERS IDENTIFIED IN 31 C.F.R. (S)(S) 357.10 AND 357.11 (AS
IN EFFECT ON THE DATE OF THIS AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS
SPECIFIED THEREIN.
(b) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES
NOR (EXCEPT AS OTHERWISE PROVIDE IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE
TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, THAT SUCH
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH
HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
(c) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER
OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED
AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR
TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY
OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR
DOCUMENT BETWEEN THE PLDEGOR ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS
OF THE NOTES ON THE OTHER HAND.
17.16 Consequential Damages. In no event shall the Trustee
---------------------
hereunder be liable for special, indirect or consequential loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Trustee
has been advised of the likelihood of such loss or damage and regardless of the
form of action.
-28-
<PAGE>
17.17 Wire Transfers. (a) The Trustee is authorized to seek
--------------
confirmation of fund transfer instructions by telephone call-back to the person
or persons designated on Exhibit L hereto, and the Trustee may rely upon the
confirmations of any one purporting to be the person or persons so designated.
The persons and telephone numbers for call-backs may be changed only in a
writing actually received and acknowledged by the Trustee. The parties to this
Pledge Agreement acknowledge that such security procedure is commercially
reasonable.
(b) It is understood that the Trustee and the beneficiary's bank in
any funds transfer may rely solely upon any account numbers or similar
identifying number provided by either of the other parties hereto to identify
(i) the beneficiary, (ii) the beneficiary's bank, or (iii) an order it executes
using any such identifying number, even where its use may result in a person
other than the beneficiary being paid, or the transfer of funds to a bank other
than the beneficiary's bank or an intermediary bank designated.
-29-
<PAGE>
IN WITNESS WHEREOF, the Pledgor and the Trustee have each caused this
Pledge Agreement to be duly executed and delivered as of the date first above
written.
Pledgor:
AMERICAN CELLULR CORPORATION
By: /s/ Mark Pelson
--------------------------------
Name: Mark Pelson
Title: Vice President
Trustee:
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By: /s/ Hans H. Helley
--------------------------------
Name: Hans H. Helley
Title: Assistant Vice President
<PAGE>
EXHIBIT A
---------
[Form of Preliminary Release Certificate]
AMERICAN CELLULAR CORPORATION
Date:
The undersigned officer of American Cellular Corporation, a Delaware
corporation (the "Pledgor"), hereby certifies to the Trustee, pursuant to
Section 3.3 of the Pledge and Escrow Agreement dated as of May 13, 1998 (the
"Pledge Agreement") between the Pledgor and Chase Manhattan Bank and Trust
Company, National Association, as trustee (the "Trustee") under the Indenture
dated as of May 13, 1998 (the "Indenture") between the Pledgor and the Trustee,
as follows:
The consummation of the Merger (as defined in the Indenture) and related
transactions including the financing thereof is scheduled to occur on _________,
1998 (the "Anticipated Merger Date").
The Pledgor reasonably believes that the Merger will be consummated on the
Anticipated Merger Date.
The Pledgor hereby requests and directs the Trustee to liquidate all of the
Cash Equivalents (as defined in the Pledge Agreement) by no later than 9:00 a.m.
(New York time) on the Anticipated Merger Date.
By: ____________________________________
Name:
Title:
A-1
<PAGE>
EXHIBIT B
---------
[Form of Merger Extension Notice Certificate]
AMERICAN CELLULAR CORPORATION
Date:
The undersigned officer of American Cellular Corporation, a Delaware
corporation (the "Pledgor"), hereby certifies to the Trustee, pursuant to
Section 3.3 of the Pledge and Escrow Agreement dated as of May 13, 1998 (the
"Pledge Agreement") between the Pledgor and Chase Manhattan Bank and Trust
Company, National Association as trustee (the "Trustee") under the Indenture
dated as of May 13, 1998 (the "Indenture") between the Pledgor and the Trustee,
as follows:
1. The Merger will be consummated after June 15, 1998.
2. The Pledgor believes that the Merger will not be consummated prior to
____________.
The Pledgor hereby authorizes the Trustee to invest the Initial Funds in
Cash Equivalents (as defined in the Pledge Agreement) that mature on or prior to
________________.
By: _____________________________
Name:
Title:
B-1
<PAGE>
EXHIBIT C
---------
[Form of Latham & Watkins Opinion]
The consummation of the Merger and the assumption by PriCellular of the
Notes and the obligations under the Registration Rights Agreement and the Pledge
Agreement and the entering into by PriCellular of the Credit Facility will not
result in the violation by the Company, PriCellular, Wireless (or any other
entity which is the borrower under the Credit Facility of their respective
Certificates of Incorporation or bylaws or any federal or New York statute or
the Delaware GCL, rule or regulation or any judgment, order, writ or decree of
any United States federal, New York or Delaware court or governmental
instrumentality or do not and will not conflict with or result in the breach or
default, whether with or without the passage of time or both, including any
repayment event, under any of the material agreements identified on Schedule A
hereto or any other material agreements entered into after the Pledge Agreement
and known to us on the date of delivery of the opinion; and, no consent,
approval, license, authorization or order of, or filing with, any federal, New
York or Delaware court or governmental agency or body is required for the
consummation of the Merger and the assumption by PriCellular of the Notes and
the obligations under the Registration Rights Agreement and the Pledge Agreement
and the entering into by PriCellular of the Credit Facility.
Such opinion may be subject to the same exceptions and assumptions as
contained in the opinion delivered to the Lenders under the Credit Facility with
respect to similar matters and acceptable to the Trustee.
C-1
<PAGE>
Schedule A
----------
Material Agreements
-------------------
1. Contribution Agreement by and among Texas/Illinois Cellular Limited
Partnership, a Delaware limited partnership, Southwestern Bell Mobile
Systems, Inc., a Delaware and Virginia corporation, the Pledgor, Cellular
Information Systems of Laredo, Inc., a Texas corporation, dated as of April
10, 1995.
2. Asset Acquisition Agreement dated as of October 15, 1996 among PriCellular,
Cellular Information Systems of Florence, Inc. and Horizon Cellular
Telephone Company of Central Kentucky, L.P.
3. Indenture to 14% Senior Subordinated Discount Notes due 2001 among
PriCellular, PriCellular Wireless Corporation and Bank of Montreal Trust
Company, as trustee.
4. Indenture of 12 1/4% Senior Subordinated Notes due 2003 among PriCellular,
Wireless and Bank of Montreal Trust Company, trustee.
5. Indenture to 10 3/4% Senior Subordinated Convertible Discount Notes due 2004
between PriCellular and Bank of Montreal Trust Company, as trustee.
6. Indenture to 10 3/4% Senior Notes due 2004 between Wireless and Bank of
Montreal Trust Company, as trustee.
7. Stockholders' Agreement, dated as of April 28, 1995, by and among
PriCellular and the parties named therein
8. Voting Agreement, dated as of December 28, 1995 by and among PriCellular and
the parties named therein
9. Operating Agreement dated as of April 28, 1994 by and between PriCellular
and McCaw.
10. Warrant Agreement between PriCellular and Price Communications Corporation
11. Employment Agreement dated as of December 28, 1995 by and between
PriCellular and Robert Price
12. Agreement and Plan of Merger dated as of March 6, 1998 between PriCellular
and the Pledgor.
13. Voting Agreement dated as of March 6, 1998, among the Pledgor, PriCellular
and shareholders of the Pledgor.
14. Spectrum Letter, dated March 6, 1998.
15. Consent and Waiver dated as of March 6, 1998 between PriCellular and AT&T
Wireless Services, Inc.
C-2
<PAGE>
16. Stock Purchase Agreement dated as of March 5, 1998 among the Pledgor and the
parties listed on Exhibit A to such agreement.
17. Stockholders Agreement dated as of March 5, 1998 by and among the Pledgor
and the parties listed on Exhibit A to such agreement.
18. Registration Rights Agreement dated as of March 5, 1998 by and among the
Pledgor and each of the parties listed on Exhibit A to such agreement.
19. Asset Purchase Agreement dated as of October 31, 1997 by and among
PriCellular, Kyle Cellular Corporation and Tennessee 04 Partners, L.P.
C-3
<PAGE>
EXHIBIT D
---------
[Form of Release Certificate]
AMERICAN CELLULAR CORPORATION
Date:
The undersigned officer of American Cellular Corporation, a Delaware
corporation (the "Pledgor"), hereby certifies, pursuant to Section 4.2 of the
Pledge and Escrow Agreement dated as of May 13, 1998 (the "Pledge Agreement")
between the Pledgor and Chase Manhattan Bank and Trust Company, National
Association as trustee (the "Trustee") under the Indenture dated as of May 13,
1998 (the "Indenture") between the Pledgor and the Trustee, as follows:
1. All of the conditions to the consummation of the Merger (as defined in
the Indenture) have been satisfied or waived as of the date hereof.
2. The Merger will be consummated on the date hereof and (a) the Pledgor
shall have received the Equity Contribution of at least $350 million, (b) the
Pledgor (on a consolidated basis) shall have incurred or assumed, after giving
effect to the Merger, no greater than $925 million (plus the amount of any (I)
Old Notes which have been properly defeased and (II) Equity Contribution in
excess of $350 million) and no less than $750 million of Indebtedness under the
Credit Facility and the Old Notes and (c) the Pledgor (on a consolidated basis)
shall not have outstanding more than $25 million of Indebtedness (other than the
Notes, the Credit Facility, the Old Notes and the Convertible Notes), after
giving effect to the Merger.
3. No Event of Default (as defined in the Indenture) has occurred and is
continuing or will occur as a result of the release of funds contemplated
hereby.
Unless otherwise indicated, capitalized terms used herein without
definition shall have the meanings specified in the Pledge Agreement.
The Pledgor hereby requests the Trustee to release $__________, which
amount is the funds in excess of the Subsequent Funds held by it in the Initial
Escrow and Pledge Account at Chase Manhattan Bank and Trust Company, National
Association and to terminate and release its pledge and assignment of, and
security interest in, the Initial Collateral under the Pledge Agreement (but not
the Subsequent Collateral) in accordance with Section 4.3 thereof. As soon as
practicable, such funds should be deposited in immediately available funds in
the following account or accounts at [Insert Bank] in the amounts indicated.
