<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1999
REGISTRATION NO. 333-71051
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
DOBSON/SYGNET COMMUNICATIONS COMPANY
(Exact name of registrant as specified in its charter)
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<S> <C> <C>
OKLAHOMA 4812 73-1110531
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>
--------------------------
<TABLE>
<S> <C>
BRUCE R. KNOOIHUIZEN
13439 NORTH BROADWAY EXTENSION 13439 NORTH BROADWAY EXTENSION
SUITE 200 SUITE 200
OKLAHOMA CITY, OKLAHOMA 73114 OKLAHOMA CITY, OKLAHOMA 73114
(405) 391-8500 (405) 391-8500
(Address, including Zip Code, and telephone (Name, address, including Zip Code, and
number, including area code, of registrant's telephone number, including area code, of agent
principal executive offices) for service)
</TABLE>
------------------------
COPIES TO:
THEODORE M. ELAM, ESQ.
MCAFEE & TAFT A PROFESSIONAL CORPORATION
TENTH FLOOR, TWO LEADERSHIP SQUARE
211 NORTH ROBINSON
OKLAHOMA CITY, OKLAHOMA 73102
(405) 235-9621
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement under the earlier effective registration statement for
the same offering. / /
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
12 1/4% Senior Notes due 2008.................... $200,000,000 100% $200,000,000 $55,600(1)
</TABLE>
(1) Estimated solely for purposes of computing the registration fee in
accordance with Rule 457(f)(2).
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8 OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8, MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 11, 1999
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
PRELIMINARY PROSPECTUS
OFFER TO EXCHANGE
ALL OUTSTANDING 12 1/4%
SENIOR NOTES DUE 2008
($200,000,000 AGGREGATE PRINCIPAL
AMOUNT OUTSTANDING)
FOR
12 1/4% SENIOR NOTES DUE 2008 OF
DOBSON/SYGNET COMMUNICATIONS COMPANY
TERMS OF EXCHANGE OFFER
- Expires 5:00 p.m., New York City time, , 1999, unless extended
- Not subject to any condition other than that the Exchange Offer not
violate applicable law or any applicable interpretation of the Staff of
the Securities and Exchange Commission
- All outstanding notes that are validly tendered and not validly withdrawn
will be exchanged
- Tenders of outstanding notes may be withdrawn any time prior to 5:00 p.m.
on the
business day prior to expiration of the Exchange Offer
- The exchange of notes will not be a taxable exchange for the U.S. federal
income tax purposes
- We will not receive any proceeds from the Exchange Offer
- The terms of the notes to be issued are substantially identical to the
outstanding notes, except for certain transfer restrictions and
registration rights relating to the outstanding notes
SEE "RISK FACTORS" BEGINNING ON PAGE [13] FOR A DISCUSSION OF CERTAIN MATTERS
THAT SHOULD BE CONSIDERED BY INVESTORS.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE NOTES TO BE DISTRIBUTED IN THE
EXCHANGE OFFER, NOR HAVE ANY OF THESE ORGANIZATIONS DETERMINED THAT THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
-----
<S> <C>
Summary.................................................................................................... 1
Where You Can Find More Information........................................................................ 12
Risk Factors............................................................................................... 13
The Exchange Offer......................................................................................... 23
Selected Consolidated Financial and Other Data............................................................. 32
Pro Forma Consolidated Financial Data...................................................................... 34
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 38
Business................................................................................................... 46
Management................................................................................................. 61
Certain Transactions....................................................................................... 63
Principal Shareholder...................................................................................... 64
Description of Certain Indebtedness........................................................................ 65
Description of the Notes................................................................................... 68
Certain U.S. Federal Tax Consequences to Non-United States Holders......................................... 101
Plan of Distribution....................................................................................... 103
Legal Matters.............................................................................................. 105
Experts.................................................................................................... 105
Certain Terms.............................................................................................. 106
Index to Financial Statements.............................................................................. F-1
</TABLE>
------------------------
No person is authorized in connection with the offering made hereby to give
any information or to make any representation not contained in this prospectus
or the accompanying Letter of Transmittal and, if given or made, such
information or representation not contained herein must not be relied upon as
having been authorized by us.
------------------------
The exchange offer is not being made to, nor will we accept surrenders for
exchange from, holders of our outstanding 12 1/4% senior notes due 2008 in any
jurisdiction in which this exchange offer or the acceptance thereof would not be
in compliance with the securities or Blue Sky laws of such jurisdiction. Neither
the delivery of this prospectus nor the accompanying Letter of Transmittal, nor
any exchange made hereunder shall under any circumstances imply that the
information herein is correct as of any date subsequent to the date hereof.
------------------------
ii
<PAGE>
SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS INCLUDING THE FINANCIAL DATA AND
RELATED NOTES, BEFORE MAKING AN INVESTMENT DECISION. THE TERMS "DOBSON/SYGNET,"
THE "COMPANY," "OUR COMPANY" AND "WE" AS USED IN THIS PROSPECTUS REFER TO
DOBSON/ SYGNET COMMUNICATIONS COMPANY AND SYGNET AS A COMBINED ENTITY, EXCEPT
WHERE IT IS MADE CLEAR THAT SUCH TERM MEANS ONLY THE PARENT COMPANY. ALL
REFERENCES TO "SYGNET" ARE TO SYGNET WIRELESS, INC. AND THE WHOLLY OWNED
SUBSIDIARY, SYGNET COMMUNICATIONS, INC. REFERENCES TO A FISCAL YEAR END RELATE
TO A YEAR ENDING ON DECEMBER 31. WE ENCOURAGE YOU TO READ THE ENTIRE PROSPECTUS,
INCLUDING THE SECTION LABELED "RISK FACTORS" AND THE FINANCIAL STATEMENTS.
CERTAIN CAPITALIZED TERMS ARE DEFINED IN "CERTAIN TERMS."
THE EXCHANGE OFFER
We completed on December 23, 1998 the private offering of $200.0 million of
12 1/4% Senior Notes due 2008. We entered into a registration agreement with the
initial purchasers in the private offering in which we agreed, among other
things, to deliver to you this Prospectus and to complete the Exchange Offer
within 180 days of the issuance of the 12 1/4% Senior Notes due 2008. You are
entitled to exchange in the Exchange Offer your outstanding notes for registered
notes with substantially identical terms. If the Exchange Offer is not completed
within 180 days of the issuance of the 12 1/4% Senior Notes due 2008, then the
interest rates on the notes will be increased to 12 3/4% per year. You should
read the discussion under the heading "Summary Description of the New Notes" and
"Description of the New Notes" for further information regarding the registered
notes.
We believe that the notes issued in the Exchange Offer may be resold by you
without compliance with the registration and prospectus delivery provisions of
the Securities Act, subject to certain conditions. You should read the
discussion under the headings "Summary of the Terms of Exchange Offer" and "The
Exchange Offer" for further information regarding the Exchange Offer and resale
of the notes.
THE COMPANY
We are a wholly owned subsidiary of Dobson Communications Corporation. On
December 23, 1998, we acquired Sygnet Wireless, Inc. and its subsidiary for
$337.5 million, and Sygnet's operations currently are our only business. Through
Sygnet, we own and operate rural and suburban cellular telephone systems serving
a single large cluster of properties with a population of 2.4 million and
166,886 subscribers in northeastern Ohio, western Pennsylvania and western New
York. The cluster includes Youngstown, Ohio, Erie, Pennsylvania, and suburban
and rural areas between the Cleveland, Akron-Canton, Pittsburgh, Buffalo and
Rochester metropolitan areas.
Sygnet has grown rapidly through selective acquisitions and internal growth.
Between 1993 and 1997, Sygnet's revenues increased at a compounded annual growth
rate of 56.0% and its Adjusted EBITDA increased at a compounded annual growth
rate of 71.1%. Excluding properties acquired during that period, Sygnet's
revenues increased at a compounded annual growth rate of 23.9% and its Adjusted
EBITDA increased at a compounded annual growth rate of 34.2% over the same
period. In addition, from December 31, 1993 to September 30, 1998, Sygnet's
market penetration rate increased from 2.5% to 7.0%. For the nine months ended
September 30, 1998, Sygnet had revenue of $76.9 million, operating income of
$15.1 million and Adjusted EBITDA of $36.4 million.
Sygnet's markets are primarily rural and suburban and include a high
concentration of expressway corridors that tend to have a significant amount of
roaming activity. Roaming revenue represented approximately 32% (28% excluding
roaming by Sygnet customers into other Sygnet markets) of Sygnet's total
revenues for both the year ended December 31, 1997 and the nine months ended
September 30, 1998. Sygnet has roaming agreements with operators of cellular
systems in adjoining MSAs and other MSAs which allow customers to roam at
competitive prices which, in certain instances, are comparable to Sygnet's home
area rates. Sygnet's principal roaming partners are AT&T Wireless, AirTouch and
SBC
1
<PAGE>
Communications. Sygnet also has roaming agreements with PCS providers, such as
AT&T Wireless and Sprint, to allow the PCS providers' customers with dual mode
telephones to roam in certain Sygnet markets.
Through selective acquisitions, Sygnet has created an integrated network of
rural and suburban cellular systems in a contiguous service area. The following
table sets forth certain data with respect to Sygnet's cellular systems as of
September 30, 1998. Sygnet owns all of the licenses for these markets except for
Pennsylvania 2 RSA.
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET YEAR ACQUIRED
MARKETS (1) POPS SUBSCRIBERS PENETRATION (2) BY SYGNET
- ---------------------------- --------- --------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Erie........................ 282,300 26,381 9.3% 1995
New York.................... 480,000 26,409 5.5% 1996
Pennsylvania................ 890,300 49,516 5.6% 1996
Youngstown.................. 721,400 64,580 9.0% 1985, 1987 and 1991
--------- ------- --
Total..................... 2,374,000 166,886 7.0%
--------- ------- --
--------- ------- --
</TABLE>
- ------------------------------
(1) The Erie market is composed of Erie, Pennsylvania MSA. The New York market
is composed of New York 3 RSA. The Pennsylvania market is composed of
Pennsylvania 1 RSA, Pennsylvania 2 RSA, Pennsylvania 6 RSA and Pennsylvania
7 RSA. Sygnet operated Pennsylvania 2 RSA under an interim operating
authority until June 3, 1997. On June 8, 1998, Sygnet entered into an
agreement to purchase Pennsylvania 2 RSA for $6.0 million. On June 29, 1998,
Sygnet entered into a management and lease agreement, under which Sygnet has
been operating Pennsylvania 2 RSA, which will continue in effect until the
FCC's grant of the license to the present owner becomes final, at which time
Sygnet intends to consummate its purchase of Pennsylvania 2 RSA. The
Youngstown market is composed of the Youngstown, Ohio MSA, the Sharon,
Pennsylvania MSA, and the Ohio 11 RSA.
(2) Determined by dividing total subscribers by the total Pops covered by the
applicable FCC cellular licenses or authorizations held by Sygnet.
BUSINESS STRATEGY
Our business strategy is to integrate our operations with those of our
parent, Dobson Communications Corporation, increase our market penetration and
further develop our cellular systems to sustain growth in our cash flows.
SYGNET ACQUISITION AND FINANCING PLAN
On December 23, 1998, we acquired Sygnet. We paid $337.5 million in cash for
all of the outstanding capital stock of Sygnet.
In order to finance the Sygnet acquisition, we consummated the following
transactions, concurrently with the Sygnet acquisition (together with the Sygnet
acquisition the "Sygnet Transactions"):
- we received an equity contribution of approximately $145.0 million from
Dobson Communications Corporation (the "Equity Contribution");
- we obtained a $430.0 million bank credit facility consisting of a $50.0
million reducing revolving credit facility and $380.0 million of term
loans (together the "New Bank Facilities");
- we sold $200.0 million aggregate principal amount of our 12 1/4% Senior
Notes due 2008, and used approximately $67.7 million to purchase a
portfolio of U.S. government securities (the "Pledged Securities") that
are pledged as security for the first six scheduled interest payments on
the notes;
- Sygnet repaid all indebtedness outstanding under its existing bank
facility (the "Sygnet Bank Facility");
2
<PAGE>
- Sygnet repurchased (the "Sygnet Note Repurchase") all of its outstanding
11 1/2% Senior Notes due 2006; and
- Sygnet sold substantially all of its owned cellular towers for $25.0
million to Dobson Tower Company, a wholly owned subsidiary of Dobson
Communications Corporation, which leased the cellular towers back to
Sygnet (the "Tower Sale Leaseback").
The following table illustrates the sources and uses of funds for the Sygnet
Transactions (in millions):
<TABLE>
<CAPTION>
SOURCES OF FUNDS USES OF FUNDS
- ----------------------------------------------- -----------------------------------------------
<S> <C> <C> <C>
Issuance of 12 1/4% Senior Notes.... $ 200.0 Amount payable in the Sygnet
Acquisition....................... $ 337.5
Equity Contribution................. 145.0
New Bank Facilities................. 407.0 Repayment of Sygnet Bank Facility... 199.0
Tower Sale Leaseback................ 25.0 Sygnet Note Repurchase.............. 136.1
Purchase of Pledged Securities...... 67.7
Fees and Expenses................... 36.7
--------- ---------
Total Sources of Funds.............. $ 777.0 Total Uses of Funds................. $ 777.0
--------- ---------
--------- ---------
</TABLE>
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the new notes
pursuant to the Exchange Offer.
3
<PAGE>
SUMMARY OF THE TERMS OF THE EXCHANGE OFFER
The Exchange Offer relates to the exchange of up to $200.0 million aggregate
principal amount of outstanding notes for an equal aggregate principal amount of
new notes. The new notes will be our obligations, entitled to the benefits of
the indenture governing the outstanding notes. The form and terms of the new
notes are identical in all material respects to the form and terms of the
outstanding notes except that the new notes have been registered under the
Securities Act of 1933, as amended (the "Securities Act") and therefore are not
entitled to the benefits of the registration rights granted under the
registration rights agreement, executed as part of the offering of the
outstanding notes.
<TABLE>
<S> <C>
Registration Rights
Agreement................... You are entitled to exchange your old notes for registered
new notes with substantially identical terms. The Exchange
Offer is intended to satisfy these rights. After the
Exchange Offer is complete, you will no longer be entitled
to any exchange or registration rights with respect to your
notes.
The Exchange Offer............ We are offering to exchange $1,000 principal amount of
12 1/4% Senior Notes due 2008 which have been registered
under the Securities Act for each $1,000 principal amount of
our outstanding 12 1/4% Senior Notes due 2008 which were
issued in December 1998 in a private offering. In order to
be exchanged, an outstanding note must be properly tendered
and accepted. All outstanding notes that are validly
tendered and not validly withdrawn will be exchanged.
As of this date there are $200.0 million principal amount of
notes outstanding.
We will issue registered notes on or promptly after the
expiration of the Exchange Offer.
Resale of the New Notes....... Based on an interpretation by the staff of the Commission
set forth in no-action letters issued to third parties,
including "Exxon Capital Holdings Corporation" (available
May 13, 1988) and "Morgan Stanley & Co. Incorporated"
(available June 5, 1991), we believe that you may offer the
new notes for resale, resell the new notes and otherwise
transfer the new notes without compliance with the
registration and prospectus delivery provisions of the
Securities Act provided that:
- you acquire the new notes in the Exchange Offer in the
ordinary course of business;
- you have no arrangement or understanding with any
person to participate in the distribution of the new
notes that you obtain in the Exchange Offer;
- you are not a broker-dealer who purchased such
outstanding notes directly from us for resale pursuant
to Rule 144A or any other available exemption under
the Securities Act; and
- you are not an "affiliate".
Expiration Date............... The Exchange Offer will expire at 5:00 p.m., New York City
time, , 1999, unless we decide to extend the
expiration date.
</TABLE>
4
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<TABLE>
<S> <C>
Accrued Interest on the New
Notes and the Outstanding
Notes....................... The new notes will bear interest from December 23, 1998. If
we accept your old notes for exchange, you will not receive
any payment in respect of interest on those outstanding
notes accrued from December 23, 1998 to the date of the
issuance of the new notes. Consequently, holders who
exchange their outstanding notes for new notes will receive
the same interest payment on June 15, 1999 (the first
interest payment date with respect to the outstanding notes
and the new notes to be issued in the Exchange Offer) that
they would have received had they not accepted the Exchange
Offer.
Termination of the Exchange
Offer....................... We may terminate the Exchange Offer at any time prior to the
expiration date if we determine that our ability to proceed
with the Exchange Offer could be materially impaired due to
any legal or governmental action, new law, statute, rule or
regulation or any interpretation of the staff of the
Commission of any existing law, statute, rule or regulation.
We do not expect any of the foregoing conditions to occur,
although there can be no assurance that such conditions will
not occur. Holders of outstanding notes will have certain
rights against our Company under the registration rights
agreement executed as part of the offering of the
outstanding notes should we fail to consummate the Exchange
Offer.
Procedures for Tendering
Outstanding Notes........... If you are a holder of a note and you wish to tender your
note for exchange pursuant to the Exchange Offer, you must
transmit to United States Trust Company of New York, as
exchange agent, on or prior to the Expiration Date:
either
- a properly completed and duly executed Letter of
Transmittal, which accompanies this Prospectus, or a
facsimile of the Letter of Transmittal, including all
other documents required by the Letter of Transmittal,
to the Exchange Agent at the address set forth on the
cover page of the Letter of Transmittal; or
- a computer-generated message transmitted by means of
The Depository Trust Company's Automated Tender Offer
Program system and received by the Exchange Agent and
forming a part of a confirmation of book-entry
transfer in which you acknowledge and agree to be
bound by the terms of the Letter of Transmittal;
and, either
- a timely confirmation of book-entry transfer of your
outstanding notes into the Exchange Agent's account at
The Depository Trust Company pursuant to the procedure
for book-entry transfers described in this Prospectus
under the heading "The Exchange Offer--Terms of the
Exchange Offer--Procedures for Tendering Old Notes"
must be
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
received by the Exchange Agent on or prior to the
Expiration Date; or
- the documents necessary for compliance with the
guaranteed delivery procedures described below.
By executing the Letter of Transmittal, you will represent
to us that, among other things:
- the new notes to be issued in the Exchange Offer are
being obtained in the ordinary course of your business
- you have no arrangement or understanding with any
person to participate in the distribution of such new
notes and
- you are not an "affiliate" of Dobson/Sygnet as defined
in Rule 405 under the Securities Act, or, if you are an
affiliate, you will comply with the registration and
prospectus delivery requirements of the Securities Act
to the extent applicable.
If you hold your old notes through The Depository Trust
Company and wish to participate in the Exchange Offer, you
may do so through The Depository Trust Company's Automated
Tender Offer Program. By participating in the Exchange
Offer, you will agree to be bound by the Letter of
Transmittal as though you had executed such Letter of
Transmittal.
Special Procedures for
Beneficial Owners........... If you are the beneficial owner of old notes and your name
does not appear on a security position listing of The
Depository Trust Company as the holder of such notes or if
you are a beneficial owner of old notes that are registered
in the name of a broker, dealer, commercial bank, trust
company or other nominee and you wish to tender such notes
or registered notes in the Exchange Offer, you should
contact the person in whose name your notes are registered
promptly and instruct that person to tender on your behalf.
If such beneficial holder wished to tender on his own behalf
such beneficial holder must, prior to completing and
executing the Letter of Transmittal and delivering its
outstanding notes, either make appropriate arrangements to
register ownership of the outstanding notes in such holder's
name or obtain a properly completed bond power from the
registered holder. The transfer of record ownership may take
considerable time.
Guaranteed Delivery
Procedures.................. If you wish to tender your notes and time will not permit
your required documents to reach the Exchange Agent by the
Expiration Date, or the procedure for book-entry transfer
cannot be completed on time or certificates for your
registered notes cannot be delivered on time, you may tender
your notes pursuant to the procedures described in this
Prospectus under the heading "The Exchange Offer--Terms of
the Exchange Offer--Guaranteed Delivery Procedures."
Withdrawal Rights............. You may withdraw the tender of your notes at any time prior
to 5:00 p.m., New York City time, on , 1999,
unless your notes were previously accepted for exchange.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Acceptance of Outstanding
Notes and Delivery of
Exchange Notes.............. Subject to certain conditions (as summarized above in
"Termination of the Exchange Offer" and described more fully
under "The Exchange Offer--Conditions of the Exchange
Offer"), we will accept for exchange any and all of your
notes which are properly tendered in the Exchange Offer
prior to 5:00 p.m., New York City time, on the Expiration
Date. The notes issued pursuant to the Exchange Offer will
be delivered promptly to you following the Expiration Date.
Certain U.S. Federal Income
Tax Consequences............ The exchange of the notes will generally not be a taxable
exchange for United States federal income tax purposes. We
believe you will not recognize any taxable gain or loss or
any interest income as a result of such exchange.
Use of Proceeds............... We will not receive any proceeds from the issuance of new
notes pursuant to the Exchange Offer. We will pay all
expenses incident to the Exchange Offer.
Exchange Agent................ United States Trust Company of New York is serving as
exchange agent in connection with the Exchange Offer. The
Exchange Agent can be reached at Corporate Trust
Administration, 114 West 47th Street, New York, NY
10036-1532. For more information with respect to the
Exchange Offer, the telephone number for the Exchange Agent
is (212) 852-1000 and the facsimile number for the Exchange
Agent is (212) 852-1625.
</TABLE>
SUMMARY DESCRIPTION OF THE NEW NOTES
<TABLE>
<S> <C>
Notes Offered................. $200,000,000 aggregate principal amount of 12 1/4% Senior
Notes due 2008.
Maturity Date................. December 15, 2008.
Interest Payment Dates........ June 15 and December 15 of each year, commencing June 15,
1999.
Ranking....................... The notes will be unsecured senior subordinated obligations
and will be subordinated to all our existing and future
senior indebtedness. The notes will rank equally with all
our other existing and future senior subordinated
indebtedness, and will rank senior to all our subordinated
indebtedness. The notes effectively will rank junior to all
liabilities of our subsidiaries. Because the notes are
subordinated, in the event of bankruptcy, liquidation or
dissolution, holders of the notes will not receive any
payment until holders of senior indebtedness have been paid
in full. The terms "senior indebtedness" and "subordinated
indebtedness" are defined in the "Description of the
Notes--Ranking" and "Description of the Notes--Certain
Definitions" sections of this Prospectus.
As of September 30, 1998, after giving pro forma effect to
the offering of the old notes and our use of the net
proceeds from the offering, and borrowings related to
certain acquisitions and related costs, we would have had no
indebtedness other than the notes and our subsidiaries would
have had $605.7 million of liabilities, including
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
$398.2 million of indebtedness, all of which would have been
effectively senior to the notes.
Optional Redemption........... We may redeem the notes, in whole or in part, at any time on
or after December 15, 2003, at the redemption prices set
forth under "Description of the Notes--Optional Redemption."
Public Equity Offering
Optional Redemption......... Before December 15, 2001, we may redeem up to 35% of the
aggregate principal amount of the notes with the net
proceeds of a public equity offering at 112.25% of the
principal amount thereof, plus accrued interest, if at least
65% of the aggregate principal amount of the notes
originally issued remains outstanding after such redemption.
See "Description of the Notes--Optional Redemption."
Change of Control............. Upon certain change of control events, each holder of notes
may require us to repurchase all or a portion of its notes
at a purchase price equal to 101% of the principal amount
thereof, plus accrued interest. See "Description of the
Notes--Certain Definitions" for the definition of a Change
of Control.
Certain Covenants............. The indenture governing the notes will contain covenants
that, among other things, will limit our ability and the
ability of our restricted subsidiaries to:
- incur additional indebtedness,
- pay dividends on, redeem or repurchase our capital
stock,
- make investments,
- issue or sell capital stock of restricted
subsidiaries,
- engage in transaction with affiliates,
- create certain liens,
- sell assets, and
- consolidate, merge or transfer all or substantially
all of our assets and the assets of our subsidiaries on
a consolidated basis.
These covenants are subject to important exceptions and
qualifications, which are described elsewhere in this
Prospectus under the heading "Description of the
Notes--Covenants."
Exchange Offer; Registration
Rights...................... Under a registration rights agreement executed as part of
the offering of the old notes, we have agreed to:
- prepare and file a registration statement enabling
note holders to exchange the privately placed notes for
publicly registered notes with identical terms,
- use our best efforts to cause the registration
statement to become effective
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
- and to consummate the Exchange Offer within 180 days
after December 23, 1998, and
- use our best efforts to file a shelf registration
statement for the resale of the notes if we cannot
effect an exchange offer within the time periods
listed above and in certain other circumstances.
The interest rate on the notes will increase to 12 3/4% if
we do not comply with our obligations under the registration
rights agreement. See "The Exchange Offer."
Absence of a Public Market for
the Exchange Notes.......... In general, you may freely transfer the new notes. However,
there are exceptions to this general statement. Holders may
not freely transfer the new notes if:
- they acquire the new notes outside of their ordinary
course of business,
- they have an arrangement with any person to
participate in the distribution of the new notes, or
- they are an affiliate of Dobson/Sygnet.
Further, the new notes will be new securities for which
there will not initially be a market. As a result, the
development or liquidity of any market for the new notes may
not occur. The initial purchasers have advised us that they
currently intend to make a market in the new notes. However,
you should be aware that the initial purchasers are not
obligated to do so. In the event such a market may develop,
the initial purchasers may discontinue it at any time
without notice. We do not intend to apply for a listing of
the new notes on any securities exchange or on any automated
dealer quotation system.
</TABLE>
RISK FACTORS
You should consider carefully the information set forth under the caption
"Risk Factors" beginning on page [13] and all the other information set forth in
this Prospectus before deciding whether to participate in the Exchange Offer.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth certain historical consolidated financial
data for Sygnet with respect to each of the three years in the period ended
December 31, 1997 and for the nine months ended September 30, 1997 and 1998. The
summary historical consolidated financial data as of and for each of the three
years in the period 1995 to 1997 have been derived from Sygnet's audited
consolidated financial statements. The summary historical consolidated financial
data as of and for the nine months ended September 30, 1997 and 1998 have been
derived from Sygnet's unaudited consolidated financial statements. In the
opinion of management, the unaudited financial statements have been prepared on
the same basis as Sygnet's audited consolidated financial statements and include
all adjustments, which consist only of normal recurring adjustments, necessary
for a fair presentation of the information set forth therein. Operating results
for the nine months ended September 30, 1998 are not necessarily indicative of
results that may be expected for the full year. The pro forma consolidated
statement of operations data give effect to the Sygnet Transactions as if they
occurred on January 1, 1997 and the pro forma consolidated balance sheet data
give effect to the Sygnet Transactions as if they occurred on September 30,
1998. The summary unaudited pro forma consolidated financial data are based on
currently available information and certain assumptions that management believes
are reasonable. The pro forma consolidated financial information does not
purport to represent what our results of operations would have been if the
Sygnet Transactions had been completed on such dates, nor does it purport to
indicate our future financial position or results of future operations. The
information as set forth below should be read in conjunction with "Selected
Consolidated Financial and Other Data," "Pro Forma Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and the related notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- --------------------
PRO FORMA
1995 (1) 1996 (2) 1997 1997 1997 1998
----------- --------- --------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Subscriber revenue.............................. $ 17,191 $ 31,085 $ 52,639 $ 55,154 $ 38,531 $ 46,738
Roaming revenue................................. 4,176 9,687 26,993 23,378 19,868 24,753
Equipment sales................................. 1,529 2,417 4,323 4,323 3,051 4,253
Other revenue................................... 1,681 1,607 1,679 1,679 1,308 1,190
----------- --------- --------- ----------- --------- ---------
Total revenue................................... 24,577 44,796 85,634 84,534 62,758 76,934
----------- --------- --------- ----------- --------- ---------
Costs and expenses:
Cost of services................................ 3,366 5,509 10,048 10,731 7,175 9,005
Cost of equipment sales......................... 4,164 5,816 9,663 9,663 6,806 7,790
General and administrative...................... 5,564 9,852 16,976 15,171 11,667 14,665
Selling and marketing........................... 3,082 6,080 10,841 12,046 7,466 9,057
Depreciation and amortization................... 3,487 10,038 28,719 74,769 21,143 21,343
----------- --------- --------- ----------- --------- ---------
Total costs and expenses........................ 19,663 37,295 76,247 122,380 54,257 61,860
----------- --------- --------- ----------- --------- ---------
Operating income (loss)........................... 4,914 7,501 9,387 (37,846) 8,501 15,074
Interest expense................................ (2,660) (11,174) (29,902) (60,388) (22,558) (21,613)
Other income (expense), net..................... (304) (195) (101) (101) 6 (340)
----------- --------- --------- ----------- --------- ---------
Income (loss) before income taxes and
extraordinary item............................ 1,950 (3,868) (20,616) (98,285) (14,051) (6,879)
Income tax benefit.............................. -- -- -- 37,349 -- --
Extraordinary loss on extinguishment of debt.... -- (1,420) -- -- -- --
----------- --------- --------- ----------- --------- ---------
Net income (loss)............................... $ 1,950 $ (5,288) $ (20,616) $ (60,936) $ (14,051) $ (6,879)
----------- --------- --------- ----------- --------- ---------
----------- --------- --------- ----------- --------- ---------
<CAPTION>
PRO FORMA
1998
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Subscriber revenue.............................. $ 48,876
Roaming revenue................................. 20,717
Equipment sales................................. 4,253
Other revenue................................... 1,190
-----------
Total revenue................................... 75,036
-----------
Costs and expenses:
Cost of services................................ 8,648
Cost of equipment sales......................... 7,790
General and administrative...................... 12,067
Selling and marketing........................... 11,003
Depreciation and amortization................... 55,788
-----------
Total costs and expenses........................ 95,296
-----------
Operating income (loss)........................... (20,260)
Interest expense................................ (45,253)
Other income (expense), net..................... (340)
-----------
Income (loss) before income taxes and
extraordinary item............................ (65,853)
Income tax benefit.............................. 25,024
Extraordinary loss on extinguishment of debt.... --
-----------
Net income (loss)............................... $ (40,829)
-----------
-----------
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
10
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------------- --------------------
PRO FORMA
1995 (1) 1996 (2) 1997 1997 1997 1998
----------- --------- --------- ----------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Adjusted EBITDA (3)............................... $ 8,401 $ 17,539 $ 38,106 $ 36,923 $ 29,644 $ 36,417
Ratio of earnings to combined fixed charges and
preferred stock dividends (4)................... 1.67x -- -- -- -- --
Capital expenditures, excluding cost of
acquisitions.................................... $ 9,056 $ 10,050 $ 25,576 $ 25,576 $ 16,979 $ 11,469
OTHER DATA:
Ending cellular subscribers (at period end)....... 44,665 106,574 142,934 142,934 130,146 166,886
Cellular penetration (at period end) (5).......... 4.4% 4.5% 6.0% 6.0% 5.5% 7.0%
Cellular churn (6)................................ 1.4% 1.3% 1.3% 1.3% 1.3% 1.5%
Average monthly revenue per cellular subscriber
(7)............................................. $ 46 $ 42 $ 36 $ 38 $ 36 $ 34
Marketing and selling costs per gross additional
cellular subscriber (8)......................... $ 370 $ 321 $ 291 $ 312 $ 306 $ 287
Cellular cell sites (at period end)............... 41 114 163 163 152 181
<CAPTION>
PRO FORMA
1998
-----------
<S> <C>
OTHER FINANCIAL DATA:
Adjusted EBITDA (3)............................... $ 35,528
Ratio of earnings to combined fixed charges and
preferred stock dividends (4)................... --
Capital expenditures, excluding cost of
acquisitions.................................... $ 11,469
OTHER DATA:
Ending cellular subscribers (at period end)....... 166,886
Cellular penetration (at period end) (5).......... 7.0%
Cellular churn (6)................................ 1.5%
Average monthly revenue per cellular subscriber
(7)............................................. $ 35
Marketing and selling costs per gross additional
cellular subscriber (8)......................... $ 331
Cellular cell sites (at period end)............... 181
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-------------------------
ACTUAL PRO FORMA
--------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net......................................................................... $ 52,138 $ 42,915
Total assets........................................................................................ 333,296 950,733
Total debt.......................................................................................... 302,644 598,155
Stockholders' equity................................................................................ 12,339 145,000
</TABLE>
- ------------------------------
(1) Includes the operations of the systems acquired in the Erie Acquisition from
September 30, 1995, the date of acquisition.
(2) Includes the operations of the systems acquired in the Horizon Acquisition
from October 9, 1996, the date of acquisition.
(3) Adjusted EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization, other income, extraordinary items, and
changes in accounting principles. In addition, the indenture governing the
notes contains certain covenant requirements that are based on Adjusted
EBITDA. See "Description of the Notes--Covenants." Adjusted EBITDA is not
derived pursuant to generally accepted accounting principles and should not
be construed as an alternative to net income, as a measure of performance,
or to cash flows, as a measure of liquidity. Adjusted EBITDA, as measured by
us, may differ significantly from similarly named measurements of other
companies and, as a consequence, may not provide any degree of reliable
comparability. The calculation of Adjusted EBITDA does not include our
commitments for capital expenditures or payments of debts and should not be
deemed to represent funds available to us.
(4) "Earnings" means earnings before extraordinary items and accounting changes,
interest expense, amortization of deferred financing costs, taxes and the
portion of rent expense under operating leases representative of interest.
Fixed charges consist of interest expense, amortization of deferred
financing costs and a portion of rent expense under operating leases
representative of interest. For the years ended December 31, 1996 and 1997
and for the nine months ended September 30, 1997 and 1998, Sygnet's earnings
were insufficient to cover its combined fixed charges and preferred stock
dividends by $4.6 million, $22.7 million, $16.2 million and $6.6 million,
respectively. On a pro forma basis, for the year ended December 31, 1997 and
the nine months ended September 30, 1998, our earnings would have been
insufficient to cover our combined fixed charges and preferred stock
dividends by $100.4 million and $65.9 million, respectively.
(5) Determined by dividing Sygnet's total ending cellular subscribers for the
period by the estimated total Pops covered by applicable FCC cellular
licenses or authorizations held by Sygnet.
(6) Churn means the number of cellular subscriber cancellations per period as a
percentage of the weighted average total cellular subscribers during such
period. Churn is stated as the average monthly churn rate for the period.
(7) Excludes roaming and equipment revenue.
(8) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during such period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales and equipment rentals.
11
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
This Prospectus constitutes a part of a registration statement filed by us
with the Securities and Exchange Commission (the "Commission") under the
Securities Act. As permitted by the rules and regulations of the Commission,
this Prospectus does not contain all of the information contained in the
registration statement and the exhibits and schedules thereto. Therefore, we
make in this Prospectus reference to the registration statement and to the
exhibits and schedules thereto. For further information about us and about the
securities we hereby offer, you should consult the registration statement and
the exhibits and schedules thereto. You should be aware that statements
contained in this Prospectus concerning the provisions of any documents filed as
an exhibit to the registration statement or otherwise filed with the Commission
are not necessarily complete, and in each instance reference is made to the copy
of such document so filed. Each such statement is qualified in its entirety by
such reference.
Upon effectiveness of the registration statement of which the Prospectus is
a part, we will become subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result,
we will file periodic reports, proxy statements and other information with the
Commission. You may read and copy reports, proxy statements and other
information we file at the public reference facilities maintained by the
Commission at the Public Reference Room 1024, 450 Fifth Street, N.W., Judiciary
Plaza, Washington D.C. 20549. Please call the Commission at 1-800-SEC-0330 for
further information on the public reference facilities. Copies of documents we
file can also be obtained at prescribed rates by writing to the Commission,
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549. You
may also access this information electronically through the Commission's web
page on the Internet at http://www.sec.gov. This web site contains reports,
proxy statement and other information regarding registrants such as ourselves
that have filed electronically with the Commission. You may also access
information regarding us through our web page on the Internet at
http://www.dobson.net.
The indenture governing the outstanding notes provides that we will furnish
to the holders of the notes copies of the periodic reports required to be filed
with the Commission under the Exchange Act. Even if we are not subject to the
periodic reporting and informational requirements of the Exchange Act, we will
make such filings to the extent that such filings are accepted by the
Commission. We will make these filings regardless of whether we have a class of
securities registered under the Exchange Act. Furthermore, we will provide the
Trustee for the notes and the holders of the notes within 15 days after such
filings with annual reports containing the information required to be contained
in Form 10-K, and quarterly reports containing the information required to be
contained in Form 10-Q promulgated by the Exchange Act. From time to time, we
will also provide such other information as is required to be contained in Form
8-K promulgated by the Exchange Act. If the filing of such information is not
accepted by the Commission or is prohibited by the Exchange Act, we will then
provide promptly upon written request, at our cost, copies of such reports to
prospective purchasers of the notes.
12
<PAGE>
RISK FACTORS
IN ADDITION TO THE INFORMATION CONTAINED IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN EVALUATING WHETHER OR NOT YOU
SHOULD PARTICIPATE IN THE EXCHANGE OFFER. CERTAIN CAPITALIZED TERMS ARE DEFINED
IN "CERTAIN TERMS."
WE HAVE A SIGNIFICANT AMOUNT OF INDEBTEDNESS OUTSTANDING
At September 30, 1998, assuming that the Sygnet Transactions had been
completed at the time, we would have had approximately $598.2 million of
consolidated indebtedness (including $398.2 million under the New Bank
Facilities) and $145.0 million of consolidated stockholder's equity. In
addition, under the same assumptions, our subsidiaries would have been able to
borrow $31.8 million of additional debt under the New Bank Facilities. The
indenture governing the notes also allows us and our subsidiaries to incur
substantial additional debt in the future. For the year ended December 31, 1997
and the nine months ended September 30, 1998, assuming the Sygnet Transactions
had been completed on January 1, 1997, our Adjusted EBITDA would have been
insufficient to cover its interest expense by $23.4 million and $9.7 million,
respectively, and our Adjusted EBITDA minus interest expense and capital
expenditures (excluding costs of acquisitions) would have been $(49.0) million
and $(21.2) million, respectively. For the year ended December 31, 1997, under
the same assumptions, our earnings would have been insufficient to cover our
combined fixed charges and preferred stock dividends by $100.4 million. For the
nine months ended September 30, 1998, under the same assumptions, our earnings
would have been insufficient to cover our combined fixed charges and preferred
stock dividends by $65.9 million. Our level of indebtedness could have important
consequences, including:
- the debt service requirements could make it more difficult for us to make
required payments under the notes;
- our ability to borrow additional money for working capital, capital
expenditures, debt service requirements or other purposes will be limited;
- a substantial portion of our future cash flow from operations will be
required to pay principal and interest on indebtedness and will not be
available for our business;
- our flexibility in planning for, or reacting to changes in, our business
and our ability to take advantage of future business opportunities may be
restricted;
- we may be more highly leveraged than certain of our competitors, which may
place us at a competitive disadvantage; and
- our high degree of leverage could make us more vulnerable in the event of
a downturn in our business.
WE MAY BE UNABLE TO MEET OUR DEBT SERVICE REQUIREMENTS
In order for us to be able to meet our debt service requirements, including
our obligations under the notes, we must successfully integrate our operations
with those of Dobson Communications Corporation, increase our market penetration
and further develop our cellular systems. We cannot assure you that we will
successfully achieve these goals or that we will generate enough cash flow from
operating activities to meet our debt service obligations and our other cash
requirements, including for working capital and capital expenditures.
Furthermore, if Sygnet is unable to satisfy any of the covenants under the New
Bank Facilities, including financial covenants, it will be unable to borrow
under the New Bank Facilities during that time. Failure to obtain such financing
could cause us to delay or abandon some or all of our plans, which could limit
our ability and that of our subsidiaries to meet debt service obligations
including obligations with respect to the notes and could have a material
adverse effect on our business. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and
13
<PAGE>
Capital Resources." Sygnet's ability to borrow under the New Bank Facilities
will be limited by the requirement that, on a quarterly basis beginning December
31, 2000, the amount available under the New Bank Facilities will reduce
quarterly until they terminate, which may require us to make significant
principal payments thereunder. See "Description of Certain Indebtedness."
WE MAY BE UNABLE TO REFINANCE OUR INDEBTEDNESS
We will need to refinance the New Bank Facilities and the notes at their
maturities. Our ability to do so will depend on, among other things, our
financial condition at the time, the restrictions in the instruments governing
their indebtedness and other factors, including market conditions, beyond our
control. If any of this indebtedness cannot be refinanced, it may cause a
default under the notes and we may be unable to meet our obligations under the
notes. In addition, if there is a delay in maintaining and expanding our systems
or if we do not generate sufficient cash flow to meet our debt service
requirements, we may need additional financing. We cannot assure you that we
could obtain any such refinancing or financing or that, if obtained, it would be
on acceptable terms. In the absence of such refinancing or financing, we could
be forced to sell assets at unfavorable prices in order to make up for any
shortfall. At September 30, 1998, after giving effect to the Sygnet
Transactions, approximately 86.7% of our assets would have consisted of
intangible assets, principally licenses granted by the FCC. The value of our
intangible assets will depend upon a variety of factors, including the success
of our business and the wireless telecommunications industry in general. In
addition, transfers of interests in such licenses require FCC approval. As a
result, we cannot assure you that the assets could be sold quickly enough, or
for sufficient amounts, to enable us to meet our obligations, including our
obligations with respect to the notes.
THE NOTES ARE EFFECTIVELY SUBDORDINATED TO ALL OF OUR OUTSTANDING OBLIGATIONS
We are a holding company with no direct operations and no significant assets
other than the stock of Sygnet. We are dependent on the cash flows of Sygnet to
meet our obligations, including our obligations to pay interest and principal on
the notes. Sygnet's ability to distribute funds to us will be restricted by the
terms of existing and future indebtedness, including the New Bank Facilities.
See "Description of Certain Indebtedness--New Bank Facilities."
Sygnet is a separate legal entity that has no obligation to make any funds
available for the notes. Because Sygnet has not guaranteed the notes, any right
we may have (and therefore the holders of the notes) to receive assets of Sygnet
upon its liquidation or reorganization is effectively junior to the claims of
the creditors, except to the extent we are a creditor of Sygnet. Sygnet has
pledged the stock of Sygnet Communications to secure borrowings under the New
Bank Facilities. In addition, Sygnet and its subsidiary have granted liens on
substantially all of their assets as security for the obligations under the New
Bank Facilities. At September 30, 1998, after giving pro forma effect to the
Sygnet Transactions, Sygnet would have had $605.7 million of liabilities,
including $398.2 million of indebtedness, all of which would have been secured
and effectively senior to the notes. See "Pro Forma Consolidated Financial Data"
and "Description of Certain Indebtedness."
WE MAY BE UNABLE TO INCUR ADDITIONAL SECURED INDEBTEDNESS
At September 30, 1998, on a pro forma basis giving effect to the Sygnet
Transactions, we would have had no outstanding indebtedness, other than the
notes, and our subsidiaries would have had $605.7 million of liabilities,
including $398.2 million of secured indebtedness, all of which would have been
effectively senior to the notes. The indenture governing the notes permits our
subsidiaries and us to incur additional indebtedness and to secure such
indebtedness. In the event Sygnet borrows additional funds under the New Bank
Facilities or our subsidiaries or we obtain additional funds through the
incurrence of other secured indebtedness and our subsidiaries or we default with
respect to any such indebtedness, the holders of such indebtedness would be
entitled to payment out of the proceeds of their collateral prior to the
14
<PAGE>
holders of general unsecured indebtedness, including the notes, despite the
existence of an event of default with respect to the notes. Assets remaining
after satisfaction of the claims of creditors of Sygnet and the holders of our
secured indebtedness may not be sufficient to pay amounts due on any or all of
the notes then outstanding. See "Description of the Notes."
RESTRICTIONS IMPOSED BY OUR DEBT AGREEMENTS MAY LIMIT OR PROHIBIT US FROM
ENGAGING IN CERTAIN TRANSACTIONS
The indenture governing the notes and the terms of the New Bank Facilities
restrict or prohibit our subsidiaries and us from:
- incurring additional indebtedness,
- paying dividends,
- repaying subordinated indebtedness prior to their maturities,
- selling assets,
- making investments,
- engaging in transactions with stockholders and affiliates,
- issuing capital stock,
- creating liens, or
- engaging in mergers or acquisitions.
In particular, the New Bank Facilities limit the ability of Sygnet to pay
dividends necessary for us to make payments on the notes. In addition, the New
Bank Facilities that require Sygnet and we maintain certain financial ratios.
See "Description of Certain Indebtedness--New Bank Facilities." These
restrictions may limit the ability of our subsidiaries and us to obtain future
financings, fund capital expenditures, or engage in other business activities
that may be in our interest. Our future indebtedness and that of our
subsidiaries may also contain significant restrictions.
If our subsidiaries or we fail to comply with the restrictions in financing
agreements, such failure could lead to a default under the terms of such
indebtedness and the notes even though we may be able to meet our 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 interest. We cannot assure you that we or our subsidiaries would be able
to make such payments or borrow enough funds from other sources to make any such
payments. Even if we could obtain additional financing, we cannot assure you
that it would be on terms that are acceptable to us. In addition, Sygnet's
obligations under the New Bank Facilities are secured by substantially all
assets of Sygnet and its subsidiaries, which could impair the ability of our
subsidiaries and of us to obtain favorable financing. See "Description of
Certain Indebtedness."
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE A CHANGE OF
CONTROL OFFER
We must offer to purchase the notes upon the occurrence of a Change of
Control at a purchase price equal to 101% of their principal amount, plus
accrued interest. See "Description of the Notes-- Repurchase of Notes upon a
Change of Control."
The New Bank Facilities prohibit us from prepaying the notes, including
required prepayments following a Change of Control. Prior to commencing an offer
to purchase, we would be required to repay in full all of our indebtedness and
that of our subsidiaries that would prohibit the repurchase of the notes,
including indebtedness under the New Bank Facilities, or obtain any consents
required to permit the repurchase. If we were unable to repay all of such
indebtedness or were unable to obtain the necessary consents, then we would be
unable to offer to purchase the notes, resulting in an event of default under
the
15
<PAGE>
indenture governing the notes. We cannot assure you that we will have enough
funds available at the time of any Change of Control offer to make any debt
payment, including repurchases of notes, as described above.
The events that constitute a Change of Control under the indenture may also
be events of default under the New Bank Facilities or our other indebtedness and
that of our subsidiaries. Such events may permit the lenders under such debt to
declare the debt due and payable and, if the debt is not paid, to require our
subsidiaries or us to sell assets that secure such debt in order to repay the
lenders. In this case, our ability to raise cash to repurchase the notes would
be limited and would reduce the practical benefit of the offer to purchase
provisions to the holders of the notes. See "Description of Certain
Indebtedness."
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS WITH THOSE OF DOBSON
COMMUNICATIONS CORPORATIONS
We intend to integrate Sygnet's operations with existing cellular operations
of Dobson Communications Corporation by centralizing pricing, customer service
and marketing, systems design, engineering, purchasing and financial and
administrative functions and from the consolidation of billing functions.
However, we may face some difficulties as a result of:
- loss of key Sygnet personnel;
- failure to integrate our corporate accounting, financial reporting and
management information systems with those of Dobson's Communications
Corporations; and
- the strain on existing personnel of Dobson Communications Corporation who
will largely manage both businesses.
In addition, telecommunications providers generally experience higher
customer and employee turnover rates during and after an acquisition. We cannot
assure you that Dobson Communications Corporation will be able to integrate
Sygnet's operations with those of Dobson Communications Corporation successfully
or manage Sygnet's business. Failure to integrate operations effectively and on
a timely basis could have a material adverse effect on our financial condition
and results of operations.
WE ARE WHOLLY OWNED AND WILL BE MANAGED BY DOBSON COMMUNICATIONS CORPORATION
WHICH MAY RESULT IN CONFLICTS OF INTEREST.
All of our outstanding capital stock is owned by Dobson Communications
Corporation. In the future we may engage in transactions with Dobson
Communications Corporation and its affiliates. Everett R. Dobson, the Chairman
and Chief Executive Officer of Dobson Communications Corporation, serves as our
Chairman and Chief Executive Officer. In addition, G. Edward Evans, President
and Chief Operating Officer of Dobson Communications Corporation's cellular
operations, serves as our President and Chief Operating Officer; Bruce R.
Knooihuizen, the Vice President and Chief Financial Officer of Dobson
Communications Corporation, serves as our Vice President and Chief Financial
Officer; and Stephen T. Dobson, the Secretary of Dobson Communications
Corporation, serves as our Treasurer and Secretary. We are controlled by Dobson
Communications Corporation in such a way that may result in conflicts of
interest with respect to transactions involving Dobson and us, including
negotiating the terms for providing services to each other or enforcing any such
arrangements. In addition, certain decisions concerning our operations or
financial structure may present conflicts of interest between Dobson and the
holders of the notes.
Certain of Dobson Communications Corporation's markets are close to Sygnet's
markets in Pennsylvania and New York. Although our directors who are also
directors or officers of Dobson Communications Corporation have certain
fiduciary obligations to us, such directors and Dobson are in positions that may
create potential conflicts of interest with respect to certain business
opportunities available to and certain transactions involving us. Neither
Everett R. Dobson, Mr. Evans, Mr. Knooihuizen, nor Stephen T.
16
<PAGE>
Dobson is obligated to present to us any particular investment opportunity which
comes to their attention, even if such opportunity is of a character which might
be suitable for investment by us.
WE FACE INTENSE COMPETITION IN OUR BUSINESS
The telecommunications industry is highly competitive. Many of our
competitors and potential competitors have substantially greater financial,
personnel, technical, marketing and other resources than do we, as well as other
competitive advantages. Currently the FCC authorizes only two cellular licensees
to operate in each license area and we compete in each of our markets with one
other cellular licensee. Competition for subscribers between cellular licensees
in a given license area is based principally upon price, the services and
enhancements offered, the technical quality of the cellular system, customer
service, system coverage and capacity. We also compete, although to a lesser
extent, with resellers, paging companies and landline telephone service
providers.
As a result of recent regulatory and legislative initiatives, our cellular
operations may face increased competition from entities which use other
communications technologies or other radio frequency spectrum such as broadband
PCS licensees and enhanced specialized mobile radio licensees. The FCC has
authorized as many as six broadband PCS licensees to provide services in each of
our markets, although not all of these licensees have begun servicing those
markets. Our operations may also face competition from other technologies
developed in the future including, but not limited to, satellite systems and
services provided over spectrum allocated to the Wireless Communications
Services and General Wireless Communications Services. While mobile services are
not currently feasible on Wireless Communications Services spectrum, and General
Wireless Communications Services spectrum has not been licensed, mobile
operations are not prohibited on such spectrum and may emerge at some future
date. We believe the likelihood of near-term competition from such services is
reduced because the areas in which we operate are less densely populated.
However, one or more of the technologies we currently use in our business may
become inferior or obsolete at some time in the future. See
"Business--Competition."
We may not be able to continue to compete successfully and new technologies
and products that are more commercially accepted than ours may be developed.
Some competitors may market other services such as long distance, cable
television access or landline local exchange services with their wireless
offerings. There has been an industry trend of declining average revenue per
minute, as competition between service providers has led to reductions in rates
for airtime and subscriptions and other charges. We expect that this trend will
continue. See "Business--Competition" for more detailed information on our
competitive environment.
OUR BUSINESS IS AFFECTED BY RAPID AND SIGNIFICANT TECHNOLOGICAL CHANGES
The telecommunications industry is subject to rapid and significant changes
in technology, including advancements protected by intellectual property laws.
Significant changes can be seen in the increasing pace of digital upgrades in
existing analog wireless systems, evolving industry standards, the availability
of new radio frequency spectrum allocations for wireless services, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements, developments in emerging
wireless transmission technologies and changes in end-user requirements and
preferences. International standards bodies and national regulators will
consider technology standards for new third-generation wireless technologies in
coming years, and we cannot assure you that our current technologies will be
compatible with such technologies. In addition, we may be required to select in
advance one technology over another. However, at the time we must make our
investment, we may not be able to accurately predict which technology will prove
to be the most economic, efficient or capable of attracting customer usage. We
also face uncertainty as to the extent of future customer demand as well as the
extent to which airtime and monthly access rates may continue to decline. The
effect of technological changes on our business cannot be predicted, and we
cannot assure you that technological developments will not have a material
adverse effect on us.
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OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL
A small number of management and operating personnel at Dobson
Communications Corporation also manage and oversee our operations. The loss of
certain of these individuals could have a material adverse effect on us. We
believe that our ability to successfully manage our planned growth will depend
in large part on our continued ability to attract and retain highly skilled and
qualified personnel. See "--Risks Associated with the Sygnet Acquisition;
Conflicts of Interest" and "Management."
WE RELY ON THE USE OF THIRD-PARTY SERVICE MARKETS TO MARKET OUR PRODUCTS AND
SERVICES. THE LOSS OF THE RIGHT TO USE THE SERVICE MARKS COULD ADVERSELY
AFFECT OUR BUSINESS
We intend to continue to use the registered service mark CELLULAR
ONE-Registered Trademark- to promote the services offered by Sygnet. Sygnet has
five-year contracts with Cellular One Group, the owner of the service mark, for
three of its four markets. These contracts begin to expire in 2001, and Sygnet
has an option to renew each of these contracts for two additional five-year
terms. See "Business--Service Marks." Under these agreements, Sygnet must meet
specified operating and service quality standards for its systems. If these
agreements are not renewed or if we fail to meet the applicable quality
standards, our ability both to attract new subscribers and retain existing
subscribers could be impaired. Recently, AT&T Wireless, which had been the
single largest user of the CELLULAR ONE-Registered Trademark- name, has
significantly reduced its use of the brand name as a primary service mark. If,
for this or some other reason beyond our control, the CELLULAR ONE-Registered
Trademark- mark was to suffer diminished marketing appeal, our ability both to
attract new subscribers and retain existing subscribers could be materially
impaired.
THE APPLICABILITY OF FRAUDULENT CONVEYANCE STATUTES COULD ADVERSELY AFFECT THE
NOTES
Various laws enacted to protect creditors may apply to our incurrence of
indebtedness and other obligations in connection with the Sygnet Transactions,
including the issuance of the notes. If a court were to find in a lawsuit by one
or more of our unpaid creditors or its or their representatives that we did not
receive fair consideration or reasonably equivalent value for incurring such
indebtedness or obligation and, at the time of such incurrence:
- we were insolvent;
- we were rendered insolvent by reason of such incurrence;
- we were engaged in a business or transaction for which our remaining
assets constituted unreasonably small capital; or
- we intended to incur or believed we would incur obligations beyond our
ability to pay such obligations as they mature,
such court, subject to applicable statutes of limitation, could decide to
invalidate, in whole or in part, such indebtedness and obligations as fraudulent
conveyances or subordinate such indebtedness and obligations to our existing or
future creditors.
The measure of insolvency for purposes of determining whether we made a
fraudulent conveyance will vary depending on the law of the jurisdiction which
is being applied. Generally, however, we would be considered insolvent at a
particular time if the sum of our debts was then greater than all of our
property at a fair valuation or if the present fair saleable value of our assets
was then less than the amount that would be required to pay our probable
liabilities on our existing debts as they became due. On the basis of Sygnet's
historical financial information, Sygnet's recent operating history and other
factors, our management believes that, after giving effect to the Sygnet
Transactions, we were not rendered insolvent, we will have sufficient capital
for the business in which we will be engaged and we will be able to pay our
debts as they mature; however, we have not obtained any independent opinion
regarding such issues. In addition,
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we cannot assure you as to what standard a court would apply in making such
determinations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
OUR BUSINESS IS REGULATED AND THERE IS POTENTIAL FOR ADVERSE REGULATORY CHANGES.
WE MAY BE UNABLE TO OBTAIN NECESSARY REGULATORY APPROVALS
The licensing, construction, operation, acquisition and sale of cellular
systems, as well as the number of cellular and other wireless licensees
permitted in each market, are regulated by the FCC. Changes in the regulation of
wireless activities and wireless carriers or the loss of any license or licensed
area could have a material adverse effect on our operations. In addition, all
cellular licenses in the United States must be renewed after the expiration of
their initial ten-year term. Our cellular licenses begin to expire in October
2000. We believe that each of these licenses will be renewed based upon FCC
rules establishing a presumption in favor of licensees that have complied with
their regulatory obligations during the initial license period. We cannot assure
you, however, that the FCC will renew our licenses. See "Business-- Regulation."
EQUIPMENT FAILURES AND NATURAL DISASTERS MAY ADVERSELY AFFECT OUR BUSINESS
A major equipment failure or a natural disaster affecting our central
switching office, our microwave links or certain of our cell sites could have a
material adverse effect on our operations.
OUR RELIANCE ON ONE VENDOR FOR OUR CUSTOMER BILLING MAY ADVERSELY AFFECT THE
TIMING OF OUR RECEIPT OF FUNDS
We rely primarily on one vendor to produce all of our customer billings. If
this billing vendor for any reason were to encounter significant problems
affecting its ability to perform its billing functions for us, our ability to
generate billings to our customers would be materially impaired until a new
arrangement could be established, which may adversely affect the timing of our
receipt of funds.
THE CONCERN OVER RADIO FREQUENCY EMISSION MAY ADVERSELY AFFECT USE OF CELLULAR
TELEPHONES
Media reports have suggested that certain radio frequency emissions from
cellular telephones may be linked to cancer, and may interfere with pacemakers
and other medical devices. Concerns over radio frequency emissions may
discourage the use of cellular telephones, which could have a material adverse
effect on our business. On August 1, 1996, the FCC released a report and order,
which became effective in August 1996 as to mobile and portable devices and
October 1997 for cellular, that updates the guidelines and methods it uses for
evaluating radio frequency emissions from radio equipment, including cellular
telephones and transmitting facilities. We do not believe these guidelines will
have a material impact on our operations. While the FCC's rules impose more
restrictive standards on radio frequency emissions from lower power devices such
as cellular telephones, we believe, based on the certificates of manufacturers,
that all cellular telephones currently provided by Sygnet to its customers, as
well as Sygnet's transmitting facilities, comply with the FCC's standards. See
"Business--Regulation."
THE POTENTIAL FAILURE OF COMPUTER SYSTEMS TO RECOGNIZE YEAR 2000 MAY ADVERSELY
AFFECT OUR OPERATIONS
The "Year 2000 Issue" is the result of the inability of some computer
programs to distinguish the year 1900 from the year 2000. Most computer programs
and operating systems were written using two digits to define the applicable
year rather than four digits. This means that any equipment containing computer
programs with time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. In some instances this could result in
system failures, disruption in operations and possible inaccuracies of data.
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Sygnet has substantially completed an inventory of all its systems and
equipment in each market to determine the impact of the Year 2000 Issue. Based
on this inventory, Sygnet has contacted its significant vendors to determine how
their products and services might be affected by the Year 2000 Issue. Generally,
Sygnet is relying upon representations made by the vendors as to their state of
readiness for the Year 2000 Issue. Based on internal evaluations and on
information provided by these vendors, certain systems have been upgraded and
tested for Year 2000 compliance. Sygnet estimates that it is 60% complete with
this phase of the project.
Sygnet is placing special emphasis on areas that present a risk of
materially interrupting its revenue stream in the event of a Year 2000 problem.
Presently, three main systems appear to have the potential to materially
interrupt our revenue stream due to the Year 2000 Issue. They are the two
cellular switches, which could prevent calls from being made, and the billing
system, which could prevent Sygnet from billing and subsequently receiving
revenue from its customers. To address this risk, the switch, which serves
Sygnet's Ohio and Pennsylvania markets, has recently undergone a software
upgrade to a Year 2000 compliant version. Sygnet has monitored testing of this
software in a Year 2000 situation with commonly known critical dates and has
encountered no problems. Accordingly, Sygnet has deemed this system to have a
minimal risk of failure regarding the Year 2000 Issue and will not develop
contingency plans for this switch unless new information becomes available that
suggests a contingency plan is warranted. The switch, which serves Sygnet's New
York market, is expected to have its software upgraded to a Year 2000 compliant
version in the first quarter of 1999. In connection with the planned upgrade of
the New York system, Sygnet plans to replace the switching equipment with
equipment that is believed to be Year 2000 compliant. In addition, the upgrade
of the billing system software to a Year 2000 compliant version is expected to
be completed during the first quarter of 1999. The vendor that provides this
system has indicated that Year 2000 compliance testing will be completed by June
of 1999. Sygnet has deemed this system to have a moderate risk of not being able
to handle the Year 2000 requirements and a contingency plan is being prepared
that may include selecting a new billing vendor in mid-1999.
The cost of testing and upgrading these systems can not be determined at
this time. Our current estimate of the cost of becoming Year 2000 compliant is
$250,000 or less. This estimate may change significantly downward or upward as
the process continues or if problems arise with either a switch or billing
system. Additionally, this estimate may change substantially if other systems or
vendors are unable to become Year 2000 compliant causing a material interruption
of the revenue stream.
YOU MAY FIND IT DIFFICULT TO SELL YOUR NOTES
Currently, there is no public market for the new notes or the old notes. We
do not intend to apply for listing of the notes on any securities exchange or on
any automated dealer quotation system. Although the initial purchasers have
informed us that they intend to make a market in the notes, they are not
obligated to do so and may discontinue any such market at any time without
notice. In addition, such market making activity may be limited during this
Exchange Offer or during an offering under a shelf registration statement should
we decide to file one. As a result, we can make no assurances to you as to the
development or liquidity of any market for the notes, your ability to sell the
notes, or the price at which you may be able to sell the notes. Future trading
prices of the notes will depend on many factors, including among other things,
prevailing interest rates, our operating results and the market for similar
securities. Historically, the market for securities similar to the notes,
including non-investment grade debt, has been subject to disruptions that have
caused substantial volatility in the prices of such securities. We cannot assure
you that, if a market develops, it will not be subject to similar disruptions.
THE MARKET VALUE OF THE NEW NOTES COULD BE ADVERSELY AFFECTED IF ONLY A LIMITED
NUMBER OF NEW NOTES ARE AVAILABLE FOR TRADING
To the extent that a large amount of old notes are not tendered or are
tendered and not accepted in the Exchange Offer, the trading market for the new
notes could be materially adversely affected.
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Generally, a limited amount, or "float," of a security could result in less
demand to purchase such security and, as a result, could result in lower prices
for such security. We cannot assure you that a sufficient number of old notes
will be exchanged for new notes in the Exchange Offer so that this does not
occur.
UNEXCHANGED OLD NOTES WILL CONTINUE TO HAVE LIMITATIONS ON TRANSFERABILITY
Untendered outstanding notes that are not exchanged for new notes pursuant
to the Exchange Offer will remain restricted securities. Outstanding notes will
continue to be subject to the following restrictions on transfer:
- outstanding notes may be resold only if registered pursuant to the
Securities Act, if an exemption from registration is available thereunder,
or if neither such registration nor such exemption is required by law,
- outstanding notes shall bear a legend restricting transfer in the absence
of registration or an exemption therefrom, and
- a holder of outstanding notes who desires to sell or otherwise dispose of
all or any part of its outstanding notes under an exemption from
registration under the Securities Act, if requested by us, must deliver to
us an opinion of independent counsel experienced in Securities Act
matters, reasonably satisfactory in form and substance to us, that such
exemption is available.
FORWARD-LOOKING STATEMENTS
The statements, other than statements of historical facts included in the
Prospectus, including the descriptions of our plans, our strategies, planned
capital expenditures, Year 2000 preparedness and anticipated cost savings, are
forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "intend," "estimate," "anticipate" or "believe." We believe that the
expectations reflected in such forward-looking statements are accurate. However,
our actual future performance will differ materially from such statements,
specifically, our plans involve a number of risks and uncertainties. Important
factors that could cause actual capital expenditures, Year 2000 preparedness,
acquisition activity, or our performance to differ materially from our plans
include, without limitation:
- our ability to satisfy the financial covenants of its existing and future
debt instruments and to raise additional capital;
- our ability to integrate our operations with Dobson's existing operations
and to successfully market our services and products to existing and new
customers;
- our ability to install equipment and expand and upgrade our systems in a
timely manner and to manage our rapid growth successfully;
- our ability to compete effectively against competitors with greater
financial, technical, marketing and other resources and respond
effectively to changes in end-user requirements and preferences;
- the inability of third party vendors to provide products and services
which are Year 2000 compliant;
- the development of other technologies and products that may gain more
commercial acceptance than ours; and
- adverse regulatory changes.
We cannot assure you that anticipated future results will be achieved. Actual
events or results may differ materially as a result of risks to which we are or
may be subject. You should not place undue reliance on these forward-looking
statements which speak only as of the date of this Prospectus. Except as
required by
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law we do not intend to update or revise these forward-looking statements to
reflect events or circumstances after the date hereof including, without
limitation, changes in our business strategy or planned capital expenditures, or
to reflect the occurrence of unanticipated events.
USE OF PROCEEDS OF THE NEW NOTES
This Exchange Offer is intended to satisfy our obligation under our
Registration Rights Agreement dated as of December 23, 1998, with NationsBanc
Montgomery Securities LLC, Lehman Brothers Inc., First Union Capital Markets,
Inc., a division of Wheat First Securities, Inc. and TD Securities (USA) Inc.,
as initial purchasers. We will not receive any cash proceeds from the issuance
of the New Notes. We will only receive old notes with a total principal amount
equal to the total principal amount of the New Notes issued in the Exchange
Offer.
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THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
At the time we issued the old notes (the "Old Notes"), we agreed to file a
registration statement to register the exchange of the Old Notes for new notes
(the "New Notes" and, together with the Old Notes the "Notes") and to use our
reasonable best efforts to cause such registration statement to become effective
under the Securities Act and to consummate the Exchange Offer within 180 days
after the issue date. In the event that applicable interpretations of the staff
of the Commission do not permit us to effect the Exchange Offer, or if certain
holders of the Old Notes notify us that they are not eligible to participate in,
or would not receive freely tradeable New Notes in exchange for tendered Old
Notes pursuant to, the Exchange Offer, Dobson/Sygnet will use its reasonable
best efforts to cause to become effective a shelf registration statement with
respect to the resale of the Old Notes and to keep the shelf registration
statement effective until two years after the issue date. If the Exchange Offer
is not completed by June 21, 1999, we will be obligated to pay liquidated
damages to holders of the Old Notes.
Each holder of the Old Notes that wishes to exchange Old Notes for New Notes
will be required to represent that
- any New Notes received will be acquired in the ordinary course of its
business,
- it has no arrangement with any person to participate in the distribution
of the New Notes, and
- it is not an "affiliate", as defined in Rule 405 of the Securities Act, of
Dobson/Sygnet or, if it is an affiliate, that it will comply with the
registration and prospectus delivery requirements of the Securities Act to
the extent applicable.
RESALE OF NEW NOTES
Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third-parties, we believe that, except as described
below, New Notes issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by any holder
thereof, other than a holder which is an "affiliate" of Dobson/Sygnet within the
meaning of Rule 405 under the Securities Act, without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and such holder does not intend to participate and has no arrangement
or understanding with any person to participate in the distribution of the New
Notes. Any holder who tenders in the Exchange Offer with the intention or for
the purpose of participating in a distribution of the New Notes cannot rely on
such interpretation by the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. Unless an exemption from
registration is otherwise available, any such resale transaction should be
covered by an effective registration statement containing the selling security
holder's information required by Item 507 of Regulation S-K under the Securities
Act. This Prospectus may be used for an offer to resell, resale or other
retransfer of New Notes only as specifically set forth herein. Only
broker-dealers who acquired the Old Notes as a result of market-making
activities or other trading activities may participate in the Exchange Offer.
Each broker-dealer that receives New Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activity or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Notes. 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, we will accept for exchange any and all Old
Notes properly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on , 1999. We will issue $1,000 principal amount of New
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Notes in exchange for each $1,000 principal amount of outstanding Old Notes
surrendered pursuant to the Exchange Offer. Old Notes may be tendered only in
$1,000 increments.
The form and terms of the New Notes will be the same as the form and terms
of the Old Notes except that the New Notes will be registered under the
Securities Act and will not bear legends restricting their transfer. The New
Notes will evidence the same debt as the Old Notes. The New Notes will be issued
under and entitled to the benefits of the indenture, which also authorized the
issuance of the Old Notes, such that both series will be treated as a single
class of debt securities under the indenture. See "Description of the
Notes--General."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes being tendered for exchange.
As of the date of this Prospectus, $200.0 million of the Old Notes are
outstanding. This Prospectus, together with the Letter of Transmittal, is being
sent to all registered holders of Old Notes. There will be no fixed record date
for determining registered holders of Old Notes entitled to participate in the
Exchange Offer. We intend to conduct the Exchange Offer in accordance with the
provisions of the Registration Rights Agreement and the applicable requirements
of the Securities Exchange Act of 1934, and the rules and regulations of the
Commission thereunder. Old Notes that are not tendered for exchange in the
Exchange Offer will remain outstanding and continue to accrue interest and will
be entitled to the rights and benefits such holders have under the indenture and
the Registration Rights Agreement.
We will be deemed to have accepted for exchange properly tendered notes
when, as and if we have given oral or written notice of acceptance to the
Exchange Agent and complied with the provisions of Section of the
Registration Rights Agreement. The Exchange Agent will act as agent for the
tendering holders for the purposes of receiving the New Notes from us. We
expressly reserve the right to amend or terminate the Exchange Offer, and not to
accept for exchange any Old Notes not accepted for exchange, upon the occurrence
of any of the conditions specified below under "--Certain Conditions to the
Exchange Offer."
Holders to tender Old Notes in the Exchange Offer will not be required to
pay brokerage commissions or fees or, subject to the instructions in the letter
of transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. We 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 Expiration Date is 5:00 p.m., New York City time on , 1999,
unless we, in our sole discretion, extend the Exchange Offer, in which case the
Expiration Date will mean the latest date and time to which the Exchange Offer
is extended.
In order to extend the Exchange Offer, we will notify the Exchange Agent of
any extension by oral or written notice and will issue a press release notifying
the registered holders of Old Notes of such extension, each prior to 9:00 a.m.,
New York City time, on the next business day after the expiration date.
We reserve the right, in our sole discretion,
- to delay accepting any Old Notes for exchange, to extend the Exchange
Offer or to terminate the Exchange Offer if any of the conditions set
forth below under "--Certain Conditions to the Exchange Offer" have not
been satisfied, by giving oral or written notice of such delay, extension
or termination to the Exchange Agent, or
- to amend the terms of the Exchange Offer in any manner.
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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 of Old Notes. If the Exchange Offer is amended in a manner
determined by us to constitute a material change, we will promptly disclose such
amendment by means of a prospectus supplement that will be distributed to the
registered holders, and we will extend the Exchange Offer, depending upon the
significance of the amendment and the manner of disclosure to the registered
holders, if the Exchange Offer would otherwise expire during such period.
Without limiting the manner in which we may choose to make a public
announcement of any delay, extension, amendment or termination of the Exchange
Offer, we have no obligation to publish, advertise or otherwise communicate any
such public announcement, other than by making a timely release to an
appropriate news agency.
If we extend the period of time during which the Exchange Offer is open, or
if we are delayed in accepting for exchange of, or in issuing and exchanging the
New Notes for, any Old Notes, or is unable to accept for exchange of, or issue
New Notes for, any Old Notes pursuant to the Exchange Offer for any reason,
then, without prejudice to our rights under the Exchange Offer, the Exchange
Agent may, on our behalf, retain all Old Notes tendered, and such Old Notes may
not be withdrawn except as otherwise provided below in "--Withdrawal of
Tenders." The right to delay acceptance for exchange of, or the issuance and the
exchange of the New Notes for, any Old Notes is subject to applicable law,
including Rule 14e-1(c) under the Exchange Act, which requires that
Dobson/Sygnet either deliver the New Notes or return the Old Notes deposited by
or on behalf of the holders thereof promptly after termination or withdrawal of
the Exchange Offer.
INTEREST ON THE NEW NOTES
The New Notes will bear interest at a rate of 12 1/4% per annum, payable
semi-annually on June 15 and December 15 of each year, commencing on June 15,
1999. Holders of New Notes will receive interest on June 15, 1999 from the date
of initial issuance of the New Notes, plus an amount equal to the accrued
interest on the Old Notes through such date. Interest on the Old Notes accepted
for exchange will cease to accrue upon issuance of the New Notes.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, we will not be
required to accept for exchange, or exchange any New Notes for, any Old Notes,
and may terminate the Exchange Offer before the acceptance of any Old Notes for
exchange, if:
- any action or proceeding is instituted or threatened in any court or by or
before any governmental agency with respect to the Exchange Offer which,
in our reasonable judgment, might materially impair our ability to proceed
with the Exchange Offer; or
- any law, statute, rule or regulation is proposed, adopted or enacted, or
any existing law, statute, rule or regulation is interpreted by the staff
of the Commission, which, in our reasonable judgment, might materially
impair our ability to proceed with the Exchange Offer; or
- any governmental approval has not been obtained, which approval we, in our
reasonable discretion, deem necessary for the consummation of the Exchange
Offer as contemplated hereby.
If we determine in its sole discretion that any of these foregoing
conditions are not satisfied, we may
- refuse to accept any Old Notes and return all Old Notes to the tendering
holders,
- extend the Exchange Offer and retain all Old Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of
holders to withdraw such Old Notes, or
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- waive such unsatisfied conditions with respect to the Exchange Offer and
accept all properly tendered Old Notes which have not been withdrawn.
If such waiver constitutes a material change to the Exchange Offer, we will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Old Notes and we will extend the
Exchange Offer for a period of five to ten business days, depending on 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
day business period.
The foregoing conditions are for our sole benefit and may be asserted by us
regardless of the circumstances giving rise to any such condition or may be
waived by us in whole or in part at any time and from time to time in our sole
discretion. The failure by us at any time to exercise any of the foregoing
rights shall not be deemed a waiver of any such right and each such right shall
be deemed an ongoing right which may be asserted at any time and from time to
time.
In addition, we will not accept for exchange any Old Notes tendered, and no
New Notes will be issued in exchange for any such Old Notes, if at such time any
stop order shall be threatened or in effect with respect to the registration
statement of which the Prospectus constitutes a part or the qualification of the
indenture under the Trust Indenture Act of 1939.
PROCEDURES FOR TENDERING
Subject to the terms and conditions hereof and the Letter of Transmittal,
only a holder of Old Notes may tender such Old Notes in the Exchange Offer. To
tender in the Exchange Offer, a holder must complete, sign and date the Letter
of Transmittal, or facsimile thereof, have the signature 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 prior to 5:00 p.m., New
York City time, on the Expiration Date or, in the alternative, comply with the
Depository Trust Corporation's Automated Tender Offer Program procedures
described below. In addition, either:
- Old Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or
- a timely confirmation of book-entry transfer, which we call a book-entry
confirmation, of such Old Notes, if such procedure is available, into the
Exchange Agent's account at the Depository Trust Corporation, which we
call the Book-Entry Transfer Facility, pursuant to the procedure for book-
entry transfer described below or properly transmitted agent's message, as
defined below, must be received by the Exchange Agent prior to the
Expiration Date, or
- the holder must comply with the guaranteed delivery procedures described
below.
To be tendered effectively, the Letter of Transmittal and other required
documents must be received by the Exchange Agent at the address set forth below
under "--Exchange Agent" prior to 5:00 p.m., New York City time, on the
Expiration Date.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute an agreement between such holder and us in accordance with the
terms and subject to the conditions set forth herein and in the Letter of
Transmittal.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO
LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO US. HOLDERS MAY REQUEST
THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR OTHER
NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS.
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Any beneficial owner whose Old Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to tender
should contact the registered holder promptly and instruct such registered
holder of Old Notes 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 Old Notes, either make appropriate arrangements to register ownership of
the Old Notes in such owner's name or obtain a properly completed bond power
from the registered holder of Old Notes. The transfer of registered ownership
may take considerable time and may not be able to be completed prior to the
Expiration Date.
Signatures on a Letter of Transmittal and a notice of withdrawal described
below must be guaranteed by an eligible institution, as defined below, unless
the Old Notes are tendered (A) by a registered holder who has not completed the
box entitled Special Issuance Instructions or "Special Delivery Instructions" on
the Letter of Transmittal, or (B) for the account of an eligible institution. In
the event that signatures on a Letter of Transmittal or a notice of withdrawal
are required to be guaranteed, such guarantor must be an eligible institution,
which means a member firm of a registered national securities 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 17Ad-15 under the Exchange Act
which is a member of one of the recognized signature guarantee programs
identified in the Letter of Transmittal.
If the Letter of Transmittal is signed by a person other than the registered
holder of any Old Notes listed therein, such Old 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 Old Notes with the signature
thereon guaranteed by an eligible institution.
If the Letter of Transmittal or any Old 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 us, provide
evidence satisfactory to us of their authority to so act must be submitted with
the Letter of Transmittal.
The Exchange Agent and the Depository Trust Corporation have confirmed that
any financial institution that is a participant in the Depository Trust
Corporation's system may utilize the Depository Trust Corporation's Automated
Tender Offer Program to tender. Accordingly, participants in the Depository
Trust Corporation's Automated Tender Offer Program may, in lieu of physically
completing and signing the Letter of Transmittal and delivering it to the
Exchange Agent, electronically transmit their acceptance of the Exchange Offer
by causing the Depository Trust Corporation to transfer the Old Notes to the
Exchange Agent in accordance with the Depository Trust Corporation's Automated
Tender Offer Program procedures for transfer. The Depository Trust Corporation
will then send an agent's message to the Exchange Agent. The term agent's
message means a message transmitted by the Depository Trust Corporation received
by the Exchange Agent and forming part of the book-entry confirmation, which
states
- that the Depository Trust Corporation has received an express
acknowledgment from a participant in the Depository Trust Corporation's
Automated Tender Offer Program that is tendering Old Notes which are the
subject of such book entry confirmation,
- that such participant has received and agrees to be bound by the terms of
the Letter of Transmittal, or, in the case of an agent's message relating
to guaranteed delivery, that such participant has received, and
- agrees to be bound by the applicable notice of guaranteed delivery, and
that the agreement may be enforced against such participant.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered Old Notes and withdrawal of tendered Old Notes
will be determined by us in our sole discretion, which
27
<PAGE>
determination will be final and binding. We reserve the absolute right to reject
any and all Old Notes not properly tendered or any Old Notes our acceptance of
which would, in the opinion of our counsel, be unlawful. We also reserve the
right to waive any defects, irregularities or conditions of tender as to
particular Old Notes. Our 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 Old Notes must be cured within such time as we
shall determine. Although we intend to notify holders of defects or
irregularities with respect to tenders of Old Notes, neither we, the Exchange
Agent nor any other person shall incur any liability for failure to give such
notification. Tenders of Old Notes will not be deemed to have been made until
such defects or irregularities have been cured or waived. Any Old 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 holder, unless otherwise provided in the Letter of
Transmittal, as soon as practicable following the Expiration Date.
In all cases, issuance of New Notes for Old Notes that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of Old Notes or a timely book-entry confirmation of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility,
a properly completed and duly executed Letter of Transmittal and all other
required documents. If any tendered Old Notes are not accepted for exchange for
any reason set forth in the terms and conditions of the Exchange Offer or if Old
Notes are submitted for a greater principal amount than the holder desires to
exchange, such unaccepted or non-exchanged Old Notes will be returned without
expense to the tendering holder thereof, or, in the case of Old Notes tendered
by book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility pursuant to the book-entry transfer procedures described
below, such non-exchanged notes will be credited to an account maintained with
such book-entry transfer facility, as promptly as practicable after the
expiration or termination of the Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Notes at the book-entry transfer facility 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 book-entry transfer
facility's system may make book-entry delivery of Old Notes by causing the
book-entry transfer facility to transfer such Old Notes into the Exchange
Agent's account at the book-entry transfer facility in accordance with such
book-entry transfer facility's procedures for transfer. However, although
delivery of Notes may be effected through book-entry transfer at the book-entry
transfer facility 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, if
the guaranteed delivery procedures described below are to be complied with,
within the time period provided under such procedures. Delivery of documents to
the book-entry transfer facility does not constitute delivery to the exchange
agent.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
- The tender is made through an Eligible Institution;
- Prior to the expiration date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed notice of
guaranteed delivery by facsimile transmission, mail or hand delivery,
setting forth the name and address of the holder, the registered number(s)
of such Old Notes and the principal amount of Old Notes tendered, stating
that the tender is being made
28
<PAGE>
thereby and guaranteeing that, within three (3) New York Stock Exchange
trading days after the Expiration Date, the Letter of Transmittal, or
facsimile thereof, together with the Old Notes 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
- Such properly completed and executed Letter of Transmittal, or facsimile
thereof, or properly transmitted Agent's Message as well as all tendered
Old Notes in proper form for transfer or a book-entry confirmation, as the
case may be, and all other documents required by the letter of
transmittal, are received by the Exchange Agent within three (3) New York
Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their Old Notes according to the guaranteed
delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Old Notes may be withdrawn
at any time prior to 5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective:
- a written notice of withdrawal must be received by the Exchange Agent at
one of the addresses set forth below under "--Exchange Agent," or
- holders must comply with the appropriate procedures of the Depository
Trust Company's automated tender offer program system.
Any such notice of withdrawal must specify the name of the person having
tendered the Old Notes to be withdrawn, identify the Old Notes to be withdrawn,
including the principal amount of such Old Notes, and, where certificates of Old
Notes have been transmitted, specify the name in which such Old Notes were
registered, if different from that of the withdrawing holder. If certificates
for Old Notes have been delivered or otherwise identified to the Exchange Agent,
then, prior to the release of such certificates, the withdrawing holder must
also submit the serial numbers of the particular certificates to be withdrawn
and a signed notice of withdrawal with signatures guaranteed by an Eligible
Institution unless such holder is an Eligible Institution. If Old Notes have
been tendered pursuant to the procedure for book-entry transfer described above,
any notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility to be credited with the withdrawn Old Notes and
otherwise comply with the procedures of such facility. All questions as to the
validity, form and eligibility, including time of receipt, of such notices will
be determined by us, whose determination shall be final and binding on all
parties. Any Old Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Old Notes which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder thereof without cost to such holder, or, in the case
of Old Notes tendered by book-entry transfer into the Exchange Agent's account
at the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such Old Notes will be credited to an account
maintained with such book-entry transfer facility for the Old Notes, as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Old Notes may be retendered by following one of the
procedures described under "--Procedures for Tendering" above at any time on or
prior to the Expiration Date.
EXCHANGE AGENT
United States Trust Company of New York has been appoint as Exchange Agent
for the Exchange Offer. Questions and requests for assistance, requests for
additional copies of this Prospectus or the Letter
29
<PAGE>
of Transmittal and requests for notice of guaranteed delivery should be directed
to the Exchange Agent addressed as follows:
<TABLE>
<S> <C> <C>
BY MAIL: BY OVERNIGHT COURIER: BY HAND:
United States Trust United States Trust United States Trust
Company of New York Company of New York Company of New York
P.O. Box 844 Corporate Trust 111 Broadway
Cooper Station Operations Department Lower Level
New York, NY 10276-0844 770 Broadway - 13th Floor New York, NY 10006
Attn: Corporate Trust New York, NY 10003 Attn: Corporate Trust
Services Services
(registered or
certified mail
recommended)
BY FACSIMILE:(212) 420-6152
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 548-6565
</TABLE>
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by us. The principal
solicitation is being made by mail. However, additional solicitation may be made
by telegraph, telephone or in person by our officers and regular employees and
those of our affiliates.
We have not retained any dealer-manager in connection with the Exchange
Offer and will not make any payments to broker-dealers or other soliciting
acceptances of the Exchange Offer. However, we 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 us and are estimated in the aggregate to be approximately $ .
Such expenses include registration fees, fees and expenses to the Exchange Agent
and trustee, accounting and legal fees and printing costs, and related fees and
expenses.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of the
Old Notes for New Notes pursuant to the Exchange Offer. If, however,
certificates representing Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of Notes tendered, or if
tendered Notes are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of 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.
30
<PAGE>
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes, as set forth:
- in the legend thereon as a consequence of the issuance of the Old Notes
pursuant to the exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state
securities laws, and
- otherwise set forth in the offering memorandum dated December , 1998,
distributed in connection with the offering of the Old Notes.
In general, the Old Notes may not be offered or sold unless registered under
the Securities Act, except pursuant to an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. We do
not currently anticipate that we will register the Old Notes under the
Securities Act.
31
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The following table sets forth certain historical consolidated financial
data for Sygnet with respect to each of the five years in the period ended
December 31, 1997 and for the nine months ended September 30, 1997 and 1998. The
selected historical consolidated financial data as of each of the five years
ended December 31, 1997 were derived from Sygnet's audited consolidated
financial statements and for the nine months ended September 30, 1997 and 1998
have been derived from Sygnet's unaudited consolidated financial statements. In
the opinion of management, the unaudited consolidated financial statements have
been prepared on the same basis as Sygnet's audited consolidated financial
statements and include all adjustments, which consist only of normal recurring
adjustments, necessary for a fair presentation of the information set forth
therein. Operating results for the nine months ended September 30, 1998 are not
necessarily indicative of results that may be expected for the full year. The
information as set forth below should be read in conjunction with "Use of
Proceeds," "Pro Forma Consolidated Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and the related notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------------------------- --------------------
1993 1994 1995(1) 1996(2) 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SUBSCRIBER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Subscriber revenue............................. $ 8,878 $ 11,312 $ 17,191 $ 31,085 $ 52,639 $ 38,531 $ 46,738
Roamer revenue................................. 3,107 4,145 4,176 9,687 26,993 19,868 24,753
Equipment sales................................ 1,098 1,172 1,529 2,417 4,323 3,051 4,253
Other revenue.................................. 1,391 1,420 1,681 1,607 1,679 1,308 1,190
--------- --------- --------- --------- --------- --------- ---------
Total revenue.................................... 14,474 18,048 24,577 44,796 85,634 62,758 76,934
Costs and expenses:
Cost of services............................... 2,515 3,452 3,366 5,509 10,048 7,175 9,005
Cost of equipment sales........................ 930 1,624 4,164 5,816 9,663 6,806 7,790
General and administrative..................... 4,412 4,467 5,564 9,852 16,976 11,667 14,665
Selling and marketing.......................... 2,166 2,555 3,082 6,080 10,841 7,466 9,057
Depreciation and amortization.................. 1,951 2,639 3,487 10,038 28,719 21,143 21,343
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses....................... 11,974 14,737 19,663 37,295 76,247 54,257 61,860
--------- --------- --------- --------- --------- --------- ---------
Operating income................................. 2,500 3,311 4,914 7,501 9,387 8,501 15,074
Interest expense............................... (702) (988) (2,660) (11,174) (29,902) (22,558) (21,613)
Other income (expense), net.................... (275) (601) (304) (195) (101) 6 (340)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary item........ 1,523 1,722 1,950 (3,868) (20,616) (14,051) (6,879)
Extraordinary loss on extinguishment of debt... -- -- -- (1,420) -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss).............................. $ 1,523 $ 1,722 $ 1,950 $ (5,288) $ (20,616) $ (14,051) $ (6,879)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Dividends on preferred stock................... -- -- -- (718) (2,122) (2,122) --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) applicable to common
stockholders................................. $ 1,523 $ 1,722 $ 1,950 $ (6,006) $ (22,738) $ (16,173) $ (6,879)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) per share applicable to
common stockholders:(3)
Before extraordinary item.................... $ (.74) $ (2.93) $ (2.21) $ (.75)
Extraordinary item........................... (.23) -- -- --
--------- --------- --------- ---------
Net income (loss)............................ $ (.97) $ (2.93) $ (2.21) $ (.75)
--------- --------- --------- ---------
--------- --------- --------- ---------
OTHER FINANCIAL DATA:
Adjusted EBITDA (4).............................. $ 4,451 $ 5,950 $ 8,401 $ 17,539 $ 38,106 $ 29,644 $ 36,417
Ratio of earnings to combined fixed charges and
preferred stock dividends (5).................. 3.11x 2.60x 1.67x -- -- -- --
Capital expenditures, excluding cost of
acquisitions................................... $ 3,630 $ 5,793 $ 9,056 $ 10,050 $ 25,576 $ 16,979 $ 11,469
OTHER DATA:
Ending cellular subscribers (at period end)...... 18,037 24,124 44,665 106,574 142,934 130,146 166,886
Cellular penetration (at period end) (6)......... 2.5% 3.3% 4.4% 4.5% 6.0% 5.5% 7.0%
Cellular churn (7)............................... 1.3% 1.5% 1.4% 1.3% 1.3% 1.3% 1.5%
Average monthly revenue per cellular subscriber
(8)............................................ $ 50 $ 45 $ 46 $ 42 $ 36 $ 36 $ 34
Marketing and selling costs per gross additional
cellular subscriber (9)........................ $ 391 $ 393 $ 370 $ 321 $ 291 $ 306 $ 287
Cellular cell sites (at period end).............. 18 24 41 114 163 152 181
</TABLE>
(SEE FOOTNOTES ON FOLLOWING PAGE.)
32
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- SEPTEMBER 30,
1993 1994 1995 1996 1997 1998
--------- --------- --------- --------- --------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Property and equipment, net............................. $ 11,127 $ 14,084 $ 21,049 $ 43,959 $ 53,007 $ 52,138
Total assets............................................ 20,553 27,418 79,618 344,178 340,986 333,296
Long-term debt.......................................... 10,928 18,264 69,500 312,250 305,500 302,644
Mandatorily redeemable preferred stock.................. -- -- -- 19,718 -- --
Stockholders' equity (deficit).......................... 5,329 4,769 4,286 (1,982) 19,218 12,339
</TABLE>
- ------------------------------
(1) Includes the operations of the system acquired in the Erie Acquisition from
September 30, 1995, the date of acquisition.
(2) Includes the operations of the systems acquired in the Horizon Acquisition
from October 9, 1996, the date of acquisition.
(3) Net income (loss) per share applicable to common stockholders for the three
years ended December 31, 1995 is not provided because there is no meaningful
data for those periods.
(4) Adjusted EBITDA is provided because it is a measure commonly used in the
telecommunications industry to determine a company's ability to incur or
service debt. Adjusted EBITDA is not derived according to generally accepted
accounting principles and should not be considered as an alternative to net
income, as a measure of performance, or to cash flows, as a measure of
liquidity. The calculation of Adjusted EBITDA does not include Sygnet's
commitments for capital expenditures or payments of debts and should not be
deemed to represent funds available to Sygnet.
(5) "Earnings" is defined as earnings before extraordinary items and accounting
changes, interest expense, amortization of deferred financing costs, taxes
and the portion of rent expense under operating leases representative of
interest. Fixed charges consist of interest expense, amortization of
deferred financing costs and a portion of rent expense under operating
leases representative of interest. For the years ended December 31, 1996 and
1997 and the nine months ended September 30, 1997 and 1998, Sygnet's
earnings were insufficient to cover combined fixed charges and preferred
stock dividends by $4.6 million, $22.7 million, $16.2 million, and $6.6
million, respectively.
(6) Determined by dividing Sygnet's total ending cellular subscribers for the
period by the estimated total Pops covered by applicable FCC cellular
licenses or authorizations held by Sygnet.
(7) Churn means the number of cellular subscriber cancellations per period as a
percentage of the weighted average total cellular subscribers during such
period. Churn is stated as the average monthly churn rate for the period.
(8) Excludes roaming and equipment revenue.
(9) Determined by dividing cellular marketing and selling costs by the gross
cellular subscribers added during such period. Cellular marketing and
selling costs represent selling expenses and losses incurred on equipment
sales and equipment rentals.
33
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma consolidated condensed financial
statements have been prepared to give effect to the Sygnet Transactions. The
accompanying unaudited pro forma consolidated condensed statements of our
operations for the year ended December 31, 1997 and the nine months ended
September 30, 1998 give effect to the Sygnet Transactions as if they occurred on
January 1, 1997. The accompanying unaudited pro forma consolidated condensed
balance sheet as of September 30, 1998 has been prepared as if the Transactions
occurred as of that date. The Sygnet acquisition has been accounted for using
the purchase method of accounting. The unaudited pro forma consolidated
financial information assumes that all of the Sygnet Notes are tendered in the
Sygnet Note Repurchase and the aggregate purchase price for the Sygnet Notes is
$136.1 million and does not give effect to Sygnet's acquisition of Pennsylvania
2 RSA.
The unaudited pro forma consolidated condensed financial statements have
been prepared on the basis of certain assumptions that we believe are
reasonable, including assumptions relating to the allocation of the
consideration paid in the Sygnet acquisition for the assets and liabilities
acquired, based on estimates of fair values using available information provided
by the management of Sygnet. The unaudited pro forma consolidated condensed
financial statements do not give effect to certain cost savings that we will
seek to obtain following the Sygnet acquisition.
The unaudited pro forma consolidated condensed financial statements and
notes thereto are provided for informational purposes only and do not purport to
be indicative of the results that would have actually been obtained had the
Transactions been completed on the dates indicated or that may be expected to
occur in the future. The unaudited pro forma consolidated financial statements
and notes thereto should be read in conjunction with "Use of Proceeds,"
"Selected Consolidated Financial and Other Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business-- Markets
and Systems" and the historical financial statements and notes thereto included
elsewhere in this Prospectus.
34
<PAGE>
DOBSON/SYGNET COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------
THE COMPANY
SYGNET ADJUSTMENTS PRO FORMA
---------- ---------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING REVENUE:
Subscriber revenue................................................. $ 52,639 $ 2,515(1) $ 55,154
Roaming revenue.................................................... 26,993 (3,615)(1) 23,378
Equipment sales.................................................... 4,323 -- 4,323
Other revenue...................................................... 1,679 -- 1,679
---------- -------- -------------
Total operating revenue.......................................... 85,634 (1,100) 84,534
---------- -------- -------------
OPERATING EXPENSES:
Service............................................................ 10,048 683 (1)(2 10,731
Equipment.......................................................... 9,663 -- 9,663
General and administrative......................................... 16,976 (1,805)(1) 15,171
Marketing and selling.............................................. 10,841 1,205(1) 12,046
Depreciation and amortization...................................... 28,719 46,050 (2)(3 74,769
---------- -------- -------------
Total operating expenses......................................... 76,247 46,133 122,380
---------- -------- -------------
OPERATING INCOME (LOSS).............................................. 9,387 (47,233) (37,846)
Interest expense................................................... (29,902) (30,436)(4) (60,338)
Other expense, net................................................. (101) -- (101)
---------- -------- -------------
LOSS BEFORE INCOME TAXES............................................. (20,616) (77,669) (98,285)
INCOME TAX BENEFIT................................................... -- 37,349(5) 37,349
---------- -------- -------------
NET LOSS............................................................. $ (20,616) $ (40,320) $ (60,936)
---------- -------- -------------
---------- -------- -------------
</TABLE>
- ------------------------------
(1) To reclassify certain operating revenues and expenses to conform with our
presentation.
(2) To reflect the impact of the elimination of the depreciation related to the
sale of the towers and the estimated increase in rental expense attributable
to the leases, pursuant to the Tower Sale Leaseback.
(3) To reflect the additional depreciation and amortization resulting from the
allocation of the purchase price to property and equipment, cellular license
acquisition costs and intangible assets. Property and equipment is being
depreciated over two to ten years, cellular license acquisition costs over
15 years and intangible assets over five to ten years. The 15 year period
used for cellular license acquisition costs is based primarily on our
internal analysis of the recovery period for our cellular investments, which
indicates that such costs will be recovered through operations over a period
of not more than 15 years. Other factors considered include the competitive
nature of the cellular industry, the rate of technological change and risk
of obsolescence, and the specific terms and characteristics of the licenses.
See "Risk Factors--We Face Intense Competition in Our Business" and "--Our
Business is Affected By Rapid and Significant Technological Changes."
(4) To reflect (i) the elimination of $29.9 million of interest expense
(including $1.1 million of amortization of deferred financing costs)
associated with indebtedness of the Sygnet Notes and the Sygnet Bank
Facility which will be repaid as part of the Transactions, (ii) $24.5
million of interest expense relating to the $200.0 million principal amount
of the Old Notes, (iii) $33.4 million of interest expense relating to the
estimated $398.3 million of borrowings under the New Bank Facilities
(assuming a weighted average interest rate of 8.38%), (iv) $.2 million of
interest expense relating to the unused principal amount of the New Bank
Facilities (assuming a commitment fee of .5%), (v) $.8 million of
amortization of deferred financing costs relating to the estimated $8.2
million of debt issuance costs incurred in connection with the offering of
the Old Notes and (vi) $1.5 million of amortization of deferred financing
costs relating to the estimated $12.6 million of debt issuance costs
incurred in connection with the New Bank Facilities.
(5) To reflect an adjustment to income tax expense for the effects of the Sygnet
Transactions, including an income tax benefit for Sygnet's pro forma pre-tax
loss during the period, assuming a 38% effective tax rate.
35
<PAGE>
DOBSON/SYGNET COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
--------------------------------------------
THE COMPANY
SYGNET ADJUSTMENTS PRO FORMA
---------- ----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
OPERATING REVENUE:
Subscriber revenue................................................ $ 46,738 $ 2,138(1) $ 48,876
Roaming revenue................................................... 24,753 (4,036)(1) 20,717
Equipment sales................................................... 4,253 -- 4,253
Other revenue..................................................... 1,190 -- 1,190
---------- ----------------- -------------
Total operating revenue......................................... 76,934 (1,898) 75,036
---------- ----------------- -------------
OPERATING EXPENSES:
Service........................................................... 9,005 (357)(1)(2) 8,648
Equipment......................................................... 7,790 -- 7,790
General and administrative........................................ 14,665 (2,598)(1) 12,067
Marketing and selling............................................. 9,057 1,946(1) 11,003
Depreciation and amortization..................................... 21,343 34,445 (2)(3 55,788
---------- ----------------- -------------
Total operating expenses........................................ 61,860 33,436 95,296
---------- ----------------- -------------
OPERATING INCOME (LOSS)............................................. 15,074 (35,334) (20,260)
---------- ----------------- -------------
Interest expense.................................................. (21,613) (23,640)(4) (45,253)
Other expense, net................................................ (340) -- (340)
---------- ----------------- -------------
LOSS BEFORE INCOME TAXES............................................ (6,879) (58,974) (65,853)
INCOME TAX BENEFIT.................................................. -- 25,024(5) 25,024
---------- ----------------- -------------
NET LOSS............................................................ $ (6,879) $ (33,950) $ (40,829)
---------- ----------------- -------------
---------- ----------------- -------------
</TABLE>
- ------------------------------
(1) To reclassify certain operating revenues and expenses to conform with our
presentation.
(2) To reflect the impact of the elimination of the depreciation related to the
sale of the towers and the estimated increase in rental expense attributable
to the leases, pursuant to the Tower Sale Leaseback.
(3) To reflect the additional depreciation and amortization resulting from the
allocation of the purchase price to property and equipment, cellular license
acquisition costs and intangible assets. Property and equipment is being
depreciated over two to ten years, cellular license acquisition costs over
15 years and intangible assets over five to ten years. The 15 year period
used for cellular license acquisition costs is based primarily on our
internal analysis of the recovery period for our cellular investments, which
indicates that such costs will be recovered through operations over a period
of not more than 15 years. Other factors considered include the competitive
nature of the cellular industry, the rate of technological change and risk
of obsolescence, and the specific terms and characteristics of the licenses.
See "Risk Factors--We Face Intense Competition in Our Business" and "--Our
Business is Affected By Rapid and Significant Technological Changes."
(4) To reflect (i) the elimination of $21.6 million of interest expense
(including $.9 million of amortization of deferred financing costs)
associated with indebtedness of the Sygnet Notes and the Sygnet Bank
Facility which will be repaid as part of the Transactions, (ii) $18.4
million of interest expense relating to the $200 million principal amount of
the Old Notes, (iii) $25.0 million of interest expense relating to the
estimated $398.3 million of borrowings under the New Bank Facilities
(assuming a weighted average interest rate of 8.38%), (iv) $.1 million of
interest expense relating to the unused principal amount of the New Bank
Facilities (assuming a commitment fee of .5%), (v) $.6 million of
amortization of deferred financing costs relating to the estimated $8.2
million of debt issuance costs incurred in connection with the offering of
the Old Notes and (vi) $1.1 million of amortization of deferred financing
costs relating to the estimated $12.6 million of debt issuance costs
incurred in connection with the New Bank Facilities.
(5) To reflect an adjustment to income tax expense for the effects of the Sygnet
Transactions, including an income tax benefit for Sygnet's pro forma pre-tax
loss during the period, assuming a 38% effective tax rate.
36
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DOBSON/SYGNET COMMUNICATIONS COMPANY
UNAUDITED PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
-----------------------------------------------------------
DOBSON/SYGNET
COMBINED THE COMPANY
COMPANIES(1) SYGNET ADJUSTMENTS PRO FORMA
------------- ---------- ----------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Current Assets...................................... $ -- $ 16,443 $ -- $ 16,443
Pledged Securities.................................. -- -- 67,661(2) 67,661
Deposits............................................ 25,000 -- (25,000)(3) --
Property, Plant and Equipment....................... -- 52,138 (9,223)(3)(4) 42,915
Cellular License Acquisition Cost................... -- 241,062 525,452(3) 766,514
Intangible Assets................................... 3,426 23,653 30,221 (3)(5 57,300
------------- ---------- ----------------- -------------
Total Assets...................................... $ 28,426 $ 333,296 $ 589,111 $ 950,833
------------- ---------- ----------------- -------------
------------- ---------- ----------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities................................. $ 3,426 $ 18,313 $ (3,426) $ 18,313
Payables--Affiliate................................. 25,000 -- (25,000)(3) --
Long-term debt, net of current portion.............. -- 302,644 295,611(6) 598,255
Deferred Credits.................................... -- -- 189,265(3) 189,265
Stockholder's Equity/Net Assets..................... -- 12,339 132,661(7) 145,000
------------- ---------- ----------------- -------------
Total Liabilities and Stockholder's Equity........ $ 28,426 $ 333,296 $ 589,111 $ 950,833
------------- ---------- ----------------- -------------
------------- ---------- ----------------- -------------
</TABLE>
- ------------------------------
(1) Represents the combined historical balance sheets of Dobson/Sygnet Operating
Company and us.
(2) To reflect the estimated $67.7 million in restricted cash to be held in a
pledged account to secure and fund the first six scheduled interest payments
on the Notes.
(3) To allocate the purchase price of the Sygnet acquisition, including the
related deferred income tax liability to the assets acquired. The purchase
price allocation excludes the $6.0 million to be paid for the Pennsylvania 2
RSA.
(4) To reflect the impact of the elimination of the purchase price related to
the sale of the towers, pursuant to the Tower Sale Leaseback.
(5) To reflect an estimated $20.8 million of debt issuance costs incurred with
the Notes and the New Bank Facilities.
(6) To reflect (i) the elimination of $302.6 million of Sygnet's indebtedness
that will be repaid as part of the Sygnet Transactions (including $110.0
million of Sygnet Notes which we estimate will be repurchased for $136.1
million in the Sygnet Note Repurchase), (ii) the incurrence of $398.3
million of indebtedness under the New Bank Facilities and (iii) the issuance
of $200.0 million of Notes.
(7) To reflect (i) the elimination of stockholders' equity of Sygnet and (ii) a
capital contribution from Dobson Communications Corporation of $145.0
million.
37
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Sygnet owns and operates cellular telephone systems serving a large cluster
of properties with approximately 2.4 million Pops and 166,886 subscribers
located in northeastern Ohio, western Pennsylvania and western New York.
Sygnet's cellular systems are located in Youngstown, Ohio and Erie,
Pennsylvania, and in primarily rural and suburban areas between the Cleveland,
Akron-Canton, Pittsburgh, Buffalo and Rochester metropolitan areas. The
following discussion and analysis is of the historical financial condition and
results of operation of Sygnet and should be read in conjunction with Sygnet's
consolidated financial statements and the notes thereto appearing elsewhere in
this Prospectus.
Sygnet's operating results have been significantly affected as a result of
the Horizon Acquisition in October 1996 and the Erie Acquisition in September
1995. The systems acquired for $252.9 million in the Horizon Acquisition serve
contiguous markets representing approximately 1.4 million Pops in western
Pennsylvania and New York. The systems acquired in the Erie Acquisition for
$42.5 million represent approximately 282,300 Pops.
Sygnet's revenues primarily consist of (i) service revenue, which includes
charges to our subscribers for access and usage; (ii) roaming revenue, which
includes charges to cellular providers for providing service to their
subscribers in our service areas; and (iii) equipment revenue, from sales of
wireless telephone equipment. There has been an industry trend of declining
average revenue per minute, as competition among service providers has led to
reductions in rates for airtime and subscriptions and other charges and we
expect that this trend will continue. We believe that the impact of this trend
will be mitigated by increases in the number of cellular telecommunications
subscribers and the number of minutes of usage per subscriber. There has also
been a broad trend in the wireless telecommunications industry of declining
average revenue per subscriber. We believe that the downward trend is primarily
the result of the addition of new lower usage customers who utilize cellular
services for personal convenience, security or as a backup for their traditional
landline telephone. Although Sygnet has experienced a decline in average revenue
per subscriber, Sygnet has introduced new pricing plans, which have increased
its number of subscribers.
Roaming accounted for 31.5% and 32.2% of Sygnet's revenue for the year ended
December 31, 1997 and the nine months ended September 30, 1998, respectively.