By: ______________________________
Name:
Title:
D-1
<PAGE>
EXHIBIT E
---------
[Form of Release of Security Interest]
[To be typed on Trustee's letterhead]
Date:
VIA FACSIMILE AND FEDERAL EXPRESS
American Cellular Corporation
1336 Basswood Street
Suite F
Schaumburg, Illinois 60173
Attention: [ ]
Re: Release of Security Interest
Ladies and Gentlemen:
Reference is hereby made to that certain Pledge and Escrow Agreement dated
as of May 13, 1998 by and among American Cellular Corporation and Chase
Manhattan Bank and Trust Company, National Association, as Trustee (as amended,
supplemented or modified from time to time in accordance with the terms thereof,
the "Pledge Agreement").
By its signature below, the Trustee hereby terminates and releases its
pledge and assignment of, and security interest in, all of the Initial
Collateral under the Pledge Agreement (but not the Subsequent Collateral), which
amount has been delivered to you on your order on the date hereof.
This release may be executed in one or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
Very truly yours,
Chase Manhattan Bank and Trust Company,
National Association
as Trustee
By: ______________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT F
---------
[Form Of Extension Certificate]
AMERICAN CELLULAR CORPORATION
Date:
The undersigned officer of American Cellular Corporation, a Delaware
corporation (the "Pledgor"), hereby certifies to the Trustee, pursuant to
Section 3.4 of the Pledge and Escrow Agreement dated as of May 13, 1998 (the
"Pledge Agreement") between the Pledgor and Chase Manhattan Bank and Trust
Company, National Association, as trustee (the "Trustee") under the Indenture
dated as of May 13, 1998 (the "Indenture") between the Pledgor and the Trustee,
as follows:
1. The Pledgor has deposited $_________ in the Initial Escrow and
Pledge Account for the benefit of the holders of the Notes.
2. The basis under which the Merger Agreement has not been satisfied
as of the date hereof relates to pending FCC or other governmental or regulatory
approvals.
3. The lenders under the Credit Facility have extended their
commitment to lend to [no earlier than the Extension Date].
4. The Pledgor has issued a press release in a reasonably commercial
manner and notified the Trustee with respect to the extension of the escrow
period.
By: _______________________________
Name:
Title:
F-1
<PAGE>
EXHIBIT G
---------
[Letterhead]
[ ], 1998
Independent Public Accountants' Report
on Sufficiency of Marketable U.S. Securities
To [ ]:
We understand that $285,000,000 American Cellular Corporation 10 1/2% Senior
Notes due 2008 (the "Notes") were issued on May 13, 1998. We also understand
-----
the Trustee currently holds the Government Securities listed on the attached
schedule (the "Government Securities") pursuant to Section 5.4 of the Pledge and
---------------------
Escrow Agreement, dated May 13, 1998 (the "Pledge Agreement"). We also
----------------
understand that at any time while the Pledge Agreement is in force, the Pledgor
may substitute Marketable U.S. Securities (the "Marketable U.S. Securities") for
--------------------------
the Government Securities pledged as Subsequent Collateral pursuant to Section
5.3(b) of the Pledge Agreement.
We have been requested to verify the mathematical correctness of the
computations shown on the attached schedule that the Marketable U.S. Securities
substituted for the Government Securities pledged as Subsequent Collateral
pursuant to the Pledge Agreement have a fair market value (measured at the date
of substitution) at least equal to 125.0% of the amount of any of the first six
scheduled interest payments on the Notes that are unpaid (or the pro rata
portion of such interest payments equal to the percentage of such interest
payments to be secured by such Marketable U.S. Securities) as of the date such
Marketable U.S. Securities are proposed to be substituted as Subsequent
Collateral pursuant to Section 5.3(b) of the Pledge Agreement.
We have performed the procedures enumerated below, which were agreed to by
American Cellular Corporation (the "Issuer") solely to assist you with respect
------
to verifying the mathematical correctness of the above mentioned computations.
This engagement to apply agreed-upon procedures was performed in accordance with
standards established by the American Institute of Certified Public Accountants.
The sufficiency of the procedures is solely the responsibility of the specified
users of the report. Consequently, we make no representation regarding the
sufficiency of the procedures described below either for the purpose for which
this report has been requested or for any other purpose.
G-1
<PAGE>
1. We have verified the computations of the amount of any of the first six
scheduled interest payments on the Notes that are unpaid (or the pro rata
portion of such interest payments equal to the percentage of such interest
payments to be secured by such Marketable U.S. Securities) as of the date
such Marketable U.S. Securities are proposed to be substituted as
Subsequent Collateral.
2. We have verified the fair market value of the Marketable U.S. Securities to
be substituted as Subsequent Collateral.
3. We have recomputed the computation of the fair market value (measured at
the date of substitution) of the Marketable U.S. Securities, which are
proposed to be substituted as Subsequent Collateral, and the fair market
value is at least equal to 125.0% of the amount of any of the first six
scheduled interest payments on the Notes that are unpaid (or the pro rata
portion of such interest payments equal to the percentage of such interest
payments to be secured by such Marketable U.S. Securities) as of the date
such Marketable U.S. Securities are proposed to be substituted as
Subsequent Collateral.
In performing the above calculations, we have relied solely on the data set
forth in the attached schedule, furnished by Merrill Lynch & Co. The scope of
our engagement did not include the verification of any underlying data,
assumptions or definitions necessary to derive the financial calculations, which
include, but are not limited to, the following:
1. The principal amounts, coupon rates, and the related maturity for the
Securities and the Notes.
2. Interest start dates, delivery dates and first interest payment dates for
the Securities and the Notes.
Our engagement was limited to the procedures enumerated above. Accordingly, we
express no opinion or any form of assurance relating to the occurrence of future
events or to the attainability of the assumptions.
The data presented in the accompanying attached schedule indicate that the
Securities will be sufficient upon receipt of scheduled interest and principal
payments on such Securities to provide for payment in full of the first six
scheduled interest payments due on all of the Notes.
G-2
<PAGE>
This letter is solely for the information of, and assistance to, Chase Manhattan
Bank and Trust Company, National Association, as Trustee under the Pledge
Agreement, and, without our prior consent, is not to be used, circulated, quoted
or otherwise referred to for any other purpose.
By: _____________________________
Name:
Title:
G-3
<PAGE>
EXHIBIT H
---------
[Form of Representations and Warranties Bring-down Certificate]
AMERICAN CELLULAR CORPORATION
The undersigned officer of American Cellular Corporation, a Delaware
corporation (the "Pledgor"), hereby certifies to the Trustee, pursuant to
Section 5.3(b) of the Pledge and Escrow Agreement dated as of May 13, 1998 (the
"Pledge Agreement") between the Pledgor and Chase Manhattan Bank and Trust
Company, National Association, as trustee (the "Trustee") under the Indenture
dated as of May 13, 1998 (the "Indenture") between the Pledgor and the Trustee,
as follows:
The representations and warranties of the Pledgor set forth in Section
7 of the Pledge Agreement are true and correct as of the day hereof.
By: ____________________________
Name:
Title:
H-1
<PAGE>
EXHIBIT I
---------
[Form of Subsequent Collateral Investments Account Letter]
[ ], 1998
Chase Manhattan Bank and Trust Company,
National Association
101 California Street
Suite 2725
San Francisco, California 94111
American Cellular Corporation
-----------------------------
Dear Sir or Madam:
Reference is made to Subsequent Collateral Investments Account No. [
] into which certain securities, instruments and other properties are deposited
from time to time (the "Subsequent Collateral Investments Account") maintained
-----------------------------------------
by you (the "Trustee"). Pursuant to the Pledge and Escrow Agreement, dated May
-------
13, 1998 (the "Pledge Agreement"), American Cellular Corporation (the
----------------
"Pledgor"), has granted to the Trustee for the holders of Notes referred to in
-------
the Indenture dated as of May 13, 1998 (the "Indenture"), between the Trustee
---------
and the Pledgor, a security interest in certain property of the Pledgor,
including, among other things, the following (the "Subsequent Collateral
---------------------
Investments"): (a) the Subsequent Collateral Investments Account, (b) all
- -----------
certificates and instruments, if any, representing or evidencing the Subsequent
Collateral Investments, (c) any and all securities entitlements to the
Subsequent Collateral Investments, (d) any and all related securities accounts
in which security entitlements to the Subsequent Collateral Investments are
carried, (e) all notes, certificates of deposit, deposit accounts, checks and
other instruments from time to time hereafter delivered to or otherwise
possessed by the Trustee for or on behalf of the Pledgor in substitution for or
in addition to any or all the then existing Subsequent Collateral Investments,
(f) all interest, dividends, cash, instruments and other property from time to
time received, receivable or otherwise distributed in respect of or in exchange
for any or all of the then existing Subsequent Collateral Investments, and (g)
all proceeds of any and all of the foregoing Subsequent Collateral (including,
without limitation, proceeds that constitute property of the types described in
clauses (a) - (f) of this paragraph) and, to the extent not otherwise included,
all cash. It is a condition to the continued maintenance of the Subsequent
Collateral Investments Account with you that you agree to this letter agreement.
By signing this letter agreement, you acknowledge notice of, and
consent to the terms and provisions of, the Pledge Agreement, a copy of which is
attached hereto,
I-1
<PAGE>
and confirm to the Trustee that the description of the Subsequent Collateral
Investments Account set forth on Schedule 1 hereof is correct and that you have
received no notice of any other pledge or assignment of the Subsequent
Collateral Investments Account. Further, you hereby agree with the Trustee that:
(a) Notwithstanding anything to the contrary in any other agreement
relating to the Subsequent Collateral Investments Account, the Subsequent
Collateral Investments Account is and will be subject to the terms and
conditions of the Pledge Agreement, will be maintained solely for the
benefit of the Trustee, will be entitled "AMERICAN CELLULAR Subsequent
Collateral Investments Account" and will be subject to written instructions
only from an officer of the Trustee. You hereby agree to comply with all
instructions (including, without limitation, any instructions to liquidate
all or less than all the Subsequent Collateral Investments and transfer the
proceeds thereof to the Trustee), originated by the Trustee relating to the
Subsequent Collateral Investments Account without further consent from any
other person (including, without limitation, the Pledgor), and not to
comply with any instructions originated by any person other than the
Trustee.