While the industry trend is to reduce roaming rates, we believe that Sygnet's
roaming rates are generally lower than rates offered by others in or near its
systems. However, we cannot assure you that this trend will not materially
impact us in the future. On a pro forma basis giving effect to the Horizon
Acquisition, roaming yield (roamer service revenue, which includes airtime, toll
charges and surcharges, divided by roaming minutes of use) was $.57, $.55, $.58
and $.57 per minute for the years ended December 31, 1995, 1996 and 1997 and for
the nine months ended September 30, 1998, respectively.
Included in our roaming revenue for the years ended December 31, 1995, 1996
and 1997 and for the nine months ended September 30, 1997 and September 30,
1998, respectively, was $.1 million, $.9 million, $3.6 million, $2.5 million and
$4.0 million attributable to Sygnet customers roaming out of their home areas
but in other Sygnet markets.
Our primary operating expense categories include cost of service and
equipment, marketing and selling, general and administrative, and depreciation
and amortization.
Cost of service consists primarily of costs associated with billing, amounts
paid for interconnection and call delivery and amounts paid to third-party
cellular providers for providing service to Sygnet's subscribers when roaming,
offset by the amount billed to Sygnet's subscribers. Changes in the
interconnection charge rate structure imposed by the FCC or mandated by the
Telecommunications Act may have a material impact on us. See
"Business--Regulation."
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Cost of equipment represents the cost associated with telephone equipment
and accessories sold to customers. In recent years, Sygnet and other cellular
companies have increased the use of discounts on phone equipment and free phone
promotions, as competition between service providers has intensified. As a
result, Sygnet has incurred, and expects to continue to incur, losses on
equipment sales, which have affected marketing and selling costs per gross
additional cellular subscriber. While we expect to continue these discounts and
promotions, we believe that the use of such promotions will lead to increased
revenue from increases in the number of cellular subscribers.
Marketing and selling costs primarily consist of advertising costs and
compensation paid to sales personnel and independent agents and retail store
operations' costs. Commissions are paid to direct sales personnel primarily for
the amount of new business generated. Independent sales agents receive
commissions for generating new sales and ongoing sales to existing customers.
General and administrative costs include all infrastructure costs such as
customer support, collections, corporate administration, costs to maintain and
operate cell sites and customer retention costs.
Depreciation and amortization relates primarily to switching and cell site
equipment, customer lists and license costs.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997
REVENUE. For the nine months ended September 30, 1998, Sygnet's total
revenue increased 22.6% to $76.9 million, from $62.8 million in the first nine
months of 1997. The growth in revenue was the result of continued growth of the
subscriber base and increased roaming revenue generated by additional usage.
Subscriber revenue grew 21.3% to $46.7 million for the nine months ended
September 30, 1998 from $38.5 million in the comparable period in 1997 mainly as
a result of continued subscriber growth, despite a decline in average revenue
per subscriber. Sygnet's number of subscribers increased by 28.2% to 166,886 at
September 30, 1998 from 130,146 at September 30, 1997 due to internal growth. On
a per subscriber basis, average monthly subscriber revenue per subscriber
declined by 6.8% to $33.85 for the nine months ended September 30, 1998 from
$36.33 during the comparable period in 1997. This was due to competitive market
pressures, continuing promotional activity and the changing mix of subscribers
reflecting increasing levels of subscribers who purchase less expensive rate
plans that include packaged minutes of use.
Roamer revenue grew 24.6% to $24.8 million during the nine months ended
September 30, 1998 compared to $19.9 million in the comparable period in 1997.
This increase was mainly a result of increased roaming traffic throughout all of
Sygnet's systems which more than offset the decline in roaming revenue per
minute of use. Roaming minutes of use increased by 30.5% to 43.6 million for the
nine months ended September 30, 1998 from 33.4 million for the comparable period
in 1997. Roaming revenue per minute, including toll, for the nine months ended
September 30, 1998 decreased to $0.57 from $0.59 for the comparable period in
1997. This decrease was mainly a result of increased intrasystem roaming traffic
that is priced lower than other roaming traffic.
Equipment sales revenue increased 39.4% to $4.3 million for the nine months
ended September 30, 1998 from $3.1 million in the comparable period in 1997.
This increase was due mainly to an increased number of telephones and
accessories sold to new customers as well as from additional sales of equipment
to existing customers for retention purposes for which credits are given on the
sales price and reflected in general and administrative costs.
COST OF SERVICES. Cost of services increased 25.5% to $9.0 million for the
nine months ended September 30, 1998 from $7.2 million for the comparable period
in 1997. This increase was mainly a result of an increase in home subscriber net
roaming costs as well as increased billing and call delivery expenses associated
with the growth in the subscriber base. The increase in net roaming costs is
attributed mostly to
39
<PAGE>
increased levels of intrasystem roaming for which rates to customers are lower
than other roaming traffic which has stimulated usage. Partially offsetting this
increase are lower costs to Sygnet for long distance charges and the elimination
of costs associated with a terminated switching agreement. As a percentage of
total revenue, cost of services was 11.7% for the nine months ended September
30, 1998 compared to 11.4% for the same period in 1997.
COST OF EQUIPMENT SALES. Cost of equipment sales increased 14.5% to $7.8
million for the nine months ended September 30, 1998 from $6.8 million in the
comparable 1997 period. This increase was due mainly to an increased number of
telephones and accessories sold to existing subscribers, as well as equipment
subsidies and sales to new subscribers, offset by a reduction in the average
cost of telephones and accessories.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs
increased 25.7% to $14.7 million for the nine months ended September 30, 1998
from $11.7 million for the comparable period in 1997. This increase was mainly a
result of the growth in the subscriber base which caused an increase in
compensation and increased customer retention costs due to competitive
pressures. As a percentage of total revenues, general and administrative expense
was 19.1% for the nine months ended September 30, 1998 compared to 18.6% for the
same period in 1997.
SELLING AND MARKETING COSTS. Selling and marketing costs increased 21.3% to
$9.1 million for the nine months ended September 30, 1998 from $7.5 million for
the comparable period in 1997. This increase is mainly due to an increase in new
subscribers added period to period which caused higher compensation and
commission expenses as well as an increase in advertising and promotional
expenses. Selling and marketing cost per gross new subscriber, including
equipment subsidies, decreased by 6.2% to $287 for the nine months ended
September 30, 1998 from $306 for the comparable period in 1997. This was
primarily a result of an improvement in the margin on telephone and accessory
subsidies and sales.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased 1.0%
to $21.3 million for the nine months ended September 30, 1998 from $21.1 million
for the comparable period in 1997 due primarily to the depreciation on higher
levels of fixed assets resulting from capital expenditures for system growth.
This increase more than offset the decrease in depreciation due to certain cell
site equipment obtained in the Horizon Acquisition which become fully
depreciated in April 1998. For the nine months ended September 30, 1998, Sygnet
incurred $11.5 million in capital expenditures, primarily for cell site and
system enhancements.
INTEREST EXPENSE, NET. Interest expense decreased 4.2% to $21.6 million for
the nine months ended September 30, 1998 from $22.6 million for the comparable
period in 1997. This decrease was primarily a result of a lower level of
borrowing due to the repayment of certain indebtedness with the proceeds from
the sale of common stock.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUE. For 1997, Sygnet's total revenue increased 91.2% to $85.6 million
from $44.8 million for 1996. The growth in revenue was the result of the Horizon
Acquisition, which occurred on October 9, 1996, and continued growth of the
subscriber base.
Subscriber revenue grew by 69.3% to $52.6 million for 1997 from $31.1
million for 1996 mainly as a result of the Horizon Acquisition and continued
subscriber growth. Subscriber revenue, on a pro forma basis giving effect to the
Horizon Acquisition, would have grown by 22.7% due to growth in the subscriber
base, offset by a decline in average revenue per subscriber. Sygnet's
subscribers grew by 34.1% to 142,934 at December 31, 1997 from 106,574 at
December 31, 1996 due mainly to internal growth. On a pro forma basis giving
effect to the Horizon Acquisition, average monthly subscriber revenue per
subscriber would have declined by 7.3% to $35.91 during 1997 from $38.75 in
1996. This was due to the changing mix of
40
<PAGE>
subscribers reflecting increasing levels of subscribers purchasing less
expensive rate plans that include limited free minutes of use, increased
promotional activity and competitive market pressures.
Roamer revenue increased 178.6% to $27.0 million during 1997 from $9.7
million for 1996. This increase was mainly a result of the Horizon Acquisition
as well as increased roaming traffic throughout all of Sygnet's systems. On a
pro forma basis giving effect to the Horizon Acquisition, roamer revenue would
have grown by 21.5% due to a greater volume of roaming traffic offset by a
reduction in roaming revenue per minute. Roaming revenue per minute for 1997
would have decreased to $0.58 from $0.59 for 1996 on a pro forma basis giving
effect to the Horizon Acquisition mainly as a result of reductions in roaming
rates with roaming partners.
Equipment sales increased 78.9% to $4.3 million for 1997 compared to $2.4
million for 1996. This increase was due mainly to the Horizon Acquisition, an
increased number of telephones and accessories distributed as new subscriber
acquisitions increased, as well as from additional sales of equipment to
existing customers. On a pro forma basis giving effect to the Horizon
Acquisition, equipment sales for 1997 would have increased 12.4% over 1996.
COST OF SERVICES. Cost of services increased 82.4% to $10.0 million during
1997 from $5.5 million for 1996 due mainly to the Horizon Acquisition. On a pro
forma basis giving effect to the Horizon Acquisition, cost of services for 1997
would have increased by 12.0% from 1996. This increase was mainly a result of an
increase in billing, call delivery and roaming costs associated with the growth
in the subscriber base, partially offset by lower rates for interconnection and
long distance charges. As a percentage of total revenues, on a pro forma basis
giving effect to the Horizon Acquisition, cost of services was 11.7% in 1997
compared to 12.7% in 1996.
COST OF EQUIPMENT SALES. Cost of equipment sales increased 66.2% to $9.7
million for 1997 from $5.8 million in 1996. This increase was due mainly to the
Horizon Acquisition and to an increased number of telephones and accessories
distributed as new subscriber acquisitions increased. Sales of equipment to
existing subscribers were also responsible for a portion of this increase. On a
pro forma basis giving effect to the Horizon Acquisition, cost of equipment
sales for 1997 would have increased 18.6% over 1996.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs grew
72.3% to $17.0 million in 1997 from $9.9 million in 1996. This increase was due
primarily to the Horizon Acquisition and an increase in costs due to internal
growth. On a pro forma basis giving effect to the Horizon Acquisition, general
and administrative expenses for 1997 would have increased 19.8% over 1996. This
increase was mainly a result of an increase in compensation, customer retention,
occupancy and maintenance expenses associated with the growth in the subscriber
base as well as the additional cell sites added during 1997. As a percentage of
total revenues, on a pro forma basis giving effect to the Horizon Acquisition,
general and administrative expense would have been 19.8% in 1997 compared to
20.0% in 1996.
SELLING AND MARKETING COSTS. Selling and marketing costs grew 78.3% to
$10.8 million for 1997 from $6.1 million in 1996. This increase is due to the
Horizon Acquisition and a higher level of new subscribers added period to
period. On a pro forma basis giving effect to the Horizon Acquisition, selling
and marketing costs grew by 12.3% and selling and marketing cost per gross new
subscriber decreased to $291 in 1997 from $324 in 1996 reflecting a decrease in
cost of telephone and accessories in addition to improved operating
efficiencies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased to
$28.7 million for 1997 from $10.0 million in 1996 due to depreciation on higher
levels of fixed assets resulting from the Horizon Acquisition and purchases of
equipment to enhance systems in existing markets, and amortization of the
license acquired in the Horizon Acquisition. The amortization of the acquired
cellular licenses and subscriber lists contributed $10.3 million to this
increased amortization. For 1997, the Company spent $25.6 million in capital
expenditures, primarily for new cell sites, cell site conversions, and system
growth.
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<PAGE>
INTEREST EXPENSE, NET. Interest expense increased to $29.9 million in 1997
from $11.2 million in 1996. This increase was primarily a result of increased
borrowings associated with the Horizon Acquisition.
NET OPERATING LOSSES. At December 1997, Sygnet had a net operating loss
carryforward of $28.7 million. No benefit of the loss carryforward has been
recorded in 1997. If, in the future, this loss carryforward is utilized, the
related benefits will be recorded.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
REVENUE. For 1996, Sygnet's total revenue increased 82.3% to $44.8 million
from $24.6 million for 1995. The growth in revenue was the result of the Horizon
and Erie Acquisitions and continued growth of the subscriber base.
Subscriber revenue grew 80.8% to $31.0 million for 1996 compared to $17.2
million for 1995 mainly as a result of the Horizon and Erie Acquisitions and
continued subscriber growth. Sygnet's subscribers increased to 106,574 at
December 31, 1996 from 44,665 at December 31, 1995 due mainly to the Horizon
Acquisition as well as internal growth. On a pro forma basis giving effect to
the Horizon Acquisition, the subscriber base increased by 36.8% to 106,574 at
December 31, 1996 from 77,891 at December 31, 1995. On a per subscriber basis
giving effect to the Horizon Acquisition, average monthly subscriber revenue
would have declined to $38.75 during 1996 from $41.66 in 1995 due in part to the
changing mix of subscribers reflecting increasing levels of subscribers
purchasing less expensive rate plans that include limited free minutes of use as
well as competitive market pressures.
Roamer revenue increased 132.0% to $9.7 million during 1996 compared to $4.2
million in 1995. This increase was mainly a result of the Horizon and Erie
Acquisitions as well as increased roaming traffic throughout all of Sygnet's
systems. Roamer revenue per minute during 1996 decreased to $.55 from $.57 in
1995. This decrease was due mainly to reductions made to roaming rates received
from other cellular carriers in the first quarter of 1995 which were in effect
for the full year in 1996, mitigated by the effects of the Horizon Acquisition.
Equipment sales increased 58.0% to $2.4 million in 1996 compared to $1.5
million in 1995. This increase was due mainly to the Horizon and Erie
Acquisitions and an increased number of telephones and accessories distributed
as new subscriber acquisitions increased, as well as from additional sales of
equipment to existing customers. Other revenue declined 4.4% to $1.6 million in
1996 from $1.7 million in 1995 as equipment rental revenue continued to decrease
due to the continued phase out of rental programs.
COST OF SERVICES. Cost of services increased 63.7% to $5.5 million in 1996
from $3.4 million in 1995 due mainly to the Horizon and Erie Acquisitions. Cost
of services decreased to 12.3% of total revenues in 1996 from 13.7% in 1995, as
a result of operating efficiencies gained from the Horizon and Erie
Acquisitions.
COST OF EQUIPMENT SALES. Cost of equipment sales increased 39.7% to $5.8
million in 1996 from $4.2 million in 1995. This increase was due mainly to the
Horizon and Erie Acquisitions and to an increased number of telephones and
accessories distributed as new subscriber acquisitions increased. The increased
cost of equipment sold resulting from the increase in gross activations was
mitigated by the declining cost to acquire new telephones.
GENERAL AND ADMINISTRATIVE COSTS. General and administrative costs
increased 77.1% to $9.9 million in 1996 from $5.6 million in 1995. This increase
is due primarily to the Horizon and Erie Acquisitions and the effects of a third
quarter 1995 one time adjustment to the personal property tax accrual resulting
from a substantial decrease in tax rates.
SELLING AND MARKETING COSTS. Selling and marketing costs increased 97.3% to
$6.1 million in 1996 from $3.1 million in 1995. This increase is due to the
Horizon and Erie Acquisitions and a higher level of
42
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new subscribers added period to period. Selling and marketing cost per gross new
subscriber, including equipment subsidies, decreased 10.1% to $310.0 in 1996
from $345.0 for 1995 as a result of a decrease in cost of telephones and
accessories in addition to improved efficiencies.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
187.9% to $10.0 million in 1996 from $3.5 million in 1995 due to depreciation on
higher levels of fixed assets resulting from the Horizon and Erie Acquisitions
and purchases for system growth, and amortization of the licenses acquired in
the Horizon and Erie Acquisitions. The amortization of the acquired cellular
licenses and subscriber lists contributed $3.4 million to this increased
amortization. For 1996, Sygnet spent $10.0 million in capital expenditures,
primarily for new cell sites, cell site conversions, and system growth.
INTEREST EXPENSE, NET. Interest expense increased to $11.2 million in 1996
from $2.7 million in 1995. This increase was primarily a result of increased
borrowings associated with the Horizon and Erie Acquisitions.
EXTRAORDINARY LOSS. In October 1996, Sygnet incurred an extraordinary loss
of $1.4 million to write off unamortized financing costs associated with an
extinguished bank credit agreement.
IMPACT OF YEAR 2000
The Year 2000 Issue is the result of the inability of some computer programs
to distinguish the year 1900 from the year 2000. Most computer programs and
operating systems were written using two digits to define the applicable year
rather than four digits. This means that any equipment containing computer
programs with time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. In some instances this could result in
system failures, disruption in operations and possible inaccuracies of data.
Sygnet has substantially completed an inventory of all its systems and
equipment in each market to determine the impact of the Year 2000 Issue. Based
on this inventory, Sygnet has contacted its significant vendors to determine how
their products and services might be affected by the Year 2000 Issue. Generally,
Sygnet is relying upon representations made by the vendors as to their state of
readiness for the Year 2000 Issue. Based on internal evaluations and on
information provided by these vendors certain systems have been upgraded and
tested for Year 2000 compliance. Sygnet estimates that it is 60% complete with
this phase of the project.
Sygnet is placing special emphasis on areas that present a risk of
materially interrupting its revenue stream in the event of a Year 2000 problem.
Presently, it appears three main systems have the potential to materially
interrupt the revenue stream due to the Year 2000 Issue. They are the two
cellular switches, which could prevent calls from being made, and the billing
system, which could prevent Sygnet from billing and subsequently receiving
revenue from its customers. To address this risk, the Northern Telecom switch,
which serves Sygnet's Ohio and Pennsylvania markets, has recently undergone a
software upgrade to a Year 2000 compliant version. Sygnet has monitored testing
of this software in a Year 2000 situation with commonly known critical dates and
has encountered no problems. Accordingly, Sygnet has deemed this system to have
a minimal risk of failure regarding the Year 2000 Issue and will not develop
contingency plans for the Northern Telecom switch unless new information becomes
available that suggests a contingency plan is warranted. The Ericsson switch,
which serves Sygnet's New York market, is expected to have its software upgraded
to a Year 2000 compliant version in the first quarter of 1999. In connection
with the planned upgrade of the New York system, the Company plans to replace
the Ericsson switching equipment with Northern Telecom equipment that is
believed to be Year 2000 compliant. In addition, the upgrade of the billing
system software to a Year 2000 compliant version is expected to be completed in
the first quarter of 1999. The vendor that provides this system has indicated
that Year 2000 compliance testing will be completed by June of 1999. Sygnet has
deemed this system to have a moderate risk of not being able to
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handle the Year 2000 requirements and a contingency plan is being prepared that
may include selecting a new billing vendor in mid-1999.
The cost of testing and upgrading these systems can not be determined at
this time. Management's current estimate of the cost of becoming Year 2000
compliant is $250,000 or less. This estimate may change significantly downward
or upward as the process continues or if problems arise with either a switch or
billing system. Additionally, this estimate may change substantially if other
systems or vendors are unable to become Year 2000 compliant causing a material
interruption of the revenue stream.
LIQUIDITY AND CAPITAL RESOURCES
Sygnet has historically relied on internally generated funds to fund debt
service and a substantial portion of its capital expenditures. Bank credit
facilities and equity issuances have been used for additional support of capital
expenditure programs and to fund acquisitions.
Net cash provided by operating activities was $13.5 million for the nine
months ended September 30, 1998 compared to $7.1 million for the comparable
period in 1997. The increase was primarily the result of the increase in
operating income, offset somewhat by a decrease in net working capital. Net cash
provided by operating activities was $9.4 million for 1997 compared to $14.8
million for 1996 and $2.4 million in 1995. This decrease from 1996 to 1997 was
primarily due to interest paid of $30.0 million in 1997 compared to $4.7 million
in 1996, which was offset significantly by the increase in revenue due to growth
in subscribers. The increase from 1995 to 1996 was primarily the result of the
increase in the number of subscribers and their related growth in revenue.
Net cash used in investing activities was $11.1 million for the nine months
ended September 30, 1998 compared to $17.6 million for the comparable period in
1997. In 1998, this activity reflects decreased levels of purchases of property
and equipment primarily for system buildout in addition to proceeds of $300,000
associated with the sale of an undeveloped patent to an officer/shareholder of
Sygnet. In 1997, this activity reflects final payments made in connection with
the Horizon Acquisition and the completion of the buildout of the system
acquired in the Horizon Acquisition. Net cash used in investing activities,
which totaled $25.8 million, $264.2 million and $49.1 million for the years
ended December 31, 1997, 1996 and 1995, respectively, principally related to the
system buildout in 1997, the Horizon Acquisition in 1996 and the Erie
Acquisition in 1995 and capital expenditures required to support the growth of
the business.
Net cash used in financing activities was $2.9 million for the nine months
ended September 30, 1998 compared to $10.0 million provided by financing
activities for the comparable period in 1997 as the combination of reduced
capital expenditures and increased cash flow from operating activities reduced
the need for outside financing. In 1997, this activity included $43.6 million in
net proceeds from the sale of Sygnet's common stock which were used primarily to
redeem the remaining outstanding preferred stock and to reduce amounts
outstanding under the Sygnet Bank Facility and fund capital expenditures. Net
cash provided by financing activities was $15.0 million for 1997 compared to
$251.2 million for 1996 and $46.6 million in 1995. The 1996 amount includes
primarily funds received, net of financing cost, from the issuance of the Sygnet
Notes and preferred stock and borrowings under the Sygnet Bank Facility to fund
acquisitions. Dividends of $.3 million and $1.2 million were paid in 1996 and
1995, respectively.
We expect our capital expenditures to total approximately $16.0 million for
1999; through September 30, 1998, Sygnet had expended $11.5 million. Of the
amount expected to be made in 1999, $7.5 million is expected to be made to
upgrade the New York system to TDMA IS-136. The amount and timing of capital
expenditures may vary depending on the rate at which we expand and develop our
cellular systems and whether we consummate additional acquisitions. In addition,
Sygnet expects to borrow $6.0 million under the New Bank Facilities to close the
acquisition of Pennsylvania 2 RSA and additional amounts to pay any accrued
interest under the Sygnet Notes.
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The New Bank Facilities aggregate $430.0 million, consisting of a $50.0
million Revolving Credit Facility and $380.0 million of Term Loan Facilities.
Obligations under the New Facilities are secured by a pledge of the capital
stock of Sygnet's subsidiary as well as a lien on substantially all of the
assets of Sygnet and its operating subsidiary. The New Bank Facilities require
that Sygnet and we maintain certain financial ratios. The failure to maintain
such ratios would constitute an event of default, notwithstanding Sygnet's
ability to meet its debt service obligations. See "Description of Certain
Indebtedness." The ability of Sygnet to borrow under the New Bank Facilities
will be limited by the requirement that, on a quarterly basis beginning December
31, 2000, the amount available under the New Bank Facilities will reduce until
they terminate.
As part of the Sygnet Transactions, Sygnet sold to Dobson Tower Company, a
wholly owned subsidiary of Dobson Communications Corporation, substantially all
of the towers owned by Sygnet for $25.0 million. Dobson Tower Company has leased
these towers back to Sygnet under an operating lease. The lease is for an
initial term of five years, with annual lease payments of approximately $1.6
million.
On September 30, 1998 after giving pro forma effect to the Sygnet
Transactions, our subsidiaries and we would have approximately $598.2 million of
indebtedness outstanding.
Although we cannot provide you any assurance, we believe that, assuming
successful implementation of our strategy, including the further development of
Sygnet's cellular systems and significant and sustained growth in Sygnet's cash
flow, borrowings under the New Bank Facilities and cash flow from operations,
will be sufficient to fund the acquistion of Pennsylvania 2 RSA to satisfy our
currently expected capital expenditure, working capital and debt service
obligations. However, we will need to refinance the New Bank Facilities and the
Notes at their maturities. Our ability to do so will depend on, among other
things, its financial condition at the time, the restrictions in the instruments
governing its indebtedness and other factors, including market conditions beyond
our control. See "Risk Factors--We May Be Unable to Refinance Our Indebtedness."
The actual amount and timing of our future capital requirements may differ
materially from our estimates as a result of, among other things, the demand for
our services and regulatory, technological and competitive developments. Sources
of additional financing may include commercial bank borrowings, vendor financing
and the sale of equity or debt securities. We cannot assure you that any such
financing will be available on acceptable terms or at all.
EFFECT OF NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income, which is required to be adopted effective January 1, 1998. This
Statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Reclassification of financial statements for earlier periods presented is
required. The implementation of Statement No. 130 did not have a material effect
on Sygnet's financial statements.
In June 1997, the FASB also issued Statement No. 131, Disclosures About
Segments of an Enterprise and Related Information, which is required to be
adopted effective January 1, 1998. This Statement changes the way companies
report segment information in annual financial statements and also requires
those companies to report selected segment information in interim financial
reports to shareholders. The implementation of Statement No. 131 did not have a
material effect on Sygnet's financial statement disclosures.
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BUSINESS
Through Sygnet, we own and operate rural and suburban cellular telephone
systems serving a single large cluster of properties with approximately 2.4
million Pops and 166,886 subscribers in northeastern Ohio, western Pennsylvania
and western New York. The cluster includes Youngstown, Ohio, Erie, Pennsylvania,
and suburban and rural areas between the Cleveland, Akron-Canton, Pittsburgh,
Buffalo and Rochester metropolitan areas. We are a wholly owned subsidiary of
Dobson Communications Corporation.
Sygnet has grown rapidly through selective acquisitions and internal growth.
Between 1993 and 1997, Sygnet's revenues increased at a compounded annual growth
rate of 56.0% and its Adjusted EBITDA increased at a compounded annual growth
rate of 71.1%. Excluding properties acquired during that period, Sygnet's
revenues increased at a compounded annual growth rate of 23.9% and its Adjusted
EBITDA increased at a compounded annual growth rate of 34.2% over the same
period. In addition, from December 31, 1993 to September 30, 1998, Sygnet's
penetration rate increased from 2.5% to 7.0%. For the nine months ended
September 30, 1998, Sygnet had revenue of $76.9 million, operating income of
$15.1 million and Adjusted EBITDA of $36.4 million.
We acquired Sygnet (the "Sygnet Acquisition") on December 23, 1998. Sygnet
has established and maintained a strong and visible local presence. Since the
merger, Sygnet's existing local management will continue to have day-to-day
operating authority, with the flexibility to respond to individual market
requirements and to foster a strong sense of customer service and community
spirit. The Company expects to benefit from synergies resulting from Dobson
Communications Corporation centralization of certain functions such as control
of pricing, customer service and marketing, systems design, engineering,
purchasing, financial and administrative functions and from the consolidation of
billing functions. For example, we expect to consolidate Sygnet's three regional
call centers and one of Dobson Communication Corporation's existing call
centers. In addition, we expect the Sygnet Acquisition to strengthen and expand
Dobson Communication Corporation's and Sygnet's existing roaming partner
relationships with AT&T Wireless because certain Sygnet properties are adjacent
to AT&T Wireless properties.
Sygnet's markets are primarily rural and suburban and include a high
concentration of expressway corridors that tend to have a significant amount of
roaming activity. Roaming revenue represented approximately 32% (28% excluding
roaming by Sygnet customers into other Sygnet markets) of Sygnet's total
revenues for both the year ended December 31, 1997 and the nine months ended
September 30, 1998. Sygnet has entered into roaming agreements with operators of
cellular systems in adjoining MSAs and other MSAs which allow customers to roam
at competitive prices which, in certain instances, are comparable to Sygnet's
home area rates. Sygnet's principal roaming partners are AT&T Wireless, AirTouch
and SBC Communications. Sygnet also has roaming agreements with PCS providers,
such as AT&T Wireless and Sprint, to allow the PCS providers' customers with
dual mode telephones to roam in certain Sygnet markets.
Through selective acquisitions, Sygnet has created an integrated network of
rural and suburban cellular systems in a contiguous service area. The following
table sets forth certain data with respect to
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Sygnet's cellular systems as of September 30, 1998. Sygnet owns all of the
licenses for these markets except for Pennsylvania 2 RSA:
<TABLE>
<CAPTION>
TOTAL TOTAL MARKET YEAR ACQUIRED
MARKETS (1) POPS SUBSCRIBERS PENETRATION (2) BY SYGNET
- ---------------------------- --------- --------------- ------------------- --------------------
<S> <C> <C> <C> <C>
Erie........................ 282,300 26,381 9.3% 1995
New York.................... 480,000 26,409 5.5% 1996
Pennsylvania................ 890,300 49,516 5.6% 1996
Youngstown.................. 721,400 64,580 9.0% 1985, 1987 and 1991
--------- ------- --
Total..................... 2,374,000 166,886 7.0%
--------- ------- --
--------- ------- --
</TABLE>
- ------------------------
(1) The Erie market is composed of Erie, Pennsylvania MSA. The New York market
is composed of New York 3 RSA. The Pennsylvania market is composed of
Pennsylvania 1 RSA, Pennsylvania 2 RSA, Pennsylvania 6 RSA and Pennsylvania
7 RSA. Sygnet had previously operated Pennsylvania 2 RSA under an interim
operating authority, which was terminated on June 3, 1997 when the FCC
awarded a permanent license to Pinellas Communications. On June 8, 1998,
Sygnet entered into an agreement to purchase Pennsylvania 2 RSA for $6.0
million. On June 29, 1998, Sygnet entered into a management and lease
agreement under which Sygnet operates Pennsylvania 2 RSA, which will
continue in effect until the FCC's grant of the license to the present owner
becomes final at which time Sygnet expects to complete its purchase of
Pennsylvania 2 RSA. The Youngstown market is composed of Youngstown, Ohio
MSA, Sharon, Pennsylvania MSA, and Ohio 11 RSA.
(2) Determined by dividing total Sygnet subscribers by the total Pops covered by
the applicable FCC cellular licenses or authorizations held by Sygnet.
BUSINESS STRATEGY
Our business strategy is to focus on integrating its operations with
Dobson's, increasing its market penetration and further developing its cellular
systems to sustain growth in the Company's cash flows. The principal elements of
the Company's strategy include:
INTEGRATE OPERATIONS WITH DOBSON COMMUNICATIONS CORPORATION. Dobson
Communications Corporation intends to integrate our operations with its existing
cellular operations to achieve economies of scale. Management believes that
these increased efficiencies will come from the centralized control of pricing,
customer service and marketing, system design, engineering, purchasing,
financial and administrative functions and from the consolidation of billing
functions. For example, we expect to consolidate Sygnet's three regional call
centers and one of Dobson Communications Corporation's existing call centers.
EXPAND STRATEGIC RELATIONSHIPS. We intend to continue to maintain and
expand strategic relationships with operators of wireless systems in major MSAs
near our systems. These relationships include roaming agreements which allow
Sygnet subscribers to use the system in the neighboring MSA at favorable rates.
Under these agreements, the MSA operator's subscribers receive similar benefits
roaming in our operating areas. Sygnet has agreements with the dominant cellular
operators in the neighboring MSAs and RSAs, including AT&T Wireless, AirTouch
and SBC Communications. We also have agreements with PCS providers, such as AT&T
Wireless and Sprint, to allow the PCS providers' customers with dual mode
telephones to roam in certain Sygnet markets. By entering into these strategic
agreements, Sygnet is able to increase its roaming revenue and offer its
subscribers larger areas in which Sygnet's rates apply.
AGGRESSIVE LOCAL MARKETING AND PROMOTION OF CELLULAR SERVICES. We plan to
continue to distinguish Sygnet as the local market's leading cellular services
provider, stressing its service quality, local sales offices and commitment to
the community. Sygnet's sales efforts have been conducted primarily through its
51 retail outlets and its direct sales force and, to a lesser extent, through
independent agents. We believe that, as an operator with strong local
distribution of products and services, Sygnet has an advantage over its
competitors who do not emphasize a local presence or focus on local market
requirements and community involvement. We intend to continue to open new retail
outlets and coordinate marketing efforts with
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Dobson Communications Corporation's centralized marketing department, which
should increase efficiencies by spreading costs over a larger customer base.
TARGETED SALES EFFORTS. Our marketing programs seek to attract subscribers
who are likely to generate high monthly revenue and low churn rates. We will
undertake extensive market research to identify and design marketing programs to
attract these subscribers and tailor distinctive rate plans and roaming rates to
emphasize the quality, value and advantage of Sygnet's cellular service. In
addition, we intend to maintain Sygnet's sales force compensation system, which
is designed to maximize the acquisition of these high use, reduced churn
subscribers. Sygnet's marketing programs and compensation systems are designed
to increase monthly revenue per subscriber and lower marketing and selling costs
per additional subscriber.
SUPERIOR CUSTOMER SERVICE. We intend to maintain a high level of customer
satisfaction through a variety of techniques, including 24-hour customer
service. We will continue to support local customer service through its direct
sales force and its retail stores. We believe that Sygnet's emphasis on superior
customer service has enabled it to achieve an average monthly churn rate of 1.3%
for the year ended December 31, 1997 and 1.5% for the nine months ended
September 30, 1998.
CONTINUED SYSTEM DEVELOPMENT. We believe that increasing capacity and
upgrading our systems will attract additional subscribers, enhance the use of
its systems by existing subscribers, increase roaming activity and further
enhance the overall efficiency of the network. Sygnet upgraded its Erie,
Youngstown and Pennsylvania markets with TDMA IS-136 digital technology to
enable it to increase roaming (by servicing the increasing number of digital
cellular subscribers and PCS subscribers with dual mode telephones) and provide
enhanced capabilities, including caller ID, longer battery life and zone
billing. Sygnet's digital system covered approximately 84% of its subscribers at
September 30, 1998. We plan to upgrade Sygnet's New York market to TDMA IS-136
in 1999 which will expand digital coverage to substantially all of its markets.
Since the beginning of 1995, Sygnet has spent approximately $56.2 million to
upgrade and expand its network. We intend to continue to improve coverage,
increase capacity and build out its systems, and plans to invest approximately
$16.0 million in 1999, which amount includes upgrading its New York system to
TDMA IS-136.
MARKETS AND SYSTEMS
Sygnet's operations are conducted in a single large cluster of properties
with approximately 2.4 million Pops and 166,886 subscribers in northeastern
Ohio, western Pennsylvania and western New York. The cluster includes four
markets: the Youngstown market, the Erie market, the Pennsylvania market, and
the New York market. To date, Sygnet has converted 130 of its 181 cell sites to
TDMA IS-136 digital service. The following is a description of Sygnet's cellular
markets.
YOUNGSTOWN MARKET
GENERAL. The Youngstown market is composed of the Youngstown, Ohio MSA, the
Sharon, Pennsylvania MSA and the Ohio 11 RSA. Sygnet initiated cellular
operations in the Youngstown market in 1985 when it acquired its license from
the FCC for the Youngstown, Ohio MSA.
LOCATION. The Youngstown market covers a contiguous area that is located at
a midway point between Pittsburgh and Cleveland along the Ohio Turnpike and
Interstate 76 and includes Interstate 80, a major transportation access route
from the midwest to New York City.
MARKETING. The Company operates under the brand name Wilcom Cellular in the
Youngstown market. The Company currently has 18 retail locations and
approximately 22 sales agents in the area.
SYSTEMS. There are 55 cell sites covering substantially all of the total
Pops in the Youngstown market. The Company has completed upgrading its system in
this area to analog/TDMA IS-136 digital service.
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ERIE MARKET
GENERAL. The Erie market is composed of the Erie, Pennsylvania MSA. The
Company initiated cellular operations in the Erie market in September 1995
following the Erie Acquisition.
LOCATION. The Erie market covers a contiguous area that includes Interstate
90, which connects Buffalo and Cleveland, and Interstate 79, which connects Erie
directly to Pittsburgh.
MARKETING. The Company operates under the brand name CELLULAR
ONE-Registered Trademark- in the Erie market. The Company currently has eight
retail locations and approximately 12 sales agents in the area.
SYSTEMS. There are 14 cell sites covering substantially all of the total
Pops in the Erie market. The Company has completed upgrading its system in this
area to analog/TDMA IS-136 digital service.
PENNSYLVANIA MARKET
GENERAL. The Pennsylvania market is composed of Pennsylvania 1 RSA,
Pennsylvania 2 RSA, Pennsylvania 6 RSA and Pennsylvania 7 RSA. Sygnet operated
the Pennsylvania 2 RSA under an interim operating authority which was terminated
upon the granting by the FCC of a permanent license to its present owner,
Pinnellas Communications. On June 8, 1998, Sygnet entered into an agreement with
Pinellas Communications to purchase the Pennsylvania 2 RSA. Since then, Sygnet
has been operating Pennsylvania 2 under a management and lease agreement with
Pinellas Communications, which will continue in effect until the FCC's grant of
the license to Pinellas Communications is no longer subject to reconsideration
or judicial review. The FCC has, however, separately approved the transfer of
the license from Pinellas Communications to Sygnet.
LOCATION. The Pennsylvania market covers a contiguous area that includes
Interstate 79 and Interstate 80, which link the major population centers in
north-central Pennsylvania, including Pittsburgh and Erie. The Pennsylvania
market also includes Route 60, a recently completed toll road, which serves as
an expressway to Pittsburgh International Airport.
MARKETING. Sygnet operates under the brand name CELLULAR
ONE-Registered Trademark- in the Pennsylvania market. The Company currently has
12 retail locations and approximately 15 sales agents in the area.
SYSTEMS. There are 62 cell sites covering substantially all of the total
Pops in the Pennsylvania market. Sygnet has substantially completed upgrading
its system in this area to analog/TDMA IS-136 digital service. Upon acquisition
of Pennsylvania 2 RSA from Pinellas, Sygnet will build out this system and
install TDMA IS-136 digital service.
NEW YORK MARKET
GENERAL. The New York market is composed of the New York 3 RSA. The Company
initiated cellular operations in the New York market in October 1996 following
the Horizon Acquisition.
LOCATION. The New York market is located in the western part of New York
and includes six counties. The system borders Buffalo and Rochester to the
north, Erie, Pennsylvania to the west and Binghamton/Elmira to the east.
Interstates 90 and 390 and Route 17 run through the New York region. Interstate
90 (the New York Thruway) connects Buffalo, Rochester and Erie. Interstate 390
connects Rochester, Corning, Binghamton and Elmira. Route 17 connects Interstate
390 west to Interstate 90 in Erie.
MARKETING. Sygnet operates under the brand name CELLULAR
ONE-Registered Trademark- in the New York market. Sygnet currently has 13 retail
locations and 11 sales agents in the area.
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SYSTEMS. There are 50 cell sites covering substantially all of the total
Pops in the New York market. Sygnet's systems in this area have not been
upgraded to digital service. We expect to upgrade Sygnet's New York market to
TDMA IS-136 digital service in 1999.
PRODUCTS AND SERVICES
We provide a variety of cellular services and products designed to address a
range of consumer, business and personal security needs. In addition to mobile
voice transmission, we offer ancillary services such as call forwarding,
call-waiting, three-party conference calling, voice message storage and
retrieval and no-answer transfer. The nature of the services we offer varies
depending upon the market area. We also sell cellular equipment at discount
prices and uses free phone promotions to encourage use of its mobile services.
We offer cellular service for a fixed monthly access fee (accompanied by
varying allotments of included or "free" minutes), plus additional variable
charges per minute of use and for custom calling features. Various pricing
programs (which are generally based on one year service contracts) are utilized.
Unlike some of its competitors, we design rate plans on a market-by-market
basis. Generally, these rate plans include high-volume user plans, medium-volume
user plans, basic plans and economy plans. In general, rate plans which include
a higher monthly access fee typically include a lower usage rate per minute. An
ongoing review of equipment and servicing pricing is maintained to ensure our
competitiveness and, as appropriate, revisions to pricing of service plans and
equipment are made to meet the demands of the local marketplace.
Sygnet has upgraded substantially all of its cellular systems (excluding its
New York system) to TDMA IS-136 digital technology to enable it to increase
roaming (by servicing the increasing number of digital cellular subscribers and
PCS subscribers with dual mode phones) and provide enhanced capabilities,
including caller ID, longer battery life and zone billing. We expect that Sygnet
will upgrade its New York region to TDMA IS-136 digital technology in 1999.
Because its digital switches will be capable of handling both analog and digital
transmission, Sygnet will be able to continue to offer analog cellular service
to those customers who do not transfer to digital handsets. Sygnet recently
commenced marketing digital cellular services to its customers.
CUSTOMER SERVICE
Customer service will remain an essential element of our marketing and
operating philosophy. We are committed to attracting new subscribers and
retaining existing subscribers by providing consistently high-quality customer
service. In each of our markets, we maintain installation and repair facilities
and a local staff, including a market manager, customer service representatives
and technical and sales representatives. Each of our cellular service areas
handles its own customer-related functions such as customer activations, account
adjustments and rate plan changes. Local offices and installation and repair
facilities enable us to service customers better, schedule installations and
make repairs. Through the use of sophisticated, centralized monitoring
equipment, we will be able to centrally monitor the technical performance of its
cellular service areas.
In addition, our customers are able to report cellular telephone service or
account problems 24-hours a day to a call service center on a toll-free access
number (with no airtime charge). We believe that our emphasis on customer
service affords us a competitive advantage over its large competitors.
SALES, MARKETING AND DISTRIBUTION
We continue to focus our marketing program on attracting subscribers who are
likely to generate high monthly revenue and low churn rates. We conduct
extensive market research to identify and design marketing programs to attract
these subscribers and tailor distinctive rate plans and roaming rates to
emphasize the quality, value and the advantage of our cellular service. We have
established marketing
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alliances with neighboring cellular systems to create larger "home rate" areas
and to effectively expand our footprint in order to increase roaming revenue and
attract new subscribers. We market our service offerings primarily through our
direct sales force and retail stores we own. We also use a network of dealers
and other agents, such as electronics stores, car dealerships and department
stores. In addition to these traditional channels, our marketing team evaluates
other, less traditional, methods of distributing our services and products, such
as targeted telemarketing and direct mail programs.
We market our cellular products and services under the brand names Wilcom
Cellular, which has strong regional recognition in the Youngstown region, and
CELLULAR ONE-Registered Trademark-, one of the most recognized brand names in
the cellular industry. The national advertising campaign conducted by the
Cellular One Group enhances our advertising exposure at a fraction of the cost
of what we could achieve alone. See "--Service Marks."
We train and compensate our sales force in a manner designed to stress the
importance of customer service, high penetration levels and minimum acquisition
costs per subscriber. We believe that our direct sales force is better able to
select and screen new subscribers and select pricing plans that realistically
match subscriber means and needs than are independent agents. In addition, we
motivate our direct sales force to sell appropriate rate plans to subscribers,
thereby reducing churn, by linking payment of commissions to subscriber
retention. As a result, our use of a direct sales force keeps marketing costs
low both directly, because commissions are lower, and indirectly, because
subscriber retention is higher than when independent agents are used.
Our after-sale telemarketing program conducted by our sales force and
customer service personnel helps to reduce customer churn rate. This program
enhances customer loyalty and allows the sales staff to check customer
satisfaction as well as to offer additional calling features, such as voicemail,
call waiting and call forwarding.
At September 30, 1998, Sygnet had 24 retail stores and 27 other retail
outlets. The retail stores range in size from 1,500 square feet to 5,000 square
feet, and each retail store is fully equipped to handle customer service and
telephone maintenance and installation. Some of these stores are also authorized
warranty repair centers. Our 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. The retail outlets, other than retail stores, consist of kiosks in
malls and other stores.
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ROAMING
We believe that regional roaming is an important service component for many
of our subscribers. We believe that roaming will continue to be a substantial
source of our revenue due, in part, to the fact that Sygnet's cellular system is
located in rural and suburban areas with a high concentration of commuting
customers and expressway corridors that tend to result in a significant amount
of roaming activity. Sygnet has entered into roaming agreements with operators
of cellular systems in adjoining MSAs and RSAs and others which provide for
roaming rates that allow customers to roam at competitive prices which, in
certain instances, are comparable to home area rates, which also increases usage
on all wireless systems, including our systems. Sygnet's principal roaming
partners are AT&T Wireless, AirTouch and SBC Communications. Sygnet also has
agreements with PCS providers, including AT&T Wireless and Sprint, to allow PCS
providers' customers with dual mode phones to roam in certain Sygnet markets.
Sygnet has agreements with NACN, which is the largest wireless telephone
network system in the world linking cellular operators throughout the United
States and Canada. NACN connects key areas across North America so that
customers can use their cellular phones to place and receive calls in these
areas as easily as they do in their home areas. Through NACN, customers receive
calls automatically without the use of complicated roaming codes as they roam in
more than 5,000 cities and towns in the United States and Canada. In addition,
special services such as call forwarding and call waiting automatically follow
subscribers as they travel. While the industry trend is to reduce roaming rates,
we believe that Sygnet's roaming rates are generally lower than the rates
offered by others in or near its systems and that Sygnet's roaming rates are not
materially impacted by this trend. However, we cannot provide any assurance that
this trend will not materially impact us in the future.
TECHNOLOGY AND SYSTEM DEVELOPMENT
OVERVIEW. Historically, most cellular services have transmitted voice and
data signals over analog-based systems, which use one continuous electronic
signal that varies in amplitude or frequency over a single radio channel.
Digital systems, on the other hand, convert voice or data signals into a stream
of digits that is compressed before transmission, enabling a single radio
channel to carry multiple simultaneous signal transmissions. This enhanced
capacity, along with enhancements in digital protocols, allows digital-based
wireless technologies to offer new and enhanced services, such as greater call
privacy and single number (or "find me") service, and more robust data
transmission features, such as "mobile office" applications (including
facsimile, electronic mail and connecting notebook computers with computer/data
networks).
While digital technology serves generally to reduce transmission
interference relative to analog technology, capacity limitations in the 8
kilobit cellular digital handsets now deployed by most digital cellular
operators also cause a perceptible decline in transmission quality. This gap in
transmission quality has proven to be a significant barrier to cellular
operators seeking to switch their customers from analog to digital service.
Enhanced 13 kilobit digital handsets are now available for digital cellular
systems. These new handsets offer improved digital transmission.
SYSTEM DEVELOPMENT. At September 30, 1998, the Sygnet network included a
Northern Telecom cellular switch (which presently serves all areas but the New
York market) and an Ericsson cellular switch (which presently serves the New
York market), 181 cell sites and a large microwave network with 151 links.
Substantially all of the Sygnet system (excluding its New York system) supports
AMPS and TDMA services. As of September 30, 1998, Sygnet had converted 130 of
its 181 cell sites to TDMA IS-136 digital technology. We intend to upgrade its
New York market to TDMA IS-136 digital technology with Northern Telecom
equipment in 1999. We will develop or build out our cellular service areas by
adding channels to existing cell sites and by building new cell sites with an
emphasis on improving coverage for hand-held phones in heavily-trafficked areas.
Such development is designed to increase capacity and to improve coverage in
response to projected subscriber demand and in response to competitive factors.
Projected
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subscriber demand is calculated for each cellular service area on a cell-by-cell
basis. Sygnet has historically met such demand through a combination of
augmenting channel capacity in existing cell sites and building new cell sites.
System expansion by cell site construction is expected to enable us to
continue to add and retain subscribers, enhance subscriber use of the systems,
increase roamer traffic due to the larger geographic area covered by the
cellular network and further enhance the overall efficiency of the network. We
believe that the increased cellular coverage will have a positive impact on
market penetration and subscriber usage.
Sygnet owns 124 of the 134 cellular towers it uses. In connection with the
Sygnet Acquisition, Sygnet sold substantially all of the 124 cellular towers it
owned in the Tower Sale Leaseback. See "Certain Transactions."
DIGITAL TECHNOLOGY. Digital signal transmission is accomplished through the
use of frequency management technologies, or "protocols." These protocols
"manage" the radio channel either by dividing it into distinct time slots (TDMA)
or by assigning specific coding instructions to each packet of digitized data
that comprises a signal (CDMA). While the FCC has mandated that licensed
cellular systems in the U.S. must utilize compatible analog signaling protocols,
at present there is no required universal digital signaling protocol. Because
the CDMA and TDMA protocols are incompatible, a subscriber of a system that
relies on TDMA technology, for example, will be unable to use his handset when
traveling in an area served only by CDMA, unless he carries a dual-mode handset
(which is not yet available) that permits the subscriber to use the cellular
system in that area. However, the FCC or industry organizations may decide to
move toward a universal digital switching protocol in the future.
Over the next decade, we expect that many cellular systems will convert from
analog to digital technology due, in part, to capacity constraints in many of
the larger cellular markets, such as New York, Los Angeles and Chicago. As
carriers reach limited capacity levels, certain calls may be unable to be
completed, especially during peak hours. Digital technology increases system
capacity and offers other advantages, often including improved overall average
signal quality, improved call security, potentially lower incremental costs for
additional subscribers and the ability to provide data transmission services.
The conversion from analog to digital technology is expected to be an
industry-wide process that will take a number of years to complete. While we do
not believe that our network will experience capacity constraints in the
foreseeable future that would require converting its network from analog to
digital technology, it has converted its systems, other than its New York
systems, to TDMA IS-136 digital service so that its subscribers will enjoy the
added benefits of digital technology, and we will benefit from increased roamer
revenue (by servicing the increasing number of digital cellular subscribers and
PCS subscribers with dual mode phones).
INFORMATION SYSTEMS. Our home subscriber billing functions our cellular
operations are provided by International Telecommunications Data Service
("ITDS"), which is also the primary provider of billing services for Dobson
Communications Corporation. Proprietary software furnished by ITDS serves all
functions of billing for the corporate and retail locations. All administrative
and customer maintenance functions are handled in-house with invoice processing
and printing handled by ITDS. We use complementing software to the billing
system allowing the use of credit, collection, and switch interfaces.
SERVICE MARKS
In its cellular telephone business, Sygnet is currently licensed to use the
CELLULAR ONE-Registered Trademark- service mark in its Erie, New York and
Pennsylvania regions. CELLULAR ONE-Registered Trademark- is a registered service
mark with the U.S. Patent and Trademark Office owned by Cellular One Group, a
Delaware general partnership of Cellular One Marketing, Inc., a subsidiary of
SWBM, together with Cellular One Development, Inc., a subsidiary of AT&T
Wireless, and Vanguard. Sygnet uses the CELLULAR ONE-Registered Trademark-
service mark to identify and promote our cellular telephone service pursuant to
licensing agreements with Cellular One Group.
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Licensing and advertising fees are determined based upon the population of the
licensed areas. Under its licensing agreements Sygnet provides high-quality
cellular telephone service to its customers and maintains a certain minimum
overall customer satisfaction rating in surveys commissioned by Cellular One
Group. Sygnet's licensing agreements are for five-year terms that expire
beginning in 2001. Sygnet may renew these agreements, subject to the
satisfaction of certain operating standards, for two additional five-year terms.
See "Risk Factors--Reliance on Use of Third-Party Service Mark."
Sygnet currently operates in the Youngstown region under the unregistered
tradename "Wilcom Cellular." Sygnet also uses "Sygnet Wireless, Inc." and
"Sygnet Communications, Inc." as unregistered tradenames.
COMPETITION
We compete with various companies in each of our markets. Overall, we
compete against the following four distinct cellular system operators:
<TABLE>
<CAPTION>
MARKETS CELLULAR COMPETITORS
- ------------------------------- -------------------------------------------------------------
<S> <C>
Erie GTE Mobilnet
New York Frontier
Pennsylvania ALLTEL and Bell Atlantic
Youngstown ALLTEL
</TABLE>
PCS licenses in our markets have been awarded to Ameritech Wireless, Aerial
Communications, AT&T Wireless, Devon Mobile Communications, New England
Wireless, Nextwave and Omnipoint. To date no PCS licensee is actively marketing
PCS services in our markets, although certain licensees have built out portions
of the highway corridors.
The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of improvements in the
capacity and quality of digital technology, shorter cycles for new products and
enhancements, and changes in consumer preferences and expectations. Accordingly,
we expect competition in the wireless telecommunications business to be dynamic
and intense as a result of the entrance of new competitors and the development
of new technologies, products and services.
Each of our markets is served by other two-way wireless service providers,
including licensed cellular and PCS operators. Many of these competitors have
been operating for a number of years, currently serve a substantial subscriber
base and have significantly greater financial and technical resources than those
available to us. Some competitors may market other services, such as long
distance, landline local exchange services and internet access, with their
wireless telecommunication service offerings. Several of our competitors are
operating, or planning to operate, through joint ventures and affiliation
arrangements, wireless telecommunications systems that encompass most of the
United States.
In each of our markets, we compete primarily against one other
facilities-based cellular carrier. Competition for customers is based
principally upon price, the services and enhancements offered, the technical
quality of the cellular system, customer service, system coverage and capacity.