(b) You will maintain a record of all securities, instruments, checks
and other remittance items received in the Subsequent Collateral
Investments Account and, in addition to providing the Trustee and the
Pledgor with a report describing the contents on the Subsequent Collateral
Investments Account on a regular basis (or upon Trustee's or Pledgor's
request), furnish to the Trustee a monthly statement of the Subsequent
Collateral Investments Account to be transmitted electronically to the
Trustee at (415) 643-8850, Attention: Hank Helley.
(c) You will transfer, in same day funds, as soon as practicable upon
receipt, all amounts collected from the Collateral Investments Account on
such day to the following account (the "Cash Collateral Account"):
-----------------------
American Cellular Corporation
Account No. [ ]
[ ]
[ ]
[ ]
Attention: [ ]
(d) All transfers referred to in paragraph (c) above shall be made by
you irrespective of, and without deduction for, any counterclaim,
defense, recoupment or set-off and shall be final, and you will not
seek to recover from the Trustee for any reason any such payment once
made.
I-2
<PAGE>
(e) All service charges and fees with respect to the Subsequent
Collateral Investments Account shall be payable by the Pledgor.
(f) The Trustee shall be entitled to exercise any and all rights of
the Pledgor in respect of the Subsequent Collateral Investments Account in
accordance with the terms of the Pledge Agreement, and the undersigned
shall comply in all respects with such exercise.
This letter agreement shall be binding upon you and your successors
and assigns and shall inure to the benefit of the Trustee, the holders of the
Notes and their successors, transferees and assigns. You may terminate this
letter agreement only upon thirty days' prior written notice to the Pledgor and
the Trustee. Upon such termination you shall close the Subsequent Collateral
Investments Account and transfer all funds in the Subsequent Collateral
Investments Account to the Cash Collateral Account. After any such termination,
you shall nonetheless remain obligated promptly to transfer to the Cash
Collateral Account all securities, instruments, funds and other property
received in respect of the Subsequent Collateral Investments Account.
I-3
<PAGE>
This letter agreement shall be governed by and construed in accordance
with the laws of the State of New York without regard to choice-of-law
principles.
Very truly yours,
AMERICAN CELLULAR CORPORATION
By: ______________________________
Name:
Title:
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By: ______________________________
Name:
Title:
Acknowledged and agreed to as of
the date first above written:
[ ]
By: __________________________
Name:
Title:
I-4
<PAGE>
EXHIBIT J
---------
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
OFFICER'S CERTIFICATE
Pursuant to the Pledge and Escrow Agreement (the "Pledge Agreement")
----------------
dated as of May 13, 1998 by and between American Cellular Corporation (the
"Pledgor") and Chase Manhattan Bank and Trust Company, National Association as
- --------
trustee (the "Trustee") for the holders of the Pledgor's 10 1/2% Senior Notes
-------
Due 2008, the undersigned officer of the Trustee, on behalf of the Trustee,
makes the following certifications to the Pledgor and the Initial Purchasers.
Capitalized terms used and not defined in this Officer's Certificate have the
meanings set forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and delivery of
this Officer's Certificate, the Trustee has established with The Chase Manhattan
Bank a cash collateral account (the "Cash Collateral Account") and, as
-----------------------
securities intermediary, a securities account in the name of "AMERICAN CELLULAR
Subsequent Collateral Investments Account" (the "Subsequent Collateral
---------------------
Investments Account") with respect to which the Trustee is the entitlement
- -------------------
holder and through which the Trustee has acquired a security entitlement to
certain Cash Equivalents (the "Subsequent Collateral Investments"), and has made
---------------------------------
appropriate book entries in its records establishing that the Subsequent Funds
and the Subsequent Collateral Investments and the Trustee's securities
entitlement thereto have been credited to and are held in the Cash Collateral
Account or the Subsequent Collateral Investments Account, as the case may be.
2. The Trustee has established and maintained and will maintain the
Cash Collateral Account and the Subsequent Collateral Investments Account and
all securities entitlements and other positions carried in the Cash Collateral
Account or the Subsequent Collateral Investments Account solely in its capacity
as Trustee and has not asserted and will not assert any claim to or interest in
the Cash Collateral Account or the Subsequent Collateral Investments Account or
any such securities entitlements or other positions except in such capacity.
3. The Trustee has acquired its security entitlement to the
Subsequent Collateral Investments directly through a "securities account" (as
defined in Section 8-501(a) of the UCC) maintained by The Chase Manhattan Bank
for the benefit of Chase Manhattan Bank and Trust Company, National Association
at the Federal Reserve Bank of New York, as securities intermediary, for value
and without notice of any adverse claim thereto. Without limiting the generality
of the foregoing, the Cash Collateral Account and the Subsequent Collateral
Investments are not and the Trustee's security entitlement to the Subsequent
Collateral Investments is not, to the Trustee's knowledge, subject to any Lien
granted by or to arising through or in favor of any securities
J-1
<PAGE>
intermediary (including, without limitation, The Chase Manhattan Bank or the
Federal Reserve Bank of New York) through which the Trustee derives its security
entitlement to the Subsequent Collateral Investments.
4. The Trustee has not caused or permitted the Cash Collateral
Account or the Subsequent Collateral Investments or its security entitlement
hereto to become subject to any Lien created by or arising through the Trustee.
IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of Chase Manhattan Bank and Trust Company,
National Association as Trustee this [ ] day of [ ], 1998.
CHASE MANHATTAN BANK AND
TRUST COMPANY, NATIONAL ASSOCIATION
By: _______________________________
Name:
Title:
J-2
<PAGE>
EXHIBIT K
---------
[Letterhead]
[ ], 1998
Independent Public Accountants' Report
on Applying Agreed-Upon Procedures
To [ ]:
We understand that $285,000,000 American Cellular Corporation 10 1/2% Senior
Notes due 2008 (the "Notes") were issued on May 13, 1998. We also understand
-----
the Trustee will hold the Securities listed on the attached schedule (the
"Securities") pursuant to Section 5.4 of the Pledge and Escrow Agreement, dated
- -----------
May 13, 1998 (the "Pledge Agreement").
----------------
We have been requested to verify the mathematical correctness of the
computations shown on the attached schedule that the Securities will be
sufficient upon receipt of scheduled interest and principal payments on such
securities to provide for payment in full of the first six scheduled interest
payments due on all of the Notes.
We have performed the procedures enumerated below, which were agreed to by
American Cellular Corporation (the "Issuer") solely to assist you with respect
------
to verifying the mathematical correctness of the above mentioned computations.
This engagement to apply agreed-upon procedures was performed in accordance with
standards established by the American Institute of Certified Public Accountants.
The sufficiency of the procedures is solely the responsibility of the specified
users of the report. Consequently, we make no representation regarding the
sufficiency of the procedures described below either for the purpose for which
this report has been requested or for any other purpose.
1. We have verified the computations of the payments in full of the first six
scheduled interest payments on all of the Notes, as shown on the attached
schedule.
2. We have verified the computations of the cash flow shown on the attached
schedule.
3. We recomputed the computations of the payments of interest on the Notes and
the amount of the payments of maturing principal and interest to be
received from the
K-1
<PAGE>
Securities to meet the first six scheduled interest payments on all of the
Notes all as set forth in the attached schedule, and found them to be
mathematically correct.
In performing the above calculations, we have relied solely on the data set
forth in the attached schedule, furnished by Merrill Lynch & Co.. The scope of
our engagement did not include the verification of any underlying data,
assumptions or definitions necessary to derive the financial calculations, which
include, but are not limited to, the following:
1. The principal amounts, coupon rates, and the related maturity for the
Securities and the Notes.
2. Interest start dates, delivery dates and first interest payment dates for
the Securities and the Notes.
Our engagement was limited to the procedures enumerated above. Accordingly, we
express no opinion or any form of assurance relating to the occurrence of future
events or to the attainability of the assumptions.
The data presented in the accompanying attached schedule indicate that the
Securities will be sufficient upon receipt of scheduled interest and principal
payments on such Securities to provide for payment in full of the first six
scheduled interest payments due on all of the Notes.
This letter is solely for the information of, and assistance to, Chase Manhattan
Bank and Trust Company, National Association, as Trustee under the Pledge
Agreement, and, without our prior consent, is not to be used, circulated, quoted
or otherwise referred to for any other purpose.
By: _________________________
Name:
Title:
K-2
<PAGE>
EXHIBIT L
Telephone Number(s) for Call-Backs and
Person(s) Designated to Confirm Funds Transfer Instructions
-----------------------------------------------------------
<TABLE>
<CAPTION>
If to Pledgor:
Name Telephone Number
- ---- ----------------
<S> <C>
1. John Fujii (847) 843-9081
2. Brian McTernan (847) 843-9081
</TABLE>
L-1
<PAGE>
EXHIBIT 12.1
STATEMENT RE: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
(In thousands) (In thousands)
1998 1997 1997 1996 1995 1994 1993
------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest $18,822 $14,696 $ 67,392 $ 47,076 $22,953 $ 2,236 $ 458
Interest portion of
rent expense 342 337 1,139 793 292 47 32
------- ------- -------- -------- ------- ------- -------
Fixed Charges $19,164 $15,033 $ 68,531 $ 47,869 $23,245 $ 2,283 $ 490
======= ======= ======== ======== ======= ======= =======
Consolidated pretax
loss from continuing
operations $(7,329) $ 390 $(13,631) $(23,043) $(7,711) $(1,440) $10,641
Fixed charges per above
19,164 15,033 68,531 47,869 23,245 2,283 490
------- ------- -------- -------- ------- ------- -------
Earnings $11,835 $15,423 $ 54,900 $ 24,826 $15,534 $ 843 $11,131
======= ======= ======== ======== ======= ======= =======
Ratio of Earnings to
Fixed Charges 1.0 22.7
======= =======
</TABLE>
_________________
(1) The ratio of earnings to fixed charges is not meaningful for periods that
result in a deficit. For the three months ended March 31, 1998 and the
years ended December 31, 1997, 1996, 1995, and 1994 the deficit of earnings
to fixed charges was $7,329, $13,631, $23,043, and $7,711, and $1,440
respectively.