Such competition may increase to the extent that licenses are transferred from
smaller, stand-alone operators to larger, better capitalized and more
experienced cellular operators that may be able to offer consumers certain
network advantages.
Cellular carriers also face to a lesser extent competition from PCS, ESMR
and mobile satellite service ("MSS") systems, as well as from resellers of these
services and cellular service. In the future, cellular operators may also
compete more directly with traditional landline telephone service providers.
Continuing technological advances in telecommunications make it impossible to
predict the extent of future competition. However, due to the depth and breadth
of these competitive services offered by operators
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using these other technologies, such competition could be significant and is
expected to become more intense.
The FCC requires that all cellular system operators provide service to
resellers on a nondiscriminatory basis. A reseller provides cellular service to
customers but does not hold an FCC license or own cellular facilities. Instead,
the reseller buys blocks of cellular telephone numbers from a licensed carrier
and resells service through its own distribution network to the public.
Therefore, a reseller may be both a customer of a cellular licensee's services
and a competitor of that licensee. Several well-known telecommunications
companies resell cellular service as a complement to their long distance, local
telephone, paging, cable television or internet offerings.
The most likely future source of direct competition to cellular providers in
the near term from a new technology is broadband PCS. Broadband PCS services
consist of wireless two-way telecommunications services for voice, data and
other transmissions employing digital micro-cellular technology. PCS operates in
the 1850 to 1990 MHz band. PCS technology utilizes a network of small,
low-powered transceivers placed throughout a neighborhood, business complex,
community or metropolitan area to provide customers with mobile and portable
voice and data communications. Many PCS licensees that will compete with the
Company have access to substantial capital resources. In addition, many of these
companies or their predecessors and affiliates already operate large cellular
telephone systems and thus bring significant wireless experience.
ESMR is a wireless communications service supplied by converting analog SMR
services into an integrated, digital transmission system. The ESMR system
incorporates characteristics of cellular technology, including multiple low
power transmitters and interconnection with the landline telephone network. ESMR
service providers, such as Nextel, may compete with analog cellular service by
providing high quality digital communication technology, lower rates, enhanced
privacy and additional features such as electronic mail and built-in paging.
ESMR handsets are likely to be more expensive than cellular telephones.
A consortium of telecommunications providers known as American Mobile
Satellite Corporation has been licensed by the FCC to provide MSS and is
currently providing such services. The FCC has also licensed four entities to
provide MSS as low earth-orbit satellite-based systems. One such licensee,
controlled by Motorola, operates a low earth-orbit satellite-based system called
"Iridium" and recently initiated such service in some markets. None of the other
licensees have yet launched MSS service. Other proposals for MSS are pending
before the FCC. The FCC is developing rules for these services and international
and foreign regulatory authorities must also approve aspects of some MSS
services. Mobile satellite systems could augment or replace communications
within land-based cellular systems. While we may experience increased
competition from low earth-orbit satellite-based systems in the future, to date,
such systems have not affected our operations.
The commercial development and deployment of most of these new technologies
remain in an early phase. We expect this activity to be focused initially in
relatively large markets in view of the substantial costs involved in building
and launching systems using these technologies. We believe that we can
effectively face this competition from our position as an incumbent in the
cellular industry with a high quality network, an extensive footprint that is
not capacity constrained, strong distribution channels, superior customer
service capabilities and an experienced management team. Since we operate in
medium to small markets, the new entrants may be unable to offer wireless
service at competitive rates in many of our markets in the near term. The
extensive capital expenditures required to deploy infrastructure are more
readily justifiable from an economic standpoint in larger, more densely
populated urban areas, than in the rural areas in which we operate.
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REGULATION
OVERVIEW. The wireless telecommunications industry is subject to extensive
governmental regulation on the federal level and to varying degrees on the state
level. Many aspects of such regulation have been impacted by the enactment of
the Telecommunications Act and have been the subject of administrative
rulemakings that are significant to our operations. The following is a summary
of the federal laws and regulations that materially affect the cellular
communications industry and a description of certain state laws. This section
does not purport to be a summary of all present and proposed federal, state and
local regulations and legislation relating to the cellular communications
industry.
FEDERAL REGULATION. The licensing, construction, modification, operation,
ownership and acquisition of cellular telephone systems are subject to
regulations and policies of the FCC under the Communications Act of 1934, as
amended (the "Communications Act"). The FCC has promulgated rules and
regulations governing, among other things, applications to construct and operate
cellular communications systems, applications to transfer control of or assign
cellular licenses and technical and operational standards for the operation of
cellular systems (such as maximum power and antenna height).
The FCC licenses cellular systems in accordance with 734 geographically
defined market areas comprising 306 MSAs and 428 RSAs. In each market, the
frequencies allocated for cellular telephone use are divided into two equal 25
MHz blocks and designated as wireline and non-wireline. Apart from the different
frequency blocks, there is no technical difference between wireline and
non-wireline cellular systems and the operational requirements imposed on each
by the FCC are the same. However, no entity may own, directly or indirectly,
more than a 5% interest in both systems in any one MSA or RSA, unless such
ownership will not pose a substantial threat to competition, and no entity may,
directly or indirectly, own a controlling interest in, or otherwise have the
ability to control, both such systems. The FCC may prohibit or impose conditions
on transfers of licenses. In addition, under FCC rules, no person may have an
attributable interest in a total of more than 45 MHz of licensed, broadband PCS,
cellular and ESMR spectrum regulated as Commercial Mobile Radio Services
("CMRS") with significant overlap in any geographic area (significant overlap
will occur when at least 10% of the population of the PCS licensed service areas
is within the CGSA (as defined below) and/or the ESMR service area).
Under FCC rules, the authorized service area of a cellular provider in each
of its markets is referred to as the "Cellular Geographic Service Area" or
"CGSA." The CGSA may conform exactly with the boundaries of the FCC designated
MSA or RSA, or it may be larger or smaller, subject to certain minimum service
requirements. A cellular licensee has the exclusive right to expand its CGSA
boundaries within the licensee's MSA or RSA for a period of five years after
grant of the licensee's initial construction permit. At the end of this
five-year build-out period, however, any entity may apply to serve portions of
the MSA or RSA of at least 50 square miles in size outside the licensee's then
designated CGSA. Sygnet's five year buildout period has expired in all of its
existing markets, with the exception of Pennsylvania 2 RSA.
Cellular service providers also must satisfy a variety of FCC requirements
relating to technical and reporting matters. One such requirement is the
coordination of proposed frequency usage with adjacent cellular users,
permittees and licensees in order to avoid interference between adjacent
systems. In addition, the height and power of base station transmitting
facilities and the type of signals they emit must fall within specified
parameters. We must pay certain annual regulatory fees to the FCC in connection
with our cellular operations, as well as other fees necessary to support
centralized numbering, administration of telephone numbers, the provision of
telecommunications relay services for the hearing-impaired and applications'
filing fees.
The Communications Act requires prior FCC approval for transfers of a
controlling interest in any license or construction permit, or any rights
thereunder. All of the applications requesting the FCC's approval for the
transfers of control. Although we cannot provide any assurance that any future
requests for approval of applications filed will be approved or acted upon in a
timely manner by the FCC, we have no reason to believe such requests or
applications would not be approved or granted in due course.
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The FCC also regulates a number of other aspects of the cellular business.
For example, the FCC regulates cellular resale practices and recently extended
the resale requirement to broadband PCS and ESMR licensees. Cellular, PCS and
ESMR providers may not restrict any customer's resale of their services or
unreasonably discriminate against resellers of their services. All resale
obligations for cellular, broadband PCS and ESMR operators will terminate on
November 24, 2002. The FCC has also adopted requirements for cellular and other
providers of two-way voice services to implement basic and enhanced 911
services. These services provide emergency service providers with the ability to
better identify and locate callers using wireless services, including callers
using special devices for the hearing impaired. We expect to implement these
services in several stages ending in October 2001. Cellular and PCS carriers are
also required to provide law enforcement agencies with capacity to support
lawful wiretaps by March 12, 2001 and technical assistance for wiretaps by June
30, 2000. These wireless 911 and law enforcement requirements may necessitate
that we incur additional capital obligations to make necessary system changes.
In addition, the FCC regulates the ancillary service offerings that cellular
and PCS licensees can provide and recently revised its rules to permit cellular,
broadband PCS, paging and ESMR licensees to offer fixed services on a co-primary
basis along with mobile services. This rule change may facilitate the provision
of wireless local loop service, which involves the use of wireless links to
provide local telephone service by cellular licensees, as well as broadband PCS
and ESMR licensees. In this regard, the FCC also recently adopted telephone
number portability rules for local exchange carriers, as well as cellular,
broadband PCS and ESMR licensees, that could facilitate the development of local
exchange competition, including wireless local loop service. The new number
portability rules generally require cellular, broadband PCS and ESMR licensees
to have the capability to deliver calls from their systems to ported numbers by
December 31, 1998 and offer number portability and roaming to ported numbers by
March 31, 2000. These requirements may result in added capital expenditures by
us to make necessary system changes, although we currently have no plans for any
such expenditures.
Initial cellular licenses are generally granted for terms of ten years,
beginning on the date of the grant of the initial operating authority, and are
renewable upon application to the FCC. Sygnet's cellular licenses expire at
various dates beginning in October 2000. Licenses may be revoked and license
renewal applications denied for cause after appropriate notice and hearing. Near
the conclusion of the license term, licensees must file applications for renewal
of licenses to obtain authority to operate for up to an additional 10-year term.
The FCC will award a renewal expectancy to a cellular licensee that meets
certain standards of past performance. If the existing licensee receives a
renewal expectancy, it is very likely that the existing licensee's cellular
license will be renewed without becoming subject to competing applications. To
receive a renewal expectancy, a licensee must show that it has provided
"substantial" service during its past license term, and has substantially
complied with applicable FCC rules and policies and the Communications Act.
"Substantial" service is defined as service which is sound, favorable and
substantially above a level of mediocre service that might only minimally
warrant renewal. If the existing licensee does not receive a renewal expectancy,
competing applications for the license will be accepted by the FCC and the
license may be awarded to another entity.
In order to increase competition in wireless communications, promote
improved quality and service and make available the widest possible range of
wireless services, federal legislation was enacted directing the FCC to allocate
radio frequency spectrum for PCS by competitive bidding. A PCS system operates
under a protected geographic service area license granted by the FCC for either
an MTA or BTA on one of six frequency blocks allocated for broadband PCS
service. The FCC has divided the United States and its possessions and
territories into PCS markets made up of 493 BTAs and 51 MTAs. As many as six
licensees will compete in each PCS service area. The FCC has allocated 120 MHz
of radio spectrum in the 2 GHz band for licensed broadband PCS services. The FCC
divided the 120 MHz of spectrum into six individual blocks, each of which is
allocated to serve either MTAs or BTAs. The spectrum allocation includes two 30
MHz blocks (A and B Blocks) licensed for each of the 51 MTAs, one 30 MHz block
(C Block) licensed for
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each of the 493 BTAs, and three 10 MHz blocks (D, E and F Blocks) licensed for
each of the 493 BTAs, a total of more than 2,000 licenses.
Applications for FCC authority may be denied and in extreme cases licenses
may be revoked if the FCC finds that an entity lacks the requisite "character"
qualifications to be a licensee. In making the determination, the FCC considers
whether an applicant or licensee has been the subject of adverse findings in a
judicial or administrative proceeding involving felonies, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition, employment
discrimination, misrepresentations to the FCC or other government agencies, or
serious violations of the Communications Act or FCC regulations.
If the FCC determines that the public interest would be served, it may
revoke the Company's cellular licenses or require an ownership restructuring if
greater than 25 percent of the Company's equity is owned of record or voted by
aliens or their representatives, a foreign government or its representative, or
any corporation organized under the laws of a foreign country. The FCC will
generally permit additional indirect ownership in excess of the statutory 25
percent benchmark where that interest is to be held by an entity or entities
from member countries of the World Trade Organization ("WTO"). For investors
from non-WTO countries, however, the FCC will determine whether the home country
of the foreign investor extends reciprocal treatment called "equivalent
competitive opportunities" to U.S. entities. If such opportunities do not exist,
it is unlikely that the FCC will permit investment beyond the 25 percent
benchmark. These restrictions could adversely affect our ability to attract
additional equity financing.
Interconnection charges paid to local exchange carriers are a major
component of our cost of service. Changes in the interconnection charge rate
structure imposed by the FCC or mandated by the Telecommunications Act may have
a material impact on us.
The Telecommunications Act, which makes significant changes to the
Communications Act and terminated the antitrust consent decree applicable to the
RBOCs, affects the telecommunications industry. This legislation, among other
things, affects competition for local telecommunications services,
interconnection arrangements for carriers, universal service funding and the
provision of interexchange services.
The Telecommunications Act requires state public utilities commissions
and/or the FCC to implement policies that mandate reciprocal compensation
between local exchange carriers, a category that will, for these purposes,
include cellular carriers, for interconnection services at rates more closely
related to cost. On August 1, 1996, the FCC adopted rules implementing the
interconnection policies imposed by the Telecommunications Act. Various aspects
of the order not directly related to interconnection between wireless carriers
and local exchange carriers are currently being reviewed by the U.S. Supreme
Court and the FCC's orders are currently subject to a federal appellate court
stay. If the FCC's rules are upheld on appeal, such action could result in
further reductions of the Company's interconnection expenses.
The Telecommunications Act requires the FCC to adopt rules that require
interstate communications carriers, including cellular carriers, to "make an
equitable and non-discriminatory contribution" to a universal service fund that
reimburses communications carriers that provide basic communications services to
users who receive services at subsidized rates. These rules could result in
increased costs for our cellular operations. The Telecommunications Act also
eases the restrictions on the provision of interexchange telephone services by
wireless carriers affiliated with RBOCs. RBOC-related wireless carriers have
interpreted the legislation to permit immediate provision of long distance call
delivery for their cellular customers.
The Telecommunications Act specifically exempts all cellular carriers from
the obligation to provide equal access to interstate long distance carriers.
However, the Telecommunications Act gives the FCC the authority to impose rules
to require unblocked access through carrier identification codes or 800/888
numbers, so that cellular subscribers are not denied access to the long distance
carrier of their choosing, if the FCC determines that the public interest so
requires. We currently provide "dial around" equal access to all of its
customers.
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The Telecommunications Act also imposes restrictions on a telecommunications
carrier's use of customer proprietary network information. FCC rules
implementing these restrictions could impose new costly obligations on us and
impose burdens on our current marketing activities.
The overall impact of the Telecommunications Act on our business is unclear
and will likely remain so for the foreseeable future. The new limitations on
local zoning requirements may facilitate the construction of new cell sites and
related facilities. See "--State, Local and Other Regulation." However, other
provisions of the statute relating to interconnection, telephone number
portability, equal access, use of customer proprietary network information and
resale could subject us to additional costs and increased competition.
STATE, LOCAL AND OTHER REGULATION. The Communications Act preempts state or
local regulation of the entry of, or the rates charged by, any commercial mobile
service or any private mobile service provider, which includes cellular
telephone service providers. The FCC has denied the petition of eight states to
continue their rate regulation authority, including authority over cellular
operators. As a practical matter, we are free to establish rates and offer new
products and service with a minimum of regulatory requirements. The three states
in which we operate maintain nominal oversight jurisdiction, primarily focusing
upon prior approval of acquisitions and transfers and resolution of customer
complaints.
The location and construction of cellular transmitter towers and antennas
are subject to FCC and Federal Aviation Administration regulations and are
subject to federal, state and local environmental regulation, as well as state
or local zoning, land use and other regulation. Before a system can be put into
commercial operation, the grantee of a construction permit must obtain all
necessary zoning and building permit approvals for the cell sites and microwave
tower locations and must secure state certification, if required. The time
needed to obtain zoning approvals and requisite state permits varies from market
to market and state to state. Likewise, variations exist in local zoning
processes. In addition, any proposed site must comply with the FCC's
environmental rules.
Zoning and planning regulation may become more restrictive in the future as
many broadband PCS carriers are now seeking sites for network construction. The
Telecommunications Act provides limited relief from state and local laws that
arbitrarily restrict the expansion of personal wireless services, which include
cellular, PCS and ESMR systems. For example, under the Telecommunications Act,
localities are now precluded from denying zoning approval for cell sites based
upon electromagnetic emission concerns, if the cellular operator's system
complies with FCC emissions standards. In addition, localities are prohibited
from adopting zoning requirements that prohibit or have the effect of
prohibiting personal wireless services, or that discriminate between
"functionally equivalent" services. Notwithstanding these new requirements,
wireless carriers have had various degrees of success in challenging offensive
zoning requirements and it is still unclear whether the costs of expanding
cellular systems by adding cell sites will increase and whether significant
delays will be experienced due to local zoning regulations.
We can provide no assurance that any state or local regulatory requirements
currently applicable to our systems will not be changed in the future or that
regulatory requirements will not be adopted in those states and localities which
currently have none.
FUTURE REGULATION. From time to time, legislation that could affect us,
either beneficially or adversely, is proposed by federal or state legislators.
There can be no assurance that federal or state legislation will not be enacted,
or that regulations will not be adopted or actions taken by the FCC or state
regulatory authorities, that might adversely affect our business. Changes such
as the allocation by the FCC of radio spectrum to services that compete with our
business could adversely affect our operating results.
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EMPLOYEES AND AGENTS
As of September 30, 1998, Sygnet had approximately 455 employees and had
agreements with more than 60 independent sales agents. None of Sygnet's
employees is represented by a labor organization, and we consider Sygnet's
employee relations to be good.
PROPERTIES
Our headquarters are in Oklahoma City, Oklahoma. Sygnet owns office
buildings in Youngstown and Warren, Ohio and land for a proposed office site in
Boardman, Ohio. As of September 30, 1998, Sygnet's cellular operations leased 55
and owned 2 retail sales and administrative offices. We will review these leases
from time to time and may, in the future, lease or acquire new facilities as
needed. We do not expect to encounter any material difficulties in meeting our
future needs for any leased space. Sygnet owned 4 cell sites and 124 towers and
leased 177 cell sites and 10 towers as of September 30, 1998. As part of the
Sygnet Transactions, Sygnet sold substantially all of its owned towers to Dobson
Tower Company, which leased these towers back to Sygnet. See "Certain
Transactions."
LEGAL PROCEEDINGS
Sygnet is not currently involved in any pending legal proceedings that
individually or in the aggregate are material to Sygnet. Sygnet is a party to
routine filings and customary regulatory proceedings with the FCC and state
public utility commissions relating to its operations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Upon completion of the Sygnet Transactions, Albert H. Pharis Jr., Sygnet's
former President and Chief Executive Officer, became a director of and entered
into a consulting arrangement with Dobson under which he is to provide services
to all of Dobson's cellular subsidiaries. Dana L. Schmaltz also joined the Board
of Directors of Dobson and its cellular subsidiaries upon completion of the
Sygnet Transactions. In addition, Craig T. Sheetz, Sygnet's former Vice
President and Chief Financial Officer, became Executive Vice President of
Operations of Dobson for Dobson's cellular subsidiaries.
The directors and executive officers of the Company are set forth below.
Certain of the officers and directors hold or have held positions in Dobson and
several of its subsidiaries. The ages of the persons set forth below are as of
December 31, 1998.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------- --- -----------------------------------------------------------------------
<S> <C> <C>
Everett R. Dobson (1).............. 38 Chairman of the Board and Chief Executive Officer
G. Edward Evans.................... 37 President and Chief Operating Officer
Bruce R. Knooihuizen............... 42 Vice President and Chief Financial Officer
Stephen T. Dobson (1).............. 35 Secretary, Treasurer and Director
Russell L. Dobson (1).............. 63 Director
Justin L. Jaschke.................. 39 Director
Albert H. Pharis, Jr............... 48 Director
Dana L. Schmaltz................... 31 Director
</TABLE>
- ------------------------
(1) Everett R. Dobson and Stephen T. Dobson are sons of Russell L. Dobson.
EVERETT R. DOBSON has served as a Chairman and Chief Executive Officer of
the Company since its formation in 1998 and as a director and officer of Dobson
since 1982. From 1990 to 1996, he served as a director, President and Chief
Operating Officer of Dobson and President of Dobson's cellular subsidiaries. He
was elected Chairman of the Board and Chief Executive Officer of Dobson in April
1996. Mr. Dobson served on the board of the Cellular Telecommunications Industry
Association ("CTIA") in 1993 and 1994. He holds a B.A. in Economics from
Southwestern Oklahoma State University ("SWOSU") where he currently sits on the
SWOSU Foundation Board and chairs the investment committee.
G. EDWARD EVANS has served as President and Chief Operating Officer of the
Company since its formation in 1998 and has served as President of Dobson's
cellular subsidiaries since January 1997. Mr. Evans was employed by BellSouth
Mobility, Inc. from 1993 to 1996, serving as General Manager-- Kentucky,
director of Field Operations at the company's corporate office in Atlanta and
Director of Marketing--Alabama. He was an Area Manager and a Market Manager of
United States Cellular, Inc. from 1990 to 1993 and was a Sales Manager of GTE
Mobilnet from 1989 to 1990. Mr. Evans serves on the board of CTIA. He has an
M.B.A. from Georgia State University.
BRUCE R. KNOOIHUIZEN has served as Vice President and Chief Financial
Officer of the Company since its formation in 1998 and has served as Vice
President and Chief Financial Officer of Dobson since July 1996. From 1994 to
1996, Mr. Knooihuizen was Chief Financial Officer and Secretary for The Westlink
Co. in San Diego, a wireless provider which was formerly an operating unit of U
S WEST. Previously, he was Treasurer and Controller of Ameritech Cellular from
1990 to 1994, Director, Accounting Operations of Ameritech Applied Technologies
from 1988 to 1990, and Controller of Ameritech Properties in 1988, all located
in Chicago. From 1980 to 1988 he held various financial and accounting positions
with The Ohio Bell Telephone Company. Mr. Knooihuizen received a B.S. in finance
from Miami University in Oxford, Ohio and an M.B.A. in finance from the
University of Cincinnati.
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STEPHEN T. DOBSON has been Secretary, Treasurer and a director of the
Company since its formation in 1998. He has been a director of Dobson since
1990. He has served as Secretary of Dobson since 1990 and served as Treasurer of
Dobson from 1991 until September, 1998 and Treasurer and Secretary of Dobson
Telephone Company since 1994 and 1990, respectively. Mr. Dobson has served as
President and a director of Dobson's wireline operations since 1997. Mr. Dobson
is a member of the Western Rural Telephone Association ("WRTA"), National
Telephone Cooperative Association and Telecommunications Resellers Association.
He holds a B.S. in business administration from the University of Central
Oklahoma.
RUSSELL L. DOBSON has been a director of the Company since its formation in
1998 and of Dobson since 1990 and was Chairman of the Board and Chief Executive
Officer from 1990 to 1996. Mr. Dobson joined his father at Dobson Telephone
Company in 1956 and became the controlling owner and Chief Executive Officer in
1975 when he purchased his father's interest. He has been active in many
industry-related groups, including the OTA, WRTA and Organization for the
Protection and Advancement of Small Telephone Companies.
JUSTIN L. JASCHKE has been a director of the Company since its formation in
1998 and of Dobson since October 1996. Mr. Jaschke has been the Chief Executive
Officer and a Director of Verio, Inc., a privately held Internet access
provider, since its inception in March 1996. Prior to forming Verio, Inc., Mr.
Jaschke served as Chief Operating Officer for Nextel following its merger with
OneComm Corporation ("OneComm") in July of 1995. Mr. Jaschke served as OneComm's
President and a member of its Board of Directors from 1993 until the merger with
Nextel. Mr. Jaschke currently serves as Chairman of the Board of Directors of
V-I-A Internet, Inc. and also serves on the Board of Directors of Metricom,
Inc., a wireless data communications provider. From May 1990 to April 1993, Mr.
Jaschke served as President and CEO of Bay Area Cellular Telephone Company. From
November 1987 to May 1990, Mr. Jaschke was Vice President of Corporate
Development of PacTel Cellular, and from 1985 to 1987 was Director of Mergers
and Acquisitions of PacTel Corporation. Prior to that, Mr. Jaschke was a
management consultant with Marakon Associates. Mr. Jaschke has a B.S. in
mathematics from the University of Puget Sound and an M.S. in management from
the Massachusetts Institute of Technology Sloan School of Management.
ALBERT H. PHARIS, JR. has served as President, Chief Executive Officer and
Director of Sygnet since Sygnet's inception in 1985. He has been active as a
board member of CTIA since 1985 and as a member of the CTIA Executive Committee
since 1989. He has also been Chairman of CTIA's Small Operators Caucus. Mr.
Pharis became a director of the Company and of Dobson in December 1998.
DANA L. SCHMALTZ became a director of the Company in accordance with the
terms of the Stockholders' Agreement dated December 23, 1998 between the Company
and J.W. Childs Associates, L.P. Mr. Schmaltz is a Vice President of J.W. Childs
Associates, L.P. and has been at J.W. Childs Associates, L.P. since February
1997. From 1995 to 1997, Mr. Schmaltz was an associate at DLJ Merchant Banking,
Inc. Mr. Schmaltz graduated from the Harvard Graduate School of Business
Administration in 1995.
COMPOSITION OF BOARD OF DIRECTORS
Our Board of Directors presently consists of six directors. Our directors
and executive officers are elected to serve until they resign or are removed, or
are otherwise disqualified to serve, or until their successors are elected and
qualified. Our directors are elected for one-year terms at the annual meeting of
stockholders which is held in April of each year. Our officers are appointed at
the Board's first meeting after each annual meeting of stockholders.
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<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
ANNUAL COMPENSATION OTHER ANNUAL UNDERLYING
------------------------------- COMPENSATION OPTION AWARDS ALL OTHER
NAME AND PRINCIPAL POSITION(1) YEAR SALARY BONUS ($) (# OF SHARES) COMPENSATION ($)
- ----------------------------------- --------- --------- --------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Everett R. Dobson.................. 1998 $ -- $ -- $ -- -- $ --
Chairman of the Board and Chief
Executive Officer
</TABLE>
- ------------------------
(1) Everett R. Dobson was elected Chief Executive Officer of Dobson/Sygnet on
July 26, 1998 and he received no compensation from Dobson/Sygnet during
1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
We do not have a separate compensation committee of our Board of Directors.
The Board of Directors will set the compensation for its executive officers.
Everett R. Dobson, Chairman of the Board and Chief Executive Officer, and
Stephen T. Dobson, Treasurer and Secretary, are directors and participate in
these deliberations concerning executive officer compensation. Each of our
directors also serves on the board of directors of Dobson Communications
Corporation and on the boards of directors of various of its subsidiaries. As
such, each of the directors will participate in the deliberations concerning
executive officer compensation for Dobson Communications Corporation and its
subsidiaries.
STOCK OPTION PLANS
Our key employees may participate in the Dobson Communications 1996 Stock
Option Plan which permits the grant of stock options to purchase Class B Common
Stock and Class C Common Stock of Dobson Communications Corporation.
CERTAIN TRANSACTIONS
We have adopted a policy requiring that any material transaction with
persons or entities affiliated with officers, directors, or our principal
stockholders be on terms no less favorable to us than reasonably could have been
obtained in an arm's length transaction with independent third parties. Any
other matters involving potential conflicts of interests are to be resolved by
the Board of Directors on a case-by-case basis.
Dobson Communications Corporation provides us with certain administrative
services, including accounting, information systems management, human resources
management and marketing. Additionally, many of our officers are also officers
of Dobson Communications Corporation and various of its other subsidiaries.
These officers perform functions for all of subsidiaries of Dobson
Communications Corporation, including Dobson/Sygnet. We reimburse Dobson
Communications Corporation based on its cost of providing the services.
We are a party to a tax sharing agreement with Dobson Communications
Corporation and its other subsidiaries. As a member of the affiliated group we
will join with Dobson Communications Corporation and its other subsidiaries in
filing a consolidated federal income tax return. Under the tax sharing
agreement, each subsidiary's contribution toward the group's consolidated
federal income tax liability is determined as if such party were at all times a
separate taxpayer not included in the group. Based on this determination of
separate tax liability, each subsidiary pays Dobson Communications Corporation
an amount in lieu of taxes equal to the amount the subsidiary would be obligated
to pay if it filed returns as a separate taxpayer. If, but only to the extent
that, the group realizes a tax benefit for any taxable year as a result of the
inclusion of a subsidiary's tax items in the determination of tax liability of
the group, Dobson Communications Corporation will pay to the subsidiary an
amount equal to such tax benefits realized.
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As part of the Sygnet Transactions, Sygnet sold substantially all of the
towers it owned to Dobson Tower Company, a wholly owned subsidiary of Dobson
Communications Corporation, for $25.0 million. Dobson Tower Company then leased
the towers back to Sygnet under an operating lease, with annual lease payments
of approximately $1.6 million.
PRINCIPAL SHAREHOLDER
All of our issued and outstanding capital stock is owned beneficially and of
record by Dobson Communications Corporation. Everett R. Dobson beneficially owns
capital stock of Dobson Communications Corporation representing 84.8% of the
voting power of its outstanding capital stock.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW BANK FACILITIES
The New Bank Facilities are provided to Sygnet by NationsBank, N.A., as
Agent, and include a $50.0 million senior secured, reducing revolving credit
facility (the "Revolving Credit Facility") and a series of three term loans
aggregating $380.0 million ("Term Loan Facilities") to be used for acquisitions,
restricted payments, and to fund capital expenditures, permitted investments,
working capital and other corporate purposes.
The following summary of the material provisions of the New Bank Facilities
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, the definitive loan documents. Capitalized terms that
are used but not defined in this section have the meanings that are given such
terms in the definitive loan agreement.
The New Bank Facilities aggregate $430.0 million and include (a) a $50.0
million, 7 3/4 year reducing revolving credit facility, (b) a $125.0 million,
7 3/4 year term loan ("Term Loan A"), (c) a $155.0 million, 8 1/4 year term loan
("Term Loan B") and (d) a $100.0 million, 9 year term loan ("Term Loan C").
Borrowings under the Revolving Credit Facility and Term Loans A and B will
bear interest, payable at least quarterly, at Sygnet's option, at (a) the
"Applicable Margin" plus the greater of (i) the Federal Funds Effective Rate
plus 0.5% and (ii) the prime rate (the "Base Rate"), or (b) the "Applicable
Margin" plus Reserve Adjusted LIBOR ("LIBOR") for interest periods of 1, 2, 3 or
6 months. The "Applicable Margin" for the Revolving Credit Facility and Term
Loan A fluctuates based on Sygnet's leverage and is the Base Rate plus 0.75% to
2.00% or LIBOR plus 1.75% to 3.00%. For Term Loan B, the "Applicable Margin"
fluctuates based on Sygnet's leverage and is the Base Rate plus 1.75% to 2.25%
or LIBOR plus 2.75% to 3.25%. Term Loan C will bear interest at LIBOR plus 3.75%
for interest periods of 1, 2, 3 or 6 months.
Commencing with the quarter ending December 31, 2000, the borrowing
commitment under the Revolving Credit Facility and Term Loan A will reduce
quarterly under the following annual amortization schedule:
<TABLE>
<CAPTION>
YEAR ANNUAL AMORTIZATION
- ------------------------------------------------------------------------- -----------------------
<S> <C>
2000..................................................................... 5.0%
2001..................................................................... 7.5%
2002..................................................................... 7.5%
2003..................................................................... 12.5%
2004..................................................................... 15.0%
2005..................................................................... 25.0%
2006..................................................................... 27.5%
</TABLE>
Commencing with the quarter ending December 31, 2000, Term Loan B will
reduce quarterly under the following annual amortization schedule:
<TABLE>
<CAPTION>
YEAR ANNUAL AMORTIZATION
- ------------------------------------------------------------------------- -----------------------
<S> <C>
2000..................................................................... 2.5%
2001..................................................................... 2.5%
2002..................................................................... 2.5%
2003..................................................................... 7.5%
2004..................................................................... 15.0%
2005..................................................................... 25.0%
2006..................................................................... 27.5%
2007..................................................................... 17.5%
</TABLE>
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Term Loan C will amortize annually under the following schedule:
<TABLE>
<CAPTION>
YEAR ANNUAL AMORTIZATION
- ------------------------------------------------------------------------- -----------------------
<S> <C>
1999-2006................................................................ 1.0%
2007..................................................................... 92.0%
</TABLE>
The commitments under the New Bank Facilities will all be permanently
reduced by an amount equal to 100% of the net cash proceeds from sales of assets
in excess of $5.0 million, to the extent not reinvested within 12 months, by an
amount equal to 100% of the net cash proceeds received from certain equity or
debt issuances and by 75% or 50% of excess cash flow, depending on Sygnet's
leverage. In addition, to the extent amounts have been borrowed in respect of
the Tower Sale Leaseback, such amounts shall be repaid with the net proceeds
therefrom and the commitments under each of Term Loan A and Term Loan B will
decrease by $10.0 million.
Sygnet may, without premium or penalty, prepay advances bearing interest
based on the Base Rate at any time and may, without premium or penalty, prepay
advances bearing interest based on the LIBOR rate at the end of an applicable
interest period. Term Loan C may be redeemed in whole or in part at 102% of the
principal amount through December 31, 1999, 101% of the principal amount through
December 31, 2001 and thereafter at 100%.
The New Bank Facilities contain a number of covenants including, among
others, covenants limiting the ability of Sygnet to incur debt, make loans,
create liens, make guarantees and investments, change their business, engage in
transactions with affiliates, sell assets, enter into restrictive agreements,
engage in sale leaseback transactions or new business and engage in mergers and
acquisitions. The New Bank Facilities will contain other usual and customary
negative and affirmative covenants, including Year 2000 compliance.
The New Bank Facilities restrict Sygnet from declaring and paying
distributions or making restrictive payments. However, Sygnet may pay dividends
to pay (i) scheduled interest on the Notes commencing after the first six
interest payments on the Notes and (ii) regularly scheduled payments on up to
$120,000,000 in liquidation preference value of preferred stock issued by Dobson
Communications Corporation, commencing January 15, 2003, in each case unless if
at the time of such dividend or distribution an event of default (other than an
event of default resulting solely from the breach of a representation or
warranty) exists or would be caused by such dividend or distribution; provided
that, with respect to any event of default (other than a payment default
(including by way of acceleration), a bankruptcy event with respect to us,
Sygnet or Dobson Communications Corporation or any of its restricted
subsidiaries or the loss of a material license or cellular system, Sygnet will
not be prohibited from paying dividends to us to pay scheduled interest on the
Notes for more than 180 days.
Sygnet is required to maintain certain financial ratios, including, among
others, a ratio of total debt to cash flow, a ratio of operating cash flow to
pro forma debt service, a ratio of operating cash flow to cash interest expense
and a fixed charge coverage ratio. In addition, Dobson Communications
Corporation and us will be required to maintain a ratio of debt to operating
cash flow.
Failure to satisfy any of the financial covenants will constitute an Event
of Default under the New Bank Facilities, permitting the lenders, after notice,
to terminate the commitment and/or accelerate payment of outstanding
indebtedness notwithstanding the ability of Sygnet to meet its debt service
obligations. The New Bank Facilities include other customary events of default
including, without limitation, loss of franchise or any material license; breach
of representations, warranties and covenants; insolvency or bankruptcy of Sygnet
or any of its subsidiaries or of Dobson Communications Corporation or any of its
subsidiaries; cross default to other material indebtedness, leases, contracts of
Sygnet, its subsidiaries, or of Dobson Communications Corporation and its
subsidiaries (excluding Logix Communications Enterprises, Inc.); any material
adverse change; dissolution or termination of Sygnet or any of its subsidiaries
or of Dobson Communications Corporation; if Dobson Communications Corporation
fails to
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maintain direct voting and economic control of Sygnet and its subsidiaries; and
if less than two-thirds of the existing executive management team of Dobson
Communications Corporation continue to hold executive positions with Dobson.
Sygnet's obligations under the New Bank Facilities are guaranteed by its
subsidiary. Borrowings under the New Bank Facilities are secured by a first
perfected security interest in all assets of Sygnet and its present and future
subsidiaries including a pledge of all intercompany notes.
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<PAGE>
DESCRIPTION OF THE NOTES
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions." In this description, the words "Company"
and "Dobson/Sygnet" refer only to Dobson Sygnet Communications Company and not
to any of its subsidiaries.
The Notes are issued under an Indenture, dated as of December 23, 1998,
between the Company and United States Trust Company of New York (the "Trustee").
A copy of the Indenture is available upon request from the Company. The
following summary of certain provisions of the Indenture does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Indenture, including the definitions of certain terms
therein and those terms made a part thereof by the Trust Indenture Act of 1939,
as amended.
GENERAL
The Notes are:
- unsecured (except to the extent described under "--Pledged Securities"
below), unsubordinated obligations of the Company,
- initially limited to $200 million aggregate principal amount, and
- will mature on December 15, 2008.
PRINCIPAL, MATURITY AND INTEREST
The Company will issue Notes with a maximum aggregate principal amount of
$200 million. The Company will issue Notes in denominations of $1,000 and
integral multiples of $1,000. The Notes will mature on December 15, 2008.
Each Note will bear interest at 12 1/4% per annum from the Closing Date or
from the most recent Interest Payment Date to which interest has been paid or
provided for, payable semiannually. Interest will be payable to Holders of
record at the close of business on the June 1 or December 1 immediately
preceding the Interest Payment Date on June 15 and December 15 of each year
commencing June 15, 1999.
Principal, premium, if any, and interest on the Notes will be payable, and
the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially will
be United States Trust Company of New York, 114 W. 47th Street, New York, New
York 10036, Attention: Corporate Trust Department). The Company may pay interest
by check mailed to the Holders at their addresses as they appear in the Security
Register.
No service charge will be made for any registration of transfer or exchange
of Notes, but the Company may require payment of a sum sufficient to cover any
transfer tax or other similar governmental charge payable in connection
therewith.
The Company may, subject to the covenants described below under "Covenants"
and applicable law, issue additional Notes under the Indenture. The Notes
offered hereby and any additional Notes subsequently issued would be treated as
a single class for all purposes under the Indenture.
OPTIONAL REDEMPTION
The Notes are redeemable, at the Company's option, in whole or in part, at
any time or from time to time, on or after December 15, 2003 and prior to
maturity. The Notes may be issued the following Redemption Prices, expressed in
percentages of principal amount, plus accrued and unpaid interest, if any, to
the Redemption Date, subject to the right of Holders of record on the relevant
Regular Record Date to
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<PAGE>
receive interest due on the relevant Interest Payment Date, if redeemed during
the 12-month period commencing December 15 of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2003........................................................................ 106.125%
2004........................................................................ 103.063
2005........................................................................ 101.531
2006 and thereafter......................................................... 100.000%
</TABLE>
In addition, prior to December 15, 2001, the Company may on one or more
occassions redeem up to 35% of the original aggregate principal amount of the
Notes with the proceeds of one or more equity offerings by the Company, at a
redemption price of 112.25% of the principal amount thereof, plus accrued and
unpaid interest to the redemption date. However, at least 65% of the aggregate
principal amount of Notes originally issued must remain outstanding after each
such redemption. Any redemption under this provision must occur within 60 days
following the closing of the equity offering.
SELECTION AND NOTICE OF REDEMPTION
In the event that less than all of the Notes are redeemed pursuant to an
optional redemption, selection of the Notes for redemption will be made by the
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Notes are listed or, if the Notes are not listed
on a national securities exchange, by lot or by such other method as the Trustee
in its sole discretion shall deem to be fair and appropriate. No Notes of $1,000
in principal amount or less may be redeemed in part. If any Note is to be
redeemed in part only, the notice of redemption shall state the portion of the
principal amount to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note. Notices of redemption must be mailed
first-class mail at least 30 but not more than 90 days before the redemption
date to each Holder of Notes to be redeemed at the Holders registered address.
REGISTRATION RIGHTS AND RESALE OF NOTES
The Company and the Initial Purchasers entered into a Registration Rights
Agreement (the "Registration Rights Agreement") on December 23, 1998 under which
the Company agreed at its expense, to:
- file a registration statement (the "Exchange Offer Registration
Statement") with the Commission with respect to a registered offer to
exchange the Notes for a new issue of debt securities of the Company (the
"New Notes") to be issued under the Indenture in the same aggregate
principal amount as and with terms that will be identical in all respects
to the Notes (except that the New Notes will not contain transfer
restrictions),
- use its best efforts to cause the Exchange Offer Registration Statement to
be declared effective under the Securities Act, and
- use its best efforts to consummate the Exchange Offer.
Based on existing interpretations of the Securities Act by the staff of the
Commission set forth in several no-action letters to third parties, and subject
to the immediately following sentence, the Company believes that the New Notes
issued pursuant to the Exchange Offer may be offered for resale, resold and
otherwise transferred by the Holders thereof without further compliance with the
registration and prospectus delivery provisions of the Securities Act. However,
any purchaser of Notes who is an "affiliate" of the Company or who intends to
participate in the Exchange Offer for the purpose of distributing the Exchange
Notes, (1) will not be able to rely on the interpretations by the staff of the
Commission set forth in the above-mentioned no-action letters, (2) will not be
able to tender its Notes in the Exchange Offer and (3) must comply with the
registration and prospectus delivery requirements of the Securities Act in
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<PAGE>
connection with any sale or transfer of the Notes unless such sale or transfer
is made pursuant to an exemption from such requirements.
Each Holder who wishes to exchange Notes for New Notes in the Exchange Offer
is required to represent that (1) it is not an affiliate of the Company, (2) any
New Notes to be received by it were acquired in the ordinary course of its
business and (3) at the time of commencement of the Exchange Offer, it has no
arrangement with any person to participate in the distribution (within the
meaning of the Securities Act) of the New Notes. In addition, in connection with
any resales of New Notes, any broker-dealer (an "Exchanging Dealer") who
acquired the Notes for its own account as a result of market-making activities
or other trading activities must deliver a prospectus meeting the requirements
of the Securities Act. The Commission has taken the position that Exchanging
Dealers may fulfill their prospectus delivery requirements with respect to the
New Notes (other than a resale of an unsold allotment form the original sale of
the Notes) with the prospectus contained in the Exchange Offer Registration
Statement. Under the Registration Rights Agreement, the Company is required to
allow Exchanging Dealers to use the prospectus contained in the Exchange Offer
Registration Statement in connection with the resale of such New Notes.
If any changes in law or applicable interpretations of the staff of the
Commission do not permit the Company to effect the Exchange Offer, or if for any
reason the Exchange Offer is not consummated within 180 days of the Closing Date
or in certain other circumstances, the Company will, at its expense (1) file
with the Commission a shelf registration statement (the "Shelf Registration
Statement") covering resales of the Notes, (2) use its best efforts to cause the
Shelf Registration Statement to be declared effective under the Securities Act
and (3) keep effective the Shelf Registration Statement until two years after
the Closing Date (or such shorter period of time that will terminate when all
the Notes covered thereby have been sold pursuant thereto or in certain other
circumstances). The Company will, in the event of the filing of a Shelf
Registration Statement, provide to each Holder covered by the Shelf Registration
Statement copies of the prospectus that is a part of the Shelf Registration
Statement, notify each Holder when the Shelf Registration Statement has become
effective and take certain other actions as are required to permit unrestricted
resales of the Notes. A Holder that sells such Notes pursuant to the Shelf
Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to the
purchaser, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
Holder (including certain indemnification obligations). In addition, each Holder
will be required to deliver certain information to be used in connection with
the Shelf Registration Statement in order to have its Notes included in the
Shelf Registration Statement.
If either (a) the Exchange Offer is not consummated on or prior to June 21,
1999 or (b) a Shelf Registration Statement is not declared effective when
required, the Company will pay liquidated damages ("Liquidated Damages") to each
Holder of Notes in an amount equal to .5% per annum of the principal amount
thereof, payable on June 15 and December 15. Upon the consummation of the
Exchange Offer or the effectiveness of the Shelf Registration Statement, as the
case may be, Liquidated Damages will cease to accrue.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement.
PLEDGED SECURITIES
Upon issuance of the Old Notes, the Company purchased the Pledged Securities
for $67.7 million and pledged them to the Trustee, for the benefit of the
Holders of the Notes. The Company believes that the amount of the Pledged
Securities will be sufficient to provide for payment in full of the first six
scheduled interest payments due on the Notes. The Pledged Securities have been
pledged by the Company to the Trustee pursuant to the Pledge Agreement.
Immediately prior to an Interest Payment Date on the Notes,
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<PAGE>
the Company may either deposit with the Trustee from funds otherwise available
to the Company cash sufficient to pay the scheduled interest scheduled or may
direct the Trustee to release from the Pledge Account proceeds sufficient to pay
interest then due on the Notes. If the Company elects to deposit cash with the
Trustee, the Company may direct the Trustee to deliver cash or Pledged
Securities from the Pledge Account to the Company. A failure by the Company to
pay interest on the Notes in a timely manner through the first six scheduled
interest payment dates will constitute an immediate Event of Default under the
Indenture, with no grace or cure period.
In addition to securing the payment of interest, the Pledged Securities and
the Pledge Account also secure repayment of the principal amount of the Notes to
the extent of such security. Once the Company makes the first six scheduled
interest payments on the Notes, all remaining Pledged Securities and any other
amounts in the Pledge Account, if any, will be released from the Pledge Account
and thereafter the Notes will be unsecured.
RANKING
The Notes are:
- unsubordinated Indebtedness of the Company,
- rank equally in right of payment with all other unsubordinated
indebtedness of the Company, and
- rank senior in right of payment to all subordinated indebtedness of the
Company.
After giving PRO FORMA effect to the Sygnet Transactions, as of September
30, 1998, the Company would have had on an unconsolidated basis no indebtedness
other than the Notes. The Company is a holding company and the are effectively
subordinated to all existing and future liabilities of the Company's
subsidiaries. As of September 30, 1998, on the same pro forma basis,
subsidiaries of the Company would have had $605.7 million of liabilities
including $398.2 million of indebtedness, all of which would have been
effectively senior to the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants and other provisions of the Indenture. Reference is made to the
Indenture for the definition of all terms as well as any other capitalized term
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person becomes a Restricted Subsidiary or assumed in connection with an
Asset Acquisition by a Restricted Subsidiary and not Incurred in connection
with, or in anticipation of, such Person becoming a Restricted Subsidiary or
such Asset Acquisition; PROVIDED that Indebtedness of such Person which is
redeemed, defeased, retired or otherwise repaid at the time of or immediately
upon consummation of the transactions by which such Person becomes a Restricted
Subsidiary or such Asset Acquisition shall not be Acquired Indebtedness.
"Adjusted Consolidated Net Income" means, for any period, the aggregate net
income (or loss) of the Company and its Restricted Subsidiaries for such period
determined in conformity with GAAP; PROVIDED that the following items shall be
excluded in computing Adjusted Consolidated Net Income (without duplication):
(i) the net income of any Person (other than net income attributable to
a Restricted Subsidiary) in which any Person (other than the Company or any
of its Restricted Subsidiaries) has a joint interest and the net income of
any Unrestricted Subsidiary, except to the extent of the amount of dividends
or other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during
such period;
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(ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
the "Limitation on Restricted Payments" covenant described below (and in
such case, except to the extent includable pursuant to clause (i) above),
the net income (or loss) of any Person accrued prior to the date it becomes
a Restricted Subsidiary or is merged into or consolidated with the Company
or any of its Restricted Subsidiaries or all or substantially all of the
property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries;
(iii) the net income of any Restricted Subsidiary to the extent that the
declaration or payment of dividends or similar distributions by such
Restricted Subsidiary of such net income is not at the time permitted by the
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable
to such Restricted Subsidiary;
(iv) any gains or losses (on an after-tax basis) attributable to Asset
Sales;
(v) except for purposes of calculating the amount of Restricted Payments
that may be made pursuant to clause (C) of the first paragraph of the
"Limitation on Restricted Payments" covenant described below, any amount
paid or accrued as dividends on Preferred Stock of the Company or any
Restricted Subsidiary owned by Persons other than the Company and any of its
Restricted Subsidiaries; and
(vi) all extraordinary gains and extraordinary losses, net of tax.
"Adjusted Consolidated Net Tangible Assets" means the total amount of assets
of the Company and its Restricted Subsidiaries (less applicable depreciation,
amortization and other valuation reserves), except to the extent resulting from
write-ups of capital assets (excluding write-ups in connection with accounting
for acquisitions in conformity with GAAP), after deducting therefrom (i) all
current liabilities of the Company and its Restricted Subsidiaries (excluding
intercompany items) and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expense and other like intangibles (other than
Federal Communications Commission license acquisition costs), all as set forth
on the most recent quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, prepared in conformity with GAAP and filed with
the Commission.
"Affiliate" means, as applied to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of its
Restricted Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be merged into or consolidated with the
Company or any of its Restricted Subsidiaries; PROVIDED that such Person's
primary business is related, ancillary or complementary to the businesses of the
Company and its Restricted Subsidiaries on the date of such investment or (ii)
an acquisition by the Company or any of its Restricted Subsidiaries of the
property and assets of any Person other than the Company or any of its
Restricted Subsidiaries that constitute substantially all of a division or line
of business of such Person; PROVIDED that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company or
any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary) of (i) all or substantially all of the Capital Stock of
any Restricted Subsidiary or (ii) all or substantially all of the assets that
constitute a division or line of business of the Company or any of its
Restricted Subsidiaries.
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"Asset Sale" means any sale, transfer or other disposition (including by way
of merger, consolidation or sale-leaseback transaction) in one transaction or a
series of related transactions by the Company or any of its Restricted
Subsidiaries to any Person other than the Company or any of its Restricted
Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company or such
Restricted Subsidiary and, in each case, that is not governed by the provisions
of the Indenture applicable to mergers, consolidations and sales of all or
substantially all of the assets of the Company; PROVIDED that "Asset Sale" shall
not include (a) sales or other dispositions of inventory, receivables and other
current assets, (b) sales, transfers or other dispositions of assets
constituting a Restricted Payment permitted to be made under the "Limitation on
Restricted Payments" covenant, (c) sales or other dispositions of assets for
consideration at least equal to the fair market value of the assets sold or
disposed of, to the extent that the consideration received consists of property
or assets (other than current assets) of a nature or type or that are used in a
business (or a company having property or assets of a nature or type, or engaged
in a business) similar or related to the nature or type of the property and
assets of, or business of, the Company and its Restricted Subsidiaries existing
on the date of such sale or other disposition, (d) sales, transfers or other
dispositions of assets with a fair market value (as certified in an Officer's
Certificate) not in excess of $5.0 million in any transaction or series of
related transactions or (e) the Tower Sale.
"Average Life" means, at any date of determination with respect to any debt
security, the quotient obtained by dividing (i) the sum of the products of (a)
the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Bank Agent" means NationsBank, N.A., or its successors as agent for the
lenders under the New Credit Agreement.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of the
rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) (a) prior to the occurrence of a
Public Market, a "person" or "group" (within the meaning of Section 13(d) or
14(d)(2) under the Exchange Act) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of Voting Stock representing a
greater percentage of the total voting power of the Voting Stock of (x) Dobson
Communications, on a fully diluted basis, than is beneficially owned by Everett
R. Dobson and his Affiliates on such date or (y) the Company, on a fully diluted
basis, than is beneficially owned by the Existing Stockholders on such date and
(b) after the occurrence of a Public Market, a "person" or "group" (within the
meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the Voting Stock of the Company on a
fully diluted basis and such ownership represents a greater percentage of the
total voting power of the Voting Stock of the Company, on a fully diluted basis,
than is held by the Existing Stockholders on such date; or (ii) individuals who
on the Closing Date constitute the Board of Directors (together with any new
directors (x) whose election by the Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least a
majority of the members of the
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Board of Directors then in office who either were members of the Board of
Directors on the Closing Date or whose election or nomination for election was
previously so approved or (y) so long as no "person" or "group" (within the
meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
Voting Stock representing a greater percentage of the total voting power of the
Voting Stock of Dobson Communications, on a fully diluted basis, than is
beneficially owned by Everett R. Dobson and his Affiliates on such date, whose
election was approved by Dobson Communications) cease for any reason to
constitute a majority of the members of the Board of Directors then in office.
"Closing Date" means the date on which the Notes are originally issued under
the Indenture.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether now outstanding or issued after the Closing Date, including
without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, for any period, Adjusted Consolidated Net
Income for such period plus, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income (i) Consolidated Interest Expense,
(ii) income taxes, (other than income taxes (either positive or negative)
attributable to extraordinary and non-recurring gains or losses or sales of
assets), (iii) depreciation expense, (iv) amortization expense, and (v) all
other non-cash items reducing Adjusted Consolidated Net Income (other than items
that will require cash payments and for which an accrual or reserve is, or is
required by GAAP to be, made), less all non-cash items increasing Adjusted
Consolidated Net Income, all as determined on a consolidated basis for the
Company and its Restricted Subsidiaries in conformity with GAAP; PROVIDED that,
if any Restricted Subsidiary is not a Wholly Owned Restricted Subsidiary,
Consolidated EBITDA shall be reduced (to the extent not otherwise reduced in
accordance with GAAP) by an amount equal to (A) the amount of the Adjusted
Consolidated Net Income attributable to such Restricted Subsidiary multiplied by
(B) the percentage ownership interest in the income of such Restricted
Subsidiary not owned on the last day of such period by the Company or any of its
Restricted Subsidiaries.
"Consolidated Interest Expense" means, for any period, the aggregate amount
of interest in respect of Indebtedness (including, without limitation,
amortization of original issue discount on any Indebtedness and the interest
portion of any deferred payment obligation, calculated in accordance with the
effective interest method of accounting; all commissions, discounts and other
fees and charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; EXCLUDING, HOWEVER, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in connection
with the offering of the Notes, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the ratio of
(i) the aggregate amount of Indebtedness of the Company and its Restricted
Subsidiaries on a consolidated basis outstanding on such Transaction Date to
(ii) the aggregate amount of Consolidated EBITDA for the then most recent four
fiscal quarters for which financial statements of the Company have been filed
with the Commission (such four fiscal quarter period being the "Four Quarter
Period"); PROVIDED that in making the foregoing calculation (A) pro forma effect
shall be given to any Indebtedness that is to be Incurred or repaid on the
Transaction Date as if such Incurrence or repayment had occurred on the first
day of such Four Quarter
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Period; (B) pro forma effect shall be given to Asset Dispositions and Asset
Acquisitions (including giving pro forma effect to the application of proceeds
of any Asset Disposition) that occur during the period beginning on the first
day of the Four Quarter Period and ending on the Transaction Date (the
"Reference Period") as if they had occurred and such proceeds had been applied
on the first day of such Reference Period; and (C) pro forma effect shall be
given to asset dispositions and asset acquisitions (including giving pro forma
effect to the application of proceeds of any asset disposition) that have been
made by any Person that has become a Restricted Subsidiary or has been merged
with or into the Company or any Restricted Subsidiary during such Reference
Period and that would have constituted Asset Dispositions or Asset Acquisitions
had such transactions occurred when such Person was a Restricted Subsidiary as
if such asset dispositions or asset acquisitions were Asset Dispositions or
Asset Acquisitions that occurred on the first day of such Reference Period;
PROVIDED that to the extent that clause (B) or (C) of this sentence requires
that pro forma effect be given to an Asset Acquisition or Asset Disposition,
such pro forma calculation shall be based upon the four full fiscal quarters
immediately preceding the Transaction Date of the Person, or division or line of
business of the Person, that is acquired or disposed of for which financial
information is available.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Company and its Restricted Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation, and which shall not take into account Unrestricted Subsidiaries),
less any amounts attributable to Disqualified Stock or any equity security
convertible into or exchangeable for Indebtedness, the cost of treasury stock
and the principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item to
be determined in conformity with GAAP (excluding the effects of foreign currency
exchange adjustments under Financial Accounting Standards Board Statement of
Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency swap
agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder of
such class or series of Capital Stock at any time prior to the Stated Maturity
of the Notes or (iii) convertible into or exchangeable for Capital Stock
referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; PROVIDED that any Capital
Stock that would not constitute Disqualified Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in "Limitation on Asset Sales" and
"Repurchase of Notes upon a Change of Control" covenants described below and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to the
"Limitation on Asset Sales" and "Repurchase of Notes upon a Change of Control"
covenants described below.
"Dobson Communications" means Dobson Communications Corporation, an Oklahoma
corporation.
"Existing Stockholders" means (i) Everett R. Dobson and his Affiliates and
(ii) Dobson Communications, so long as no "person" or "group" (within the
meaning of Section 13(d) or 14(d)(2) under the Exchange Act) becomes the
ultimate "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) of
more than 35% of the total voting power of the Voting Stock of Dobson
Communications on a fully
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diluted basis and such ownership represents a greater percentage of the total
voting power of the Voting Stock of Dobson Communications, on a fully diluted
basis, than is held by the Existing Stockholders in clause (i) on such date.
"fair market value" means the price that would be paid in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy, as determined in
good faith by the Board of Directors, whose determination shall be conclusive if
evidenced by a Board Resolution.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations contained or referred to in
the Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of the Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the offering of the Notes and (ii) except as otherwise provided,
the amortization of any amounts required or permitted by Accounting Principles
Board Opinion Nos. 16 and 17.
"Government Securities" means direct obligations of, obligations fully
guaranteed by, or participations in pools consisting solely of obligations of or
obligations guaranteed by, the United States of America for the payment of which
guarantee or obligations the full faith and credit of the United States of
America is pledged and which are not callable or redeemable at the option of the
issuer thereof.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness of any other Person and,
without limiting the generality of the foregoing, any obligation, direct or
indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services
(unless such purchase arrangements are on arm's-length terms and are entered
into in the ordinary course of business), to take-or-pay, or to maintain
financial statement conditions or otherwise) or (ii) entered into for purposes
of assuring in any other manner the obligee of such Indebtedness of the payment
thereof or to protect such obligee against loss in respect thereof (in whole or
in part); PROVIDED that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business. The term "Guarantee"
used as a verb has a corresponding meaning.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, Guarantee or otherwise become liable for or with respect to, or become
responsible for, the payment of, contingently or otherwise, such Indebtedness,
including an "Incurrence" of Indebtedness by reason of a Person becoming a
Restricted Subsidiary; PROVIDED that neither the accrual of interest nor the
accretion of original issue discount shall be considered an Incurrence of
Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication):
(i) all indebtedness of such Person for borrowed money,
(ii) all obligations of such Person evidenced by bonds, debentures,
notes or other similar instruments,
(iii) all obligations of such Person in respect of letters of credit or
other similar instruments (including reimbursement obligations with respect
thereto, but excluding obligations with respect to letters of credit
(including trade letters of credit) securing obligations (other than
obligations described in (i) or (ii) above or (v), (vi) or (vii) below)
entered into in the ordinary course of business
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of such Person to the extent such letters of credit are not drawn upon or,
if drawn upon, to the extent such drawing is reimbursed no later than the
third Business Day following receipt by such Person of a demand for
reimbursement),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services, which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services, except Trade
Payables,
(v) all obligations of such Person as lessee under Capitalized Leases,
(vi) all Indebtedness of other Persons secured by a Lien on any asset of
such Person, whether or not such Indebtedness is assumed by such Person;
PROVIDED that the amount of such Indebtedness shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the
amount of such Indebtedness,
(vii) all Indebtedness of other Persons Guaranteed by such Person to the
extent such Indebtedness is Guaranteed by such Person and
(viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date (or in the case of a revolving credit or other
similar facility, the total amount of funds outstanding and/or available on the
date of determination) of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, PROVIDED (A) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness less the unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP, (B) money borrowed at the time of the
Incurrence of any Indebtedness in order to pre-fund the payment of interest on
such Indebtedness shall be deemed not to be "Indebtedness" so long as such money
is held to secure the payment of such interest and (C) that Indebtedness shall
not include any liability for federal, state, local or other taxes.
"Interest Rate Agreement" means any interest rate protection agreement,
interest rate future agreement, interest rate option agreement, interest rate
swap agreement, interest rate cap agreement, interest rate collar agreement,
interest rate hedge agreement, option or future contract or other similar
agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan or
other extension of credit (including, without limitation, by way of Guarantee or
similar arrangement, but excluding advances to customers in the ordinary course
of business that are, in conformity with GAAP, recorded as accounts receivable
on the balance sheet of the Company or its Restricted Subsidiaries) or a capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, bonds, notes, debentures or other
similar instruments issued by, such Person and shall include (i) the designation
of a Restricted Subsidiary as an Unrestricted Subsidiary and (ii) the fair
market value of the Capital Stock (or any other Investment), held by the Company
or any of its Restricted Subsidiaries, of (or in) any Person that has ceased to
be a Restricted Subsidiary, including without limitation, by reason of any
transaction permitted by clause (iii) of the "Limitation on the Issuance and
Sale of Capital Stock of Restricted Subsidiaries" covenant. For purposes of the
definition of "Unrestricted Subsidiary" and the "Limitation on Restricted
Payments" covenant described below, (i) "Investment" shall include the fair
market value of the assets (net of liabilities (other than liabilities to the
Company or any of its Subsidiaries)) of any Restricted Subsidiary at the time
that such Restricted Subsidiary is designated an Unrestricted Subsidiary, (ii)
the fair market value of the assets (net of liabilities (other than liabilities
to the Company or any of its Subsidiaries)) of any Unrestricted Subsidiary at
the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary
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shall be considered a reduction in outstanding Investments and (iii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including, without limitation, any conditional sale or other
title retention agreement or lease in the nature thereof or any agreement to
give any security interest).
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the proceeds
of such Asset Sale in the form of cash or cash equivalents, including payments
in respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary) and proceeds
from the conversion of other property received when converted to cash or cash
equivalents, net of (i) brokerage commissions and other fees and expenses
(including fees and expenses of counsel and investment bankers) related to such
Asset Sale, (ii) provisions for all taxes (whether or not such taxes will
actually be paid or are payable) as a result of such Asset Sale without regard
to the consolidated results of operations of the Company and its Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other obligation outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the property or assets sold or (B) is required to be paid
as a result of such sale and (iv) appropriate amounts to be provided by the
Company or any Restricted Subsidiary of the Company as a reserve against any
liabilities associated with such Asset Sale, including, without limitation,
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale, all as determined in conformity with GAAP and
(b) with respect to any issuance or sale of Capital Stock, the proceeds of such
issuance or sale in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations (to the extent corresponding to the
principal, but not interest, component thereof) when received in the form of
cash or cash equivalents (except to the extent such obligations are financed or
sold with recourse to the Company or any Restricted Subsidiary of the Company)
and proceeds from the conversion of other property received when converted to
cash or cash equivalents, net of attorney's fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof.
"New Credit Agreement" means the credit agreement dated as of the Closing
Date between Dobson/ Sygnet Operating Company and NationsBank, N.A. and certain
other financial institutions, together with any agreements, instruments and
documents executed or delivered pursuant to or in connection with such credit
agreement (including without limitation any Guarantees and security documents),
in each case as such credit agreement or such agreements, instruments or
documents may be amended (including any amendment and restatement thereof),
supplemented, extended, renewed, replaced or otherwise modified from time to
time (including any agreement extending the maturity of, refinancing or
otherwise restructuring (including the inclusion of additional borrowers
thereunder that are subsidiaries of the Company) all or a portion of the
Indebtedness under such agreement or any successor agreement).
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"Offer to Purchase" means an offer by the Company to purchase Notes from the
Holders commenced by mailing a notice to the Trustee and each Holder stating:
(i) the covenant pursuant to which the offer is being made and that all
Notes validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date
such notice is mailed) (the "Payment Date");
(iii) that any Note not tendered will continue to accrue interest
pursuant to its terms;
(iv) that, unless the Company defaults in the payment of the purchase
price, any Note accepted for payment pursuant to the Offer to Purchase shall
cease to accrue interest on and after the Payment Date;
(v) that Holders electing to have a Note purchased pursuant to the Offer
to Purchase will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
Payment Date;
(vi) that Holders will be entitled to withdraw their election if the
Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and
(vii) that Holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of the
Notes surrendered; PROVIDED that each Note purchased and each new Note
issued shall be in a principal amount of $1,000 or integral multiples
thereof.
On the Payment Date, the Company shall (i) accept for payment on a pro rata
basis Notes or portions thereof validly tendered pursuant to an Offer to
Purchase; (ii) deposit with the Paying Agent money sufficient to pay the
purchase price of all Notes or portions thereof so accepted; and (iii) deliver,
or cause to be delivered, to the Trustee all Notes or portions thereof so
accepted together with an Officers' Certificate specifying the Notes or portions
thereof accepted for payment by the Company. The Paying Agent shall promptly
mail to the Holders of Notes so accepted payment in an amount equal to the
purchase price, and the Trustee shall promptly authenticate and mail to such
Holders a new Note equal in principal amount to any unpurchased portion of the
Note surrendered; PROVIDED that each Note purchased and each new Note issued
shall be in a principal amount of $1,000 or integral multiples thereof. The
Company will publicly announce the results of an Offer to Purchase as soon as
practicable after the Payment Date. The Trustee shall act as the Paying Agent
for an Offer to Purchase. The Company will comply with Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable, in the event that the Company
is required to repurchase Notes pursuant to an Offer to Purchase.
"Permitted Investment" means:
(i) an Investment in the Company or a Restricted Subsidiary or a Person
which will, upon the making of such Investment, become a Restricted
Subsidiary or be merged or consolidated with or into or transfer or convey
all or substantially all its assets to, the Company or a Restricted
Subsidiary; PROVIDED that such person's primary business is related,
ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment;
(ii) Temporary Cash Investments;
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(iii) payroll, travel and similar advances to cover matters that are
expected at the time of such advances ultimately to be treated as expenses
in accordance with GAAP;
(iv) stock, obligations or securities received in satisfaction of
judgments;
(v) Investments in prepaid expenses, negotiable instruments held for
collection and lease, utility and worker's compensation, performance and
other similar deposits;
(vi) Interest Rate Agreements and Currency Agreements designed solely to
protect the Company or its Restricted Subsidiaries against fluctuations in
interest rates or foreign currency exchange rates; and
(vii) loans or advances to officers or employees of the Company or of any
Restricted Subsidiary that do not in the aggregate exceed $3 million at any
time outstanding.
"Permitted Liens" means:
(i) Liens for taxes, assessments, governmental charges or claims that
are being contested in good faith by appropriate legal proceedings promptly
instituted and diligently conducted and for which a reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP
shall have been made;
(ii) statutory and common law Liens of landlords and carriers,
warehousemen, mechanics, suppliers, materialmen, repairmen or other similar
Liens arising in the ordinary course of business and with respect to amounts
not yet delinquent or being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made;
(iii) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security;
(iv) Liens incurred or deposits made (including deposits made to the
FCC) to secure the performance of tenders, bids, leases, statutory or
regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money);
(v) easements, rights-of-way, municipal and zoning ordinances and
similar charges, encumbrances, title defects or other irregularities that do
not materially interfere with the ordinary course of business of the Company
or any of its Restricted Subsidiaries;
(vi) Liens (including extensions and renewals thereof) upon real or
personal property acquired after the Closing Date; PROVIDED that (a) such
Lien is created solely for the purpose of securing Indebtedness Incurred, in
accordance with the "Limitation on Indebtedness" covenant described below,
(1) to finance the cost (including the cost of design, development,
improvement, construction, installation or integration) of the item of
property or assets subject thereto and such Lien is created prior to, at the
time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of such
property or (2) to refinance any Indebtedness previously so secured, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed
100% of such cost and (c) any such Lien shall not extend to or cover any
property or assets other than such item of property or assets and any
improvements on such item;
(vii) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of the Company and its
Restricted Subsidiaries, taken as a whole;
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(viii) Liens encumbering property or assets under construction arising
from progress or partial payments by a customer of the Company or its
Restricted Subsidiaries relating to such property or assets;
(ix) any interest or title of a lessor in the property subject to any
Capitalized Lease or operating lease;
(x) Liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(xi) Liens on property of, or on shares of Capital Stock or Indebtedness
of, any Person existing at the time such Person becomes, or becomes a part
of, any Restricted Subsidiary; PROVIDED that such Liens do not extend to or
cover any property or assets of the Company or any Restricted Subsidiary
other than the property or assets acquired;
(xii) Liens in favor of the Company or any Restricted Subsidiary;
(xiii) Liens arising from the rendering of a final judgment or order
against the Company or any Restricted Subsidiary of the Company that does
not give rise to an Event of Default;
(xiv) Liens securing reimbursement obligations with respect to letters of
credit that encumber documents and other property relating to such letters
of credit and the products and proceeds thereof;
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xvi) Liens encumbering customary initial deposits and margin deposits,
and other Liens that are either within the general parameters customary in
the industry and incurred in the ordinary course of business, in each case,
securing Indebtedness under Interest Rate Agreements and Currency Agreements
and forward contracts, options, future contracts, futures options or similar
agreements or arrangements designed solely to protect the Company or any of
its Restricted Subsidiaries from fluctuations in interest rates, currencies
or the price of commodities;
(xvii) Liens arising out of conditional sale, title retention, consignment
or similar arrangements for the sale of goods entered into by the Company or
any of its Restricted Subsidiaries in the ordinary course of business in
accordance with the past practices of the Company and its Restricted
Subsidiaries prior to the Closing Date;
(xviii) Liens that secure Indebtedness with an aggregate principal amount
not in excess of $5 million at any time outstanding; and
(xix) Liens on or sales of receivables.
"Pledge Account" means an account established with the Trustee pursuant to
the terms of the Pledge Agreement for the deposit of the Pledged Securities to
be purchased by the Company with the net proceeds from the Notes.
"Pledge Agreement" means the Collateral Pledge and Security Agreement, dated
as of the Closing Date, made by the Company in favor of the Trustee, governing
the disbursement of funds from the Pledge Account, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time.
"Pledged Securities" means the Government Securities to be purchased by the
Company and held in the Pledge Account in accordance with the Pledge Agreement.
"Preferred Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's preferred or preference equity, whether
now outstanding or issued after the Closing Date, including, without limitation,
all series and classes of such preferred stock or preference stock.
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"Public Equity Offering" means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
A "Public Market" shall be deemed to exist if (i) a Public Equity Offering
has been consummated and (ii) at least 15% of the total issued and outstanding
Common Stock of the Company has been distributed by means of an effective
registration statement under the Securities Act or sales pursuant to Rule 144
under the Securities Act.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any Restricted
Subsidiary that, together with its Subsidiaries, (i) for the most recent fiscal
year of the Company, accounted for more than 10% of the consolidated revenues of
the Company and its Restricted Subsidiaries or (ii) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the Company
and its Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of the Company for such fiscal year.
"S&P" means Standard & Poor's Ratings Service and its successors.
"Stated Maturity" means, (i) with respect to any debt security, the date
specified in such debt security as the fixed date on which the final installment
of principal of such debt security is due and payable and (ii) with respect to
any scheduled installment of principal of or interest on any debt security, the
date specified in such debt security as the fixed date on which such installment
is due and payable.
"Subsidiary" means, with respect to any Person, any corporation, association
or other business entity of which more than 50% of the voting power of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Sygnet Acquisition" means, collectively, the transfer of the stock of
Dobson/Sygnet Operating Company to the Company and the merger of Dobson/Sygnet
Operating Company with and into Sygnet Wireless, Inc., pursuant to which Sygnet
Wireless, Inc. will survive as a Wholly Owned Restricted Subsidiary of the
Company.
"Temporary Cash Investment" means any of the following:
(i) direct obligations of the United States of America or any agency
thereof or obligations fully and unconditionally guaranteed by the United
States of America or any agency thereof,
(ii) time deposit accounts, certificates of deposit and money market
deposits maturing within 180 days of the date of acquisition thereof issued
by a bank or trust company which is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by
the United States of America, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated
"A" (or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor,
(iii) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above,
(iv) commercial paper, maturing not more than 90 days after the date of
acquisition, issued by a corporation (other than an Affiliate of the
Company) organized and in existence under the laws of the United States of
America, any state thereof or any foreign country recognized by the United
States of America with a rating at the time as of which any investment
therein is made of "P-1" (or higher) according to Moody's or "A-1" (or
higher) according to S&P, and
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(v) securities with maturities of six months or less from the date of
acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any
political subdivision or taxing authority thereof, and rated at least "A" by
S&P or Moody's.
"Tower Lease" means the lease of the towers sold in the Tower Sale pursuant
to a tower lease agreement between Sygnet Communications, Inc. and Dobson Tower
Company.
"Tower Sale" means the sale of substantially all of Sygnet Communications,
Inc.'s towers to Dobson Tower Company or any of its Affiliates.
"Trade Payables" means, with respect to any Person, any accounts payable or
any other indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person or any of its Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of any Indebtedness
by the Company or any of its Restricted Subsidiaries, the date such Indebtedness
is to be Incurred and, with respect to any Restricted Payment, the date such
Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary unless such Subsidiary owns any
Capital Stock of, or owns or holds any Lien on any property of, the Company or
any Restricted Subsidiary; PROVIDED that (A) any Guarantee by the Company or any
Restricted Subsidiary of any Indebtedness of the Subsidiary being so designated
shall be deemed an "Incurrence" of such Indebtedness and an "Investment" by the
Company or such Restricted Subsidiary (or both, if applicable) at the time of
such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the "Limitation on Restricted
Payments" covenant described below and (C) if applicable, the Incurrence of
Indebtedness and the Investment referred to in clause (A) of this proviso would
be permitted under the "Limitation on Indebtedness" and "Limitation on
Restricted Payments" covenants described below. The Board of Directors may
designate any Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED
that immediately after giving effect to such designation (x) all Liens and
Indebtedness of such Unrestricted Subsidiary outstanding immediately after such
designation would, if Incurred at such time, have been permitted to be incurred
for all purposes of the Indenture and (y) no Default or Event of Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly providing the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any class
or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.
"Wholly Owned" means, with respect to any Subsidiary of any Person, the
ownership of all of the outstanding Capital Stock of such Subsidiary (other than
any director's qualifying shares or Investments by foreign nationals mandated by
applicable law) by such Person or one or more Wholly Owned Subsidiaries of such
Person.
COVENANTS
The Indenture contains, among others, the following covenants:
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LIMITATION ON INDEBTEDNESS
(a) Neither the Company nor any Restricted Subsidiary may Incur any
Indebtedness (other than the Notes and other Indebtedness existing on the
Closing Date). However, the Company may Incur Indebtedness, and any Restricted
Subsidiary may Incur Acquired Indebtedness, if, after giving effect to the
Incurrence of such Indebtedness and the receipt and application of the proceeds
therefrom, the Consolidated Leverage Ratio would be less than:
- 8 to 1, for Indebtedness Incurred on or prior to December 31, 1999, or
- 7 to 1, for Indebtedness Incurred after December 31, 1999.
(b) The Company and any Restricted Subsidiary may Incur the following types
of Indebtedness:
(i) Indebtedness secured under the New Credit Agreement, or any
refinancing thereof, in a principal amount not to exceed $450.0 million,
less any amount of such Indebtedness permanently repaid under the
"Limitation on Asset Sales" covenant described below;
(ii) Indebtedness of any Restricted Subsidiary owed to the Company or
any of its Restricted Subsidiaries. However, any subsequent issuance or
transfer of Capital Stock, or any other event resulting in any such
Restricted Subsidiary ceasing to be a Restricted Subsidiary or any
subsequent transfer of such Indebtedness except to the Company or another
Restricted Subsidiary, will be deemed an Incurrence of Indebtedness after
such issuance or transfer.
(iii) Indebtedness issued in exchange for, or the net proceeds of which
are used to refinance or refund, then outstanding Indebtedness, other than
Indebtedness Incurred under clause (i), (ii), (iv), (vi), (viii) or (x) of
this paragraph, and any refinancings thereof in an amount not to exceed the
amount so refinanced or refunded (plus premiums, accrued interest, fees and
expenses); PROVIDED that Indebtedness the proceeds of which are used to
refinance or refund the Notes or Indebtedness that is PARI PASSU with, or
subordinated in right of payment to, the Notes shall only be permitted under
this clause (iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is PARI PASSU with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is outstanding, is expressly made
PARI PASSU with, or subordinate in right of payment to, the remaining Notes,
(B) in case the Indebtedness to be refinanced is subordinated in right of
payment to the Notes, such new Indebtedness, by its terms or by the terms of
any agreement or instrument pursuant to which such new Indebtedness is
issued or remains outstanding, is expressly made subordinate in right of
payment to the Notes at least to the extent that the Indebtedness to be
refinanced is subordinated to the Notes and (C) such new Indebtedness,
determined as of the date of Incurrence of such new Indebtedness, does not
mature prior to the Stated Maturity of the Indebtedness to be refinanced or
refunded, and the Average Life of such new Indebtedness is at least equal to
the remaining Average Life of the Indebtedness to be refinanced or refunded;
and PROVIDED FURTHER that in no event may Indebtedness of the Company be
refinanced by means of any Indebtedness of any Restricted Subsidiary
pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or appeal bonds
provided in the ordinary course of business, (B) under Currency Agreements
and Interest Rate Agreements; PROVIDED that such agreements (a) are designed
solely to protect the Company or its Subsidiaries against fluctuations in
foreign currency exchange rates or interest rates and (b) do not increase
the Indebtedness of the obligor outstanding at any time other than as a
result of fluctuations in foreign currency exchange rates or interest rates
or by reason of fees, indemnities and compensation payable thereunder; or
(C) arising from agreements providing for indemnification, adjustment of
purchase price or similar obligations, or from Guarantees or letters of
credit, surety bonds or performance bonds securing any obligations of the
Company or any of its Restricted Subsidiaries pursuant to such agreements,
in any case Incurred in connection with the disposition of any business,
assets or Restricted Subsidiary (other than Guarantees of Indebtedness
Incurred by any Person acquiring all or any portion of such business,
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assets or Restricted Subsidiary for the purpose of financing such
acquisition), in an amount not to exceed the gross proceeds actually
received by the Company or any Restricted Subsidiary in connection with such
disposition;
(v) Indebtedness of the Company, to the extent the net proceeds thereof
are promptly (A) used to purchase Notes tendered in an Offer to Purchase
made as a result of a Change in Control or (B) deposited to defease the
Notes as described below under "Defeasance";
(vi) Guarantees of the Notes and Guarantees of Indebtedness of the
Company by any Restricted Subsidiary provided the Guarantee of such
Indebtedness is permitted by and made in accordance with the "Limitation on
Issuances of Guarantees by Restricted Subsidiaries" covenant described
below;
(vii) Indebtedness Incurred to finance the cost (including the cost of
design, development, construction, installation or integration) of tangible
telecommunications network assets, equipment or inventory acquired by the
Company or a Restricted Subsidiary after the Closing Date;
(viii) Indebtedness of the Company, and any refinancings thereof, not to
exceed, at any one time outstanding, two times the Net Cash Proceeds
received by the Company after the Closing Date as a capital contribution or
from the issuance and sale of its Capital Stock (other than Disqualified
Stock) to a Person that is not a Subsidiary of the Company to the extent
such Net Cash Proceeds have not been used pursuant to clause (C) (2) of the
first paragraph or clause (iii), (iv), (v) or (viii) of the second paragraph
of the "Limitation on Restricted Payments" covenant described below to make
a Restricted Payment; PROVIDED that such Indebtedness does not mature prior
to the Stated Maturity of the Notes and has an Average Life longer than the
Notes; and
(ix) Indebtedness, and any refinancings thereof, outstanding at any time
in an aggregate amount not to exceed $10 million, less any amount of such
Indebtedness permanently repaid as provided under the "Limitation on Asset
Sales" covenant described below.
(c) The maximum amount of Indebtedness that the Company or a Restricted
Subsidiary may Incur pursuant to this "Limitation on Indebtedness" covenant
shall not be deemed to be exceeded solely as the result of fluctuations in the
exchange rates of currencies.
LIMITATION ON RESTRICTED PAYMENTS
Neither the Company nor any Restricted Subsidiary is permitted to take any
of the following actions (each a "Restricted Payment") to,
(i) declare or pay any dividend or make any distribution on or with
respect to its Capital Stock. However, dividends or distributions are
permitted if they are either payable solely in Capital Stock, other than
Disqualified Stock or in options, warrants or other rights to acquire
Capital Stock, or are payable to the Company or any Restricted Subsidiary.
If such Restricted Subsidiary is not a Wholly Owned Subsidiary then the
distributions or dividends may be payable to its other shareholders only if
on a pro rata basis measured by value.
(ii) Purchase, redeem, retire or otherwise acquire for value any Capital
Stock of the Company or an Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by
any Person or (B) a Restricted Subsidiary (including options, warrants or
other rights to acquire such shares of Capital Stock) held by any Affiliate
of the Company (other than a Wholly Owned Restricted Subsidiary) or any
holder (or any Affiliate of such holder) of 5% or more of the Capital Stock
of the Company,
(iii) make any voluntary or optional principal payment, any redemption,
repurchase, defeasance, or other acquisition or retirement for value, of any
Indebtedness of the Company that is subordinated in right of payment to the
Notes, or
(iv) make any Investment, other than a Permitted Investment.
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However, the Company or any Restricted Subsidiary may make Restricted
Payments if, at the time of, and after giving effect to, the proposed Restricted
Payment:
(A) a Default or Event of Default occurs and continues to occur or would
result therefrom or shall have occurred and be continuing,
(B) the Company could not Incur at least $1.00 of Indebtedness under
paragraph (i) of the "Limitation on Indebtedness" covenant, or
(C) the aggregate amount of such Restricted Payments and all other
Restricted Payments declared or made after the date of the Indenture would
exceed the sum of:
(1) 50% of the Adjusted Consolidated Net Income (or, if the Adjusted
Consolidated Net Income is a loss, minus 100% of the amount of such loss)
accrued during the period treated as one accounting period, beginning on
the first day of the fiscal quarter immediately following the Closing
Date to the end of the most recent fiscal quarter preceding the date of
such Restricted Payment for which consolidated financial statements of
the Company have been filed with the Commission PLUS
(2) the aggregate Net Cash Proceeds received by the Company after
the Closing Date as a capital contribution or from issuing or selling its
Capital Stock, and options, warrants and other rights to acquire its
Capital Stock other than Disqualified Stock, to a Person who is not a
Subsidiary of the Company (except to the extent such Net Cash Proceeds
are used to Incur Indebtedness pursuant to clause (viii) under the
"Limitation on Indebtedness" covenant) (in each case, exclusive of any
Disqualified Stock or any options, warrants or other rights that are
redeemable at the option of the holder, or are required to be redeemed,
prior to the Stated Maturity of the Notes) PLUS
(3) an amount equal to the net reduction in Investments constitutes
Restricted Payments resulting from payments of interest, dividends,
repayments of loans or advances, returns of capital or other transfers of
assets to the Company or any Restricted Subsidiary or from the Net Cash
Proceeds from the sale of any such Investment (except to the extent any
such payment or proceeds are included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided
in the definition of "Investments"), not to exceed, in each case, the
amount of Investments previously made by the Company or any Restricted
Subsidiary in such Unrestricted Subsidiary.
The provision of paragraph (a) of the "Limitation on Indebtedness" covenant
will not prohibit the following actions:
(i) the payment of any dividend within 60 days after the date of its
declaration if, at the date of declaration, the payment of the dividend
would not be a Restricted Payment;
(ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of
payment to the Notes with the proceeds of, or in exchange for, Indebtedness
Incurred under clause (iii) of the paragraph (b) of the "Limitation on
Indebtedness" covenant;
(iii) the repurchase, redemption or other acquisition of Capital Stock of
the Company (or options, warrants or other rights to acquire such Capital
Stock) in exchange for, or out of the proceeds of a substantially concurrent
capital contribution or offering of, shares of Capital Stock (other than
Disqualified Stock) of the Company (or options, warrants or other rights to
acquire such Capital Stock, exclusive of any options, warrants or other
rights that are redeemable at the option of the holder, or are required to
be redeemed, prior to the Stated Maturity of the Notes);
(iv) the making of any principal payment or the repurchase, redemption,
retirement, defeasance or other acquisition for value of Indebtedness of the
Company which is subordinated in right of
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payment to the Notes in exchange for, or out of the proceeds of, a
substantially concurrent capital contribution or offering of, shares of the
Capital Stock (other than Disqualified Stock) of the Company (or options,
warrants or other rights to acquire such Capital Stock, exclusive of any
options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes);
(v) the declaration or payment of dividends on the Common Stock of the
Company following a Public Equity Offering of such Common Stock, of up to 6%
per annum of the Net Cash Proceeds received by the Company in such Public
Equity Offering;
(vi) payments or distributions to dissenting stockholders pursuant to
applicable law or in connection with a consolidation, merger or transfer of
assets that complies with the provisions of the Indenture applicable to
mergers, consolidations and transfers of all or substantially all of the
property and assets of the Company;
(vii) the purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company to the extent
necessary in the good faith judgment of the Board of Directors of the
Company, to prevent the loss or secure the renewal or reinstatement of any
license or franchise held by the Company or any Restricted Subsidiary from
any governmental agency;
(viii) Investments in any Person the primary business of which is related,
ancillary or complementary to the business of the Company and its Restricted
Subsidiaries on the date of such Investments. However, the aggregate amount
of such Investments may not exceed the sum of:
- $10 million plus the amount of Net Cash Proceeds received by the Company
as a capital contribution or from the sale of its Capital Stock (other
than Disqualified Stock) to a Person who is not a Subsidiary of the
Company, except to the extent such Net Cash Proceeds are used to Incur
Indebtedness pursuant to clause (viii) under the "Limitation on
Indebtedness" covenant or to make Restricted Payments pursuant to clause
(C)(2) of the first paragraph, or clauses (iii), (iv) or (v) of this
paragraph, of this "Limitation on Restricted Payments" covenant, plus
- the net reduction in Investments made pursuant to this clause (viii)
resulting from distributions on or repayments of such Investments or from
the Net Cash Proceeds from the sale of any such Investment (except in
each case to the extent any such payment or proceeds is included in the
calculation of Adjusted Consolidated Net Income) or from such Person
becoming a Restricted Subsidiary (valued in each case as provided in the
definition of "Investments"), PROVIDED that the net reduction in any
Investment shall not exceed the amount of such Investment;
(ix) Investments acquired as a capital contribution or in exchange for
Capital Stock (other than Disqualified Stock) of the Company; or
(x) the purchase, redemption, retirement or other acquisition for value
of Capital Stock of the Company, or options to purchase such shares, held by
directors, employees or former directors or employees of the Company or any
Restricted Subsidiary (or their estates or beneficiaries under their
estates) upon death, disability, retirement, termination of employment or
pursuant to the terms of any agreement under which such shares of Capital
Stock or options were issued. However, the aggregate consideration paid for
such purchase, redemption, acquisition, cancellation or other retirement of
such shares of Capital Stock or options after the Closing Date does not
exceed $1 million in any calendar year;
except in the case of clauses (i) and (iii), no Default or Event of Default
shall have occurred and be continuing or occur as a consequence of the actions
or payments set forth therein.
Each Restricted Payment permitted pursuant to the preceding paragraph (other
than the Restricted Payment referred to in clause (ii) thereof, an exchange of
Capital Stock for Capital Stock or Indebtedness referred to in clause (iii) or
(iv) thereof and an Investment referred to in clause (ix) thereof), and the Net
Cash Proceeds from any capital contribution or any issuance of Capital Stock
referred to in clauses (iii), (iv) and (viii), shall be included in calculating
whether the conditions of clause (C) of the first paragraph of
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this "Limitation on Restricted Payments" covenant have been met with respect to
any subsequent Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, or Indebtedness that ranks equally with the Notes,
then the Net Cash Proceeds of such issuance shall be included in clause (C) of
the first paragraph of this "Limitation on Restricted Payments" covenant only to
the extent such proceeds are not used for such redemption, repurchase or other
acquisition of Indebtedness.
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED
SUBSIDIARIES
Neither the Company nor any Restricted Subsidiary shall create or otherwise
cause or permit to exist any consensual restriction on the ability of any
Restricted Subsidiary to:
- pay dividends or make any other distributions on its Capital Stock or pay
any Indebtedness owed to the Company or any other Restricted Subsidiary,
- make loans or advances to the Company or any other Restricted Subsidiary,
or
- transfer any of its property or assets to the Company or any other
Restricted Subsidiary.
However, the prohibition does not apply to:
- any restriction pursuant to and agreement in effect or entered into on the
date of the Indenture including interest, without limitation, the New
Credit Agreement, and any amendments, extensions, refinancings, renewals
or replacements of such agreements; if the restrictions in any such
amendments, extensions, refinancings, renewals or replacements are no less
favorable in any material respect to the Holders than those restrictions
that are being extended, refinanced, renewed or replaced;
- existing under or by reason of applicable law;
- existing with respect to any Person or the property or assets of any
Person acquired by the Company or any Restricted Subsidiary, existing at
the time of such acquisition and not incurred in contemplation thereof;
- in the case of restrictions relating to the transfers of property,
restrictions that:
- restrict in a customary manner the subletting, assignment or transfer
of any property or asset that is a lease, license, conveyance or
contract or similar property or asset,
- exist by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the
Company or any Restricted Subsidiary not otherwise prohibited by the
Indenture, or
- are agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate,
detract from the value of property or assets of the Company or any
Restricted Subsidiary in any manner material to the Company or any
Restricted Subsidiary;
- with respect to a Restricted Subsidiary and imposed pursuant to an
agreement that has been entered into for the sale or disposition of all or
substantially all of the Capital Stock of, or property and assets of, such
Restricted Subsidiary; or
- if contained in the terms of any Indebtedness of a Restricted Subsidiary:
- the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in
such Indebtedness or agreement,
- the encumbrance or restriction is not materially more disadvantageous
to the Holders of the Notes than is customary in comparable financings
(as determined by the Company), and
- if the Company determines that any such encumbrance or restriction will
not materially affect the Company's ability to make principal or
interest payments on the Notes.
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LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF RESTRICTED
SUBSIDIARIES
Neither the Company nor any Restricted Subsidiary will sell any shares of
Capital Stock of a Restricted Subsidiary (including options, warrants or other
rights to purchase shares of such Capital Stock) except:
- to the Company or a Wholly Owned Restricted Subsidiary;
- issuances of director's qualifying shares or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law;
- if, immediately after giving effect to such sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary. However,
any Investment in such Person remaining after giving effect to such sale
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant, if made on the date of such issuance or sale; and
- sales of Common Stock of a Restricted Subsidiary. However, any Net Cash
Proceeds of such sale must be applied in accordance with clause (A) or (B)
of the "Limitation on Asset Sales" covenant described below.
LIMITATION ON ISSUANCES OF GUARANTEES BY RESTRICTED SUBSIDIARIES
The Company will not permit any Restricted Subsidiary to Guarantee any
Indebtedness of the Company which ranks equally with or subordinate in right of
payment to the Notes ("Guaranteed Indebtedness"), unless:
- such Restricted Subsidiary simultaneously Guarantees (a "Subsidiary
Guarantee") payment of the Notes and
- such Restricted Subsidiary waives any rights of reimbursement, indemnity
or subrogation against the Company or any other Restricted Subsidiary as a
result of any payment by such Restricted Subsidiary under its Subsidiary
Guarantee;
The above restriction does not apply to any Guarantee of any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not Incurred in contemplation of becoming a Restricted Subsidiary. If
the Guaranteed Indebtedness ranks equally with the Notes, then the Guarantee of
such Guaranteed Indebtedness shall rank equally with or be subordinated to the
Subsidiary Guarantee. If the Guaranteed Indebtedness is subordinated to the
Notes, then the Guarantee of such Guaranteed Indebtedness shall be also
subordinated to the Subsidiary Guarantee to the extent that the Guaranteed
Indebtedness is subordinated to the Notes.
LIMITATION ON LIENS
Neither the Company nor any Restricted Subsidiary will create or permit to
exist any Lien, other than Permitted Liens, on any of its assets or properties,
including Capital Stock or Indebtedness of any Restricted Subsidiary, unless at
the same time effective provision is made to secure the obligations due under
the Indenture and the Notes (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Notes, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to:
- Liens existing on the Closing Date;
- Liens on any assets or Capital Stock of the Company or its Restricted
Subsidiaries created in favor of the Holders;
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- Liens on assets of a Restricted Subsidiary created in favor of the Company
or a Wholly Owned Restricted Subsidiary to secure Indebtedness owing to
the Company or such other Restricted Subsidiary;
- Liens securing Indebtedness which is Incurred to refinance secured
Indebtedness which is permitted to be Incurred under clause (b) (iii) of
the second paragraph of the "Limitation on Indebtedness" covenant.
However, any such Liens may not cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets
securing the Indebtedness being refinanced;
- Liens on the Capital Stock of, or any property or assets of, a Restricted
Subsidiary securing Indebtedness of such Restricted Subsidiary permitted
under the "Limitation on Indebtedness" covenant; or
- Liens securing Indebtedness Incurred under clause (b) (i) of the second
paragraph of the "Limitation on Indebtedness" covenant.
LIMITATION ON SALE-LEASEBACK TRANSACTIONS
Neither the Company nor any Restricted Subsidiary shall enter into any
sale-leaseback transaction for any of its assets or properties unless;
- the lease, including renewal rights, does not exceed three years;
- the lease secures or relates to industrial revenue or pollution control
bonds;
- the transaction is solely between the Company and any Wholly Owned
Restricted Subsidiary or solely between Wholly Owned Restricted
Subsidiaries;
- the transaction is either the Tower Sale or the Tower Lease; or
- within twelve months after the sale or transfer of any assets or
properties is completed, the Company or such Restricted Subsidiary applies
the net proceeds received from such sale in accordance with the
"Limitation on Asset Sales" covenant described below.
LIMITATION ON TRANSACTIONS WITH STOCKHOLDERS AND AFFILIATES
Neither the Company nor any Restricted Subsidiary shall engage in any
transaction or series of transactions, including, without limitation, the
purchase, sale, lease or exchange of property or assets, or the rendering of any
service, with any holder (or any Affiliate of such holder) of 5% or more of any
class of Capital Stock of the Company or with any Affiliate of the Company or
any Restricted Subsidiary an ("Affiliate Transaction"), except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained in an arm's-length transaction with a non-Affiliate.
The provisions of the paragraph above shall not prohibit the following
activities:
(i) transactions (A) approved by a majority of the members of the Board
of Directors who do not have any material financial interest in such
transactions or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized
investment banking firm stating that the transaction is fair to the Company
or such Restricted Subsidiary from a financial point of view;
(ii) any transaction solely between the Company and any of its Wholly
Owned Restricted Subsidiaries or solely between Wholly Owned Restricted
Subsidiaries;
(iii) the payment of reasonable and customary regular fees to directors
of the Company who are not employees of the Company;
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(iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company
files a consolidated tax return or with which the Company is part of a
consolidated group for tax purposes;
(v) transactions between the Company or any of its Restricted
Subsidiaries and Dobson Communications Corporation or its Affiliates on
terms of the kind customarily employed to allocate charges among members of
a consolidated group of entities, in any such case that are fair and
reasonable to the Company or such Restricted Subsidiary; PROVIDED that the
aggregate consideration subject to such transactions does not exceed $3
million in any calendar year; or
(vi) any Restricted Payments not prohibited by the "Limitation on
Restricted Payments" covenant.
Any transaction covered by the first paragraph of this "Limitation on
Transactions with Stockholders and Affiliates" covenant and not covered by
clauses (ii) through (vi) of this paragraph, the aggregate amount of which
exceeds $1.0 million in value, must be approved or determined to be fair in the
manner provided for in clause (i)(A) or (B) above or if the aggregate amount
exceeds $5.0 million in value, the transaction must be approved or determined to
be fair in the manner provided for in clause (i)(B) above.
LIMITATION ON ASSET SALES
Neither the Company nor any Restricted Subsidiary shall make any Asset Sale,
unless:
- the consideration received by the Company or such Restricted Subsidiary is
at least equal to the fair market value of the assets sold or disposed of,
and
- at least 85% of the consideration received consists of cash or Temporary
Cash Investments.
If the Net Cash Proceeds received by the Company or any Restricted
Subsidiary from one or more Asset Sales in any period of 12 consecutive months
exceed 10% of Adjusted Consolidated Net Tangible Assets (determined as of the
date closest to the commencement of such 12-month period for which a
consolidated balance sheet of the Company and its subsidiaries has been filed
with the Commission), then the Company or the Restricted Subsidiary shall:
(i) within 12 months after the date Net Cash Proceeds so received exceed
10% of Adjusted Consolidated Net Tangible Assets
(A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay Senior Indebtedness of the Company or any Restricted
Subsidiary providing a Subsidiary Guarantee or Indebtedness of any other
Restricted Subsidiary, in each case owing to a Person other than the
Company or any of its Restricted Subsidiaries or
(B) invest an equal amount, or the amount not so applied pursuant to
clause (A) in property or assets (other than current assets) of a nature
or type or that are used in a business similar or related to the nature
or type of the property and assets of, or the business of, the Company
and its Restricted Subsidiaries existing on the date of such investment
and
(ii) apply such excess Net Cash Proceeds (to the extent not applied
pursuant to clause (i)) as provided below. The amount of such excess Net
Cash Proceeds required to be applied during such twelve-month period as set
forth in clause (i) of the preceding sentence and not applied by the end of
such period shall constitute "Excess Proceeds."
At such time as the aggregate amount of Excess Proceeds not theretofore
subject to an Offer to Purchase pursuant to this "Limitation on Asset Sales"
covenant totals at least $5 million, the Company must commence and consummate an
Offer to Purchase from the Holders on a pro rata basis an aggregate principal
amount of Notes equal to the Excess Proceeds on such date, at a purchase price
equal to 100% of the principal amount thereof plus accrued interest to the
Payment Date.
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REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
Within 30 days after a Change of Control the Company must commence and
consummate an Offer to Purchase for all Notes then outstanding, at a purchase
price equal to 101% of the principal amount thereof, plus accrued interest to
the Payment Date.
There can be no assurance that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant and by other
securities of the Company which might be outstanding at the time. The covenant
requiring the Company to repurchase the Notes upon a Change of Control will,
unless consents are obtained, require the Company to repay all indebtedness then
outstanding which by its terms would prohibit such Note repurchase, either prior
to or concurrently with such Note repurchase.
COMMISSION REPORTS AND REPORTS TO HOLDERS
At all times from and after the earlier of:
- the date of the commencement of an Exchange Offer or the effectiveness of
the Shelf Registration Statement (the "Registration"), and
- June 21, 1999,
in either case, whether or not the Company is then required to file reports
with the Commission, the Company must file with the Commission all such reports
and other information as it would be required to file with the Commission by
Sections 13(a) or 15(d) under the Securities Exchange Act of 1934 if it were
subject thereto. The Company shall supply the Trustee and each Holder or shall
supply to the Trustee for forwarding to each such Holder, without cost to such
Holder, copies of such reports and other information. In addition, at all times
prior to the earlier of the date of the Registration and June 21, 1999, the
Company shall, at its cost, deliver to each Holder of the Notes quarterly and
annual reports substantially equivalent to those which would be required by the
Exchange Act. In addition, at all times prior to the Registration, upon the
request of any Holder or any prospective purchaser of the Notes designated by a
Holder, the Company shall supply to such Holder or such prospective purchaser
the information required under Rule 144A under the Securities Act.
EVENTS OF DEFAULT
The following events are defined as "Events of Default" in the Indenture:
(a) default in the payment of principal of (or premium, if any, on) any
Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise;
(b) default in the payment of interest on any Note when the same becomes
due and payable, and such default continues for a period of 30 days;
PROVIDED that a failure to make any of the first six scheduled interest
payments on the Notes in a timely manner will constitute an Event of Default
with no grace or cure period;
(c) default in the performance or breach of the provisions of the
Indenture applicable to mergers, consolidations and transfers of all or
substantially all of the assets of the Company or the failure to make or
consummate an Offer to Purchase in accordance with the "Limitation on Asset
Sales" or "Repurchase of Notes upon a Change of Control" covenant;
(d) the Company defaults in the performance of or breaches any other
covenant or agreement of the Company in the Indenture or under the Notes
(other than a default specified above) and such default or breach continues
for a period of 30 consecutive days after written notice by the Trustee or
the Holders of 25% or more in aggregate principal amount of the Notes;
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(e) there occurs with respect to any Indebtedness of the Company or any
Significant Subsidiary having an aggregate outstanding principal amount of
$5 million or more for all such issues of all such Persons, whether such
Indebtedness now exists or shall hereafter be created:
- an event of default that has caused the holder thereof to declare such
Indebtedness to be due and payable prior to its Stated Maturity and
such Indebtedness has not been discharged in full or such
acceleration has not been rescinded or annulled within 30 days of
such acceleration, and/or
- the failure to make a principal payment at the final (but not any
interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for the
payment of money in excess of $5 million in the aggregate for all such final
judgments or orders against all such Persons (treating any deductibles,
self-insurance or retention as not so covered) shall be rendered against the
Company or any Significant Subsidiary and shall not be paid or discharged,
and there shall be any period of 30 consecutive days following entry of the
final judgment or order that causes the aggregate amount for all such final
judgments or orders outstanding and not paid or discharged against all such
Persons to exceed $5 million during which a stay of enforcement of such
final judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(g) a court having jurisdiction in the premises enters a decree or order
for:
- relief in respect of the Company or any Significant Subsidiary in an
involuntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect,
- appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant
Subsidiary or for all or substantially all of the property and assets
of the Company or any Significant Subsidiary, or
- the winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 30 consecutive days;
(h) the Company or any Significant Subsidiary:
- commences a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consents to the
entry of an order for relief in an involuntary case under any such
law,
- consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or
- effects any general assignment for the benefit of creditors; or
(i) the Pledge Agreement shall cease to be in full force and effect or
enforceable in accordance with its terms, other than in accordance with its
terms.
If an Event of Default (other than an Event of Default involving bankruptcy
or insolvency proceedings that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
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and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto.
If an Event of Default specified in clause (g) or (h) above occurs with
respect to the Company, the principal of, premium, if any, and accrued interest
on the Notes then outstanding shall automatically become and be immediately due
and payable without any declaration or other act on the part of the Trustee or
any Holder. At any time after declaration of acceleration, but before a judgment
or decree for the payment of the money due has been obtained by the Trustee, the
Holders of at least a majority in principal amount of the outstanding Notes by
written notice to the Company and to the Trustee, may waive all past defaults
and rescind and annul a declaration of acceleration and its consequences if:
- all existing Events of Default, other than the nonpayment of the principal
premium, if any, and interest on the Notes that have become due solely by
such declaration of acceleration, have been cured or waived, and
- the rescission would not conflict with any judgment or decree of a court
of competent jurisdiction. For information as to the waiver of defaults,
see "--Modification and Waiver."
The Holders of a majority in aggregate principal amount of the outstanding
Notes may direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee. However, the Trustee may refuse to follow any direction that
conflicts with law or the Indenture, that may involve the Trustee in personal
liability, or that the Trustee determines in good faith may be unduly
prejudicial to the rights of Holders of Notes not joining in the giving of such
direction and may take any other action it deems proper that is not inconsistent
with any such direction received from Holders of Notes. A Holder may not pursue
any remedy with respect to the Indenture or the Notes unless:
- the Holder gives the Trustee written notice of a continuing Event of
Default;
- the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy;
- such Holder or Holders offer the Trustee indemnity satisfactory to the
Trustee against any costs, liability or expense;
- the Trustee does not comply with the request within 60 days after receipt
of the request and the offer of indemnity; and
- during such 60-day period, the Holders of a majority in aggregate
principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request.
However, such limitations do not apply to the right of any Holder of a Note
to receive payment of the principal of, premium, if any, or interest on, such
Note or to bring suit for the enforcement of any such payment, on or after the
due date expressed in the Notes, which right shall not be impaired or affected
without the consent of the Holder.
The Indenture requires certain officers of the Company to certify, on or
before a date not more than 90 days after the end of each fiscal year, that a
review has been conducted of the activities of the Company and its Restricted
Subsidiaries and the Company's and its Restricted Subsidiaries' performance
under the Indenture and that the Company has fulfilled all obligations
thereunder, or, if there has been a default in the fulfillment of any such
obligation, specifying each such default and the nature and status thereof. The
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Company is also obligated to notify the Trustee of any default or defaults in
the performance of any covenants or agreements under the Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company will not, in a single transaction or series of related
transactions, consolidate with, merge with or into, or sell, convey, transfer,
lease or otherwise dispose of all or substantially all of its property and
assets to, any Person unless:
(i) the resulting, surviving or transferee Person ("Successor Company")
is a Person organized under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume all of the obligations of
the Company on all of the Notes and under the Indenture;
(ii) immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction on a pro forma
basis, the Successor Company shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately prior to
such transaction;
(iv) immediately after giving effect to such transaction on a pro forma
basis the Successor Company could Incur at least $1.00 of Indebtedness under
the first paragraph of the "Limitation on Indebtedness" covenant. However,
this clause does not apply to a consolidation or merger with or into a
Wholly Owned Restricted Subsidiary with a positive net worth if no
consideration (other than Common Stock in the surviving Person or the
Company) is issued or distributed to the stockholders of the Company; and
(v) the Company delivers to the Trustee an Officers' Certificate
(attaching the arithmetic computations to demonstrate compliance with
clauses (iii) and (iv)) and Opinion of Counsel, in each case stating that
such consolidation, merger or transfer and such supplemental indenture
complies with this provision and that all conditions precedent provided for
herein relating to such transaction have been complied with;
Clauses (iii) and (iv) above do not apply if the principal purpose of such
transaction is to change the state of incorporation of the Company.