<PAGE>
Exhibit 21.1
Subsidiaries of American Cellular Corporation
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Name of Subsidiary State of Organization
- ----------------------------------------------------------------------------
<S> <C>
American Cellular Wireless LLC Delaware
ConnectOne Communications Corporation Delaware
PCPCS Corporation Delaware
ICSB Corporation Delaware
Alton CellTelCo Cellular Corporation Delaware
Alton CellTelCo Partnership Illinois
Alexandra Cellular Corporation Delaware
Amro Cellular Corporation Delaware
Bunyon Cellular Corporation Delaware
Cellular Information Systems of Laredo, Inc. Texas
Central KY Cell Corp. Alabama
Chill Cellular Cooperation Delaware
Chippewa Cellular Corporation Delaware
Dutchess County Cellular Telephone Company Delaware
Duluth/Superior Cellular, Inc. Minnesota
Eastern Wireless Cellular Corporation Delaware
Five Cellular Corporation Delaware
Four Cellular Corporation Delaware
Gilro Cellular Corporation Delaware
Jessica Cellular Corporation Delaware
Kyle Cellular Corporation Delaware
Marathon Cellular Corporation Delaware
Minnesota Six Cellular Corporation Louisiana
Northland Cellular Corporation Delaware
One Cellular Corporation Wisconsin
Pebbles Cellular Corporation Delaware
Seven Cellular Corporation Delaware
Three Cellular Corporation Delaware
Vilas Cellular Corporation Wisconsin
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
Name of Subsidiary State of Organization
- ----------------------------------------------------------------------------
<S> <C>
Wausau Cellular License Corporation Delaware
Wausau Cellular Limited Partnership Delaware
</TABLE>
<PAGE>
NON-WHOLLY OWNED SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary Economic Interest
- ---------- -----------------
<S> <C>
Alton CelTelCo Partnership 87.0%
Chill Cellular Corporation 99.4%
Dutchess County Cellular Telephone Company 95.5%
Wausau Cellular Limited Partnership 95.1%
Wausau Cellular License Corporation 95.1%
Texas/Illinois Cellular Limited Partnership 44.5%
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" and
"Summary Historical and Pro Forma Financial Information" in the Registration
Statement (Form S-4) and related Prospectus of American Cellular Corporation
for the registration of its $285,000,000 10 1/2% Senior Notes due 2008 and to
the inclusion therein of our report dated January 22, 1998 (except for the
third paragraph of Note 13 as to which the date is March 10, 1998) with
respect to the consolidated financial statements and schedules of PriCellular
Corporation.
ERNST & YOUNG LLP
New York, New York
July 31, 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Experts" in the
Registration Statement (Form S-4) and related Prospectus of American Cellular
Corporation for the registration of its $285,000,000 10 1/2% Senior Notes due
2008 and to the inclusion therein of our report dated July 28, 1998, with
respect to the financial statements of American Cellular Corporation.
ERNST & YOUNG LLP
New York, New York
July 31, 1998
<PAGE>
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________
FORM T-1
Statement of Eligibility and Qualification Under
the
Trust Indenture Act of 1939 of a Corporation
Designated to Act as Trustee
_______________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)____
_________________________
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
(Exact name of trustee as specified in its
charter)
95-4655078
(I.R.S. Employer Identification No.)
101 California Street, Suite #2725
San Francisco, California
(Address of principal executive offices)
94111
(Zip Code)
__________________
American Cellular Corporation
(Exact name of Obligor as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
94-3295327
(I.R.S. Employer Identification No.)
1336 Basswood Street, Suite F
Schaumburg, Illinois
(Address of principal executive offices)
60173
(Zip Code)
________________________________
10 1/2% Series B Senior Note due 5/15/2008
(Title of Indenture securities)
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which it
is subject.
Comptroller of the Currency, Washington, D.C.
Board of Governors of the Federal Reserve System, Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the Obligor is an affiliate of the trustee, describe each such
affiliation.
None.
ITEM 16. LIST OF EXHIBITS.
List below all exhibits filed as part of this statement of eligibility.
Exhibit 1. Articles of Association of the Trustee as Now in Effect (see
Exhibit 1 to Form T-1 filed in connection with Registration
Statement No. 333-41329, which is incorporated by reference).
Exhibit 2. Certificate of Authority of the Trustee to Commence Business
(see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 333-41329, which is incorporated by reference).
Exhibit 3. Authorization of the Trustee to Exercise Corporate Trust Powers
(contained in Exhibit 2).
Exhibit 4. Existing By-Laws of the Trustee (see Exhibit 4 to Form T-1 filed
in connection with Registration Statement No. 333-41329, which is
incorporated by reference).
Exhibit 5. Not Applicable
Exhibit 6. The consent of the Trustee required by Section 321 (b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration
Statement No. 333-41329, which is incorporated by reference).
Exhibit 7. A copy of the latest report of condition of the Trustee,
published pursuant to law or the requirements of its supervising
or examining authority.
Exhibit 8. Not Applicable
Exhibit 9. Not Applicable
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chase Manhattan Bank and Trust Company, National Association, has duly
caused this statement of eligibility and qualification to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of San
Francisco, and State of California, on the 4th day of August, 1998.
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION
By /s/ Hans H. Helley
------------------------
Hans H. Helley
Assistant Vice President
<PAGE>
EXHIBIT 7. Report of Condition of the Trustee.
================================================================================
CONSOLIDATED REPORT OF CONDITION OF Chase Manhattan Bank and Trust Company, N.A.
--------------------------------------------
(Legal Title)
LOCATED AT 1800 Century Park East, Ste. 400 Los Angeles, CA 94111
---------------------------------------------------------------------
(Street) (City) (State) (Zip)
AS OF CLOSE OF BUSINESS ON March 31, 1998
--------------
===============================================================================
===============================================================================
ASSETS DOLLAR AMOUNTs IN THOUSANDS
1. Cash and balances due from
a. Noninterest-bearing balances and currency and coin (1,2) 2,654
b. Interest bearing balances (3) 0
2. Securities
a. Held-to-maturity securities (from Schedule RC-B, column A) 0
b. Available-for-sale securities (from Schedule RC-B, column D) 1,061
3. Federal Funds sold (4) and securities purchased agreements to resell 73,370
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C) 132
b. LESS: Allowance for loan and lease losses 0
c. LESS: Allocated transfer risk reserve 0
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) 132
5. Trading assets 0
6. Premises and fixed assets (including capitalized leases) 171
7. Other real estate owned (from Schedule RC-M) 0
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) 0
9. Customers liability to this bank on acceptances outstanding 0
10. Intangible assets (from Schedule RC-M) 1,648
11. Other assets (from Schedule RC-F) 2,139
12a. TOTAL ASSETS 81,175
b. Losses deferred pursuant to 12 U.S.C. 1823 (j) 0
c. Total assets and losses deferred pursuant to 12 U.S.C. 1823 (j)
(sum of items 12.a and 12.b) 81,175
(1) includes cash items in process of collection and unposted debits.
(2) The amount reported in this item must be greater than or equal to the sum of
Schedule RC-M, items 3.a and 3.b
(3) includes time certificates of deposit not held for trading.
(4) Report "term federal funds sold" in Schedule RC, item 4.a "Loans and leases,
net of unearned income" and in Schedule RC-C, part 1.
4
<PAGE>
LIABILITIES
13. Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E) 51,348
(1) Noninterest-bearing 13,251
(2) Interest-bearing 38,097
b. In foreign offices, Edge and Agreement subsidiaries,
and IBF'
(1) Noninterest-bearing
(2) Interest-bearing
14. Federal funds purchased (2) and securities sold under agreements to
repurchase 0
15. a. Demand notes issued to the U.S. Treasury 0
b. Trading liabilities 0
16. Other borrowed money (includes mortgage indebtedness and obligations
under capitalized leases):
a. With a remaining maturity of one year or less 0
b. With a remaining maturity of more than one year through
three years 0
c. With a remaining maturity of more than three years 0
17. Not applicable
18. Bank's liability on acceptances executed and outstanding 0
19. Subordinated notes and Debentures (3) 0
20. Other liabilities (from Schedule RC-G) 5,118
21. Total liabilities (sum of items 13 through 20) 56,466
22. Not applicable
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus 0
24. Common stock-- 600
25. Surplus (exclude all surplus related to preferred stock) 12,590
26. a. Undivided profits and capital reserves 11,519
b. Net unrealized holding gains (losses) on available-for-sale
securities 0
27. Cumulative foreign currency translation adjustments
28. a. Total equity capital (sum of items 23 through 27) 24,709
b. Losses deferred pursuant to 12 U.S.C. 1823 (j) 0
c. Total equity capital and losses deferred pursuant to 12
U.S.C. 1823 (j) (sum of items 28.a and 28.b) 24,709
29. Total liabilities, equity capital, and losses deferred
pursuant to 12 U.S.C. 1823 (j) (sum of items 21 and 28.c) 81,175
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 1-MO
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> FEB-26-1998
<PERIOD-END> MAR-31-1998
<CASH> 25,233,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,233,000
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 25,233,000
<CURRENT-LIABILITIES> 213,000
<BONDS> 0
0
0
<COMMON> 3,000
<OTHER-SE> 25,017,000
<TOTAL-LIABILITY-AND-EQUITY> 25,020,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 33,000
<INCOME-TAX> 13,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,000
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
10 1/2% SENIOR NOTES DUE 2008
FOR ALL OUTSTANDING
10 1/2% SENIOR NOTES DUE 2008
OF
AMERICAN CELLULAR CORPORATION
PURSUANT TO THE PROSPECTUS DATED ,1998
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1998,
UNLESS EXTENDED (THE "EXPIRATION DATE").
- --------------------------------------------------------------------------------
To:
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION,
THE EXCHANGE AGENT
<TABLE>
<S> <C>
By Registered or Certified Mail: By Hand Delivery:
Chase Manhattan Bank and Trust Company, Chase Manhattan Bank and Trust Company,
National Association National Association
c/o Chase Manhattan Bank c/o Chase Manhattan Bank
55 Water Street, Second Floor, Room 234 55 Water Street, Second Floor, Room 234
New York, New York 10041 New York, New York 10041
Attention: Carlos Esteves Attention: Carlos Esteves
By Overnight Delivery: By Facsimile:
</TABLE>
Chase Manhattan Bank and Trust (212) 638-7380
Company,
National Association
c/o Chase Manhattan Bank Confirm by Telephone:
55 Water Street, Second Floor, Room
234 (212) 638-0828
New York, New York 10041
Attention: Carlos Esteves
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORT H
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS
ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS
LETTER OF TRANSMITTAL IS COMPLETED.
The undersigned acknowledges receipt of the Prospectus dated , 1998
(the "Prospectus"), of American Cellular Corporation, a Delaware corporation
(the "Company"), and this Letter of Transmittal (the "Letter of Transmittal"),
which together with the Prospectus constitutes the Company's offer (the
"Exchange Offer") to exchange $1,000 principal amount of its 10 1/2% Senior
Notes due 2008 (the "Exchange Notes") for each $1,000 principal amount of its
outstanding 10 1/2% Senior Notes due 2008 (the "Private Notes"). Recipients of
the Prospectus should read the requirements described in such Prospectus with
respect to eligibility to participate in the Exchange Offer. Capitalized terms
used but not defined herein have the meaning given to them in the Prospectus.
<PAGE>
The undersigned hereby tenders the Private Notes described in the box
entitled "Description of Private Notes" below pursuant to the terms and
conditions described in the Prospectus and this Letter of Transmittal. The
undersigned is the registered owner of all the Private Notes and the
undersigned represents that it has received from each beneficial owner of
Private Notes ("Beneficial Owners") a duly completed and executed form of
"Instruction to Registered Holder from Beneficial Owner" accompanying this
Letter of Transmittal, instructing the undersigned to take the action
described in this Letter of Transmittal.
This Letter of Transmittal is to be used by a holder of Private Notes (i) if
certificates representing Private Notes are to be forwarded herewith, (ii) if
delivery of Private Notes is to be made by book-entry transfer to the Exchange
Agent's account at The Depository Trust Company ("DTC"), pursuant to the
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Procedures for Tendering," or (iii) if a tender is made pursuant to the
guaranteed delivery procedures in the section of the Prospectus entitled "The
Exchange Offer--Guaranteed Delivery Procedures."
The undersigned hereby represents and warrants that the information received
from the beneficial owners is accurately reflected in the boxes entitled
"Beneficial Owner(s)--Purchaser Status" and "Beneficial Owner(s)--Residence."
Any beneficial owner whose Private Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact such registered holder of Private Notes promptly and
instruct such registered holder of Private Notes to tender on behalf of the
beneficial owner. If such beneficial owner wishes to tender on its own behalf,
such beneficial owner must, prior to completing and executing this Letter of
Transmittal and delivering its Private Notes, either make appropriate
arrangements to register ownership of the private Notes in such beneficial
owner's name or obtain a properly completed bond power from the registered
holder of Private Notes. The transfer of record ownership may take
considerable time.
In order to properly complete this Letter of Transmittal, a holder of
Private Notes must (i) complete the box entitled "Description of Private
Notes," (ii) complete the boxes entitled "Beneficial Owner(s)--Purchaser
Status" and "Beneficial Owner(s)--Residence," (iii) if appropriate, check and
complete the boxes relating to book-entry transfer, guaranteed delivery,
Special Issuance Instructions and Special Delivery Instructions, (v) sign the
Letter of Transmittal by completing the box entitled "Sign Here" and (v)
complete the Substitute Form W-9. Each holder of Private Notes should
carefully read the detailed instructions below prior to completing the Letter
of Transmittal.
Holders of Private Notes who desire to tender their Private Notes for
exchange and (i) whose Private Notes are not immediately available or (ii) who
cannot deliver their Private Notes, this Letter of Transmittal and all other
documents required hereby to the Exchange Agent on or prior to the Expiration
Date, must tender the Private Notes pursuant to the guaranteed delivery
procedures set forth in the section of the Prospectus entitled "The Exchange
Offer--Guaranteed Delivery Procedures." See Instruction 2.
Holders of Private Notes who wish to tender their Private Notes for exchange
must complete columns (1) through (3) in the box below entitled "Description
of Private Notes," complete the boxes entitled and sign the box below entitled
"Sign Here." If only those columns are completed, such holder of Private Notes
will have tendered for exchange all Private Notes listed in column (3) below.
If the holder of Private Notes wishes to tender for exchange less than all of
such Private Notes, column (4) must be completed in full. In such case, such
holder of Private Notes should refer to Instruction 5.
2
<PAGE>
DESCRIPTION OF PRIVATE NOTES
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) PRIVATE NOTE TENDERED FOR
OF PRIVATE NOTE(S), EXACTLY AS NAME(S) APPEAR(S) NUMBER(S) AGGREGATE EXCHANGE (MUST BE
ON (ATTACH SIGNED PRINCIPAL AMOUNT IN INTEGRAL
PRIVATE NOTE CERTIFICATE(S) LIST REPRESENTED BY MULTIPLES OF
(PLEASE FILL IN, IF BLANK) IF NECESSARY) CERTIFICATE(S)(1) $1,000)(2)
</TABLE>
- -------------------------------------------------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
---------------------------------------
- -------------------------------------------------------------------------------
1. Unless indicated in the column "Principal Amount Tendered for Exchange,"
any tendering Holder of 10% Senior Notes due 2008 will be deemed to have
tendered the entire aggregate principal amount represented by the column
labeled "Aggregate Principal Amount Represented by Certificate(s)."
2. The minimum permitted tender is $1,000 in principal amount of 10 1/2%
Senior Notes due 2008. All other tenders must be in integral multiples
of $1,000.
[_] CHECK HERE IF TENDERED PRIVATE NOTES ARE ENCLOSED HEREWITH.
[_] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND
COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS (AS HEREINAFTER
DEFINED) ONLY:
Name of Tendering Institution: ________________________________________________
Account Number: _______________________________________________________________
Transaction Code Number: ______________________________________________________
[_] CHECK HERE IF TENDERED PRIVATE NOTES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY ENCLOSED HEREWITH AND COMPLETE THE FOLLOWING
(FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
Name of Registered Holder of Private Note(s): _________________________________
Date of Execution of Notice of Guaranteed Delivery: ___________________________
Window Ticket Number (if available): __________________________________________
Name of Institution which Guaranteed Delivery: ________________________________
Account Number (if delivered by book-entry transfer): _________________________
[_] CHECK HERE IF YOU ARE A BROKER DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Name: _________________________________________________________________________
Address: ______________________________________________________________________
-----------------------------------------------------------------------
3
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 6, 7 AND 8) (SEE INSTRUCTIONS 1, 6, 7 AND 8)
To be completed ONLY (i) if To be completed ONLY if the
the Exchange Notes issued in Exchange Notes issued in
exchange for Private Notes, exchange for Private Notes,
certificates for Private Notes certificates for Private Notes
in a principal amount not in a principal amount not
exchanged for Exchange Notes, or exchanged for Exchange Notes, or
Private Notes (if any) not Private Notes (if any) not
tendered for exchange, are to be tendered for exchange, are to be
issued in the name of someone mailed or delivered (i) to
other than the undersigned or someone other than the
(ii) if Private Notes tendered undersigned or (ii) to the
by book-entry transfer which are undersigned at an address other
not exchanged are to be returned than the address shown below the
by credit to an account undersigned's signature.
maintained at DTC.
Issue to: Issue to:
Name _____________________________ Name ____________________________
(PLEASE PRINT) (PLEASE PRINT)
Address __________________________ Address _________________________
__________________________________ _________________________________
(INCLUDE ZIP CODE) (INCLUDE ZIP CODE)
__________________________________
(TAX IDENTIFICATION OR SOCIAL _________________________________
SECURITY NO.) (TAX IDENTIFICATION OR SOCIAL
SECURITY NO.)
Credit Private Notes not ex-
changed and delivered by book-en-
try transfer to DTC account set
forth below:
Account Number:
__________________________________
4
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--RESIDENCE
- -------------------------------------------------------------------------------------------
<S> <C>
STATE OF DOMICILE/PRINCIPAL PRINCIPAL AMOUNT OF
PLACE OF BUSINESS OF EACH PRIVATE NOTES HELD FOR
BENEFICIAL OWNER OF PRIVATE NOTES ACCOUNT OF BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
BENEFICIAL OWNER(S)--PURCHASER STATUS
The beneficial owner of each of the Private Notes described herein is
(check the box that applies):
[_] A "Qualified Institutional Buyer" as (defined in Rule 144A under the
Securities Act)
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1),
(2), (3) or (7) under the Securities Act
[_] A non "U.S. person" (as defined in Regulation S of the Securities Act)
that purchased the Private Notes outside the United States in accordance
with Rule 904 of the Securities Act
[_] Other (describe) ________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5
<PAGE>
SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Pursuant to the offer by American Cellular Corporation, a Delaware
corporation (the "Company"), upon the terms and subject to the conditions set
forth in the Prospectus dated , 1998 (the "Prospectus") and this Letter
of Transmittal (the "Letter of Transmittal"), which together with the
Prospectus constitutes the Company's offer (the "Exchange Offer") to exchange
$1,000 principal amount of its 10 1/2% Senior Notes due 2008 (the "Exchange
Notes") for each $1,000 principal amount of its outstanding 10 1/2% Senior
Notes due 2008 (the "Private Notes"), the undersigned hereby tenders to the
Company for exchange the Private Notes indicated above.