DEFEASANCE
DEFEASANCE AND DISCHARGE. The Company will be deemed to have paid and will
be discharged from any and all obligations in respect of the Notes on the 123rd
day after the deposit referred to below, and the provisions of the Indenture
will no longer be in effect with respect to the Notes (except for certain
obligations to register the transfer or exchange of the Notes, to replace
stolen, lost or mutilated Notes, to maintain paying agencies and to hold monies
for payment in trust) if, among other things:
(A) the Company has deposited with the Trustee money and/or U.S.
Government Obligations that through the payment of interest and principal in
respect thereof in accordance with their terms will provide money in an
amount sufficient to pay the principal of, premium, and accrued interest on
the Notes on the Stated Maturity of such payments in accordance with the
terms of the Indenture and the Notes,
(B) the Company has delivered to the Trustee:
- either an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the Company's exercise of its option under this
"Defeasance" provision and will be subject to federal income tax on
the same amount and in the same manner and at the same times as would
have been the case if such deposit,
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defeasance and discharge had not occurred, which Opinion of Counsel
must be based upon (and accompanied by a copy of) a ruling of the
Internal Revenue Service to the same effect unless there has been a
change in applicable federal income tax law after the Closing Date
such that a ruling is no longer required or
- a ruling directed to the Trustee received from the Internal Revenue
Service to the same effect as the aforementioned Opinion of Counsel
and
- an Opinion of Counsel to the effect that the creation of the
defeasance trust does not violate the Investment Company Act of 1940
and after the passage of 123 days following the deposit (except with
respect to any trust funds for the account of any Holder who may be
deemed an "insider" for purposes of the United States Bankruptcy
Code, after one year following the deposit) the trust funds will not
be subject to the effect of Section 547 of the United States
Bankruptcy Code or Section 15 of the New York Debtor and Creditor
Law,
(C) immediately after giving effect to such deposit on a pro forma
basis, no Default or Event of Default shall have occurred and be continuing
on the date of such deposit or during the period ending on the 123rd day
after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement
or instrument to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound, and
(D) if at such time the Notes are listed on a national securities
exchange, the Company has delivered to the Trustee an Opinion of Counsel to
the effect that the Notes will not be delisted as a result of such deposit,
defeasance and discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT. The
provisions of the Indenture will no longer be in effect with respect to clauses
(iii) and (iv) under "Consolidation, Merger and Sale of Assets" and all the
covenants described herein under "Covenants," clauses (c) and (d) under "Events
of Default" with respect to such clauses (iii) and (iv) under "Consolidation,
Merger and Sale of Assets" and such covenants and clauses (e) and (f) under
"Events of Default" shall be deemed not to be Events of Default, if the Company
shall deposit with the Trustee money and/or U.S. Government Obligations that
through the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount sufficient to pay the principal
of, premium and accrued interest on the Notes on the Stated Maturity of such
payments in accordance with the terms of the Indenture and the Notes, the
satisfaction of the provisions described in clauses (B)(ii), (C) and (D) of the
preceding paragraph and the delivery by the Company to the Trustee of an Opinion
of Counsel to the effect that, among other things, the Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
such deposit and defeasance of certain covenants and Events of Default and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit and defeasance had
not occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT. If the Company determines
to omit compliance with certain covenants and provisions of the Indenture with
respect to the Notes as described in the immediately preceding paragraphs and
the Notes are declared due and payable because of the occurrence of an Event of
Default that remains applicable, the amount of money and/or U.S. Government
Obligations on deposit with the Trustee will be sufficient to pay amounts due on
the Notes at the time of their Stated Maturity but may not be sufficient to pay
amounts due on the Notes at the time of the acceleration resulting from such
Event of Default. However, the Company will remain liable for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company and
the Trustee with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding
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Notes. However, no modification or amendment may, without the consent of each
Holder affected thereby;
- change the Stated Maturity of the principal of, or any installment of
interest on, any Note,
- reduce the principal of, or premium, if any, or interest on, any Note,
- change the place or currency of payment of principal of, or premium, if
any, or interest on, any Note,
- impair the right to institute suit for the enforcement of any payment on
or after the Stated Maturity (or, in the case of a redemption, on or after
the Redemption Date) of any Note,
- reduce the above-stated percentage of outstanding Notes the consent of
whose Holders is necessary to modify or amend the Indenture,
- waive a default in the payment of principal of, premium, if any, or
interest on the Notes, or
- reduce the percentage or aggregate principal amount of outstanding Notes
the consent of whose Holders is necessary for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the principal of,
premium, if any, or interest on any of the Notes or for any claim based thereon
or otherwise in respect thereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in the Escrow and Security Agreement, the
Indenture, or in any of the Notes or because of the creation of any Indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer, director, employee or controlling person of the Company or of any
successor Person thereof. Each Holder, by accepting the Notes, waives and
releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a Default, the
Trustee will not be liable, except for the performance of such duties as are
specifically set forth in such Indenture. If an Event of Default has occurred
and is continuing, the Trustee will use the same degree of care and skill in its
exercise of the rights and powers vested in it under the Indenture as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
The Indenture and provisions of the Trust Indenture Act of 1939, as amended,
incorporated by reference therein contain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain payment of claims
in certain cases or to realize on certain property received by it in respect of
any such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions. However, if the Trustee acquires any conflicting interest,
it must eliminate such conflict or resign.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth herein, the Notes have been issued in the form of one or
more global notes. The global notes were deposited with, or on behalf of, The
Depository Trust Company (the "Depositary") and registered in the name of Cede &
Co., as nominee of the Depositary (such nominee being referred to herein as the
"Global Note Holder").
Notes offered and sold in reliance on Regulation S were initially
represented by one or more permanent global notes in definitive, fully
registered form (the "Offshore Global Note") which were registered in the name
of the Global Note Holder and deposited on behalf of the purchasers of the Notes
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represented thereby with a custodian for the Global Note Holder for credit to
the respective accounts of the purchasers (or to such other accounts as they may
direct) at the Euroclear System ("Euroclear") or Cedel Bank, societe anonyme
("Cedel Bank").
Notes offered and sold to "Qualified Institutional Buyers" in reliance on
Rule 144A under the Securities Act will be represented by one or more permanent
global notes in definitive, fully registered form (the "U.S. Global Note" and
together with the Offshore Global Note, the "Global Notes") which will be
registered in the name of the Global Note Holder and deposited on behalf of the
purchasers of the Notes represented thereby with a custodian for the Global Note
Holder for credit to the respective accounts of the purchasers (or to such other
accounts as they may direct) at the Depositary.
Notes (1) transferred to institutional "accredited investors" who are not
"Qualified Institutional Buyers" (as such terms are defined under "Notice to
Investors" elsewhere herein ("Non-Global Purchasers")) or (2) issued as
described under "Certificated Notes" below, will be issued in registered,
definitive, certificated form (the "Certificated Notes"). Upon the transfer of
Certificated Notes to a Qualified Institutional Buyer or in an offshore
transaction under Regulation S, such Certificated Notes may, unless the Global
Note shall have previously been exchanged in whole for Certificated Notes, be
exchanged for an interest in a Global Note representing the principal amount of
the Notes being transferred upon delivery of appropriate certificates to the
Trustee.
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the
"Participants") and to facilitate the clearance and settlement of transactions
in such securities between Participants through electronic book-entry changes in
accounts of its Participants. The Participants include securities brokers and
dealers (including the Initial Purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to the Depositary's system
is also available to other entities such as banks, brokers, dealers and trust
companies (collectively, the "Indirect Participants") that clear through or
maintain a custodial relationship with a Participant, either directly or
indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through Participants or Indirect
Participants.
The Company expects that pursuant to procedures established by the
Depositary (1) upon deposit of the Global Notes, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Notes and (2) ownership of the Notes
evidenced by the Global Notes will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Participants), the Participants and the
Indirect Participants. Prospective purchasers are advised that the laws of some
states require that certain persons take physical delivery in definitive form of
securities that they own. Consequently, the ability to own, transfer or pledge
Notes evidenced by the Global Notes will be limited to such extent. For certain
other restrictions on the transferability of the Notes, see "Notice to
Investors."
Investors may hold their interests in the Offshore Global Note directly
through Euroclear or Cedel Bank, if they are participants in such systems, or
indirectly through organizations that are participants in such systems.
Beginning 40 days after the later of the commencement of this offering and the
Closing Date (but not earlier), investors may also hold such interests through
organizations other than Euroclear or Cedel Bank that are Participants in the
Depositary. Euroclear and Cedel Bank will hold such interests in the Offshore
Global Note on behalf of their participants through customers' securities
accounts in their respective names on the books of their respective
depositaries, which in turn will hold such interests in the Offshore Global Note
in customers' securities acocunts in the depositaries' names on the books of the
Depositary.
So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole Holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Notes will not be considered the owners or Holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or
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approvals to the Trustee thereunder. Neither the Company nor the Trustee will
have any responsibility or liability for any aspect of the records of the
Depositary relating to the Notes.
Payments in respect of the principal of, premium, if any, and interest on
any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Notes, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Participants and Indirect Participants to the beneficial owners of Notes will be
governed by standing instructions and customary practice and will be the
responsibility of the Participants and Indirect Participants.
Transfers between Participants will be effected in accordance with the
Depositary's rules and will be settled in immediately available funds. If a
holder requires physical delivery of a Certificated Note for any reason,
including to sell Notes to persons in states which require physical delivery of
such securities or to pledge such securities, such holder must transfer its
interest in the Global Notes in accordance with the normal procedures of the
Depositary and in accordance with the procedures set forth in the Indenture.
Transfers by an owner of a beneficial interest in the U.S. Global Note to a
transferee who takes delivery of such interest through the Offshore Global Note,
whether before, on or after the 40th day after the later of the commencement of
this offering and the Closing Date, will be made only upon receipt by the
Trustee of a certification to the effect that such transfer is being made in
accordance with Regulation S. Transfers of Certificated Notes to persons who
will hold through the U.S. Global Note or the Offshore Global Note will be
subject to certifications provided by the Trustee.
CERTIFICATED NOTES
Transferees of Notes who are not "Qualified Institutional Buyers" as defined
in Rule 144A under the Securities Act may hold Notes only in the form of
Certificated Notes. All such Certificated Notes would be subject to the legend
requirements described herein under "Notice to Investors." In addition, if (1)
the Company notifies the Trustee in writing that the Depositary is no longer
willing or able to act as a depositary and the Company is unable to locate a
qualified successor within 90 days or (2) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in the form
of Certificated Notes under the Indenture then, upon surrender by the Global
Note Holder of the Global Notes, Certificated Notes will be issued to each
person that the Global Note Holder and the Depositary identify as being the
beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (including principal, premium, if any, and interest) be made by
wire transfer of immediately available funds to the accounts specified by the
Global Note Holder. With respect to Certificated Notes, the Company will make
all payments of principal, premium, if any, and interest by wire transfer of
immediately available funds to the accounts specified by the Holders thereof or,
if no such account is specified, by mailing a check to each Holder's registered
address. Notes represented by the Global Notes are expected to be
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eligible to trade in the PORTAL market and to trade in the Depositary's Same-Day
Funds Settlement System, and any permitted secondary market trading activity in
such Notes will, therefore, be required by the Depositary to be settled in
immediately available funds. The Company expects that secondary trading in the
Certificated Notes will also be settled in immediately available funds.
Because of time zone differences, the securities account of a Euroclear or
Cedel Bank participant purchasing an interest in a Global Note from a
Participant in the Depositary will be credited, and any such crediting will be
reported to the relevant Euroclear or Cedel Bank participant, during the
securities settlement processing day (which must be a business day for Euroclear
or Cedel Bank) immediately following the settlement date of the Depositary. The
Depositary has advised the Company that cash received in Euroclear or Cedel Bank
as a result of sales of interests in a Global Note by or through a Euroclear or
Cedel Bank participant to a Participant will be received with value on the
settlement date of the Depositary but will be available in the relevant
Euroclear or Cedel Bank cash account only as of the business day for Euroclear
or Cedel Bank following the Depositary's settlement date.
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CERTAIN U.S. FEDERAL TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS
The following summary describes the material anticipated U.S. federal income
tax consequences of the purchase, ownership and disposition of the Notes by
Non-United States Holders (as defined below). Except where noted, it deals only
with Notes held as capital assets within the meaning of Section 1221 of the
Internal Revenue Code of 1986, as amended (the "Code"), and does not discuss all
of the tax consequences that may be relevant to a holder in light of his
particular circumstances. Furthermore, the discussion below is based upon the
provisions of the Code and regulations, administrative and judicial decisions
thereunder as of the date hereof, and such authorities may be repealed, revoked
or modified with possible retroactive effect so as to result in U.S. federal
income tax consequences different from those discussed below.
As used herein, "Non-United States Holder" or "Non-U.S. Holder" means any
person or entity that is, as to the United States, a foreign corporation, a
nonresident alien individual, a nonresident fiduciary of a foreign estate or
trust or a foreign partnership one or more of the members of which is, as to the
United States, a foreign corporation, a nonresident alien individual or a
nonresident fiduciary of a foreign estate or trust.
ALL PROSPECTIVE PURCHASERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE
OWNERSHIP AND DISPOSITION OF THE NOTES.
TAXATION OF INTEREST ON THE NOTES
If a Non-U.S. Holder of a Note does not satisfy all of the conditions
discussed in the next paragraph, the Non-U.S. Holder will be subject to a 30%
U.S. federal withholding tax with respect to payments of interest on the Note
(the "30% U.S. Withholding Tax"). If applicable to a Non-U.S. Holder of a Note,
the 30% U.S. Withholding Tax must be withheld by the Company or its paying agent
from any payments of interest with respect to the Note.
The 30% U.S. Withholding Tax is not applicable to payments of interest with
respect to a Note, if the Non-U.S. Holder of the Note:
- does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote
within the meaning of Section 871(h)(3) of the Code and the regulations
thereunder,
- is not a controlled foreign corporation related, directly or indirectly,
to the Company through stock ownership,
- is not a bank whose receipt of interest on a Note is described in Section
881(c)(3)(A) of the Code, and
- satisfies the statement requirement set forth in Sections 871(h) and
881(c) of the Code and the Treasury Regulations thereunder (the "Statement
Requirement").
To satisfy the Statement Requirement, the Non-U.S. Holder of a Note or a
financial institution holding the Note on behalf of such Non-U.S. Holder must
provide, in accordance with specified procedures, the Company or its paying
agent with a statement to the effect that the beneficial owner of the Note is
not a U.S. person. These requirements will be met if:
- the Non-U.S. Holder provides his name and address, and certifies, under
penalties of perjury, that he is not a U.S. person (which certification
may be made on an IRS Form W-8 or Form W-8IMY (or substitute form)), or
- a financial institution holding the Note on behalf of the Non-U.S. Holder
certifies, under penalties of perjury, that such statement has been
received by it and furnishes a paying agent with a copy thereof.
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With respect to Notes held by a foreign partnership, under current law, the
IRS Form W-8 or Form W-8IMY (or substitute form) may be provided by the foreign
partnership. However, for interest and sale proceeds paid with respect to a Note
after December 31, 1999, unless the foreign partnership has entered into a
withholding agreement with the IRS, a foreign partnership will be required, in
addition to providing an intermediary IRS Form W-8 (or substitute form), to
attach an appropriate certification by each partner. Treasury Regulations
generally effective for payments made after December 31, 1999, modify certain of
the Statement Requirements. It is possible that the Company and other
withholding agents may request a new withholding exemption form from holders in
order to qualify for continued exemption from withholding under the Treasury
Regulations when they become effective. Prospective investors, including foreign
partnerships and their partners, should consult their tax advisors regarding
possible additional reporting requirements.
The 30% U.S. Withholding Tax is not imposed or may be reduced or eliminated
with respect to the payments of interest on a Note, if the Company or its paying
agent receives IRS Form 4224 or Form W-8ECI (or substitute form) or IRS Form
1001 or Form W8BEN (or substitute form) (or, after December 31, 1999, IRS Form
W-8 or Form W-8IMY (or substitute form)) from the Non-U.S. Holder of the Note,
establishing, unless the Company has knowledge to the contrary, either:
- that interest paid on the Note is effectively connected with the conduct
of a trade or business in the U.S., or
- that a tax treaty applies to reduce the rate of, or eliminate, the
withholding tax, respectively. Interest paid to a Non-U.S. Holder that is
effectively connected with the conduct by the holder of a trade or
business in the U.S. is generally taxed on a net income basis at the
graduated rates that are applicable to U.S. persons. In the case of a
Non-U.S. Holder that is a corporation, such effectively connected income
may also be subject to the U.S. federal branch profits tax (which is
generally imposed on a foreign corporation on the deemed repatriation from
the U.S. of effectively connected earnings and profits) at a 30% rate
(unless the rate is reduced or eliminated by an applicable income tax
treaty and the holder is a qualified resident of the treaty country).
SALE, EXCHANGE OR OTHER DISPOSITION OF NOTES
A Non-U.S. Holder will generally not be subject to U.S. federal income or
withholding tax with respect to capital gain recognized on a sale, exchange or
other disposition of the Notes unless:
- the gain is effectively connected with a trade or business of the Non-U.S.
Holder in the U.S.,
- in the case of a Non-U.S. Holder who is an individual, such holder is
present in the U.S. for 183 or more days in the taxable year of the sale
or other disposition and certain other conditions are met, or
- the Non-U.S. Holder is subject to tax pursuant to certain provisions of
the Code applicable to U.S. expatriates.
Gain recognized by a Non-U.S. Holder on a sale, exchange or other
disposition of the Notes that is effectively connected with the conduct by the
Holder of a trade or business in the U.S. is generally taxed on a net income
basis at the graduated rates that are applicable to U.S. persons. In the case of
a Non-U.S. Holder that is a corporation, such effectively connected income may
also be subject to the U.S. branch profits tax (which is generally imposed on a
foreign corporation on the deemed repatriation from the United States of
effectively connected earnings and profits) at a 30% rate (unless the rate is
reduced or eliminated by an applicable income tax treaty and the Holder is a
qualified resident of the treaty country).
The exchange of a Note by a Non-U.S. Holder for an Exchange Note pursuant to
the Exchange Offer should not constitute a taxable exchange. A Non-U.S. Holder
should have the same tax basis and holding period in the Exchange Note as it did
in the Note.
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FEDERAL ESTATE TAX
A Note beneficially owned by an individual who at the time of death is a
Non-U.S. Holder will not be subject to U.S. federal estate tax as a result of
such individual's death, provided that such individual does not actually or
constructively own 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote within the meaning of Section 871(h)(3)
of the Code and provided that the interest payments with respect to such Note
would not have been, if received at the time of such individual's death,
effectively connected with the conduct of a U.S. trade or business by such
individual.
INFORMATION REPORTING AND BACKUP WITHHOLDING
No information reporting or backup withholding will be required with respect
to payments made by the Company or its paying agent to a Non-U.S. Holder if the
Statement Requirement has been met and the payor does not have actual knowledge
that the Non-U.S. Holder is a U.S. person.
In addition, information reporting and backup withholding will not apply if
payments on a Note are paid or collected by a foreign office of a nominee,
custodian or other foreign agent on behalf of the beneficial owner of such Note,
or if a foreign office of a broker pays the proceeds of the sale of a Note to
the beneficial owner thereof. However, payments made or collected by such
nominee, custodian, agent or broker that is, for U.S. federal income tax
purposes:
- a U.S. person,
- a controlled foreign corporation, or a foreign person 50% or more of whose
gross income is effectively connected with a U.S. trade or business for a
specified three year period, or
- (with respect to payments made after December 31, 1999) a foreign
partnership with certain connections to the U.S., will be subject to
information reporting (but not backup withholding) unless such nominee,
custodian, agent or broker has in its records documentary evidence that
the beneficial owner is not a U.S. person and certain other conditions are
met, or the beneficial owner otherwise establishes an exemption.
Backup withholding may apply to any payment that such broker is required to
report if the broker has actual knowledge that the payee is a U.S. person.
Payments to or through the U.S. office of a broker will be subject to
information reporting and backup withholding unless the Holder certifies, under
penalties of perjury, that it is not a U.S. person or otherwise establishes an
exemption.
Treasury Regulations generally effective for payments made after December
31, 1999, modify certain of the certification requirements for backup
withholding. It is possible that the Company and other withholding agents may
request a new withholding exemption form from holders in order to qualify for
continued exemption from backup withholding under the Treasury Regulations when
they become effective. Non-U.S. Holders should consult their own tax advisors
regarding the application of information reporting and backup withholding in
their particular situations, the availability of an exemption therefrom, and the
procedures for obtaining such an exemption, if available. Any amounts withheld
under the backup withholding rules generally will be allowed as a refund or
credit against the Non-U.S. Holder's U.S. federal income tax liability and may
entitle such Holder to a refund, provided the required information is furnished
to the IRS.
PLAN OF DISTRIBUTION
There has previously been only a limited secondary market and no public
market for the Old Notes. We do not intend to apply for the listing of the Notes
on a national securities exchange or for their quotation through The Nasdaq
Stock Market. The Notes are eligible for trading in the PORTAL market. We have
been advised by the Initial Purchasers that the Initial Purchasers currently
intend to make a market in the Notes; however, no Initial Purchaser is obligated
to do so and any market making may be
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discontinued by any Initial Purchaser at any time. In addition, such market
making activity may be limited during the Exchange Offer. Therefore, there can
be no assurance that an active market for the Old Notes or the New Notes will
develop. If a trading market does not develop or is not maintained, holders of
Notes may experience difficulty in reselling Notes. If a trading market develops
for the Notes, future trading prices of such securities will depend on many
factors, including, among other things, prevailing interest rates, our results
of operations and the market for similar securities. Depending on such factors,
the Notes may trade at a discount from their offering price.
BROKER-DEALERS WHO DID NOT ACQUIRE OLD NOTES AS A RESULT OF MARKET MAKING
ACTIVITIES OR TRADING ACTIVITIES MAY NOT PARTICIPATE IN THE EXCHANGE OFFER.
With respect to resale of New Notes, based on an interpretation by the staff
of the Commission set forth in no-action letters issued to third parties we
believe that a holder (other than a person that is our affiliate within the
meaning of Rule 405 under the Securities Act or a "broker" or "dealer"
registered under the Exchange Act) who exchanges Old Notes for New Notes in the
ordinary course of business and who is not participating, does not intend to
participate, and has no arrangement or understanding with any person to
participate, in the distribution of the New Notes, will be allowed to resell the
New Notes to the public without further registration under the Securities Act
and without delivering to the purchasers of the New Notes a prospectus that
satisfies the requirements of Section 10 thereof. However, if any holder
acquires New Notes in the Exchange Offer for the purpose of distributing or
participating in a distribution of the New Notes, such holder cannot rely on the
position of the staff of the Commission enunciated in EXXON CAPITAL HOLDINGS
CORPORATION (available May 13, 1988) or similar no-action letters or any similar
interpretive letters and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction, unless an exemption from registration is otherwise
available.
As contemplated by the no-action letters mentioned above and the
Registration Rights Agreement, each holder accepting the Exchange Offer is
required to represent to us in the Letter of Transmittal that (i) the New Notes
are to be acquired by the holder in the ordinary course of business, (ii) the
holder is not engaging and does not intend to engage in the distribution of the
New Notes, and (iii) the holder acknowledges that, if such holder participates
in the Exchange Offer for the purpose of distributing the New Notes, such holder
must comply with the registration and prospectus delivery requirements of the
Securities Act and cannot rely on the above no-action letters.
Any broker or dealer registered under the Exchange Act (each a
"Broker-Dealer") who holds Old Notes that were acquired for its own account as a
result of market-making activities or other trading activities (other than Old
Notes acquired directly from us or our affiliate) may exchange such Old Notes
for New Notes pursuant to the Exchange Offer, however, such Broker-Dealer may be
deemed an underwriter within the meaning of the Securities Act and, therefore,
must deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of the New Notes received by it in the Exchange
Offer, which prospectus delivery requirement may be satisfied by the delivery by
such Broker-Dealer of this Prospectus. We have agreed to cause the Exchange
Offer Registration Statement, of which this Prospectus is a part, to remain
continuously effective for a period of 180 days, if required, from the Exchange
Date, and to make this Prospectus, as amended or supplemented, available to any
such Broker-Dealer for use in connection with resales. Any Broker-Dealer
participating in the Exchange Offer will be required to acknowledge that it will
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resales of New Notes received by it in the Exchange Offer.
The delivery by a Broker-Dealer of a prospectus in connection with resales of
New Notes shall not be deemed to be an admission by such Broker-Dealer that it
is an underwriter within the meaning of the Securities Act. We will not receive
any proceeds from any sale of New Notes by a Broker-Dealer.
New Notes received by Broker-Dealers for their own account pursuant to the
Exchange Offer may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated
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transactions, through the writing of options on the New Notes or a combination
of such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such Broker-Dealer and/or the purchasers of any such New Notes.
LEGAL MATTERS
Certain legal matters with respect to the validity of the Notes are being
passed upon for Dobson/ Sygnet Communications Company by McAfee & Taft A
Professional Corporation, Oklahoma City, Oklahoma.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements of Sygnet Wireless, Inc., at December 31, 1996 and 1997 and
for each of the three years in the period ended December 31, 1997 included in
this Prospectus elsewhere in the and Registration Statement as set forth in
their report also included herein. The consolidated financial statements are
included herein in reliance on their report given on their authority as experts
in accounting and auditing.
The consolidated balance sheets of Dobson/Sygnet Communications Company and
Dobson/Sygnet Operating Company, included in this Prospectus and in the
Registration Statement have been audited by Arthur Andersen LLP, independent
public accountants as indicated in their reports appearing herein in reliance
upon the authority of said firm as experts in giving said reports.
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CERTAIN TERMS
ADJUSTED EBITDA--Represents earnings before interest, income taxes,
depreciation and amortization and other non-cash expenses.
ALLTEL--ALLTEL Corporation and its affiliates.
AMPS--Advanced Mobile Telephone Service.
AT&T WIRELESS--AT&T Wireless Services, Inc. and its affiliates.
BAM--Bell Atlantic Mobile.
BELL ATLANTIC--Bell Atlantic Corporation.
BTA--Basic Trading Area.
CDMA--A digital technology that uses code division multiple access.
CELLULAR ONE GROUP--The owner of the service mark "CELLULAR
ONE-Registered Trademark-".
CGSA--Cellular Geographic Service Area.
CHURN--The number of cellular subscriber cancellations per month as a
percentage of the weighted average total cellular subscribers during such
period.
COMMUNICATIONS ACT--The Communications Act of 1934.
CMRS--Commercial Mobile Radio Services.
CTIA--Cellular Telecommunications Industry Association.
DOBSON/SYGNET--Dobson/Sygnet Communications Company, a wholly owned
subsidiary Dobson Communications Corporation.
DOBSON/SYGNET OPERATING--Dobson/Sygnet Operating Company, a wholly owned
subsidiary of Dobson/ Sygnet Communications Company.
DOBSON TOWER COMPANY--Dobson Tower Company, a wholly owned subsidiary of
Dobson Communications Corporation.
EQUITY CONTRIBUTION--Equity investments in the Company aggregating $145.0
million made by Dobson Communications Corporation.
ERICSSON--Telefonaktiebolaget LM Ericsson and its affiliates.
ERIE ACQUISITION--Sygnet's 1995 acquisition of Erie Cellular Telephone
Company which owned the FCC license and the related system for the Erie,
Pennsylvania MSA.
ESMR--Enhanced Specialized Mobile Radio.
FOOTPRINT--The total system coverage area served under FCC license by a
given licensee.
FRONTIER--Frontier Communications.
GTE--GTE Corporation and its affiliates.
HORIZON ACQUISITION--Sygnet's 1996 acquisition of the FCC licenses and
related systems for Pennsylvania 1 RSA, Pennsylvania 2 RSA, Pennsylvania 6 RSA,
Pennsylvania 7 RSA and New York 3 RSA.
INITIAL PURCHASERS--NationsBanc Montgomery Securities LLC, Lehman Brothers,
Inc., First Union Capital Markets, a division of Wheat First Securities, Inc.
and TD Securities (USA) Inc.
ITDS--International Telecommunications Data Services.
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MOTOROLA--Motorola, Inc.
MSA--Metropolitan Statistical Area, an FCC-designated cellular regulatory
region. We may also refer to MSA as a "Market."
MSS--Mobile Satellite Services.
MTA--Major Trading Area.
NACN--The North American Cellular Network.
NEW BANK FACILITIES--A $430.0 million senior secured bank facility to
consist of a $50.0 million reducing revolving credit facility and $380.0 million
of term loan facilities to be provided to Dobson/Sygnet Operating by banks led
by NationsBank, N.A.
NEXTEL--Nextel Communications, Inc.
NORTHERN TELECOM--Northern Telecom, Inc.
OKLAHOMA TELECOM ACT--Oklahoma Telecommunications Act of 1997.
OMNIPOINT--Omnipoint Corporation.
PCS--Personal Communications Services.
PENETRATION--The total subscribers at the end of a period divided by total
Pops covered by the applicable FCC cellular licenses or authorizations.
PENNSYLVANIA 2 ACQUISITION; PENNSYLVANIA 2--Sygnet's acquisition of the FCC
license for, and certain assets related to, Pennsylvania 2 RSA ("Pennsylvania
2").
PLEDGED SECURITIES--A portfolio of approximately $67.7 million of U.S.
government securities we purchased with proceeds of the issuance of the Notes
that are pledged as security for the first six scheduled interest payments on
the Notes.
POP OR POPS--Each Pop represents a person in a cellular market area, such as
an MSA or an RSA. As used in this Prospectus, unless otherwise indicated, the
terms "Pops" means the estimate of the population of an MSA or RSA as derived
from the KAGAN CELLULAR TELEPHONE ATLAS FOR 1998 by Paul Kagan Associates, Inc.
RBOC--The five remaining of the seven original Regional Bell Operating
Companies established by the Department of Justice's 1982 breakup of the Bell
System.
REGISTRATION RIGHTS AGREEMENT--Agreement dated December 23, 1998 among
Dobson/Sygnet, NationsBanc Montgomery Securities LLC, Lehman Brothers, Inc.,
First Union Capital Markets, a division of Wheat First Securities, Inc. and TD
Securities (USA) Inc.
RESALE--Resale by a provider of telecommunications services (such as a local
exchange carrier) of such services to other providers or carriers on a wholesale
or a retail basis.
RSA--Rural Service Area, an FCC-designated cellular regulatory region. We
may also refer to an RSA as a "market."
SBC--SBC Communications, Inc.
SPRINT--Sprint Corporation and affiliated companies.
SWBM--Southwestern Bell Mobile Systems, Inc.
SWBT--Southwestern Bell Telephone Company.
SYGNET--Sygnet Wireless, Inc. and its wholly owned subsidiary, Sygnet
Communications, Inc.
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SYGNET ACQUISITION--The merger of Dobson/Sygnet Operating Company into
Sygnet effective December 23, 1998.
SYGNET BANK FACILITY--Sygnet's bank facility under which all outstanding
indebtedness ($199.0 million) was paid as part of the Sygnet Transactions.
SYGNET FINANCING--The sale of the Old Shares, the Equity Investments, the
issuance and sale of the Dobson/Sygnet Notes, the establishment of and funding
under the New Credit Facilities, the repayment of Sygnet's credit facility, and
the purchase of Sygnet Notes in the Sygnet Tender Offer.
SYGNET NOTE REPURCHASE--Sygnet's repurchase of all of its outstanding
11 1/2% Senior Notes due 2006.
SYGNET TRANSACTIONS--The Equity contributions, the New Bank Facilities, the
Pledged Securities, the Sygnet Bank Facility, the Sygnet Note Repurchase and the
Tower Sale Leaseback.
SYSTEM--An FCC-licensed cellular telephone system.
TDMA--A digital technology that uses time multiple access.
TELECOMMUNICATIONS ACT--The Telecommunications Act of 1996.
TEXAS 10 ACQUISITION; TEXAS 10--The Company's acquisition on December 2,
1998 of the FCC license for, and certain assets related to, the system for Texas
10 RSA ("Texas 10").
TOWER SALE LEASEBACK--Sygnet's sale of substantially all of its owned
cellular towers for $25.0 million to Dobson Tower Company, a wholly owned
subsidiary of Dobson Communications Corporation, which leased the cellular
towers back to Sygnet.
US WEST--US WEST, Inc. and its affiliated companies.
VANGUARD--Vanguard Cellular Systems, Inc.
VYVX--Vyvx, Inc.
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
SYGNET WIRELESS, INC.
Report of independent auditors........................................................................... F-2
Consolidated balance sheets as of December 31, 1996 and 1997............................................. F-3
Consolidated statements of operations for the years ended December 31, 1995, 1996 and 1997............... F-4
Consolidated statements of shareholders' equity (deficit) for the years ended December 31, 1995, 1996 and
1997................................................................................................... F-5
Consolidated statements of cash flows for the years ended December 31, 1995, 1996 and 1997............... F-6
Notes to consolidated financial statements............................................................... F-7
Consolidated balance sheets as of December 31, 1997 and September 30, 1998 (unaudited)................... F-17
Consolidated statements of operations for the nine months ended September 30, 1997 and 1998
(unaudited)............................................................................................ F-18
Consolidated statements of cash flows for the nine months ended September 30, 1997 and 1998
(unaudited)............................................................................................ F-19
Notes to consolidated financial statements (unaudited)................................................... F-20
DOBSON/SYGNET COMMUNICATIONS COMPANY
Report of independent public accountants................................................................. F-22
Balance sheet as of September 30, 1998................................................................... F-23
Notes to balance sheet................................................................................... F-24
DOBSON/SYGNET OPERATING COMPANY
Report of independent public accountants................................................................. F-26
Balance sheet as of September 30, 1998................................................................... F-27
Notes to balance sheet................................................................................... F-28
</TABLE>
F-1
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REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Sygnet Wireless, Inc.
We have audited the accompanying consolidated balance sheets of Sygnet
Wireless, Inc. as of December 31, 1996 and 1997, and the related consolidated
statements of operations, shareholders' equity (deficit), and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Sygnet
Wireless, Inc. at December 31, 1996 and 1997 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Cleveland, Ohio
February 6, 1998
F-2
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 2,257,748 $ 860,086
Accounts receivable, less allowance for doubtful accounts of $809,800 at
December 31, 1997 and $1,168,800 at December 31, 1996........................ 8,857,028 10,711,627
Inventory...................................................................... 1,696,952 1,867,445
Prepaid expenses............................................................... 531,171 309,460
-------------- --------------
Total current assets......................................................... 13,342,899 13,748,618
Other assets:
Cellular licenses--net......................................................... 252,271,468 245,866,235
Customer lists--net............................................................ 24,535,885 19,382,087
Deferred financing costs--net.................................................. 10,068,956 8,982,430
-------------- --------------
Total other assets........................................................... 286,876,309 274,230,752
Property and equipment--net...................................................... 43,958,969 53,007,015
-------------- --------------
Total assets................................................................. $ 344,178,177 $ 340,986,385
-------------- --------------
-------------- --------------
LIABILITIES, REDEEMABLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable............................................................... $ 2,826,629 $ 3,264,206
Deferred revenue............................................................... 1,679,873 2,058,066
Accrued expenses and other liabilities......................................... 2,744,789 4,196,230
Interest payable............................................................... 6,940,623 6,749,755
-------------- --------------
Total current liabilities.................................................... 14,191,914 16,268,257
Long-term debt................................................................... 312,250,000 305,500,000
Redeemable Series A Senior Cumulative Nonvoting Preferred Stock, $.01 par,
aggregate redemption value of $20,690,411, 500,000 shares authorized, 200,000
shares issued and outstanding and warrants..................................... 19,718,028 --
Shareholders' equity (deficit):
Common shares, $.01 par, Class A, 1 vote per share; 60,000,000 shares
authorized; 4,010,653 shares issued and outstanding as of December 31, 1997;
2,653 shares issued and outstanding as of December 31, 1996.................. 27 40,107
Common shares, $.01 par, Class B, 10 votes per share; 10,000,000 shares
authorized; 5,159,977 shares issued and outstanding as of December 31, 1997;
6,167,977 shares issued and outstanding as of December 31, 1996.............. 61,679 51,599
Additional paid-in capital..................................................... 5,812,211 47,598,498
Retained deficit............................................................... (7,605,730) (28,222,124)
Note receivable from officer/shareholder....................................... (249,952) (249,952)
-------------- --------------
Total shareholders' equity (deficit)............................................. (1,981,765) 19,218,128
-------------- --------------
Total liabilities, redeemable preferred stock and shareholders' equity
(deficit)...................................................................... $ 344,178,177 $ 340,986,385
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes.
F-3
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------------------
1995 1996 1997
------------- ------------- --------------
<S> <C> <C> <C>
REVENUE:
Subscriber revenue............................................... $ 17,191,291 $ 31,084,883 $ 52,638,712
Roamer revenue................................................... 4,175,809 9,687,284 26,992,584
Equipment sales.................................................. 1,529,284 2,416,769 4,323,052
Other revenue.................................................... 1,680,544 1,607,245 1,679,412
------------- ------------- --------------
Total revenue.................................................. 24,576,928 44,796,181 85,633,760
COSTS AND EXPENSES:
Cost of services................................................. 3,365,954 5,508,386 10,048,416
Cost of equipment sales.......................................... 4,163,890 5,816,144 9,663,251
General and administrative....................................... 5,563,887 9,852,004 16,975,592
Selling and marketing............................................ 3,082,492 6,080,308 10,841,059
Depreciation and amortization.................................... 3,486,554 10,038,439 28,718,937
------------- ------------- --------------
Total costs and expenses....................................... 19,662,777 37,295,281 76,247,255
------------- ------------- --------------
INCOME FROM OPERATIONS............................................. 4,914,151 7,500,900 9,386,505
OTHER:
Interest expense................................................. 2,660,248 11,173,688 29,901,678
Other expense, net............................................... 303,867 194,723 101,221
------------- ------------- --------------
(LOSS) INCOME BEFORE EXTRAORDINARY ITEM............................ 1,950,036 (3,867,511) (20,616,394)
Extraordinary loss on extinguishment of debt....................... -- (1,420,864) --
------------- ------------- --------------
NET (LOSS) INCOME.................................................. $ 1,950,036 $ (5,288,375) $ (20,616,394)
------------- ------------- --------------
------------- ------------- --------------
Earnings per share information (pro forma for 1996):
Loss before preferred stock dividend and accretion............... (5,288,375) $ (20,616,394)
Preferred stock dividend and accretion........................... $ (718,028) $ (2,121,423)
------------- --------------
Net loss applicable to common shareholders....................... $ (6,006,403) $ (22,737,817)
------------- --------------
------------- --------------
Net loss per share applicable to common shareholders
Before extraordinary item...................................... $ (.74) $ (2.93)
Extraordinary item............................................. (.23) --
------------- --------------
Net loss....................................................... $ (.97) $ (2.93)
------------- --------------
------------- --------------
Weighted average common shares outstanding......................... 6,170,630 7,773,370
------------- --------------
------------- --------------
</TABLE>
See accompanying notes.
F-4
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATERD STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
WILCOM CORPORATION SYGNET COMMUNICATIONS, INC.
COMMON STOCK COMMON STOCK
---------------------------------------------- ---------------------------------------------
TYPE A TYPE B TYPE A TYPE B
---------------------- ---------------------- -------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
----------- --------- ----------- --------- --------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance as of January 1, 1995..... 500 $ 12,500 2,500 $ 62,500 209,362 $ 209,362 1,046,801 $ 1,046,801
Net Income......................
Dividends declared..............
Type A common stock
repurchased...................
Type B common stock
repurchased...................
----- --------- ----------- --------- --------- --------- ---------- -----------
Balance as of December 31, 1995... 500 12,500 2,500 62,500 209,362 209,362 1,046,801 1,046,801
Net loss........................
Dividends declared..............
Corporate merger................ (500) (12,500) (2,500) (62,500) 4,360 4,360 21,800 21,800
Retirement of treasury stock.... (8,024) (40,173)
Sygnet Wireless
capitalization................ (205,698) (213,722) (1,028,428) (1,068,601)
Capital contribution of
S Corporation earnings........
Preferred stock dividend........
Accretion of preferred stock....
Exchange of common shares.......
----- --------- ----------- --------- --------- --------- ---------- -----------
Balance as of December 31, 1996... -- -- -- -- -- -- -- --
Net loss........................
Preferred Stock dividend........
Accretion of Preferred Stock....
Stock option compensation.......
Excess of redemption price over
carring value of Preferred
Stock.........................
Net Proceeds from issuance of
stock to Boston Venture.......
Exchange of Common Shares.......
----- --------- ----------- --------- --------- --------- ---------- -----------
Balance as of December 31,
1997.......................... -- $ -- -- $ -- -- $ -- -- $ --
----- --------- ----------- --------- --------- --------- ---------- -----------
----- --------- ----------- --------- --------- --------- ---------- -----------
<CAPTION>
SYGNET WIRELESS, INC.
------------------------------------------- NOTE
RECEIVABLE TREASURY
CLASS A CLASS B ADDITIONAL RETAINED FROM STOCK
-------------------- --------------------- PAID-IN EARNINGS OFFICER/ ---------
SHARES AMOUNT SHARES AMOUNT CAPITAL (DEFICIT) SHAREHOLDER SHARES
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
<S> <C>
Balance as of January 1, 1995..... -- $ -- -- $ -- $ 4,170,368 $ (482,842) $ (249,952) --
Net Income...................... 1,950,036
Dividends declared.............. (713,519)
Type A common stock
repurchased................... 8,024
Type B common stock
repurchased................... 40,173
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
Balance as of December 31, 1995... -- -- -- -- 4,170,368 753,675 (249,952) 48,197
Net loss........................ (5,288,375)
Dividends declared.............. (261,625)
Corporate merger................ 48,840
Retirement of treasury stock.... (1,718,991) (48,197)
Sygnet Wireless
capitalization................ 6,170,630 61,706 1,220,617
Capital contribution of
S Corporation earnings........ 2,809,405 (2,809,405)
Preferred stock dividend........ (690,411)
Accretion of preferred stock.... (27,617)
Exchange of common shares....... 2,653 27 (2,653) (27)
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
Balance as of December 31, 1996... 2,653 27 6,167,977 61,679 5,812,211 (7,605,730) (249,952) --
Net loss........................ (20,616,394)
Preferred Stock dividend........ (1,149,040)
Accretion of Preferred Stock.... (46,849)
Stock option compensation....... 306,000
Excess of redemption price over
carring value of Preferred
Stock......................... (925,534)
Net Proceeds from issuance of
stock to Boston Venture....... 3,000,000 30,000 43,601,710
Exchange of Common Shares....... 1,008,000 10,080 (1,008,000) (10,080)
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
Balance as of December 31,
1997.......................... 4,010,653 $ 40,107 5,159,977 $ 51,599 $47,598,498 $(28,222,124) $ (249,952) $ --
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
--------- --------- ---------- --------- ----------- ------------ ------------ ---------
<CAPTION>
AMOUNT
-----------
Balance as of January 1, 1995..... $ --
Net Income......................
Dividends declared..............
Type A common stock
repurchased................... $ (312,936)
Type B common stock
repurchased................... $(1,406,055)
-----------
Balance as of December 31, 1995... $(1,718,991)
Net loss........................
Dividends declared..............
Corporate merger................
Retirement of treasury stock.... 1,718,991
Sygnet Wireless
capitalization................
Capital contribution of
S Corporation earnings........
Preferred stock dividend........
Accretion of preferred stock....
Exchange of common shares.......
-----------
Balance as of December 31, 1996... --
Net loss........................
Preferred Stock dividend........
Accretion of Preferred Stock....
Stock option compensation.......
Excess of redemption price over
carring value of Preferred
Stock.........................
Net Proceeds from issuance of
stock to Boston Venture.......
Exchange of Common Shares.......
-----------
Balance as of December 31,
1997.......................... $ --
-----------
-----------
</TABLE>
See accompanying notes
F-5
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------------------
1995 1996 1997
-------------- --------------- --------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income............................................... $ 1,950,036 $ (5,288,375) $ (20,616,394)
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation.................................................. 2,765,816 5,948,693 16,018,841
Amortization.................................................. 720,738 4,089,746 12,700,096
Compensation expense from issuance of stock options........... -- -- 306,000
Loss on disposal of equipment................................. 161,222 177,633 102,955
Extraordinary loss on extinguishment of debt.................. -- 1,420,864 --
Changes in operating assets and liabilities:
Accounts receivable......................................... (2,838,833) (184,315) (1,854,599)
Inventory................................................... (184,951) (287,900) (170,493)
Prepaid and deferred expenses............................... 7,951 28,649 232,548
Accounts payable and accrued expenses....................... (589,925) 2,424,406 2,866,653
Accrued interest payable.................................... 452,933 6,481,912 (190,868)
-------------- --------------- --------------
Net cash provided by operating activities....................... 2,444,987 14,811,313 9,394,739
INVESTING ACTIVITIES
Acquisitions of Horizon and Erie................................ (40,533,104) (254,150,136) (599,442)
Purchases of property and equipment............................. (9,056,098) (10,049,999) (25,575,837)
Proceeds from sale of equipment................................. 513,730 -- 405,995
-------------- --------------- --------------
Net cash used in investing activities........................... (49,075,472) (264,200,135) (25,769,284)
FINANCING ACTIVITIES
Dividends paid.................................................. (1,158,980) (261,625) --
Proceeds from long-term debt.................................... 51,986,188 320,750,000 30,500,000
Principal payments on long-term debt............................ (750,000) (78,000,000) (37,250,000)
Increase in financing costs..................................... (1,716,230) (10,290,097) (65,376)
Net proceeds from issuance of preferred stock................... -- 19,000,000 --
Redemption of preferred stock................................... -- -- (21,839,451)
Net proceeds from issuance of common stock...................... -- -- 43,631,710
Purchase of treasury stock...................................... (1,718,991) -- --
-------------- --------------- --------------
Net cash provided by financing activities....................... 46,641,987 251,198,278 14,976,883
(Decrease) increase in cash and cash equivalents................ 11,502 1,809,456 (1,397,662)
Cash and cash equivalents at beginning of year.................. 436,790 448,292 2,257,748
-------------- --------------- --------------
Cash and cash equivalents at end of year........................ $ 448,292 $ 2,257,748 $ 860,086
-------------- --------------- --------------
-------------- --------------- --------------
</TABLE>
See accompanying notes
F-6
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
These financial statements include the combined financial statements of
Sygnet Communications, Inc. ("Sygnet") and Wilcom Corporation ("Wilcom") through
August 31, 1996, the effective date of the merger described below, and the
consolidated accounts of Sygnet Wireless, Inc. and its wholly-owned subsidiary
Sygnet Communications, Inc. ("Sygnet") (hereinafter collectively referred to as
the "Company") thereafter. The Company owns and operates cellular telephone
systems serving one large cluster with an approximate population of 2.4 million
in Northeastern Ohio, Western Pennsylvania and Western New York.
On August 19, 1996, the shareholders of Sygnet and Wilcom effected a
corporate restructuring whereby Wilcom was merged into Sygnet and shareholders
of Wilcom received 8.72 shares of Sygnet common stock for each share of Wilcom
common stock held as of August 31, 1996, the effective date of the merger. This
merger was a business combination between entities under common control whereby
the assets and liabilities so transferred were accounted for at historical cost
in a manner similar to that in pooling-of-interest accounting. Also, in
conjunction with this merger, the shareholders of Sygnet amended the articles of
incorporation to change Sygnet's name to Sygnet Wireless, Inc.
Prior to the restructuring, Sygnet and Wilcom had been operating their
cellular business through three partnerships (Youngstown Cellular Telephone
Company ("YCTC")), Erie Cellular Telephone Company ("Erie"), and Wilcom
Cellular) and Sharon--Youngstown Cellular, Inc. ("Sharon"). As a result of the
restructuring and merger, Sharon was renamed Sygnet and is the wholly-owned
subsidiary and operating company of Sygnet Wireless, Inc. The existence of YCTC,
Erie, and Wilcom Cellular terminated on October 1, 1996 when all partnership
interests transferred to Sygnet.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement No. 130, REPORTING COMPREHENSIVE
INCOME, which is required to be adopted effective January 1, 1998. This
Statement establishes standards for the reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
Reclassification of financial statements for earlier periods presented is
required. The impact of Statement No. 130 on the Company's financial statements
is not expected to be material.
In June 1997, the FASB also issued Statement No. 131, DISCLOSURES ABOUT
SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which is required to be
adopted effective January 1, 1998. This Statement changes the way companies
report selected segment information in annual financial statements and also
requires those companies to report selected segment information in interim
financial reports to shareholders. The impact of Statement No. 131 on the
Company's financial statement disclosures is not expected to be material.
3. ACQUISITIONS
On October 9, 1996, the Company acquired certain cellular licenses,
property, equipment, customer lists, current assets and current liabilities of
Horizon Cellular Telephone Company of Chautauqua L.P., Horizon Cellular
Telephone Company of Crawford L.P., and Horizon Cellular Telephone Company of
Indiana L.P. (hereinafter collectively referred to as "Horizon") for cash of
$252.9 million. The acquired systems provide cellular service to an estimated
population of 1.4 million in contiguous markets in Western Pennsylvania and
Western New York.
F-7
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
3. ACQUISITIONS (CONTINUED)
On September 30, 1995, Sygnet, as a general partner, purchased 95.46% of
Erie for cash of $40.53 million. On November 30, 1995, Sharon purchased 4.54% of
Erie for $1.92 million, which was paid on February 12, 1996.
The above transactions were accounted for as purchases and, accordingly, the
results of operations of the companies acquired have been included in the
consolidated financial statements since the dates of acquisition.
Cash paid for acquisitions is summarized below:
<TABLE>
<CAPTION>
1995 1996
------------- --------------
<S> <C> <C>
Current assets acquired....................................... $ 923,234 $ 3,613,696
Property and equipment........................................ 1,349,195 18,986,400
Cellular licenses............................................. 40,289,743 207,223,616
Customer lists................................................ 25,700,000
Current liabilities assumed................................... (108,878) (774,134)
------------- --------------
Net assets and liabilities acquired........................... 42,453,294 254,749,578
Amounts payable in future periods............................. (1,920,190) (599,442)
------------- --------------
Cash paid..................................................... $ 40,533,104 $ 254,150,136
------------- --------------
------------- --------------
</TABLE>
The pro forma unaudited condensed combined results of operations for the
year ended December 31, 1996 as if the purchase occurred on January 1, 1996 are
as follows:
<TABLE>
<CAPTION>
1996
--------------
<S> <C>
Revenue....................................................................... $ 69,851,000
--------------
--------------
Loss before extraordinary item................................................ $ (15,283,000)
--------------
--------------
Net loss...................................................................... $ (16,704,000)
--------------
--------------
Pro forma net loss per share applicable to common shareholders................ $ (3.25)
--------------
--------------
</TABLE>
4. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its wholly-owned subsidiary. Intercompany balances and transactions
have been eliminated in the consolidated financial statements.
CASH EQUIVALENTS
The Company considers all liquid investments with a maturity of three months
or less when purchased to be cash equivalents.
F-8
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORY
Inventory consisting of merchandise purchased for resale is stated at the
lower of cost or market determined by the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost and are depreciated over their
estimated useful lives calculated under the straight-line or double-declining
balance methods.
INTANGIBLE ASSETS
The FCC issues licenses that enable cellular carriers to provide cellular
service in specific geographic areas. The FCC grants licenses for a term of up
to 10 years and generally grants renewals if the licensee has complied with its
obligations under the Communications Act of 1934. In 1993, the FCC adopted
specific standards to apply to cellular renewals, concluding it will award a
renewal to a cellular licensee that meets certain standards of past performance.
Historically, the FCC has granted license renewals routinely. The Company
believes that it has met, and will continue to meet all requirements necessary
to secure renewal of its cellular licenses.
The Company has acquired cellular licenses and customer lists through its
acquisition of interests in various cellular systems. The cost of licenses and
customer lists acquired was $231,003,426 in 1996. The Company uses a 40 year
useful life to amortize its licenses under the straight-line method. Purchased
cellular and paging customer lists are being amortized over 5 years under the
straight-line method. The components of intangible assets at December 31 are
summarized below:
<TABLE>
<CAPTION>
1996 1997
-------------- --------------
<S> <C> <C>
Cellular licenses............................................ $ 255,849,696 $ 255,849,696
Customer lists............................................... 25,819,792 25,819,792
-------------- --------------
281,669,488 281,669,488
Accumulated amortization..................................... (4,862,135) (16,421,166)
-------------- --------------
$ 276,807,353 $ 265,248,322
-------------- --------------
-------------- --------------
</TABLE>
Amortization expense was $523,768, $3,652,470 and $11,559,031 in 1995, 1996
and 1997, respectively.