By executing this Letter of Transmittal and subject to and effective upon
acceptance for exchange of the Private Notes tendered for exchange herewith,
the undersigned will have irrevocably sold, assigned, transferred and
exchanged, to the Company, all right, title and interest in, to and under all
of the Private Notes tendered for exchange hereby, and hereby will have
appointed the Exchange Agent as the true and lawful agent and attorney-in-fact
(with full knowledge that the Exchange Agent also acts as agent of the
Company) of such holder of Private Notes with respect to such Private Notes
with full power of substitution to (i) deliver certificates representing such
Private Notes, or transfer ownership of such Private Notes on the account
books maintained by DTC (together, in any such case, with all accompanying
evidences of transfer and authenticity), to the Company, (ii) present and
deliver such Private Notes for transfer on the books of the Company, (iii)
receive all benefits and otherwise exercise all rights and incidents of
beneficial ownership with respect to such Private Notes, all in accordance
with the terms of the Exchange Offer. The power of attorney granted in this
paragraph shall be deemed to be irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that (i) the undersigned is
the owner, (ii) has a net long position within the meaning of Rule 14e-4 under
the Securities Exchange Act of 1934, as amended ("Rule 14e-4") equal to or
greater than the principal amount of Private Notes tendered hereby, (iii) the
tender of such Private Notes complies with Rule 14e-4 (to the extent that Rule
14e-4 is applicable to such exchange), (iv) the undersigned has full power and
authority to tender, exchange, assign and transfer the Private Notes and (v)
that when such Private Notes are accepted for exchange by the Company, the
Company will acquire good and marketable title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not be subject to any
adverse claims. The undersigned will, upon receipt, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
the Private Notes tendered for exchange hereby.
By tendering, the undersigned hereby further represents to the Company that
(i) the Exchange Notes to be acquired by the undersigned in exchange for the
Private Notes tendered hereby and any beneficial owner(s) of such Private
Notes in connection with the Exchange Offer will be acquired by the
undersigned and such beneficial owner(s) in the ordinary course of business of
the undersigned, (ii) the undersigned have no arrangement or understanding
with any person to participate in the distribution of the Exchange Notes,
(iii) the undersigned and each beneficial owner(s) acknowledge and agree that
any person who is a broker-dealer registered under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or is participating in the Exchange
Offer for the purpose of distributing the Exchange Notes must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the undersigned and each
beneficial owner understand that a secondary resale transaction described in
clause (iii) above and any resales of Exchange Notes obtained by the
undersigned in exchange for the Private Notes acquired by the undersigned
directly from the Company should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or Item 508, as applicable, of Regulation S-K of the Commission and
(v) neither the undersigned or any beneficial owner is an "affiliate," as
defined in Rule 405 under the Securities Act, of the Company. If the
undersigned is a broker-dealer that will receive Exchange Notes for its own
account in exchange for the Private Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of such Exchange Notes; however, by so
acknowledging and by delivering a prospectus, the undersigned does not and
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
6
<PAGE>
For purposes of the Exchange Offer, the Company will be deemed to have
accepted for exchange, and to have exchanged, validly tendered Private Notes,
if, as and when the Company gives oral or written notice thereof to the
Exchange Agent. Tenders of Private Notes for exchange may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer--Withdrawal of Tenders" in the Prospectus. Any Private Notes
tendered by the undersigned and not accepted for exchange will be returned to
the undersigned at the address set forth above unless otherwise indicated in
the box above entitled "Special Delivery Instructions" as promptly as
practicable after the Expiration Date.
The undersigned acknowledges that the Company's acceptance of Private Notes
validly tendered for exchange pursuant to any one of the procedures described
in the section of the Prospectus entitled "The Exchange Offer" and in the
instructions hereto will constitute a binding agreement between the
undersigned and the Company upon the terms and subject to the conditions of
the Exchange Offer.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions," please return any Private Notes not tendered for exchange in
the name(s) of the undersigned. Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions," please mail any certificates for
Private Notes not tendered or exchanged (and accompanying documents, as
appropriate) to the undersigned at the address shown below the undersigned's
signature(s). In the event that both "Special Issuance Instructions" and
"Special Delivery Instructions" are completed, please issue the certificates
representing the Exchange Notes issued in exchange for the Private Notes
accepted for exchange in the name(s) of, and return any Private Notes not
tendered for exchange or not exchanged to, the person(s) so indicated. The
undersigned recognizes that the Company has no obligation pursuant to the
"Special Issuance Instructions" and "Special Delivery Instructions" to
transfer any Private Notes from the name of the holder of Private Note(s)
thereof if the Company does not accept for exchange any of the Private Notes
so tendered for exchange or if such transfer would not be in compliance with
any transfer restrictions applicable to such Private Note(s).
IN ORDER TO VALIDLY TENDER PRIVATE NOTES FOR EXCHANGE, HOLDERS OF PRIVATE
NOTES MUST COMPLETE, EXECUTE AND DELIVER THIS LETTER OF TRANSMITTAL.
Except as stated in the Prospectus, all authority herein conferred or agreed
to be conferred shall survive the death, incapacity, or dissolution of the
undersigned, and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Except as otherwise stated in the Prospectus, this tender for
exchange of Private Notes is irrevocable.
7
<PAGE>
SIGN HERE
(SIGNATURE(S) OF OWNER(S))
Must be signed by the registered holder(s) of Private Notes exactly as
name(s) appear(s) on certificate(s) representing the Private Notes or on a
security position listing or by person(s) authorized to become registered
Private Note holder(s) by certificates and documents transmitted herewith. If
signature is by trustees, executors, administrators, guardians, attorneys-in-
fact, officers of corporations or others acting in a fiduciary or
representative capacity, please provide the following information. (See
Instruction 6).
Name(s): _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(PLEASE PRINT)
Capacity (full title): _________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Address: _______________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ( ) _____________________________________________
Tax Identification or Social Security Nos.: ____________________________________
PLEASE COMPLETE SUBSTITUTE FORM W-9
GUARANTEE OF SIGNATURE(S)
(SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 1)
________________________________________________________________________________
(AUTHORIZED SIGNATURE)
________________________________________________________________________________
(DATE)
________________________________________________________________________________
(NAME AND TITLE)
________________________________________________________________________________
(NAME OF FIRM)
Date: __________________________, 1998
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by an institution
which is (1) a member firm of a registered national securities exchange or of
the National Association of Securities Dealers, Inc., (2) a commercial bank or
trust company having an office or correspondent in the United States, or (3)
an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended, which is a member of one of
the following recognized Signature Guarantee Programs (an "Eligible
Institution"):
a. The Securities Transfer Agents Medallion Program (STAMP)
b. New York Stock Exchange Medallion Signature Program (MSP)
c. The Stock Exchange Medallion Program (SEMP)
Signatures on this Letter of Transmittal need not be guaranteed (i) if this
Letter of Transmittal is signed by the registered holder(s) of the Private
Notes tendered herewith and such registered holder(s) have not completed the
box entitled "Special Issuance Instructions" or the box entitled "Special
Delivery Instructions" on this Letter of Transmittal or (ii) if such Private
Notes are tendered for the account of an Eligible Institution. IN ALL OTHER
CASES, ALL SIGNATURES MUST BE GUARANTEED BY AN ELIGIBLE INSTITUTION.
2. DELIVERY OF THIS LETTER OF TRANSMITTAL AND PRIVATE NOTES; GUARANTEED
DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by holders
of Private Notes (i) if certificates are to be forwarded herewith or (ii) if
tenders are to be made pursuant to the procedures for tender by book-entry
transfer or guaranteed delivery set forth in the section of the Prospectus
entitled "The Exchange Offer." Certificates for all physically tendered
Private Notes or by any timely confirmation of a book-entry transfer (a "Book-
Entry Confirmation"), as well as a properly completed and duly executed copy
of this Letter of Transmittal or facsimile hereof, and any other documents
required by this Letter of Transmittal, must be received by the Exchange Agent
at its address set forth on the cover of this Letter of Transmittal prior to
5:00 p.m., New York City time, on the Expiration Date. Holders of Private
Notes who elect to tender Private Notes and (i) whose Private Notes are not
immediately available or (ii) who cannot deliver the Private Notes, this
Letter of Transmittal or other required documents to the Exchange Agent prior
to 5:00 p.m., New York City time, on the Expiration Date, must tender their
Private Notes according to the guaranteed delivery procedures set forth in the
Prospectus. Holders may have such tender effected if: (a) such tender is made
through an Eligible Institution; (b) prior to 5:00 p.m., New York City time,
on the Expiration Date, the Exchange Agent has received from such Eligible
Institution a properly completed and duly executed Notice of Guaranteed
Delivery, setting forth the name and address of the holder of such Private
Notes, the certificate number(s) of such Private Notes and the principal
amount of Private Notes tendered for exchange, stating that tender is being
made thereby and guaranteeing that, within five New York Stock Exchange
trading days after the Expiration Date, this Letter of Transmittal (or a
facsimile thereof), together with the certificate(s) representing such Private
Notes (or a Book-Entry Confirmation), in proper form for transfer, and any
other documents required by this Letter of Transmittal, will be deposited by
such Eligible Institution with the Exchange Agent; and (c) a properly executed
Letter of Transmittal (or a facsimile hereof), as well as the certificate(s)
for all tendered Private Notes in proper form for transfer or a Book-Entry
confirmation, together with any other documents required by this Letter of
Transmittal, are received by the Exchange Agent within five New York Stock
Exchange trading days after the Expiration Date.
THE METHOD OF DELIVERY OF PRIVATE NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. INSTEAD
OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND
DELIVERY SERVICE, PROPERLY INSURED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE.
NEITHER THIS LETTER OF TRANSMITTAL NOR ANY PRIVATE NOTES SHOULD BE SENT TO THE
COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL
BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH
HOLDERS.
9
<PAGE>
No alternative, conditional or contingent tenders will be accepted. All
tendering holders of Private Notes, by execution of this Letter of Transmittal
(or facsimile hereof, if applicable), waive any right to receive notice of the
acceptance of their Private Notes for exchange.
3. INADEQUATE SPACE. If the space provided in the box entitled "Description
of Private Notes" above is inadequate, the certificate numbers and principal
amounts of the Private Notes being tendered should be listed on a separate
signed schedule affixed hereto.
4. WITHDRAWALS. A tender of Private Notes may be withdrawn at any time prior
to 5:00 p.m., New York City time, on the Expiration Date by delivery of
written or facsimile notice of withdrawal to the Exchange Agent at the address
set forth on the cover of this Letter of Transmittal. To be effective, a
notice of withdrawal of Private Notes must (i) specify the name of the person
who tendered the Private Notes to be withdrawn (the "Depositor"), (ii)
identify the Private Notes to be withdrawn (including the certificate number
of numbers and aggregate principal amount of such Private Notes), and (iii) be
signed by the holder of Private Notes in the same manner as the original
signature on the Letter of Transmittal by which such Private Notes were
tendered (including any required signature guarantees). All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company in its sole discretion, whose determination
shall be final and binding on all parties. Any Private Notes so withdrawn will
thereafter be deemed not validly tendered for purposes of the Exchange Offer
and no Exchange Notes will be issued with respect thereto unless the Private
Notes so withdrawn are validly retendered. Properly withdrawn Private Notes
may be retendered by following one of the procedures described in the section
of the Prospectus entitled "The Exchange Offer--Procedures for Tendering" at
any time prior to 5:00 p.m., New York City time, on the Expiration Date.
5. PARTIAL TENDERS. Tenders of Private Notes will be accepted only in
integral multiples of $1,000 principal amount. If a tender for exchange is to
be made with respect to less than the entire principal amount of any Private
Notes, fill in the principal amount of Private Notes which are tendered for
exchange in column (4) of the box entitled "Description of Private Notes," as
more fully described in the footnotes thereto. In case of a partial tender for
exchange, a new certificate, in fully registered form, for the remainder of
the principal amount of the Private Notes, will be sent to the holders of
Private Notes unless otherwise indicated in the appropriate box on this Letter
of Transmittal as promptly as practicable after the expiration or termination
of the Exchange Offer.
6. SIGNATURES ON THIS LETTER OF TRANSMITTAL, ASSIGNMENT AND ENDORSEMENTS.
(a) The signature(s) of the holder of Private Notes on this Letter of
Transmittal must correspond with the name(s) as written on the face of the
Private Notes without alternation, enlargement or any change whatsoever.
(b) If tendered Private Notes are owned of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Private Notes are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate copies of this Letter of Transmittal and any necessary or
required documents as there are different registrations or certificates.
(d) When this Letter of Transmittal is signed by the holder of the Private
Notes listed and transmitted hereby, no endorsements of Private Notes or bond
powers are required. If, however, Private Notes not tendered or not accepted,
are to be issued or returned in the name of a person other than the holder of
Private Notes, then the Private Notes transmitted hereby must be endorsed or
accompanied by a properly completed bond power, in a form satisfactory to the
Company, in either case signed exactly as the name(s) of the holder of Private
Notes appear(s) on the Private Notes. Signatures on such Private Notes or bond
powers must be guaranteed by an Eligible Institution (unless signed by an
Eligible Institution).
(e) If this Letter of Transmittal or Private Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by this
Company, evidence satisfactory to the Company of their authority to so act
must be submitted with this Letter of Transmittal.
10
<PAGE>
(f) If this Letter of Transmittal is signed by a person other than the
registered holder of Private Notes listed, the Private Notes must be endorsed
or accompanied by a properly completed bond power, in either case signed by
such registered holder exactly as the name(s) of the registered holder of
Private Notes appear(s) on the certificates. Signatures on such Private Notes
or bond powers must be guaranteed by an Eligible Institution (unless signed by
an Eligible Institution).
7. TRANSFER TAXES. Except as set forth in this Instruction 7, the Company
will pay all transfer taxes, if any, applicable to the exchange of Private
Notes pursuant to the Exchange Offer. If, however, a transfer tax is imposed
for any reason other than the exchange of the Private Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemptions
therefrom is not submitted with this Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
8. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the Exchange Notes are to
be issued, or if any Private Notes not tendered for exchange are to be issued
or sent to someone other than the holder of Private Notes or to an address
other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed. Holders of Private Notes tendering Private
Notes by book-entry transfer may request that Private Notes not accepted be
credited to such account maintained at DTC as such holder of Private Notes may
designate.
9. IRREGULARITIES. All questions as to the validity, form, eligibility
(including time of receipt), compliance with conditions, acceptance and
withdrawal of tendered Private Notes will be determined by the Company in its
sole discretion, which determination will be final and binding. The Company
reserves the absolute right to reject any and all Private Notes not properly
tendered or any Private Notes the Company's acceptance of which would, in the
opinion of counsel for the Company, be unlawful. The Company also reserves the
right to waive any defects, irregularities or conditions of tender as to
particular Private Notes. The Company's interpretation of the terms and
conditions of the Exchange Offer (including the instructions in the Letter of
Transmittal) will be final and binding on all parties. Unless waived, any
defects or irregularities in connection with tenders of Private Notes must be
cured with such time as the Company shall determine. Although the Company
intends to notify holders of defects or irregularities with respect to tenders
of Private Notes, neither the Company, the Exchange Agent nor any other person
shall incur any liability for failure to give such notification. Tenders of
Private Notes will not be deemed to have been made until such defects or
irregularities have been cured or waived. Any Private Notes received by the
Exchange Agent that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned by the Exchange
Agent to the tendering holders, unless otherwise provided in this Letter of
Transmittal, as soon as practicable following the Expiration Date.
10. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive,
amend or modify certain of the specified conditions as described under "The
Exchange Offer--Conditions" in the Prospectus in the case of any Private Notes
tendered (except as otherwise provided in the Prospectus).
11. MUTILATED, LOST, STOLEN OR DESTROYED PRIVATE NOTES. Any tendering Holder
whose Private Notes have been mutilated, lost, stolen or destroyed should
contact the Exchange Agent at the address listed below for further
instructions:
Chase Manhattan Bank and Trust Company,
National Association
c/o Chase Manhattan Bank
55 Water Street
Second Floor, Room 234
New York, New York 10041
12. REQUESTS FOR INFORMATION OR ADDITIONAL COPIES. Requests for information
or for additional copies of the Prospectus and this Letter of Transmittal may
be directed to the Exchange Agent at the address or telephone number set forth
on the cover of this Letter of Transmittal.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF, IF
APPLICABLE) TOGETHER WITH CERTIFICATES, OR CONFIRMATION OF BOOK-ENTRY OR THE
NOTICE OF GUARANTEED DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS MUST BE
RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE.
11
<PAGE>
IMPORTANT TAX INFORMATION
Under current federal income tax law, a holder of Private Notes whose
tendered Private Notes are accepted for exchange may be subject to backup
withholding unless the holder provides the Company (as payor), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Private
Notes is awaiting a TIN) and that (A) the holder of Private Notes has not been
notified by the Internal Revenue Service that he or she is subject to backup
withholding as a result of a failure to report all interest or dividends or
(B) the Internal Revenue Service has notified the holder of Private Notes that
he or she is no longer subject to backup withholding; or (ii) an adequate
basis for exemption from backup withholding. If such holder of Private Notes
is an individual, the TIN is such holder's social security number. If the
Exchange Agent is not provided with the correct taxpayer identification
number, the holder of Private Notes may be subject to certain penalties
imposed by the Internal Revenue Service.
Certain holders of Private Notes (including, among others, all corporations
and certain foreign individuals) are not subject to these backup withholding
and reporting requirements. Exempt holders of Private Notes should indicate
their exempt status on Substitute Form W-9. A foreign individual may qualify
as an exempt recipient by submitting to the Exchange Agent a properly
completed Internal Revenue Service Form W-8 (which the Exchange Agent will
provide upon request) signed under penalty of perjury, attesting to the
holder's exempt status. See the enclosed Guidelines of Certification of
Taxpayer Identification Number on Substitute Form W-9 (the "Guidelines") for
additional instructions.
If backup withholding applies, the Company is required to withhold 31% of
any payment made to the holder of Private notes or other Payee. Backup
withholding is not an additional federal income tax. Rather, the federal
income tax liability of persons subject to backup withholding will be reduced
by the amount of tax withheld. If withholding results in an overpayment of
taxes, a refund may be obtained from the Internal Revenue Service.
The holder of Private Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) or the record
owner of the Private Notes. If the Private Notes are held in more than one
name or are not held in the name of the actual owner, consult the enclosed
Guidelines for additional guidance regarding which number to report.
12
<PAGE>
INSTRUCTION TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF
10 1/2% SENIOR NOTES DUE 2008
OF
AMERICAN CELLULAR CORPORATION
The undersigned hereby acknowledges receipt of the Prospectus dated ,
1998 (the "Prospectus") of American Cellular Corporation, a Delaware
corporation (the "Company"), and the accompanying Letter of Transmittal (the
"Letter of Transmittal"), that together constitute the Company's offer (the
"Exchange Offer"). Capitalized terms used by not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the 10 1/2% Senior Notes
due 2008 (the "Private Notes") held by you for the account of the undersigned.
The aggregate face amount of the Private Notes held by you for the account
of the undersigned is (fill in amount):
$ of the Private Notes.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Private Notes held by you for the account of the
undersigned (insert principal amount of Private Notes to be tendered, if
any):
$ of the Private Notes.