The ongoing value and remaining useful lives of intangible and other
long-term assets are subject to periodic evaluation and the Company currently
expects the carrying amounts to be fully recoverable. When events and
circumstances indicate that intangible and other long-term assets might be
impaired, an undiscounted cash flow methodology would be used to determine
whether an impairment loss would be recognized.
REVENUE RECOGNITION
The Company earns revenue primarily by providing cellular services to its
customers (Subscriber Revenue) and from the usage of its system by the customers
of other cellular carriers (Roamer Revenue). Access revenue for Subscriber
Revenue is billed one month in advance. Revenue is recognized as service is
rendered. Subscriber acquisition costs (primarily commissions and loss on
equipment sales) are expensed when incurred.
F-9
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
DEFERRED FINANCING COSTS
Deferred financing costs are being amortized over the terms of the bank
credit facility and senior notes. Accumulated amortization was $266,084 and
$1,409,754 at December 31, 1996 and 1997, respectively. Amortization expense was
$196,170, $437,276 and $1,141,065 in 1995, 1996 and 1997, respectively. Upon
entering into a new bank credit facility in October 1996, an extraordinary loss
of $1,420,864 was incurred to write-off unamortized financing costs under the
extinguished bank credit agreement as described in Note 6.
ADVERTISING COSTS
Advertising costs are recorded as expense when incurred. Advertising expense
was $933,498, $1,225,151 and $1,841,138 in 1995, 1996 and 1997, respectively.
NET LOSS PER COMMON SHARE
In 1997, the Company adopted FASB Statement No. 128, EARNINGS PER SHARE,
which replaced the computation of primary and fully diluted earnings per share
with basic and diluted earnings per share. No restatement of prior year earnings
per share amounts was necessary since the impact was not significant.
Net loss per share is computed using the weighted average number of shares
of common stock outstanding during the period. The pro forma net loss per share
for 1996 is based on the number of common shares outstanding, as if the
corporate restructuring described in Note 1 occurred at the beginning of the
year. The effect of stock options is not included in the computation of dilutive
earnings per share since it is anti-dilutive.
Losses applicable to common shareholders include adjustments for Preferred
Stock dividends and accretions and the excess of the redemption price paid over
the carrying value of the Preferred Stock. Earnings per share for 1995 is not
presented because such data prior to the restructuring described in Note 1 is
not meaningful.
STOCK COMPENSATION
The Company accounts for its stock-based employee compensation arrangements
based on the intrinsic value of the equity instruments granted, as set forth in
APB Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results may differ from those estimates.
SIGNIFICANT CONCENTRATIONS
In connection with providing cellular services to customers of other
cellular carriers, the Company has contractual agreements with those carriers
which provide for agreed upon billing rates between the parties. Approximately
62%, 48% and 43% of the Company's Roamer Revenue was earned from two cellular
carriers in 1995, 1996 and 1997, respectively.
F-10
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
4. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
Derivative financial instruments are used by the Company in the management
of interest rate exposure and are accounted for on an accrual basis. Income and
expense are recorded in the same category as that arising from the related
liability being hedged (i.e., adjustments to interest expense).
The Company uses variable interest rate credit facilities to finance
acquisitions and operations of the Company. The Company may reduce its exposure
to fluctuations in interest rates by creating offsetting positions through the
use of derivative financial instruments. The Company does not use derivative
financial instruments for trading or speculative purposes, nor is the Company a
party to leveraged derivatives. The notional amount of interest rate swaps is
the underlying principal amount used in determining the interest payments
exchanged over the life of the swap. The notional amount is not a measure of the
Company's exposure through its use of derivatives.
The Company may be exposed to credit loss in the event of nonperformance by
the counterparties to its interest rate swap agreements. The Company anticipates
the counterparties will be able to fully satisfy its obligations under the
agreements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1996 and 1997, the carrying value of cash equivalents,
accounts receivable, the interest rate swap and the long-term bank debt
approximated fair value. The fair value of the long-term unsecured senior notes,
calculated based on quoted market prices, was $112,750,000 and $118,800,000 at
December 31, 1996 and 1997, respectively.
5. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
USEFUL LIFE 1996 1997
------------- -------------- --------------
<S> <C> <C> <C>
Land, building and improvements............... 5-19 years $ 7,296,770 $ 10,575,573
Cellular system and equipment................. 2.5-19 years 41,498,865 57,010,440
Customer premise equipment.................... 3 years 1,690,906 665,935
Office furniture and equipment................ 3-10 years 4,341,459 9,257,464
Cell site construction in progress............ 1,076,817 1,522,275
-------------- --------------
55,904,817 79,031,687
Accumulated depreciation...................... (11,945,848) (26,024,672)
-------------- --------------
$ 43,958,969 $ 53,007,015
-------------- --------------
-------------- --------------
</TABLE>
At December 31, 1997, the Company had purchase commitments of approximately
$9.3 million for equipment.
F-11
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
6. LONG-TERM DEBT
On September 19, 1996, the Company issued $110,000,000 11 1/2% unsecured
Senior Notes due October 1, 2006 (the Notes). The Notes pay interest
semiannually on April 1 and October 1 of each year commencing April 1, 1997. The
Notes are redeemable at the option of the Company at redemption prices
(expressed as a percentage of principal amount) ranging from 105.75% in 2001 to
100.00% in 2005 and thereafter. Among other things, the Notes contain certain
covenants which limit additional indebtedness, payment of dividends, sale of
assets or stock, changes in control and transactions with related parties. The
proceeds from the Notes were used to repay amounts borrowed under a $75 million
bank credit agreement and to finance the acquisition of Horizon described in
Note 3.
On October 9, 1996, Sygnet entered into a new financing agreement (the Bank
Credit Facility) with a commercial bank group. The Bank Credit Facility is a
senior secured reducing revolver that provides Sygnet the ability to borrow up
to $300.0 million through June 30, 1999. Mandatory reductions in the revolver
occur quarterly thereafter through June 30, 2005, when the Bank Credit Facility
terminates. The Bank Credit Facility is secured by certain assets and the stock
of Sygnet. The Bank Credit Facility provides for various borrowing rate options
based on either a fixed spread over the London Interbank Offered Rate (LIBOR) or
the prime rate. Interest payments are made quarterly. As of December 31, 1997,
$195.5 million was outstanding under the Bank Credit Facility.
Among other things, the Bank Credit Facility contains financial covenants
which require the maintenance of debt service ratios and the hedging of interest
rate risk and limit distributions to shareholders and sales of assets. In
connection with these covenants, the Company has a three year interest rate swap
with a total underlying notional amount of $80 million. The swap agreements
converted the interest rate on $80 million notional amount of the credit
facility from a variable rate based upon a three month LIBOR (5.81% at December
31, 1997) to fixed rates ranging from 5.79% to 6.03%. Amounts paid or received
under these agreements are recognized as adjustments to interest expense.
There are no future minimum payments based upon the borrowing levels at
December 31, 1997 for the next five years.
Interest paid was $2,202,345, 4,691,776 and $30,076,031 in 1995, 1996 and
1997 respectively.
7. LEASES
The Company has entered into various operating leases for land and office
facilities. Leases for tower sites provide for periodic extensions of lease
periods with future lease payments indexed to the consumer price index.
F-12
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
7. LEASES (CONTINUED)
Minimum future rental payments under operating leases having remaining terms
in excess of one year as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998........................................... $1,777,262
1999........................................... 1,445,209
2000........................................... 1,182,204
2001........................................... 817,668
2002........................................... 505,431
Thereafter..................................... 6,657,092
----------
Total.......................................... $12,384,866
----------
----------
</TABLE>
Rent expense was approximately $460,800, $906,042 and $2,077,644 in 1995,
1996 and 1997, respectively.
8. RETIREMENT PLAN
The Company sponsors a 401(k) retirement and profit sharing plan which
covers substantially all its employees. Eligible employees can contribute from
1% to 15% of their compensation. The Company, at its discretion, may match a
portion of the employee's contribution. The Company may also, at its discretion,
make additional profit sharing contributions to the plan. Total pension expense
was $114,000, $181,000 and $293,000 in 1995, 1996 and 1997, respectively.
9. REDEEMABLE PREFERRED STOCK AND WARRANTS
On April 3, 1997, 100,000 shares of Series A Senior Cumulative Nonvoting
Preferred Stock (Preferred Stock) were redeemed by the Company at a cost of
$10,000,000 which was funded by the Bank Credit Facility. On June 20, 1997, the
remaining 118,394.51 shares of Preferred Stock were redeemed by the Company at a
cost of $11,839,451. This redemption was funded by the Common Stock Sale
described in Note 10.
The Preferred Stock had a redemption value of $100 per share and was
recorded at fair value on the date of issuance less issuance costs. Dividends
were cumulative from the date of issuance, accrued quarterly in arrears and were
payable in shares of Preferred Stock. The dividend rates increased annually from
15% in 1997 to 21% in 2000 and thereafter. As of December 31, 1996, the Company
accrued stock dividends in the amount of $690,411 (which represented 6,904
shares). The Preferred Stock included the potential issuance of warrants to
purchase shares of the Company's Class A Common Stock. For financial reporting
purposes, the estimated fair value of the warrants was included with the
Preferred Stock in the accompanying balance sheet and the excess of the
redemption value of the Preferred Stock over the carrying value was accreted by
periodic charges to additional paid-in capital over the life of the issue. No
warrants were issued.
The Company has authorized 5 million shares of Nonvoting Preferred Stock,
par value $.01 per share, of which 500,000 are designated as Series A Senior
Cumulative Nonvoting Preferred Stock.
F-13
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
9. REDEEMABLE PREFERRED STOCK AND WARRANTS (CONTINUED)
The Company has also authorized 10 million shares of Voting Preferred Stock,
par value $.01 per share, none of which are issued as of December 31, 1997.
10. SHAREHOLDERS' EQUITY
On June 20, 1997, the Company issued and sold 3,000,000 shares of Class A
Common Stock, $.01 par value, to Boston Ventures Limited Partnership V (Boston
Ventures) at a price of $15 per share (Common Stock Sales). The proceeds of
$43.6 million, net of issuance fees of $1.4 million, were used to redeem the
remaining outstanding Preferred Stock as described in Note 9, and to reduce
amounts outstanding under the Bank Credit Facility. As a condition of the Common
Stock Sales, Boston Ventures appointed two representatives on the Company's
eleven member board of directors.
In August 1997, Boston Ventures purchased 1,000,000 shares of Class B Common
Stock from shareholders pursuant to a tender offer which upon purchase based on
the requirements of the corporate restructuring described in Note 1, became
Class A Common Stock.
On August 28, 1996, the Company approved a plan to recapitalize the Company
whereby the Sygnet common stock Type A (205,698 shares) and Type B (1,028,428
shares) were converted into 6,170,630 shares of Sygnet Wireless, Inc. Class B
common stock in a 5 for 1 split, effective on September 20, 1996. These shares
are entitled to ten votes per share.
On January 5, 1995, Sygnet repurchased 8,024 Type A shares for $39.00 per
share and 40,173 Type B shares for $35.00 per share from a shareholder for
approximately $1,719,000. These shares were accounted for at cost and held as
treasury stock until August 28, 1996 when they were retired.
Under the most restrictive of the covenants discussed in Note 6, the Company
could not declare any additional dividends on its common stock at December 31,
1997.
On December 29, 1994, the Company received a promissory note from an
officer/shareholder for $249,952 for the purchase of common shares from a
shareholder. The note requires annual payment of interest at 8.23% with
principal repayment commencing on December 31, 1998 through December 31, 2001.
11. INCOME TAXES
On August 31, 1996, Sygnet and Wilcom terminated their status as Subchapter
S Corporations. As a result of this termination, application of the provisions
of Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES, requires deferred income taxes to be provided for differences in the
basis for tax purposes and for financial accounting purposes of recorded assets
and liabilities. As a result of the termination of their Subchapter S
Corporation status, Sygnet and Wilcom contributed their undistributed earnings
to additional paid-in capital. At December 31, 1997, the Company has net
operating loss carryforwards of $28.7 million that expire in 2011 and 2012. For
financial reporting purposes, a valuation allowance of $7,747,300 has been
recognized to offset the net deferred tax assets which primarily relate to the
net operating loss carryforward.
F-14
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
11. INCOME TAXES (CONTINUED)
Amounts for deferred tax assets and liabilities at December 31, 1996 and
1997 are as follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................. $ 787,200 $ --
Amortization.................................................. 1,271,800 3,593,000
------------- -------------
Total deferred tax liabilities.................................. 2,059,000 3,593,000
Deferred tax assets:
AMT credit carryforward....................................... 63,400 63,400
Allowance for doubtful accounts............................... 397,400 275,300
Depreciation.................................................. 958,400
Net operating loss carryforward............................... 2,550,000 9,756,800
Other......................................................... 201,700 390,400
------------- -------------
3,212,500 11,444,300
Valuation allowance............................................. (1,153,500) (7,851,300)
------------- -------------
Total deferred tax assets....................................... 2,059,000 3,593,000
------------- -------------
Net deferred tax assets......................................... $ -- $ --
------------- -------------
------------- -------------
</TABLE>
The components of the income tax provision (benefit) in the consolidated
statements of operations for the year ended December 31, 1996 and 1997 are as
follows:
<TABLE>
<CAPTION>
1996 1997
------------- -------------
<S> <C> <C>
Cumulative effect of conversion from S to C corporation
status........................................................ $ 745,000 $ --
Deferred income tax (benefit)................................... (1,898,500) (6,697,800)
Valuation allowance............................................. 1,153,500 6,697,800
------------- -------------
Total provision for income tax (benefit)........................ $ -- $ --
------------- -------------
------------- -------------
</TABLE>
12. STOCK OPTION PLAN
The Company has stock option plans that provide for the purchase of Class A
common stock by employees and directors of the Company. Under the stock option
plans the Company is authorized to issue 1,250,000 options for the purchase of
shares of Class A common stock (1,000,000 for employees and 250,000 for
non-employee directors). These options vest over a period ranging from grant
date to five years, are exercisable based upon the terms of the grants and
expire at the end of ten years. The Company applies APBO No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES and related Interpretations in accounting for the
plan, which requires that for certain options granted, the Company recognizes as
compensation expense the excess of the deemed fair value for accounting purposes
of the common stock over the exercise price of the options. For the majority of
options, no compensation cost has been recognized. Had compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION, the Company's net loss and net loss per share would not have been
materially different from the amounts reported.
F-15
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
12. STOCK OPTION PLAN (CONTINUED)
For pro forma calculations the fair value of each option is estimated on the
date of grant using the Minimum Value option-pricing model with the following
weighted-average assumptions used for grants in both 1996 and 1997: risk-free
interest rates ranging from 5.9% to 6.9% and average expected lives ranging from
5.25 to 7.5 years for issued options.
A summary of the status of the company's stock option plan as of December
31, 1996 and 1997 and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
1996 1997
----------------------------- -----------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
---------- ----------------- ---------- -----------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year........... -- $ -- 533,200 $ 10.00
Granted.................................... 533,200 10.00 183,000 10.31
Exercised.................................. -- -- -- --
Canceled................................... -- -- --
---------- ------ ---------- ------
Outstanding at year end.................... 533,200 10.00 716,200 $ 10.08
---------- ------ ---------- ------
---------- ------ ---------- ------
Options exercisable at year end............ -- 651,200
Weighted-average fair value of options
granted during the year.................. $ -- $ 7.80
Weighted-average remaining contractual
life..................................... 9.68 8.87
</TABLE>
At December 31, 1997, there were 533,800 options available for future grant.
F-16
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
1997 1998
-------------- --------------
(NOTE) (UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents...................................................... $ 860,086 $ 467,124
Accounts receivable, less allowance for doubtful accounts of $565,862 at
September 30, 1998 and $809,800 at December 31, 1997......................... 10,711,627 13,506,769
Inventory...................................................................... 1,867,445 1,539,169
Prepaid expenses............................................................... 309,460 929,915
-------------- --------------
Total current assets......................................................... 13,748,618 16,442,977
Other assets:
Cellular licenses--net......................................................... 245,866,235 241,062,311
Customer lists--net............................................................ 19,382,087 15,527,090
Deferred financing costs--net.................................................. 8,982,430 8,126,156
-------------- --------------
Total other assets........................................................... 274,230,752 264,715,557
Property, plant and equipment--net............................................... 53,007,015 52,137,706
-------------- --------------
Total assets................................................................. $ 340,986,385 $ 333,296,240
-------------- --------------
-------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable............................................................... $ 3,264,206 $ 1,807,017
Deferred revenue............................................................... 2,058,066 2,381,739
Accrued expenses and other liabilities......................................... 4,196,230 4,591,172
Interest payable............................................................... 6,749,755 9,533,632
-------------- --------------
Total current liabilities.................................................... 16,268,257 18,313,560
Long-term debt................................................................... 305,500,000 302,644,000
Shareholders' equity:
Common shares, $.01 par, Class A, 1 vote per share, 60,000,000 shares
authorized, 4,734,091 shares issued and outstanding as of September 30, 1998;
4,010,653 shares issued and outstanding as of December 31, 1997.............. 40,107 47,341
Common shares, $.01 par, Class B, 10 votes per share; 10,000,000 shares
authorized, 4,436,539 shares issued and outstanding as of September 30, 1998;
5,159,977 shares issued and outstanding as of December 31, 1997.............. 51,599 44,365
Additional paid-in capital....................................................... 47,598,498 47,598,498
Retained deficit................................................................. (28,222,124) (35,101,572)
Note receivable from officer/shareholder......................................... (249,952) (249,952)
-------------- --------------
Total shareholders' equity................................................... 19,218,128 12,338,680
-------------- --------------
Total liabilities and shareholders' equity................................... $ 340,986,385 $ 333,296,240
-------------- --------------
-------------- --------------
</TABLE>
NOTE: THE BALANCE SHEET AT DECEMBER 31, 1997 HAS BEEN DERIVED FROM THE AUDITED
CONSOLIDATED FINANCIAL STATEMENTS AT THAT DATE BUT DOES NOT INCLUDE ALL OF THE
INFORMATION AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
FOR COMPLETE FINANCIAL STATEMENTS.
F-17
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
Revenue:
Subscriber revenue.............................................................. $ 38,531,124 $ 46,738,516
Roamer revenue.................................................................. 19,868,262 24,752,828
Equipment sales................................................................. 3,050,594 4,252,652
Other revenue................................................................... 1,307,703 1,190,063
-------------- --------------
Total revenue..................................................................... 62,757,683 76,934,059
Costs and expenses:
Cost of services................................................................ 7,175,048 9,004,943
Cost of equipment sales......................................................... 6,806,047 7,789,947
General and administrative...................................................... 11,666,527 14,664,517
Selling and marketing........................................................... 7,465,863 9,056,770
Depreciation and amortization................................................... 21,142,930 21,343,437
-------------- --------------
Total costs and expenses.......................................................... 54,256,415 61,859,614
-------------- --------------
Income from operations............................................................ 8,501,268 15,074,445
Other:
Interest expense, net........................................................... 22,558,545 21,612,673
Other........................................................................... (6,174) 341,220
-------------- --------------
Net income (loss)................................................................. $ (14,051,103) $ (6,879,448)
-------------- --------------
-------------- --------------
Earnings per share information:
Net income (loss)............................................................... $ (14,051,103) $ (6,879,448)
Preferred stock dividend and accretion.......................................... (2,121,472) --
-------------- --------------
Net income (loss) applicable to common shareholders............................. $ (16,172,575) $ (6,879,448)
-------------- --------------
-------------- --------------
Net income (loss) per share applicable to common shareholders................... $ (2.21) $ (.75)
-------------- --------------
-------------- --------------
Common shares outstanding......................................................... 7,302,498 9,170,630
-------------- --------------
-------------- --------------
</TABLE>
F-18
<PAGE>
SYGNET WIRELESS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
30,
------------------------------
1997 1998
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.......................................................................... $ (14,051,103) $ (6,879,448)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation.................................................................... 11,614,565 11,828,239
Amortization.................................................................... 9,528,365 9,515,198
Loss (gain) on disposal of assets............................................... (14,358) 109,104
Changes in operating assets and liabilities:
Accounts receivable........................................................... (2,269,177) (2,795,142)
Inventory..................................................................... 413,076 328,276
Prepaid and deferred expenses................................................. 188,487 (620,455)
Accounts payable and accrued expenses......................................... 732,773 (738,574)
Accrued interest payable...................................................... 982,713 2,783,877
-------------- --------------
Net cash provided by operating activities......................................... 7,125,341 13,531,075
INVESTING ACTIVITIES
Business acquisition.............................................................. (599,442) --
Purchases of property and equipment............................................... (16,979,123) (11,468,537)
Proceeds from sale of assets...................................................... 20,995 400,500
-------------- --------------
Net cash used in investing activities............................................. (17,557,570) (11,068,037)
FINANCING ACTIVITIES
Proceeds from long-term debt...................................................... 23,500,000 16,894,000
Principal payments on long-term debt.............................................. (35,250,000) (19,750,000)
Increase in financing costs....................................................... (308,666) --
Redemption of preferred stock..................................................... (21,839,451) --
Net proceeds from sale of common stock............................................ 43,875,000 --
-------------- --------------
Net cash (used in) provided by financing activities............................... 9,976,883 (2,856,000)
Decrease in cash and cash equivalents............................................. (455,346) (392,962)
Cash and cash equivalents at beginning of period.................................. 2,257,748 860,086
-------------- --------------
Cash and cash equivalents at end of period........................................ $ 1,802,402 $ 467,124
-------------- --------------
-------------- --------------
</TABLE>
F-19
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
These financial statements include the consolidated accounts of Sygnet
Wireless, Inc. (the "Company") and its wholly-owned subsidiary Sygnet
Communications, Inc. ("Sygnet"). The Company owns and operates cellular
telephone systems serving one large cluster with an approximate population of
2.4 million in Northeastern Ohio, Western Pennsylvania and Western New York.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the nine-month period ended September 30,
1998 are not necessarily indicative of the results that may be expected for the
year ended December 31, 1998. For further information, refer to the consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K for the fiscal year ended December 31, 1997 (File No. 333-10161)
filed with the Securities and Exchange Commission.
2. AGREEMENT AND PLAN OF MERGER
On July 28, 1998, the Company entered into an Agreement and Plan of Merger
("Merger") with a subsidiary of Dobson Communications Corporation ("Dobson")
pursuant to which Dobson will acquire all outstanding shares of common stock of
the Company for an aggregate amount of $337.5 million, or approximately $34.51
per share. The agreement is pending regulatory approval and is expected to close
in the fourth quarter of 1998.
3. LONG-TERM DEBT
The Company has $110.0 million 11 1/2% unsecured Senior Notes due October 1,
2006 (the "Notes"). The Notes pay interest semiannually on April 1 and October 1
of each year. The Notes are redeemable at the option of the Company at
redemption prices (expressed as a percentage of principal amount) ranging from
105.75% in 2001 to 100.00% in 2005 and thereafter. Among other things, the Notes
contain certain covenants which limit additional indebtedness, payment of
dividends, sale of assets or stock, changes in control and transactions with
related parties.
Sygnet has a financing agreement (the "Bank Credit Facility") with a
commercial bank group. The Bank Credit Facility is a senior secured reducing
revolver that provides Sygnet the ability to borrow up to $300.0 million through
June 30, 1999. Mandatory reductions in the revolver occur quarterly thereafter
through June 30, 2005, when the Bank Credit Facility terminates. The Bank Credit
Facility is secured by certain assets and the stock of Sygnet. The Bank Credit
Facility provides for various borrowing rate options based on either a fixed
spread over the London Interbank Offered Rate (LIBOR) or the prime rate. As of
September 30, 1998, the amount outstanding under the Bank Credit Facility is
$192.6 million.
4. REDEEMABLE PREFERRED STOCK AND WARRANTS
On April 3, 1997, 100,000 shares of Series A Senior Cumulative Nonvoting
Preferred Stock ("Preferred Stock"), were redeemed by the Company at a cost of
$10.0 million which was funded by the Bank Credit Facility. On June 20, 1997,
the remaining 118,394.51 shares of Preferred Stock were redeemed by
F-20
<PAGE>
SYGNET WIRELESS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. REDEEMABLE PREFERRED STOCK AND WARRANTS (CONTINUED)
the Company at a cost of $11,839,451. This redemption was funded by the Common
Stock Sale described in Note 5.
The Preferred Stock had a redemption value of $100 per share and was
recorded at fair value on the date of issuance less issuance costs. Dividends
were cumulative from the date of issuance, accrued quarterly in arrears and were
payable in shares of Preferred Stock. The dividend rates increased annually from
15% in 1997 to 21% in 2000 and thereafter. The Preferred Stock included the
potential issuance of warrants to purchase shares of the Company's Class A
Common Stock. For financial reporting purposes, the estimated fair value of the
warrants was included with the Preferred Stock in the accompanying balance sheet
and the excess of the redemption value of the Preferred Stock over the carrying
value was accreted by periodic charges to additional paid-in capital over the
life of the issue. No warrants were issued.
The Company has authorized 5 million shares of Nonvoting Preferred Stock,
par value $.01 per share, of which 500,000 are designated as Series A Senior
Cumulative Nonvoting Preferred Stock.
5. SHAREHOLDERS EQUITY
On June 20, 1997, the Company issued and sold 3,000,000 shares of Class A
Common Stock, $.01 par value, to Boston Ventures Limited Partnership V ("Boston
Ventures") at a price of $15 per share ("Common Stock Sale"). The proceeds of
$43.9 million, net of issuance fees, were used to redeem the remaining
outstanding Preferred Stock as described in Note 4, and to reduce amounts
outstanding under the Bank Credit Facility. As a condition of the Common Stock
Sale, Boston Ventures has two representatives on the Company's eleven member
board of directors.
In August 1997, Boston Ventures purchased 1,000,000 shares of Class B Common
Stock from shareholders pursuant to a tender offer which, upon purchase, became
Class A Common Stock.
6. COMMITMENTS AND CONTINGENCIES
In accordance with the Merger (see Note 2), the Company may be liable to pay
severance benefits and incentive compensation for an approximate amount of $1.9
million to certain employees if the Merger occurs and certain other conditions
are met before December 31, 1998.
On June 8, 1998, the Company entered into an agreement with Pinellas
Communications to purchase the license to operate a cellular telephone system in
the Rural Service Area PA-2. The purchase price is $6.0 million and the
transaction is expected to close in the fourth quarter of 1998.
F-21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Dobson/Sygnet Communications Company:
We have audited the accompanying balance sheet of Dobson/Sygnet
Communications Company (an Oklahoma corporation) as of September 30, 1998. This
financial statement is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement 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 balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Dobson/Sygnet Communications
Company as of September 30, 1998, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
December 2, 1998
F-22
<PAGE>
DOBSON/SYGNET COMMUNICATIONS COMPANY
BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
CASH................................................................. $ 100
---------
---------
STOCKHOLDER'S EQUITY
STOCKHOLDER'S EQUITY
Common stock, $1.00 par value, 500 shares authorized
and 100 shares issued and outstanding............................ $ 100
---------
---------
</TABLE>
F-23
<PAGE>
DOBSON/SYGNET COMMUNICATIONS COMPANY
NOTES TO BALANCE SHEET
SEPTEMBER 30, 1998
1. ORGANIZATION:
The Company was incorporated under the name Front Nine Holdings, Inc. as an
Oklahoma corporation on July 23, 1998. Subsequently, the Company changed its
name to Dobson/Sygnet Communications Company (the "Company") and amended its
certificate of incorporation on December 2, 1998 to reflect this change. The
Company is a wholly owned subsidiary of Dobson Communications Corporation
("Dobson Communications").
CAPITAL RESOURCES AND GROWTH
The Company's total indebtedness and debt service requirements will
substantially increase as a result of the transactions described in Note 3, and
the Company will be subject to significant financial restrictions and
limitations. If the Company is unable to borrow sufficient funds through bank
financing, capital contributions from Dobson Communications and the senior notes
described in Note 3, the Company may be unable to borrow additional funds from
other sources during such time period to fund planned capital expenditures, its
ongoing operations or other permissible uses.
The Company's ability to manage future growth will depend upon its ability
to monitor operations, control costs, maintain effective quality controls and
significantly expand the Company's internal management, technical and accounting
systems, all of which will result in higher operating expenses. Any failure to
expand these areas and to implement and improve such systems, procedures and
controls in an efficient manner at a pace consistent with the growth of the
Company's business could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's cash flows currently are entirely dependent upon Dobson
Communications and such dependency will continue at least until such time as the
Company completes the merger of Sygnet's operations into the Company.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying balance sheet includes cash
and short-term investments with original maturities of three months or less.
3. ACQUISITIONS:
On July 28, 1998, Dobson/Sygnet Operating Company ("Operating"), an
affiliate of the Company entered into a definitive agreement to acquire the
stock of Sygnet for $337.5 million. Sygnet owns and operates cellular systems in
Ohio, Pennsylvania and New York covering an estimated population base of 2.4
million people. In connection with the acquisition, Operating plans to redeem
Sygnet's senior notes ($110 million at September 30, 1998) and refinance
Sygnet's credit facility ($192.6 million at September 30, 1998) herein referred
to as the ("Refinancings"). In connection with the Sygnet acquisition, Operating
will also be required to finance the acquisition of Pennsylvania 2 RSA for $6.0
million.
In July 1998, Operating placed $25 million into escrow pending the close of
the Sygnet acquisition. The Company expects to finance the remaining purchase,
consisting of the remaining $312.5 million of stock, the Refinancings and the
Pennsylvania 2 RSA acquisition, through a combination of bank financing
described in Note 4, capital contributions from Dobson Communications and the
issuance of senior notes.
F-24
<PAGE>
DOBSON/SYGNET COMMUNICATIONS COMPANY
NOTES TO BALANCE SHEET
SEPTEMBER 30, 1998
3. ACQUISITIONS: (CONTINUED)
Upon the issuance of senior notes by the Company, it will purchase the stock of
Operating and contribute the net proceeds of the senior notes offering to
Operating. The Sygnet and Pennsylvania 2 RSA acquisitions are expected to close
in the fourth quarter of 1998 or early in 1999.
4. LONG-TERM DEBT:
In connection with the pending Sygnet acquisition, Operating received
commitments for a new $450.0 million credit facility to be secured by the assets
acquired in the Sygnet acquisition. Operating also obtained commitments for
bridge financing. Subsequent to September 30, 1998, the commitments for bridge
financing expired. In connection with the bridge financing, Operating incurred
$3.36 million in fees to obtain the bridge financing.
F-25
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Dobson/Sygnet Operating Company:
We have audited the accompanying balance sheet of Dobson/Sygnet Operating
Company (an Ohio corporation) as of September 30, 1998. This financial statement
is the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement 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 balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. 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 balance sheet referred to above presents fairly, in all
material respects, the financial position of Dobson/Sygnet Operating Company as
of September 30, 1998, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma,
December 2, 1998
F-26
<PAGE>
DOBSON/SYGNET OPERATING COMPANY
BALANCE SHEET
SEPTEMBER 30, 1998
<TABLE>
<S> <C>
ASSETS
CASH........................................................................... $ 100
----------
OTHER ASSETS:
Deposit...................................................................... 25,000,000
Deferred costs............................................................... 3,425,658
----------
Total other assets......................................................... 28,425,658
----------
Total assets............................................................... $28,425,758
----------
----------
LIABILITIES AND STOCKHOLDER'S EQUITY
Accounts payable............................................................... $3,425,658
----------
Total current liabilities.................................................. 3,425,658
PAYABLES--AFFILIATE............................................................ 25,000,000
STOCKHOLDER'S EQUITY
Common stock, $1 par value, 500 shares authorized and 100 shares issued and
outstanding................................................................ 100
----------
Total liabilities and stockholder's equity................................. $28,425,758
----------
----------
</TABLE>
F-27
<PAGE>
DOBSON/SYGNET OPERATING COMPANY
NOTES TO BALANCE SHEET
SEPTEMBER 30, 1998
1. ORGANIZATION:
The Company was incorporated under the name SWI Acquisition Corp., as an
Ohio corporation on July 23, 1998. Subsequently, the Company changed its name to
Dobson/Sygnet Operating Company and amended its certificate of incorporation on
August 25, 1998 to reflect this change. The Company is a wholly owned subsidiary
of Dobson Communications Corporation ("Dobson Communications"). The Company
currently serves as the company for the pre-acquisition activity of Sygnet
Wireless, Inc. ("Sygnet") (See Note 3) and, upon consummation of the Sygnet
acquisition, will merge with Sygnet.
CAPITAL RESOURCES AND GROWTH
The Company's total indebtedness and debt service requirements will
substantially increase as a result of the transactions described in Note 3, and
the Company will be subject to significant financial restrictions and
limitations. If the Company is unable to raise sufficient funds through the bank
financing, capital contributions from Dobson Communications and the senior notes
issued by Dobson/Sygnet Communications Company described in Note 3, the Company
may be unable to borrow additional funds from other sources in the future to
fund planned capital expenditures, its ongoing operations or other permissible
uses.
The Company's ability to manage future growth will depend upon its ability
to monitor operations, control costs, maintain effective quality controls and
significantly expand the Company's internal management, technical and accounting
systems, all of which will result in higher operating expenses. Any failure to
expand these areas and to implement and improve such systems, procedures and
controls in an efficient manner at a pace consistent with the growth of the
Company's business could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company's cash flows currently is entirely dependent upon Dobson
Communications and such dependency will continue at least until such time as the
Company completes the merger of Sygnet's operations into the Company.
2. SIGNIFICANT ACCOUNTING POLICIES:
CASH AND CASH EQUIVALENTS
Cash and cash equivalents on the accompanying combined balance sheet
includes cash and short-term investments with original maturities of three
months or less.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company assesses potential impairments of long-lived assets and certain
identifiable intangibles when there is evidence that events or changes in
circumstances indicate that an asset's carrying value may not be recoverable. An
impairment loss is recognized when the sum of the expected future net cash flows
is less than the carrying amount of the asset. No such losses have been
identified by the Company.
DEFERRED COSTS
Deferred costs consist primarily of fees incurred to secure long-term debt
and acquisition costs. Deferred financing costs will be amortized on a
straight-line basis over the term of the debt. Acquisition
F-28
<PAGE>
DOBSON/SYGNET OPERATING COMPANY
NOTES TO BALANCE SHEET
SEPTEMBER 30, 1998
2. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
costs will be allocated to the appropriate balance sheet accounts in the Sygnet
purchase price allocation and will be amortized accordingly.
3. ACQUISITIONS:
On July 28, 1998, the Company entered into a definitive agreement to acquire
the stock of Sygnet for $337.5 million. Sygnet owns and operates cellular
systems in Ohio, Pennsylvania and New York covering an estimated population base
of 2.4 million people. In connection with the acquisition, the Company plans to
redeem Sygnet's senior notes ($110.0 million at September 30, 1998) and
refinance Sygnet's credit facility ($192.6 million at September 30, 1998) herein
referred to as the ("Refinancings"). In connection with the Sygnet acquisition,
the Company will also be required to finance the acquisition of Pennsylvania 2
RSA for $6.0 million.
In July 1998, the Company placed $25.0 million into escrow pending the close
of the Sygnet acquisition. The Company expects to finance the remaining
purchase, consisting of the remaining $312.5 million of stock, the Refinancings
and the Pennsylvania 2 RSA acquisition, through a combination of bank financing
described in Note 4, capital contributions from Dobson Communications and the
issuance of senior notes by Communications. The Sygnet and Pennsylvania 2 RSA
acquisitions are expected to close in the fourth quarter of 1998 or early in
1999.
4. LONG-TERM DEBT:
In connection with the pending Sygnet acquisition, the Company received
commitments for a new $450.0 million credit facility to be secured by the assets
acquired in the Sygnet acquisition. As part of the Sygnet acquisition, the
Company also obtained commitments for bridge financing. Subsequent to September
30, 1998, the commitments for bridge financing expired. In connection with the
bridge financing, the Company incurred $3.36 million in fees to obtain the
bridge financing. These fees are reflected in deferred cost on the accompanying
balance sheet.
5. RELATED PARTY TRANSACTIONS
The Company had payables to Dobson Communications and certain of its
subsidiaries totaling $25.0 million at September 30, 1998 representing advances
related to the Sygnet acquisition described in Note 3. The Company expects to
repay these advances in connection with consummation of the acquisition with
proceeds from long-term debt. Accordingly, the payables to these affiliates have
been reflected as a non-current liability in the accompanying balance sheet.
F-29
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Oklahoma General Corporation Act under which the Company
is incorporated, Article X of the Company's Amended Certificate of Incorporation
provides for indemnification of each of the Company's officers and directors
against (a) expenses, including attorney's fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by him in connection with
any action, suit or proceeding brought by reason of his being or having been a
director, officer, employee or agent of the Company, or of any other
corporation, partnership, joint venture, or other enterprise at the request of
the Company, other than an action by or in the right of the Company, provided
that he acted in good faith and in a manner he reasonably believed to be in the
best interest of the Company, and with respect to any criminal action, he had no
reasonable cause to believe that his conduct was unlawful and (b) expenses
(including attorney's fees) actually and reasonably incurred by him in
connection with the defense or settlement of any action or suit by or in the
right of the Company brought by reason of his being or having been a director,
officer, employee or agent of the Company, or any other corporation,
partnership, joint venture, or other enterprise at the request of the Company,
provided that he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the Company; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable to the Company, unless and
only to the extent that the court in which such action or suit was decided has
determined that the person is fairly and reasonably entitled to indemnification
for such expenses which the court shall deem proper. The Company's bylaws
provide for similar indemnification. These provisions may be sufficiently broad
to indemnify such persons for liabilities arising under the Securities Act of
1933, as amended.
The Company's directors and officers are also insured against claims arising
out of the performance of their duties in such capacities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated July 28, 1998 between Sygnet Wireless, Inc.
and Dobson/Sygnet Operating Company (formerly known as Front Nine Operating
Company) (without schedules). (1) [2.0]
2.2 Purchase Agreement dated July 8, 1998 by and between Sygnet Communications,
Inc. and Pinellas Communications. (2) [10.32]
2.3 Asset Acquisition Agreement dated July 11, 1996 among Horizon Cellular
Telephone Company of Chantaugua, L.P., Horizon Cellular Telephone Company of
Crawford, L.P. and Sygnet Communications, Inc. (3) [10.17]
2.4 Agreement for Purchase of Partnership Interest dated September 15, 1995 by and
between Sygnet Communications, Inc. and Erie Cellular Systems, Inc.
(formerly McCaw Communications of Erie, Inc.). (3) [10.18]
2.5 Agreement to Furnish Schedules. (4)
3.1 Registrant's Amended Certificate of Incorporation. (4)
3.2 Registrant's Amended Bylaws. (4)
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
4.1 Indenture dated December 23, 1998 between Registrant, as Issuer, and United
States Trust Company of New York, as Trustee. (1) [4.1]
4.2 Form of Note under Indenture (contained in Exhibit 4.1 hereto). (1) [4.1]
4.3 Pledge Agreement dated December 23, 1998 between Registrant, as Pledgor, and
NationsBanc Montgomery Securities LLC, Lehman Brothers, Inc., First Union
Capital Markets, a division of Wheat First Securities, Inc. and TD
Securities (USA) Inc., as Initial Purchasers, and United States Trust
Company of New York, as Trustee. (4)
4.4 Registration Rights Agreement dated December 23, 1998 between Registrant and
NationsBanc Montgomery Securities LLC, Lehman Brothers Inc., First Union
Capital Markets, a division of Wheat First Securities, Inc. and TD
Securities (USA) Inc. (4)
4.5 Credit Agreement among the Agents and Lenders named therein and Dobson/Sygnet
Operating Company, dated as of December 23, 1998. (4)
5 Opinion of McAfee & Taft A Professional Corporation. (5)
10.1 Asset Purchase Agreement dated December 23, 1998 by and between Sygnet
Communications, Inc. and Dobson Tower Company. (4)
10.2 Master Site License Agreement dated December 23, 1998 by and between Sygnet
Communications, Inc. and Dobson Tower Company. (4)
10.3.1 Cellular One License Agreement effective December 1, 1996, between Cellular
One Group and Erie Cellular Telephone Company. (5)
10.3.2 Cellular One License Agreement, effective as of December 17, 1996, between
Cellular One Group and Sygnet Communications, Inc. (PA-1). (5)
10.3.3 Cellular One License Agreement, effective as of November 7, 1996, between
Cellular One Group and Sygnet Communications, Inc. (PA-6). (5)
10.3.4 Cellular One License Agreement, effective as of January 30, 1997, between
Cellular One Group and Sygnet Communications, Inc. (PA-7). (5)
10.3.5 Cellular One License Agreement, effective as of January 1, 1997, between
Cellular One Group and Sygnet Communications, Inc. (NY-3). (5)
10.4 Intercarrier Services Agreement dated April 25, 1995 between Youngstown
Cellular Telephone Company and EDS Personal Communications Corporation, with
Amendment dated April 10, 1996. (3) [10.13]
10.4.1 Amendment No. 2 dated August 1, 1997 to Intercarrier Services Agreement dated
April 25, 1995 between Youngstown Cellular Telephone Company and EDS
Personal Communications Corporation. (4)
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
10.5 Northern Telecom, Inc. DMS-MTX Cellular Supply Agreement dated June 1, 1996
between Youngstown Cellular Telephone Company and Northern Telecom, Inc. (3) [10.12]
10.5.1 Amendment No. 1 dated April 15, 1998 to Northern Telecom, Inc. DMS-MTX
Cellular Supply Agreement dated June 1, 1996 between Youngstown Cellular
Telephone Company and Northern Telecom, Inc. (4)
10.6* Consulting Agreement, dated December 21, 1998 between Dobson Communications
Corporation and Albert H. Pharis, Jr. (4)
12 Ratio of earnings to combined fixed charges and preferred stock dividends. (4)
21 Subsidiaries. (4)
23.1 Consent of McAfee & Taft A Professional Corporation will be contained in
Exhibit 5 hereto. (5) [5]
23.2 Consent of Arthur Andersen LLP (Oklahoma City -- DSCC). (5)
23.3 Consent of Ernst & Young LLP (Cleveland--Sygnet). (5)
24 Power of Attorney. (4)
27 Financial Data Schedule. (4)
99.1 Letter of Transmittal. (4)
99.2 Notice of Guarantee of Delivery. (4)
99.3 Guidelines for Certification of Taxpayer Identification Number. (4)
99.4 Company letter. (4)
99.5 Client letter. (4)
99.6 Instruction to Beneficial Holders. (4)
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
(1) Filed as an exhibit to the Current Report on Form 8-K of Dobson
Communications Corporation (333-23769) filed on January 7, 1999, as the
exhibit number indicated in brackets and incorporated by reference herein.
(2) Filed as an exhibit to the Quarterly Report of Sygnet Wireless, Inc.
(333-10161) on Form 10-Q for the quarterly period ended June 30, 1998, as
the exhibit number indicated in brackets and incorporated by reference
herein.
(3) Filed as an exhibit to the Sygnet Wireless, Inc. Registration Statement on
Form S-1 (Registration No. 333-10161), as the exhibit number indicated in
brackets and incorporated by reference herein.
(4) Previously filed as an exhibit to this Registration Statement.
(5) Filed herewith.
(b) Financial Statement Schedules
None.
II-3
<PAGE>
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at the time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registration pursuant to the provisions described under Item 20, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnifications against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this amended Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Oklahoma City,
State of Oklahoma, on the 11th day of February, 1999.
<TABLE>
<S> <C> <C>
DOBSON/SYGNET COMMUNICATIONS COMPANY
By: /s/ Everett R. Dobson*
-----------------------------------------
Everett R. Dobson
CHAIRMAN OF THE BOARD, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on the 11th day of February, 1999.
NAME TITLE
- ------------------------------ ----------------------------------------
/s/ Everett R. Dobson* Chairman of the Board, President and
- ------------------------------ Chief Executive Officer (Principal
Everett R. Dobson Executive Officer) and Director
/s/ Stephen T. Dobson* Secretary and Director
- ------------------------------
Stephen T. Dobson
/s/ Bruce R. Knooihuizen Vice President and Chief Financial
- ------------------------------ Officer (Principal Financial Officer)
Bruce R. Knooihuizen
/s/ Trent LeForce* Corporate Controller (Principal
- ------------------------------ Accounting Officer)
Trent LeForce
/s/ Russell L. Dobson* Director
- ------------------------------
Russell L. Dobson
/s/ Justin L. Jaschke* Director
- ------------------------------
Justin L. Jaschke
/s/ Albert H. Pharis, Jr.* Director
- ------------------------------
Albert H. Pharis, Jr.
/s/ Dana L. Schmaltz* Director
- ------------------------------
Dana L. Schmaltz
<TABLE>
<S> <C> <C> <C>
*By: /s/ BRUCE R.
KNOOIHUIZEN
-------------------------
Bruce R. Knooihuizen
ATTORNEY-IN-FACT
</TABLE>
II-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated July 28, 1998 between Sygnet Wireless, Inc.
and Dobson/Sygnet Operating Company (formerly known as Front Nine Operating
Company) (without schedules). (1) [2.0]
2.2 Purchase Agreement dated July 8, 1998 by and between Sygnet Communications,
Inc. and Pinellas Communications. (2) [10.32]
2.3 Asset Acquisition Agreement dated July 11, 1996 among Horizon Cellular
Telephone Company of Chantaugua, L.P., Horizon Cellular Telephone Company of
Crawford, L.P. and Sygnet Communications, Inc. (3) [10.17]
2.4 Agreement for Purchase of Partnership Interest dated September 15, 1995 by and
between Sygnet Communications, Inc. and Erie Cellular Systems, Inc.
(formerly McCaw Communications of Erie, Inc.). (3) [10.18]
2.5 Agreement to Furnish Schedules. (4)
3.1 Registrant's Amended Certificate of Incorporation. (4)
3.2 Registrant's Amended Bylaws. (4)
4.1 Indenture dated December 23, 1998 between Registrant, as Issuer, and United
States Trust Company of New York, as Trustee. (1) [4.1]
4.2 Form of Note under Indenture (contained in Exhibit 4.1 hereto). (1) [4.1]
4.3 Pledge Agreement dated December 23, 1998 between Registrant, as Pledgor, and
NationsBanc Montgomery Securities LLC, Lehman Brothers, Inc., First Union
Capital Markets, a division of Wheat First Securities, Inc. and TD
Securities (USA) Inc., as Initial Purchasers, and United States Trust
Company of New York, as Trustee. (4)
4.4 Registration Rights Agreement dated December 23, 1998 between Registrant and
NationsBanc Montgomery Securities LLC, Lehman Brothers Inc., First Union
Capital Markets, a division of Wheat First Securities, Inc. and TD
Securities (USA) Inc. (4)
4.5 Credit Agreement among the Agents and Lenders named therein and Dobson/Sygnet
Operating Company, dated as of December 23, 1998. (4)
5 Opinion of McAfee & Taft A Professional Corporation. (5)
10.1 Asset Purchase Agreement dated December 23, 1998 by and between Sygnet
Communications, Inc. and Dobson Tower Company. (4)
10.2 Master Site License Agreement dated December 23, 1998 by and between Sygnet
Communications, Inc. and Dobson Tower Company. (4)
10.3.1 Cellular One License Agreement effective December 1, 1996, between Cellular
One Group and Erie Cellular Telephone Company. (5)
10.3.2 Cellular One License Agreement, effective as of December 17, 1996, between
Cellular One Group and Sygnet Communications, Inc. (PA-1). (5)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT METHOD OF
NUMBERS DESCRIPTION FILING
- --------- ------------------------------------------------------------------------------ -------------
<C> <S> <C>
10.3.3 Cellular One License Agreement, effective as of November 7, 1996, between
Cellular One Group and Sygnet Communications, Inc. (PA-6). (5)
10.3.4 Cellular One License Agreement, effective as of January 30, 1997, between
Cellular One Group and Sygnet Communications, Inc. (PA-7). (5)
10.3.5 Cellular One License Agreement, effective as of January 1, 1997, between
Cellular One Group and Sygnet Communications, Inc. (NY-3). (5)
10.4 Intercarrier Services Agreement dated April 25, 1995 between Youngstown
Cellular Telephone Company and EDS Personal Communications Corporation, with
Amendment dated April 10, 1996. (3) [10.13]
10.4.1 Amendment No. 2 dated August 1, 1997 to Intercarrier Services Agreement dated
April 25, 1995 between Youngstown Cellular Telephone Company and EDS
Personal Communications Corporation. (4)
10.5 Northern Telecom, Inc. DMS-MTX Cellular Supply Agreement dated June 1, 1996
between Youngstown Cellular Telephone Company and Northern Telecom, Inc. (3) [10.12]
10.5.1 Amendment No. 1 dated April 15, 1998 to Northern Telecom, Inc. DMS-MTX
Cellular Supply Agreement dated June 1, 1996 between Youngstown Cellular
Telephone Company and Northern Telecom, Inc. (4)
10.6* Consulting Agreement, dated December 21, 1998 between Dobson Communications
Corporation and Albert H. Pharis, Jr. (4)
12 Ratio of earnings to combined fixed charges and preferred stock dividends. (4)
21 Subsidiaries. (4)
23.1 Consent of McAfee & Taft A Professional Corporation will be contained in
Exhibit 5 hereto. (5) [5]
23.2 Consent of Arthur Andersen LLP (Oklahoma City -- DSCC). (5)
23.3 Consent of Ernst & Young LLP (Cleveland--Sygnet). (5)
24 Power of Attorney. (4)
27 Financial Data Schedule. (4)
99.1 Letter of Transmittal. (4)
99.2 Notice of Guarantee of Delivery. (4)
99.3 Guidelines for Certification of Taxpayer Identification Number. (4)
99.4 Company letter. (4)
99.5 Client letter. (4)
99.6 Instruction to Beneficial Holders. (4)
</TABLE>
- ------------------------
* Management contract or compensatory plan or arrangement.
** To be filed by amendment.
<PAGE>
(1) Filed as an exhibit to the Current Report on Form 8-K of Dobson
Communications Corporation (333-23769) filed on January 7, 1999, as the
exhibit number indicated in brackets and incorporated by reference herein.
(2) Filed as an exhibit to the Quarterly Report of Sygnet Wireless, Inc.
(333-10161) on Form 10-Q for the quarterly period ended June 30, 1998, as
the exhibit number indicated in brackets and incorporated by reference
herein.
(3) Filed as an exhibit to the Sygnet Wireless, Inc. Registration Statement on
Form S-1 (Registration No. 333-10161), as the exhibit number indicated in
brackets and incorporated by reference herein.
(4) Previously filed as an exhibit to this Registration Statement.
(5) Filed herewith.
<PAGE>
EXHIBIT 5
[LETTERHEAD]
February 11, 1999
Dobson/Sygnet Communications Company
13439 N. Broadway Extension
Suite 200
Oklahoma City, Oklahoma 73114
Re: 12 1/4% Senior Notes due 2008
Ladies and Gentlemen:
We have acted as special counsel to Dobson/Sygnet Communications Company
(the "Company") in connection with the issuance and sale of $200,000,000
aggregate principal amount of the Company's 12 1/4% Senior Notes due 2008
(which are referred to herein as the "Old Notes") and the registration under
the Securities act of 1933 of $200,000,000 aggregate principal amount of the
Company's 12 1/4% Senior Notes due 2008 (the "New Notes"). The New Notes are to
be offered in exchange for all outstanding Old Notes (the "Exchange Offer") as
more fully set forth in the prospectus which forms are a part of the Company's
Registration Statement on Form S-4, as amended, (the "Registration Statement")
with which this opinion is being filed.
In this connection we have examined the Company's Certificate of
Incorporation and Bylaws, minutes of certain meetings of the Company's Board
of Directors and the Indenture dated as of December 23, 1998 between the
Company and United States Trust Company of New York, as Trustee, governing
the Old Notes and the New Notes, and have made such other investigations of
fact and law as we deem necessary to render the opinions set forth herein.
Based on the foregoing, we are of the opinion that the New Notes to be
exchanged for the Old Notes in the Exchange Offer, when issued in accordance
therewith, will be legally issued, fully paid and non-assessable and will be
binding obligations of the Company.
The opinion expressed herein as to the New Notes constituting binding
obligations of the Company is subject to the exceptions that (1) enforcement
may be limited by bankruptcy, insolvency (including, without limitation, all
laws relating to fraudulent transfers), reorganization, moratorium or similar
laws affecting enforcement of creditors rights generally, and (2)
<PAGE>
enforcement is subject to general principles of equity (regardless of whether
enforcement is considered a proceeding in equity or at law).
We hereby consent to the reference to our firm in the Prospectus under
the caption "Legal Matters".