[_] NOT to TENDER any Private Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Private Notes held by you for
the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in
the Letter of Transmittal that are to be made with respect to the undersigned
as a beneficial owner of the Private Notes, including but not limited to the
representations that (i) the undersigned's principal residence is in the state
of (fill in state) , (ii) the undersigned is acquiring the Exchange Notes
in the ordinary course of business of the undersigned, (iii) the undersigned
has no arrangement or understanding with any person to participate in the
distribution of Exchange Notes, (iv) the undersigned acknowledges that any
person who is a broker-dealer registered under the Exchange Act or is
participating in the Exchange Offer for the purpose of distributing the
Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933, as amended, in connection with a
secondary resale transaction of the Exchange Notes acquired by such person and
cannot rely on the position of the Staff of the Securities and Exchange
Commission set forth in certain no-action letters (see the section of the
Prospectus entitled "The Exchange Offer--Resale of the Exchange Notes"), (v)
the undersigned understands that a secondary resale transaction described in
clause (iv) above and any resales of Exchange Notes obtained by the
undersigned in exchange for the Private Notes acquired by the undersigned
directly from the Company should be covered by an effective registration
statement containing the selling security holder information required by Item
507 or Item 508, if applicable, of Regulation S-K of the Commission, (vi) the
undersigned is not an "affiliate," as defined in Rule 405 under the Securities
Act, of the Company, and (vii) if the undersigned is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Private Notes that
were acquired as a result of market-making activities other trading
activities, it acknowledges that it will deliver a prospectus meeting the
requirements of the Securities Act in connection with any sale of such
Exchange Notes; however, by so acknowledging and by delivering a prospectus,
the undersigned will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act; (b) to agree, on behalf of the undersigned,
as set forth in the Letter of Transmittal; and (c) to take such other action
as necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of Private Notes.
13
<PAGE>
The purchaser status of the undersigned is (check the box that applies):
[_] A "Qualified Institutional Buyer" (as defined in Rule 144A under the
Securities Act)
[_] An "Institutional Accredited Investor" (as defined in Rule 501(a)(1), (2),
(3)or (7) under the Securities Act)
[_] A non "U.S. person" (as defined in Regulation S of the Securities Act) that
purchased the Private Notes outside the United States in accordance with
Rule 904 of the Securities Act.
[_] Other (describe) __________________________________________________________
- --------------------------------------------------------------------------------
SIGN HERE
----------------------------------------------------------------------------
Name of Beneficial Owner(s) ________________________________________________
Signature(s) _______________________________________________________________
Address ____________________________________________________________________
Principal place of business (if different from address listed above) _______
Telephone Numbers __________________________________________________________
Taxpayer Identification of Social Security Number(s) _______________________
Date _______________________________________________________________________
- --------------------------------------------------------------------------------
14
<PAGE>
PAYER'S NAME: CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION
- --------------------------------------------------------------------------------
PART 1--PLEASE PROVIDE YOUR
TIN IN THE BOX AT RIGHT AND ----------------------
CERTIFY BY SIGNING AND
DATING BELOW.
SUBSTITUTE Social Security Number
OR
FORM W-9 ----------------------
DEPARTMENT OF Employer Identification
THE TREASURY Number
PART 2--CERTIFICATION--UNDER PENALTIES OF PERJURY, I
CERTIFY THAT:
INTERNAL --------------------------------------------------------
REVENUE
SERVICE
(1) The number shown on this form is my current
Taxpayer Identification Number (or I am waiting
for a number to be issued to me ) and
PAYER'S REQUEST
FOR TAXPAYER
IDENTIFICATION (2) I am not subject to backup withholding either
NUMBER ("TIN") because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to
backup withholding as a result of a failure to
report all interest or dividends, or the IRS has
notified me that I am no longer subject to backup
withholding.
Signature _______________________ Date _______ , 1998
Name _________________________________________________
Address ______________________________________________
City States Zip Code
--------------------------------------------------------
CERTIFICATION INSTRUCTIONS--You must
cross out item (2) in Part 2 above if PART 3--
you have been notified by the IRS that Awaiting
you are subject to backup withholding TIN [_]
because of underreporting interest or
dividends on your tax return. However,
if after being notified by the IRS
that you are subject to backup
withholding you receive another
notification from the IRS stating that
you are no longer subject to backup
withholding, do not cross out such
item (2).
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENT MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER
IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECK THE BOX IN PART
3 OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification
number has not been issued to me, and either (a) I have mailed or delivered
an application to receive a taxpayer identification number to the
appropriate Internal Revenue Service Center or Social Security
Administration Office or (b) I intend to mail or deliver such an
application in the near future. I understand that if I do not provide a
taxpayer identification number within sixty (60) days, 31% of all
reportable payments made to me thereafter will be withheld until I provide
such a number.
Signature ___________________________________________ Date: , 1998
- --------------------------------------------------------------------------------
15
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
10 1/2% SENIOR NOTES DUE 2008
- --------------------------------------------------------------------------------
THIS FORM, OR ONE SUBSTANTIALLY EQUIVALENT HERETO, MUST BE USED BY ANY
HOLDER OF 10 1/2% SENIOR NOTES DUE 2008 (THE "PRIVATE NOTES") OF AMERICAN
CELLULAR CORPORATION, A DELAWARE CORPORATION (THE "COMPANY"), WHO WISHES TO
TENDER PRIVATE NOTES PURSUANT TO THE COMPANY'S EXCHANGE OFFER, AS DEFINED IN
THE PROSPECTUS DATED , 1998 (THE "PROSPECTUS") AND (I) WHOSE PRIVATE
NOTES ARE NOT IMMEDIATELY AVAILABLE OR (II) WHO CANNOT DELIVER SUCH PRIVATE
NOTES OR ANY OTHER DOCUMENTS REQUIRED BY THE LETTER OF TRANSMITTAL ON OR
BEFORE THE EXPIRATION DATE (AS DEFINED IN THE PROSPECTUS) OR (III) WHO
CANNOT COMPLY WITH THE BOOK-ENTRY TRANSFER PROCEDURE ON A TIMELY BASIS. SUCH
FORM MAY BE DELIVERED BY FACSIMILE TRANSMISSION, MAIL OR HAND DELIVERY TO
THE EXCHANGE AGENT. SEE "THE EXCHANGE OFFER--GUARANTEED DELIVERY PROCEDURES"
IN THE PROSPECTUS.
- --------------------------------------------------------------------------------
AMERICAN CELLULAR CORPORATION
NOTICE OF GUARANTEED DELIVERY
TO: CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION,
THE EXCHANGE AGENT
<TABLE>
<S> <C> <C>
By Registered or Certified
Mail: By Hand Delivery: By Overnight Delivery:
Chase Manhattan Bank and Trust Chase Manhattan Bank and Trust Chase Manhattan Bank and Trust
Company, Company, Company,
National Association National Association National Association
c/o Chase Manhattan Bank c/o Chase Manhattan Bank c/o Chase Manhattan Bank
55 Water Street, Second Floor, 55 Water Street, Second Floor, 55 Water Street, Second Floor,
Room 234 Room 234 Room 234
New York, New York 10041 New York, New York 10041 New York, New York 10041
Attention: Carlos Esteves Attention: Carlos Esteves Attention: Carlos Esteves
By Facsimile:
(212) 638-7380
Confirm by Telephone:
(212) 638-0828
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Private Notes specified below pursuant to the guaranteed delivery procedures
set forth under the caption "The Exchange Offer--Guaranteed Delivery
Procedures" in the Prospectus. By so tendering, the undersigned does hereby
make, at and as of the date hereof, the representations and warranties of a
tendering Holder of Private Notes set forth in the Letter of Transmittal. The
undersigned hereby tenders the Private Notes listed below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
CERTIFICATE NUMBERS PRINCIPAL AMOUNT
(IF AVAILABLE) TENDERED
- --------------------------------------------------------------------------------
<S> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, successors and assigns of the undersigned.
<TABLE>
<S> <C>
If Private Notes will be tendered by book- SIGN HERE
entry transfer
Name of Tendering Institution: ___________________________________________
SIGNATURE(S)
___________________________________________ ___________________________________________
The Depository Trust Company Account No.: ___________________________________________
NAME(S) (PLEASE PRINT)
___________________________________________ ___________________________________________
___________________________________________
ADDRESS
___________________________________________
ZIP CODE
___________________________________________
AREA CODE AND TELEPHONE NO.
Date: _____________________________________
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the Letter
of Transmittal (or facsimile thereof), together with the Private Notes
tendered hereby in proper form for transfer, or confirmation of the book-
entry transfer of such Private Notes into the Exchange Agent's account at
the Depository Trust Company, pursuant to the procedure for book-entry
transfer set forth in the prospectus, and any other required documents, all
by 5:00 p.m., New York City time, on the fifth New York Stock Exchange
trading day following the Expiration Date (as defined in the Prospectus).
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SIGN HERE
Name of Firm ______________________________ ___________________________________________
AUTHORIZED SIGNATURE
Address ___________________________________ ___________________________________________
NAME(S) (PLEASE PRINT)
___________________________________________ ___________________________________________
(ZIP CODE)
Area Code and Telephone No. _______________ ___________________________________________
Date: _____________________________________
</TABLE>
DO NOT SEND CERTIFICATES FOR PRIVATE NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR PRIVATE NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
<PAGE>
INSTRUCTIONS
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the Holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service, properly insured. If such delivery is by mail, it is
recommended that the Holder use properly insured, registered mail with return
receipt requested. For a full description of the guaranteed delivery procedures,
see the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery
Procedures." In all cases, sufficient time should be allowed to assure timely
delivery. No Notice of Guaranteed Delivery should be sent to the Company.
2. Signature on this Notice of Guaranteed Delivery; Guarantee of
Signatures. If this Notice of Guaranteed Delivery is signed by the registered
Holder(s) of the Private Notes referred to herein, then the signature must
correspond with the name(s) as written on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered Holder(s) of any Private Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered Holder(s) appear(s) on the face of the Private Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, evidence
satisfactory to the Company of their authority so to act must be submitted
with this Notice of Guaranteed Delivery.
3. Requests for Assistance or Additional Copies. Questions relating to
the Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the Letter
of Transmittal and this Notice of Guaranteed Delivery, may be directed to the
Exchange Agent at the address set forth on the cover hereof or to your broker,
dealer, commercial bank or trust company.