Very truly yours,
/s/ McAFEE & TAFT
A Professional Corporation
-2-
<PAGE>
Exhibit 10.3.1
CELLULAR ONE LICENSE AGREEMENT
between
Cellular One Group
and
Erie Cellular Tel. Co.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
<TABLE>
<CAPTION>
SECTION TITLE PAGE NO.
- ------- ----- --------
<S> <C> <C>
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS ................... 8
II. TERM AND RENEWAL ......................................... 9
III. RIGHTS AND DUTIES OF LICENSOR ............................ 11
IV. DUTIES OF LICENSEE ....................................... 18
V. FEES AND REPORTING ....................................... 28
VI. MARKS .................................................... 33
VII. CONFIDENTIAL INFORMATION ................................. 37
VIII. ADVERTISING .............................................. 38
IX. INSURANCE ................................................ 41
X. TRANSFER OF INTEREST ..................................... 42
XI. DEFAULT AND TERMINATION .................................. 44
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION ............... 50
XIII. INDEPENDENT STATUS AND INDEMNIFICATION ................... 51
XIV. APPROVAL AND WAIVERS ..................................... 52
XV. NOTICES .................................................. 52
XVI. ENTIRE AGREEMENT ......................................... 53
XVII. SEVERABILITY AND CONSTRUCTION ............................ 53
XVIII. APPLICABLE LAW ........................................... 54
XIX. ACKNOWLEDGMENTS .......................................... 55
</TABLE>
i
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a Delaware
general partnership ("Licensor") and Erie Cellular Tel. Co., a
corporation/partnership organized under the laws of Ohio ("Licensee").
PREAMBLE
Licensor is a Delaware general partnership (the "Partnership") with its
principal place of business in Dallas, Texas. The current general partners of
the Partnership are Cellular One Marketing, Inc., a Delaware corporation,
Cellular One Development, Inc., a Delaware corporation, and Vanguard Cellular
Corp., a North Carolina corporation. Additional partners may be admitted to the
Partnership from time to time. (The Partnership partners, as they may exist from
time to time, are referred to herein as the "Partnership Partners").
The Partnership is engaged in the business of licensing and promoting
the service mark "Cellular One" and certain related trademarks, service marks
and designs.
Licensee desires to receive a license from Licensor to use the
Cellular One-Registered Trademark- mark, together with the marks designated on
Exhibit A hereto and such other marks as Licensor may hereinafter designate in
writing (collectively referred to as the "Marks") within the market(s)
described on Exhibit B (the "Licensed Territory") in accordance with the
provisions of this License Agreement.
INTRODUCTORY STATEMENT
Licensor's goal has been and continues to be the promotion of the Marks
as being synonymous, in the minds of consumers of telecommunications services,
with nationwide, dependable, high quality telecommunications services and
related services, goods and equipment (the "National Brand Goal"). Historically,
Licensor's strategy to achieve the National Brand Goal has been to license the
Marks, and predecessors of the Marks, for use by providers of Cellular
Radiotelephone Services (as defined in 47 C.F.R Section22.99) ("Cellular
Telephone Services") on the so-called "A" side in certain Federal Communications
Commission ("FCC") designated markets. The competition to licensees of the Marks
has historically come primarily from "B" side providers of Cellular Telephone
Services (who constitute the other providers of Cellular Telephone Services
under the duopoly created by the FCC for such service). Given this duopoly,
Licensor believes that its strategy for achieving the National Brand Goal has
been effective to date. However, the telecommunications landscape has changed
dramatically in
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<PAGE>
recent periods and Licensor believes that its strategy may need to be modified
or entirely new strategies adopted to achieve and maintain the National Brand
Goal.
Licensor believes that these modified or new strategies will be
essential if its licensees are to enjoy the competitive benefits afforded by a
widely recognized national brand as other powerful national brand competitors,
which have not historically competed with licensees of the Marks, enter their
markets directly. Licensor believes that the emergence of these major new
competitors, with powerful national brands, will be accompanied by technological
changes that will render the distinction between Cellular Telephone Services and
other telecommunications services increasingly less important to consumers.
Licensor expects that consumers will begin to focus on applications, utilities,
brand names and distribution channels and will demand that a provider of
telecommunications services, either directly or through alliances, offer a full
menu of communications, such as long distance, cellular (or other wireless)
service, internet access, satellite television and local service, all under one
name and perhaps billed by a single source. Licensor believes that its current
and future strategies must be sufficiently flexible to permit it to respond to
these expected changes in the industry and to provide its licensees with a
national brand that can be used in a manner that will allow those licensees to
meet consumer expectations.
Licensor plans to continue, as its primary strategy, granting licenses
to "A" side Cellular Telephone Services providers (both in newly licensed
markets or in connection with the renewal of currently outstanding Cellular One
"A" side licenses), and to begin attempting to grant licenses to "B" side
providers of Cellular Telephone Services or to resellers of Cellular Telephone
Services in FCC licensed markets not served by an "A" side Cellular One
licensee. Licensor may also consider, however, licensing a provider of Alternate
Wireless Services (as defined below), such as a personal communications service
provider, the right to utilize the Marks in a market or markets where no
Cellular Telephone Services provider utilizes the Marks to promote such
services.
Licensor has, from time to time, granted licensees of the Marks the
right to use one or more of such Marks in connection with products or services
other than those constituting Cellular Telephone Services. Among other things,
Licensor has permitted licensees of the Marks to incorporate one or more of the
Marks onto cellular telephone equipment or to utilize one or more of the Marks
in connection with the nationwide delivery of calls to cellular telephones.
Licensor has also granted licensees the right to continue to use or to begin
using one or more of the Marks in connection with some of the products and
services (the "Additional Products" and "Additional Services") described on
Exhibit D hereto. Licensor anticipates that consumers of wireless
telecommunications services may come to expect that high quality offerings of
services such as Cellular Telephone Services or other Primary Services (as
defined below) will include uniform functionality and service features and
bundles of Additional Products, Additional Services and Cellular Telephone
Services or other Primary Services. As such demand develops, Licensor expects to
designate standards for the offering and delivery of the Cellular Telephone
Services or other Primary Services and related Additional Products and
Additional Services, and to identify one or more Additional Products or
Additional Services as
2
<PAGE>
"Core Products," the offering of which will be subject to the provisions of this
License Agreement, as described in Section III.I. hereof.
As part of its plan to achieve and maintain the National Brand Goal,
Licensor will from time to time establish standards pursuant to Section III.B.
hereof, defining minimum acceptable operating and other criteria for offerings
by Licensee of the Cellular Telephone Services or other Primary Services and
related Additional Services and Additional Products. In light of market
conditions, as they change from time to time, Licensor may designate separate
standards for products offered under a particular Mark. Licensor has provided,
on Exhibit E to this License Agreement, a description of the technical standards
and service standards (collectively, the "Quality Standards") which will
initially be applicable to the Cellular Telephone Services or other primary
Services, Core Products, Additional Services and Additional Products displaying
or sold under the various Marks.
Licensor may, in the future, designate certain of the Additional
Products or Additional Services as Core Products where and when it determines
that consumers have come to expect that such products or services will be
offered in conjunction with any high quality offering of Cellular Telephone
Services or other Primary Services, and in order to achieve and maintain the
National Brand Goal. The existing required Core Products are nationwide call
delivery and roaming capability. Additional Core Products may include, by way of
example only, such products or services as long distance, voice messaging, local
exchange service, dispatch service and paging service, which offer consumers
nationwide consistency of operation or other benefits. Unless it elects not to
do so, Licensee will be obligated to offer the Core Products under the specified
Marks throughout the Licensed Territory in connection with its delivery of
Cellular Telephone Services or other Primary Services. If Licensee is unable or
elects not to so offer one or more Core Products in connection with Cellular
Telephone Services or other Primary Services, Licensor, subject to Section
III.I. of this License Agreement, may amend the License Agreement to terminate
Licensee's rights to utilize the Marks to promote the Core Products not then
being offered or, with respect to the existing Core Products of nationwide call
delivery and roaming capability, may terminate this License Agreement.
The development of the wireless telecommunications industry and the
regulatory patterns relating to that industry have resulted in overlaps or
conflicts between licensees of the Marks with regard to certain promotional
activities. In order to permit licensees of the Marks to make full use of such
Marks in their promotional and other activities and in order to reduce conflicts
between or the expense of resolving conflicts between such licensees, this
License Agreement permits licensees of the Marks to make certain incidental use
of the Marks outside of their respective licensed territories while permitting
Licensor to impose reasonably necessary restrictions, including requiring the
use of tag lines or other identifying mechanisms, where necessary to maintain
the integrity of the licensed territories and to avoid customer confusion
regarding the providers of Cellular Telephone Services or other Primary Services
therein. In addition, because the markets for wireless telecommunications
services vary from geographic area to geographic area for economic, demographic,
topographic, legal and other reasons, and because Licensor expects that certain
markets may develop at different rates from others, this
3
<PAGE>
License Agreement permits Licensor to vary definitions of Cellular Telephone
Services or other Primary Services, Core Products, Additional Services and
Additional Products and to vary the Quality Standards and certain of the fees
payable hereunder in order to achieve or maintain progress toward the National
Brand Goal.
The foregoing is intended as an explanation of Licensor's goals and
planning, and shall not be deemed to affect the meaning or construction of any
of the following provisions. In the event of any conflict between the foregoing
and the following provisions, the following provisions shall prevail.
DEFINED TERMS
As used in this License Agreement, the capitalized terms set forth
below shall have the following meanings:
"1-800-CELL ONE Mark" shall mean the service mark denoted as such on
Exhibit A hereto.
"800 Number Supplement" shall have the meaning set forth in Section
IV.J.1.(b) of this License Agreement.
"A" Side" shall mean the Block A (nonwireline) cellular frequencies
as designated by the FCC.
"Additional Fees" shall mean any fees determined in accordance with
Section V.G. of this License Agreement.
"Additional Products" shall mean the products described as "Additional
Products" on Exhibit D hereto.
"Additional Services" shall mean the services described as "Additional
Services" on Exhibit D hereto.
"Advisory Council" shall have the meaning set forth in Section III.D.
of this License Agreement.
"Affiliate" shall have the meaning set forth in Section X.C. of this
License Agreement.
"Alternate Wireless Services" shall mean any telecommunications service
offering simultaneous, two-way wireless transmission and receipt of voice or
data, other than Cellular Telephone Services.
"Annual Administrative Fee" shall mean the fee determined in accordance
with Section V.D. of this License Agreement.
4
<PAGE>
"Annual Advertising Fee" shall mean the fee determined in accordance
with Section V.C. of this License Agreement.
"Annual License Fee" shall mean the fee determined in accordance with
Section V.B. of this License Agreement.
"Application Fee" shall mean the fee determined in accordance with
Section V.A. of this License Agreement.
"B" Side" shall mean the Block B (wireline) cellular frequencies as
designated by the FCC.
"Cellular One Mark" shall mean the trademark or service mark "Cellular
One" denoted as such on Exhibit A hereto.
"Cellular One Promotional Fund" shall have the meaning set forth in
Sections III.E. and VIII.C. of this License Agreement.
"Cellular Telephone Services" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
"Certificates of Insurance" shall mean certificates designating
insurance coverages required to be delivered to Licensor pursuant to Section
IX.C. of this License Agreement.
"C.F.R." shall mean the Code of Federal Regulations, as may be amended
from time to time.
"Change of Control" shall have the meaning set forth in Section X.D. of
this License Agreement.
"Confidential Information" shall have the meaning set forth in Section
VII.A. of this License Agreement.
"Consumer Service Number" shall have the meaning set forth in Section
IV.J. of this License Agreement.
"Consumer Service Number Fee" shall mean the fee determined in
accordance with Section V.F. of this License Agreement.
"Core Products" shall mean those Additional Products and Additional
Services designated as "Core Products" on Exhibit D to this License Agreement,
as amended from time to time.
5
<PAGE>
"CTIA" shall mean the Cellular Telecommunications Industry Association,
or any successor thereto recognized by Licensor as such.
"Effective Date" shall mean the date shown adjacent to Licensor's
signature on this License Agreement.
"FCC" shall have the meaning set forth in the Introductory Statement to
this License Agreement.
"Fund" shall have the meaning set forth in Section VIII.C. of this
License Agreement.
"Graphic Standards Manual" shall have the meaning set forth in Section
III.A. of this License Agreement.
"Guide to Quality Operations" shall mean the guide and other materials
provided by Licensor to Licensee pursuant to Section III.B. hereto.
"Incidental Use" shall have the meaning set forth in Section VI.C. of
this License Agreement.
"initial Year" shall have the meaning set forth in Section II.A.2. of
this License Agreement.
"Licensed Territory" shall mean the market(s) described on Exhibit B,
as amended from time to time pursuant to the provisions of this License
Agreement.
"Licensee" shall have the meaning set forth in the first paragraph of
this License Agreement.
"Licensor" shall mean Cellular One Group, a Delaware general
partnership, and its permitted successors and assigns under this License
Agreement.
"Long Distance Carrier" shall have the meaning set forth in Section
IV.J.1.(a) of this License Agreement.
"MSA" shall mean the cellular Metropolitan Statistical Areas as
referred to in 47 C.F.R. Section 22.909.
"Marks" shall have the meaning set forth in the Preamble to this
License Agreement.
"National Brand Goal" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
6
<PAGE>
"Other 800 Programs" shall have the meaning set forth in Section V.F.
of this License Agreement.
"Partnership" shall have the meaning set forth in the Preamble to this
License Agreement.
"Partnership Partners" shall have the meaning set forth in the Preamble
to this License Agreement.
"Permits" shall have the meaning set forth in Section IV.B. of this
License Agreement.
"Personal Communication Services" shall have the meaning set forth in
Exhibit D hereto.
"Potential Customer Confusion" shall have the meaning set forth in
Section VI.D. of this License Agreement.
"Primary Services" shall mean the services specifically described on
Exhibit C hereto.
"Quality Standards" shall mean the technical standards and service
standards applicable to Primary Services, Core Products, Additional Services and
Additional Products set forth on Exhibit E to this License Agreement, as amended
from time to time.
"RSA" shall mean the cellular Rural Service Areas as referred to in 47
C.F.R. Section22.909.
"Revised Licenses" shall mean the license agreements between Licensor
and its licensees, which are entered into after July 31, 1996 as part of
Licensor's general licensing program utilizing the Marks for or in conjunction
with the provision of telecommunication services, including, without limitation,
the provision of Cellular Telephone Services and/or other telecommunication
services substantially the same as or reasonably similar to the Primary Services
being licensed to Licensee hereunder.
"Strategic Market Change" shall have the meaning set forth in Section
III.H.4. of this License Agreement.
"Subsequent Year" shall have the meaning set forth in Section II.A.2.
of this License Agreement.
"Survey Company" shall have the meaning set forth in Section III.C. of
this License Agreement.
"Term" shall have the meaning set forth in Section II of this License
Agreement.
7
<PAGE>
"Terminated Market(s)" shall have the meaning set forth in the
introduction to Section XII of this License Agreement.
The parties therefore agree as follows:
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS
A. Grant
1. Subject to the remainder of this License Agreement
(including without limitation, Licensor's rights described in Section I.B and
Sections III.E. through III.J. below), Licensor grants to Licensee, upon the
terms and conditions of this License Agreement, the exclusive right, license and
privilege to use the Marks in the Licensed Territory described on Exhibit B
during the Term of this License Agreement to promote the Primary Services,
consisting of Cellular Telephone Services on the "A" side, "B" side and/or the
other services described on Exhibit C hereto.
2. Subject to the remainder of this License Agreement,
Licensor grants to Licensee, upon the terms and conditions of this License
Agreement, the exclusive right, license and privilege to use the Marks during
the Term in connection with the promotion and sale of the Additional Services
and the Additional Products in the Licensed Territory.
3. Subject to the terms of this License Agreement, Licensor
grants to Licensee, upon the terms and conditions of this License Agreement, the
right, license and privilege to make Incidental Use (as defined in Section
VI.C.) of the Marks.
B. Limitations on Grant
1. If the Licensed Territory as described on Exhibit B
consists of multiple markets and the Licensee's rights under this License
Agreement are terminated with respect to one or more of such markets in
accordance with the provisions of this License Agreement, Exhibit B to this
License Agreement and specifically the term "Licensed Territory" shall
thereafter be deemed to apply only to the remaining market(s) as to which
Licensee's rights under this License Agreement continue. In addition, the
Licensed Territory may be modified, in accordance with the provisions of Section
VI.D., in the event that Licensor determines that Potential Customer Confusion
exists.
2. Notwithstanding Licensee's exclusive right to utilize the
Marks to promote the Primary Services, Additional Services and Additional
Products in the Licensed Territory, other persons possessing a license to use
the Marks may promote the Primary Services, Additional Products and Additional
Services provided by such parties outside of the Licensed Territory in media
receiving distribution within or accessible by persons located in the Licensed
8
<PAGE>
Territory, such as regional magazines or newspapers, regional television and
radio and World Wide Web pages.
3. Subject to the provisions of Sections III.H. and III.I. of
this License Agreement, Licensor may terminate Licensee's right to use the Marks
to designate or promote certain Core Products, Additional Products and
Additional Services.
C. Acknowledgments
1. Subject to the specific grants to Licensee set forth in
this Section I, Licensee acknowledges that Licensor has and retains the right to
use and license the Marks anywhere in the world, within or outside of the
Licensed Territory and that Licensee shall have no rights with regard to such
use or any benefits therefrom.
2. Licensor and Licensee agree that effective with the
commencement of the Term of this License Agreement, all prior licenses to which
Licensee is a party relating to the use of the Marks, or any of them, in the
Licensed Territory or any part thereof shall terminate, together with all of
Licensee's rights thereunder.
II. TERM AND RENEWAL
A. Term
1. Except as otherwise provided in Section II.B. of this
License Agreement, the term (the "Term") of this License Agreement is five (5)
years, beginning on the Effective Date and ending on the day preceding the fifth
anniversary thereof. Licensee recognizes and agrees that Licensor may modify or
terminate the Term as it applies to Additional Products and Additional Services
or Core Products in accordance with Articles III and VI hereof.
2. The period from the Effective Date of this License
Agreement until December 31 of that calendar year shall be referred to herein as
the "Initial Year." Each subsequent calendar year commencing after the end of
the Initial Year shall be referred to herein as a "Subsequent Year."
B. Renewal
Licensee may, at its option, renew the license granted by this
License Agreement for two (2) additional terms (each, in turn, the "Term") of
five (5) years each provided that:
1. Licensee gives Licensor written notice of its election to
renew not less than six (6) months nor more than twelve (12) months before the
end of the expiring Term;
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<PAGE>
2. Licensee is neither in default of any of its obligations
under this License Agreement, nor on probation pursuant to Section XI.E.;
3. Licensee has not during the expiring Term received any
notice of default under Section XI.D. which relates to a default which has not
been cured;
4. At the end of the expiring Term, Licensee continues to hold
all of the Permits (as defined in Section IV.B.) necessary to provide the
Primary Services and those of the Core Products, Additional Services and
Additional Products being provided, sold or distributed by it;
5. No later than ninety (90) days before the end of the
expiring Term, Licensee executes Licensor's then-current form of license renewal
agreement, which agreement will supersede this License Agreement in all
respects, provided that such license renewal agreement shall not contain any
terms, provisions or conditions which differ materially from the terms,
provisions or conditions of this License Agreement, except terms, provisions and
conditions (i) which in the good faith judgment of Licensor are not materially
adverse to Licensee, (ii) which are appropriate, in the good faith judgment of
Licensor, to accommodate any material economic, technological, demographic, or
other market changes occurring during the prior five (5) year Term, (iii) which
Licensor determines in good faith are necessary to protect the Marks, (iv)
which Licensor determines in good faith are necessary to prevent Potential
Customer Confusion (as defined in Section VI.D.), (v) which relate to charges
and fees (including increases) which Licensor believes in good faith are
necessary to provide adequate support for the promotion of the Marks consistent
with the National Brand Goal during the renewal Term in question, (vi) which are
reasonably necessary in Licensor's determination to maintain or achieve the
National Brand Goal, (vii) which Licensor adopts pursuant to Sections III.G.,
III.H. or III.I. hereof, or (viii) which relate or are enacted pursuant to
Section IV.E.;
6. At the end of the expiring Term, Licensee shall be in
compliance with the provisions of Section IV.A.2. If Licensee has been assigned
probation status at such time as described in Section IV.A.2., then such
probation status shall continue and the required timely improvements shall be a
condition of effective renewal;
7. At the end of the expiring Term, Licensee is offering on a
good faith commercial basis the Primary Services and all of the Core Products
for which Licensee is authorized to utilize the Marks, in substantially all of
the Licensed Territory in accordance with the Quality Standards and is promoting
such Primary Services and Core Products utilizing the applicable Marks in
accordance with the Graphic Standards Manual; and
8. At the end of the expiring Term, Licensee shall have
satisfied all monetary obligations owed by Licensee to Licensor, and shall have
timely met such obligations throughout the term of this License Agreement.
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<PAGE>
III. RIGHTS AND DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee,
and no other party is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. This License
Agreement is not intended to and shall not create any partnership, joint venture
or other business relationship, other than that of Licensor and Licensee,
between the parties hereto, or to vest any rights in any third party or group of
third parties. This License Agreement shall not create any rights on behalf of
Licensee against any third party, including any other licensee of the Marks.
Subject to the foregoing, and to the remainder of this License Agreement,
Licensor shall undertake the following duties:
A. Marks Usage Guidelines
1. Licensor will provide Licensee, from time to time, with a
Graphic Standards Manual (the "Graphic Standards Manual") containing written and
graphic guidelines for the correct reproduction, application and presentation of
the Marks. The Graphic Standards Manual may include, among other things, Mark
specimens, samples of advertisements and clip art indicating color, proportion,
and format. The Graphic Standards Manual may also provide for the use of one or
more tag lines to be used to differentiate or highlight a particular service or
offering or group of services or offerings, such as "Paging By Cellular One" and
require its usage in specific circumstances, including use on signage and
promotional materials referenced in Section IV.F. The Graphic Standards Manual
may also provide guidelines for the proper use of tag lines and require such
usage in the event that two or more licensees of the Marks are permitted to make
use thereof within the Licensed Territory, or any part thereof, pursuant to
Sections VI.C. or VI.D.
2. From time to time, upon not less than one (1) year's
notice, Licensee shall be entitled to designate one or more icons to be used
with one or more of the Marks and the manner of their usage to signify an
association of such icon or icons with such Marks.
B. Technical Guidelines, Quality Standards
1. Licensor will provide Licensee with a Guide to Quality
Operations (the "Guide to Quality Operations") containing suggestions for
providing customers with high quality Primary Services, Core Products,
Additional Services and Additional Products, and other materials, as Licensor
deems appropriate. The Guide to Quality Operations may be modified and
supplemented from time to time as Licensor deems appropriate.
2. Attached to this License Agreement as Exhibit E are the
Quality Standards (the "Quality Standards"), as of the date hereof, applicable
to Primary Services, Core Products, Additional Services and Additional Products,
respectively, to be sold or provided, as the case may be, utilizing the Marks.
The Quality Standards include, as a general matter, criteria for minimum
acceptable service delivery levels and encompass such matters as geographic
coverage requirements, participation in a nationwide call delivery network,
standardized dialing patterns
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<PAGE>
and the availability of telephone customer assistance. The Quality Standards
also include required features and technical guidelines for minimum acceptable
system functionality (although specific equipment or system designs will not be
required) and may encompass such matters as required functionality for
telephones and other devices constituting Additional Products, required
compliance by equipment with designated industry standards, compliance by
switching equipment with uniform handoff requirements, and similar requirements
relating to the delivery of Primary Services and Additional Services or the
operation of Additional Products.
3. From time to time, Licensor, by written notice to Licensee
in accordance with Section IV.A., shall have the right to amend the Quality
Standards with regard to any Mark to require added features or functionality for
Primary Services, to modify the minimum technical or operating standards
relating thereto or to require coordination and uniformity in the delivery of
Primary Services, Additional Services, Additional Products and Core Products
within the Licensed Territory and beyond. Licensor shall not be obligated to
consider the particular needs of Licensee or any group of licensees of the Marks
in connection with any amendment to the Quality Standards, except that Licensor
shall not propose amendments to the Quality Standards applicable to Licensee
only.
4. From time to time, Licensor, by written notice to Licensee
in accordance with Section IV.A., shall have the right to amend Exhibit E with
regard to any Mark to designate features, technical or operating standards or
functionality appropriate under existing economic, market, demographic and
technological conditions in similarly situated markets directed to the
achievement and maintenance of the National Brand Goal. Although uniformity and
consistency will normally be required by Licensor throughout the Licensed
Territory and among the various territories or markets in which Licensee and
others are licensed to use the Marks, the Licensor may, from time to time, make
certain distinctions, based upon demographic, topographic, legal or other
considerations, and provide for differing Quality Standards with regard thereto.
5. In addition, Licensor may, upon at least six (6) months
written notice to Licensee, amend Exhibit E to amend the Quality Standards for
Additional Products, Additional Services and Core Products, to designate Quality
Standards for any new Marks added to Exhibit A hereto or to designate Quality
Standards for Additional Products, Additional Services and Core Products for
which separate Quality Standards do not exist. In the event that an Additional
Product or Additional Service becomes a Core Product, Licensor may further amend
Exhibit E to establish Quality Standards for the offering and delivery of the
Core Products, as a whole or as a package of Core Products or Primary Services
and Core Products.
6. Exhibit E to this License Agreement, as amended from time
to time, is incorporated herein by reference. All references to the Quality
Standards shall mean those standards established, as of such time, by Exhibit E.
7. At Licensee's request, Licensor shall be entitled, but in
no event shall be required, to waive compliance by Licensee with one or more
of the Quality Standards in one or
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<PAGE>
more of the markets constituting a part of the Licensed Territory, in the
event that Licensor believes such a waiver to be consistent with the National
Brand Goal. Any waiver by Licensor of a Quality Standard must be in writing
and may, at Licensor's election, be for a limited period or subject to one or
more conditions.
C. Customer Satisfaction Surveys
Licensor shall have the right, at its own expense, commission
an independent survey company ("Survey Company") to conduct a customer
satisfaction survey of Licensee's customers on a yearly basis for purposes of
assessing the quality of Licensee's Primary Services, Additional Services,
Additional Products or Core Products, or all of them. The methodology of the
survey will be determined by the Survey Company and Licensor. An outline of
current survey methodology for Primary Services, which may change from time to
time, is attached as Exhibit F. The results of all surveys of Licensee's
customers will be shared with Licensee to assist Licensee in improving its
business and complying with Licensee's obligations under this License Agreement,
including its obligations with regard to the Quality Standards described herein.
The results of surveys will be used to evaluate the general level of customer
satisfaction and to assist Licensor in determining whether or not Licensee is
meeting the Quality Standards. Licensor will instruct the Survey Company to
obtain all required survey information directly from the Licensee and not
through or in conjunction with Licensor. The Survey Company will be required to
execute an appropriate confidentiality agreement for the benefit of Licensee and
the other licensees of the Marks, which shall provide that the Survey Company
will not disclose any Confidential Information of Licensee to Licensor, the
Partnership Partners or affiliates, or their employees or to any other party
(except that the results of the survey for each market and other survey
information which is applicable generally to all licensees of the Marks or any
of them may be disclosed to Licensor and used by Licensor in connection with its
business operations).
D. Licensee Advisory Council
Licensor has established an elected council of licensees
("Advisory Council") comprised of licensees other than Partnership Partners from
a broad cross-section of markets throughout the United States, to advise and
consult with Licensor regarding material matters such as advertising, marketing
and Quality Standards relating to the Marks and to act as a liaison organization
between Licensor and the licensees of the Marks. The procedures and
responsibilities adopted for the operation of the Advisory Council are subject
to change, from time to time, as may be appropriate in the judgment of Licensor
to provide the most effective organization for performing the contemplated
functions of the Advisory Council. The representative of any licensee serving on
the Advisory Council shall be an officer of such licensee or other person
reasonably acceptable to Licensor. The charter of responsibility of the Advisory
Council provides that all members of the Advisory Council will be informed of
applicable antitrust laws and shall abide by any decisions of Licensor's
antitrust counsel in such regard.
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E. National and Regional Advertising
Licensor has established and maintains the Cellular One
Promotional Fund, as described in Section VIII.C. of this License Agreement.
Licensor administers the Fund with the goal of enhancing the image of the Marks
and achieving or maintaining the National Brand Goal. Licensor, in connection
with the Cellular One Promotional Fund, or otherwise, shall have the right, from
time to time, to promote the Marks in local, regional or national advertising
receiving distribution within the Licensed Territory and to engage in any other
promotional activities, including sponsoring sporting or other public events
within the Licensed Territory, as Licensor deems appropriate in connection with
the National Brand Goal. No consent of Licensee shall be necessary to any such
promotional activities.
F. National/Regional Programs
Licensor may, in its discretion, make available a national
and/or one or more regional account programs under which, through the voluntary
cooperation of its licensees in various markets, client companies with multiple
market operations may enter into a single contract arrangement for one or more
of the Primary Services or any of the Core Products, Additional Services or
Additional Products for their employees located in such markets. Licensor or its
designee may administer any such national or regional accounts program(s). In
addition, Licensor may, from time to time, utilize the Marks or permit third
party licensees of the Marks to utilize the Marks to promote the sale and
distribution of Additional Products or Additional Services in or by means of
media, such as, but not limited to, direct mail catalogs, World Wide Web pages
and radio and television broadcasts receiving wide distribution, both within and
outside of the Licensed Territory; provided, however, that no such promotional
activity shall have as its primary purpose the targeting of any single market or
territory. In addition, Licensor may also, from time to time, utilize the Marks
or permit third party licensees of the Marks to promote and sell Additional
Products or Additional Services as part of a coordinated regional or national
marketing effort including all or part of the Licensed Territory; provided,
however, that no such promotional activity shall have as its primary purpose the
targeting of any single market or territory.
G. Designation of Primary Services
1. Set forth on Exhibit C hereto are descriptions of the
Primary Services applicable to Licensee as of the dated of this License
Agreement. From and after the date hereof, Licensor and Licensee, by executing
an amendment to Exhibit C, shall be entitled to amend the description of the
Primary Services and to add or delete services therefrom. Licensor shall be
entitled to group the Primary Services into categories (for use, among other
things, in defining Quality Standards applicable to particular Primary Services)
and, with the consent of Licensee, to add or omit one or more services from the
definition of Primary Services with regard to one or more markets constituting
part of the Licensed Territory.
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2. Consistent with Section VI.D., to the extent necessary to
prevent Potential Customer Confusion, Licensor shall be entitled, with or
without the consent of Licensee, to amend Exhibit C hereto to modify the
description of Primary Services or to separate Primary Services into classes or
categories for the purpose of differentiating between the Primary Services (by
means of tag lines or otherwise) to be rendered in one or more markets
constituting a part of the Licensed Territory; provided, however, that any such
amendment of Exhibit C shall only become effective upon at least six (6) months
written notice to Licensee thereof.
H. Designation and Deletion of AddItional Products and Services
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are descriptions
of products and services which, upon thirty (30) days written notice to
Licensor, Licensee may promote or sell utilizing the Marks which are applicable
to the Additional Product or Additional Service in question, as may be
designated in Licensor's Graphic Standards Manual. Licensor may review, from
time to time, Exhibit D to this License Agreement in light of current
demographic, technological, regulatory and other circumstances (including,
without limitation, Strategic Market Changes) for the purpose of adding or
deleting products and services from the descriptions of Additional Products and
Additional Services, modifying the definitions assigned to one or more
Additional Products or Additional Services or modifying the Term of this
License Agreement or any Licensed Territory with regard thereto. In undertaking
such review, the Licensor shall consider Exhibit D in light of the National
Brand Goal. Licensor shall not be obligated to consider the needs of any
particular licensee or group of licensees in connection with its review of
Exhibit D, nor shall it have an obligation, other than as specifically provided
for herein, to inform Licensee of the progress of such review. Any such
amendment of Exhibit D shall be made pursuant to Sections III.H.2 through
III.H.5 below or pursuant to Section VI.D. hereof.
2. Based upon the review contemplated by Section III.H.1.
above, or otherwise as deemed appropriate by Licensor in its sole discretion,
Licensor may at any time, or from time to time, during the Term, upon not less
than thirty (30) days written notice to Licensee designate one or more new or
additional services or products as Additional Services or Additional Products.
3. Based upon the review contemplated by Section III.H.1.
above, or as otherwise deemed appropriate by Licensor, at any time from and
after January 1, 1999, Licensor may modify or amend Exhibit D hereto, or any
description set forth therein, and may delete products or services constituting
Additional Products or Additional Services, reduce or extend the Term with
resect to one or more Additional Products or Additional Services or modify the
Licensed Territory with regard thereto (i) immediately upon written notice to
Licensee with respect to any Additional Product or Additional Service not then
being offered to the public throughout the Licensed Territory on a good faith,
nondiscriminatory commercial basis by Licensee under the specified Marks at the
time of such written notice, (ii) upon not less than six (6) months written
notice with respect to any Additional Product or Additional Service which is
being offered to the public throughout the Licensed Territory on a good faith,
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nondiscriminatory commercial basis by Licensee under the specified Marks at the
time of such written notice, provided that in the event of modification or
amendment pursuant to either (i) or (ii) preceding, Licensor shall have
determined that a Strategic Market Change has occurred and that such
modification or amendment is required to reasonably permit appropriate response
thereto. A written explanation of the reason for such modification or amendment
shall accompany the written notice referred to in (i) or (ii) preceding. During
such time as Licensee can demonstrate to the satisfaction of Licensor that
Licensee is offering and actively promoting the Primary Services, long distance
service and local calling service (as further described on Exhibit D) under the
specified Marks to the public (including business, residential and mobile
consumers) throughout the Licensed Territory on a good faith, nondiscriminatory
commercial basis, Licensor may agree to refrain from licensing others to use the
Marks for other Additional Products and Additional Services in the Licensed
Territory. Any such agreement shall be subject to those conditions and
limitations as Licensor may establish.
4. For the purposes of this Section III.H., a "Strategic
Market Change" shall mean any change in economic, demographic, technological,
regulatory or competitive conditions which Licensor reasonably believes requires
a material modification in the manner in which the Primary Services, the Core
Products, the Additional Products or the Additional Services, or any of them,
are marketed or delivered, in order to continue the successful promotion of the
Marks to achieve or maintain the National Brand Goal. While it is anticipated
that a Strategic Market Change will be national in scope, and that Licensor's
response thereto will be similarly uniform, Licensor shall be entitled, subject
to Section III.B.4., to respond under this Section III.H. to Strategic Market
Changes affecting a more limited class or classes of markets.
5. Notwithstanding Section III.H.3. above, Licensee shall have
a limited right to have Exhibit D amended to restore Additional Services or
Additional Products deleted under Section III.H.3. For the ninety (90) day
period following delivery of a notice of modification or amendment under Section
III.H.3., Licensee may submit a request to Licensor to reinstate an Additional
Product or Additional Service on Exhibit D or to rescind any other modification
of Exhibit D adopted pursuant to Section III.H.3, stating its reasons therefor.
Licensor shall consider Licensee's request for reinstatement in good faith, but
shall not be obligated to amend Exhibit D. Any reinstatement of an Additional
Product or Additional Service under this Section III.H.5. shall be subject to
such conditions as Licensor shall believe appropriate under the circumstances,
consistent with the achievement or maintenance of the National Brand Goal.
I. Designation and Deletion of Core Products
1. From time to time after the date hereof, to the extent that
Licensor determines that consumers have come to expect that one or more of the
Additional Products and Additional Services described on Exhibit D, as amended
from time to time, are commonly offered as a part of any offering of nationwide,
dependable, high quality telecommunications services or are otherwise
fundamental to the achievement or maintenance of the National Brand Goal,
Licensor may, upon six (6) months written notice to Licensee, amend Exhibit D
hereto to designate those Additional Products and Additional Services as "Core
Products" and may
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further designate an effective date for such designation. However, nationwide
call delivery and nationwide roaming as further described on Exhibit D are
existing required Core Products, and need not be further designated as such
pursuant to this Section III.H.1.
2. From and after the effective date of any designation of an
Additional Product or Additional Service as a Core Product, Licensee shall offer
such Additional Service or Additional Product under the specified Marks on a
good faith commercial basis in substantially all of the Licensed Territory, or
shall have adopted and provided to Licensor in writing a good faith plan
acceptable to Licensor for doing so promptly. Licensee shall promote using the
specified Marks and make all the Core Products available to its customers and to
the public generally in the Licensed Territory, in connection with promoting and
making the Primary Services available and shall not discriminate in terms of
price, availability or promotional efforts in favor of similar products or
services designated by other trademarks or service marks. Upon Licensor's
request. Licensee shall promptly provide a copy of its plans for offering any
Core Products under the specified Marks which it does not then offer.
3. In the event that Licensee shall fail to comply with its
obligations under Section III.1.2 above, or shall fail within six (6) months of
the effectiveness of the designation of any Additional Product or Additional
Service as a Core Product to offer (or plan to offer pursuant to a plan
submitted to and approved by Licensor and promptly thereafter implemented by
Licensee) such Core Product under the specified Marks in good faith, on a
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory, Licensor shall be entitled to immediately amend Exhibit D hereto to
delete therefrom the Core Products not being offered by Licensee under the
specified Marks on a good faith, nondiscriminatory, commercial basis in
substantially all of the Licensed Territory, and shall be entitled to use or
license others to use the Marks in connection with such Core Products in the
Licensed Territory. With respect to the existing Core Products of nationwide
call delivery and nationwide roaming as further described in Exhibit D, Licensor
shall also be entitled to terminate this License Agreement pursuant to Section
XI.D. if, within six (6) months from the Effective Date, such Core Products are
not being offered by Licensee under the specified Marks on a good faith,
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory.
J. Other Licenses, Compensation to Licensor
Licensor has and may continue to license the Marks, or any of them, to
third parties for use in connection with products or services other than Primary
Services, Core Products, Additional Products, or Additional Services. (For
example, Licensor has licensed one of the Marks to a third party marketer of
children's toys). Such licenses, subject to Licensee's rights set forth in
Section I, may permit use of the Marks by such third party licensees to promote
and sell products and services, other than Primary Services, Core Products,
Additional Services and Additional Products, within the Licensed Territory. As
part of such licensing arrangements, Licensor has, and may, from time to time
hereafter, receive fees or other consideration from third parties who provide
goods and services to licensees of the Marks in connection with
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promotional or other programs arranged by Licensor. Licensee shall have no claim
or right with regard to any such fee or consideration or the arrangements giving
rise thereto.
K. Reseller Arrangements
In the event this License Agreement is being executed and delivered by
a licensee who is being licensed to resell Cellular Telephone Services or an
Alternate Wireless Service, it is anticipated that certain terms and conditions
applicable herein to providers of such services will need to be modified and
that certain additional terms and conditions may need to be added hereto to
accommodate the differences between the provision of such services directly by a
provider and by a reseller of such services. Accordingly, as necessary, in any
such event, the parties hereto shall complete and attach hereto an appropriate
Exhibit G to reflect such modified or additional terms and conditions and such
Exhibit G shall thereafter be deemed to be incorporated herein and made a part
hereof for all purposes.
IV. DUTIES OF LICENSEE
All duties of Licensee under this License Agreement are to Licensor,
and no other party is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. Licensee understands
and acknowledges that the high quality operation of its business under the Marks
is important to Licensee, Licensor and other licensees of the Marks in order to
maintain high operating standards and to protect the reputation of, and goodwill
associated with, the Marks. Toward that end, Licensee acknowledges and accepts
the following duties:
A. Quality of Service
1. Licensee agrees to provide high quality Primary Services
and Core Products and, to the extent provided, high quality Additional Services
and Additional Products, to its customers by, among other things, complying with
this License Agreement and the applicable Quality Standards Upon, six (6) months
written notice of the modification of or addition to the Quality Standards,
Licensee shall cause its Primary Services, Core Products, Additional Services or
Additional Products to comply therewith; provided, however,that Licensee shall
be entitled to adopt a plan reasonably acceptable to Licensor to discontinue the
offering of any Additional Services or Additional Products in lieu of complying
with the Quality Standards relating thereto, provided such Additional Products
or Additional Services do not constitute Core Products.
2. Licensee shall attain and maintain an overall minimum
customer satisfaction rating of at least 85% (or such increased level as may be
required pursuant to the provisions of this Section IV.A.) with regard to the
Licensed Territory as a whole (on a population weighted basis) and more than 70%
with respect to any market constituting a part thereof, with regard to
Licensee's Primary Services and Core Products. If Licensee has licenses
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to use the Marks in more than one Licensed Territory pursuant to additional
license agreements with Licensor, Licensee shall be obligated to achieve an
overall minimum customer satisfaction rating of 85% (or any increased level
adopted) for all of such Licensed Territories (on a population weighted basis),
and more than 70% with respect to any market constituting a part thereof.
Licensor reserves the right to increase the overall minimum acceptable customer
satisfaction rating to a percentage greater than 85% if Licensor, in its
reasonable discretion, determines that such higher percentage is appropriate
given the technical state of the industry delivering Primary Services, Core
Products, Additional Products and/or Additional Services at such time; provided,
however, that the Advisory Council must approve any such increase in the minimum
acceptable customer satisfaction rating, and such increase shall not be
effective until the beginning of the next calendar year following the Advisory
Council's approval. In the event that a customer satisfaction survey conducted
by Licensor pursuant to Section III.C. of this License Agreement results in an
overall minimum customer satisfaction rating below 85% (or below any higher
percentage established by Licensor as described above), but more than 70%, in
Licensee's Licensed Territory or Licensed Territories as a whole (on a
population weighted basis), then Licensee will be assigned probation status
under Section XI.E. of this License Agreement and surveys will be commissioned
in the market(s) in the Licensed Territory or Licensed Territories, as the case
may be, which did not achieve a rating of at least,85% (or any higher
percentage established by Licensor), from time to time thereafter as Licensor
deems appropriate until Licensee has achieved an overall minimum customer
satisfaction rating of at least 85% (or any higher percentage established by
Licensor as described above) and the probation status is removed, or until this
License Agreement is terminated, as herein provided, whichever shall first
occur. Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction survey(s).
3. During the Term, Licensee shall provide the Primary
Services and Core Products throughout the Licensed Territory, and shall
maintain, or cause others to maintain on its behalf, a sufficient number of
customer service locations and other facilities, including retail storefronts or
similar facilities, to permit customers and potential customers convenient
access to Primary Services, Core Products, Additional Products and Additional
Services, consistent with existing competitive conditions and in accordance with
the Quality Standards.
B. Legal Compliance
1. Licensee agrees to comply, at its own expense, with all
applicable laws, ordinances and regulations of federal, state, county or
municipal authorities. Licensee will also obtain and maintain, at its own
expense, all permits, approvals, licenses and franchises and shall make all
required filings, applications and reports to all government or administrative
entities or self regulatory organizations as shall be necessary, from time to
time, to provide those of the Primary Services, the Core Products, the
Additional Services or the Additional Products as Licensee may then be
providing, and to otherwise engage in business, generally, throughout the
Licensed Territory (collectively, the "Permits"). Without limiting the
generality of the foregoing, Licensee's obligation under this Section IV.B.
shall include the maintaining of Licensee's qualification to do business
throughout the Licensed Territory, and the filing of all
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income and franchise tax returns with respect to Licensee's operations. In the
event that any of Licensee's material Permits is scheduled to expire during the
Term, including any renewal of such Term, Licensee agrees TO comply with all
requirements for extension of said Permit prior to such expiration. Licensee
shall notify Licensor in writing within five (5) days after receipt of any
notice from the FCC or any other governmental authority regarding an actual or
threatened termination or revocation of any Permit material to the provision of
the Primary Services, Core Products, Additional Products or Additional Services
by Licensee within the Licensed Territory, including any license by the FCC to
conduct business as a provider of telecommunications services or necessary to
construct facilities relating to telecommunications services, and shall within
such time provide a copy of any such notice to Licensor. In addition, Licensee
shall notify Licensor within five (5) days after becoming aware of the
commencement of any action, suit or proceeding, or the issuance of any order,
writ, injunction, award or decree of any court, agency or other governmental
instrumentality which could have a material adverse effect on the operation or
financial condition of Licensee's business as it relates to the Primary
Services, the Core Products, the Additional Services or the Additional Products.
2. To the extent that Licensee's business is dependent upon
one or more agreements with a provider of Primary Services, Core Products,
Additional Services or Additional Products for which Licensee acts as a
reseller, "Permits" shall include such contractual relationship and the license
granted hereunder shall be dependent upon the continuation thereof in good
standing.
3. Licensee represents and warrants that it possesses all
Permits necessary to the conduct of its business and to the business of
providing the Primary Services, Core Products, Additional Services and
Additional Products within the Licensed Territory, including, if applicable, any
Permits necessary to permit it to act as a reseller of services provided by
others.
C. Business Practices
Licensee shall maintain a competent, conscientious, trained
staff. Neither Licensor nor Licensee shall engage in any trade practice or other
activity which is harmful to the goodwill or reflects unfavorably on the Marks
or on the reputation of Licensee, Licensor, Licensee's business or other
licensees of Licensor, or which constitutes deceptive or unfair competition,
consumer fraud or misrepresentation.
D. Information to Licensor
1. Upon Licensor's request, subject to the confidentiality
requirements described in Section III.C., Licensee must, in connection with any
customer satisfaction survey Licensor elects to conduct in accordance with
Section III.C., promptly furnish to the Survey Company designated by Licensor a
complete and accurate customer list of all of its subscribers and customers for
its Primary Services, Core Products, Additional Products and Additional
Services, as a whole or separately, in a format reasonably prescribed by
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey
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Company shall require in connection with the performance of its duties. Licensee
hereby gives the Survey Company permission to contact any and all of its
subscribers and customers in conducting a customer survey to ascertain the
quality level of Licensee's services and products and obtain related market
research data in accordance with the methodology set forth in Exhibit F or as
Licensor may reasonably deem appropriate. Licensee shall promptly provide
Licensor with additional information reasonably requested by Licensor regarding
matters such as Licensee's legal status (for example, any Change in Control),
affiliated companies, dealers, agents, retailers, Primary Services, Core
Products, Additional Products and Additional Services being provided or sold
utilizing the Marks, Licensee's use of the Marks, including Incidental Use and
Potential Customer Confusion, and other matters which Licensor may reasonably
determine are relevant to Licensee's performance under this License Agreement.
2. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of each Permit necessary or related to its business of
providing Primary Services, Core Products, Additional Services or Additional
Products using the Marks (with the financial details thereof deleted or redacted
if Licensee so chooses), together with any amendments, termination or other
notices relating thereto.
3. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of Licensee's most recent financial statements for the most
recently completed fiscal year and any subsequent interim periods, including
reports of auditors, if any, and supporting schedules, relating to Licensee's
business of providing Primary Services, Core Products, Additional Services or
Additional Products using the Marks.
E. Voting by Licensees
Licensor shall be entitled, from time to time, during the
Term, or at any time with regard to a Term to commence in the future, to submit
a proposed amendment to this License Agreement and any Exhibits hereto, to all
of its licensees which have executed Revised Licenses, with a request that such
licensees indicate their approval or disapproval thereof by written ballot.
Unless licensees which have executed Revised Licenses with Licensor and which
are obligated to pay in excess of 50% of the aggregate of all Annual License
Fees payable by all similarly situated licensees shall vote against such
amendment, this License Agreement, and the applicable Exhibits hereto, shall be
amended as proposed by Licensor in the material submitted to the licensees.
Notwithstanding the foregoing, without the express written consent of Licensee,
no amendment to this License Agreement approved under this Section IV.E. shall,
with regard to prior time periods or events taking place prior to the adoption
thereof, increase Licensee's obligations to pay any amounts to Licensor or
otherwise undertake any obligations to Licensor or any other party. In addition,
no amendment to this License Agreement approved solely pursuant to this Section
IV.E. shall (i) modify the Licensed Territory, (ii) prohibit or prevent
Licensee from providing the Primary Services under the Marks in the Licensed
Territory, or (iii) permit Licensor to license others to use the Marks for
providing Alternate Wireless Services or Cellular Telephone Services in the
Licensed Territory. Any notice provided by Licensor hereunder requiring an
approval or disapproval of an amendment to this License Agreement or
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any Exhibits hereto shall be delivered to Licensee in accordance with the
notice provisions of this License Agreement not less than ninety (90) days prior
to the proposed effectiveness thereof. Licensor shall be entitled to set forth
in any notice proposing an amendment to this License Agreement or any Exhibits
hereto an effective date more than ninety (90) days following the delivery of
notice with regard thereto. Licensees which fail to respond to a request by
Licensor to approve or disapprove of an amendment to this License Agreement or
any Exhibits hereto within sixty (60) days after delivery of the proposed
amendment shall be deemed to have consented to such amendment. This Section
IV.E. shall not modify or limit any of Licensor's other rights provided for in
this License Agreement, including but not limited to Licensor's rights to amend
Exhibits to this Agreement under Sections III or IV, to the extent permitted
therein, or to modify or impose the fees or other charges, to the extent such
modification is permitted, required of Licensee under Sections V or VIII hereof.
Only Licensor shall have the right to propose an amendment to this License
Agreement or any Exhibits under this Section IV.E.
F. Signage, Promotion
1. For each market in the Licensed Territory, Licensee shall,
at its own expense, cause the Cellular One Mark to be used or incorporated with
such reasonable prominence in such advertising and other business references to
Licensee as may be appropriate to create a clear impression, among the general
public, that Licensee is affiliated with the Cellular One program. Without
limiting Licensee's obligation to comply with the foregoing, Licensee shall, for
each market in the Licensed Territory, associate Licensee and the Cellular One
name in the telephone "yellow pages" and "white pages" directory listings, and
at least cause the Cellular One Mark to be used or incorporated on or in each of
the following, insofar as they relate to Licensee's business utilizing the
Marks:
(i) Licensee's customer billing statements and
the accompanying envelopes;
(ii) Licensee's advertising media, including without
limitation, print advertising, brochures, marketing materials,
point-of-sale materials, billboards and broadcast media such as radio
and television advertising, on line advertising, home pages on the
World Wide Web and other computer accessible information;
(iii) The greetings, introductions or opening
messages of Licensee's telephone operators, voice mail, telephone
answering machines and other call answering services, in response to
customer and prospective customer inquiries;
(iv) Licensee's stationery, business cards, notices
and other mailouts, and, to the extent practicable, any press or other
media coverage afforded Licensee; and
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(v) Signs or displays on the exterior and interior of
each of Licensee's facilities which interface with customers or
prospective customers In the Licensed Territory.
2. To the extent required by this License Agreement, pursuant
to Sections III.A., VI.B., VI.D. or otherwise, Licensee shall, at its own
expense, modify its usage of the Marks and adopt tag lines, icons or similar
marks or variations, and modify the signage and other items described in Section
IV.F.1. above as may be appropriate, within one (1) year or such shorter period
as Licensor may reasonably require or as may be otherwise provided in this
License Agreement.
3. Licensee shall use the Cellular One Mark (or any mark
substituted therefor by Licensor) as the principal service mark or trademark, as
appropriate, designating Primary Services and Core Products sold or distributed
by it within the Licensed Territory and shall otherwise use the applicable Marks
in connection with Additional Products and Additional Services in the Licensed
Territory to the extent commercially reasonable and as required by this License
Agreement. Use of the Marks shall be strictly in accordance with the Graphic
Standards Manual as amended from time to time. Licensee shall only use those
Marks as are specified by Licensor in connection with each of the Additional
Products and Additional Services.
G. Dealers, Agents and Retailers
In the event that, pursuant to this License Agreement,
Licensee permits its authorized dealers, agents or retailers to use the Marks in
the Licensed Territory, such dealers, agents and retailers shall be subject to
the obligations set forth in this License Agreement and those imposed upon such
parties by Licensee; provided, however, that unless required by Licensee, such
dealers, agents and retailers need not necessarily comply with the specific
obligations of Sections IV.F.1.(i), IV.F.1.(iii) and IV.F.1.(iv) hereof in
connection with each dealers', agents' or retailers' use or incorporation of the
Marks on or in the items therein listed.
H. Additional Products and Services
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are certain
products and services relating to the Primary Services with regard to which,
upon notice to Licensor, Licensee may promote or sell utilizing the Marks as
therein specified.
2. In the event that Licensee shall elect to use the Marks
within all or any part of the Licensed Territory in connection with one or more
of the specified Additional Products or Additional Services, Licensee shall
provide Licensor not less than thirty (30) days written notice of such intended
use, together with a description of Licensee's business and promotional plans
with regard thereto and the portion of the Licensed Territory to which such use
will relate.
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I. Use of the Cellular One Trademark
In order to protect and enhance the Cellular One Mark and the
goodwill pertaining thereto, Licensee shall, consistent with Exhibit D, use the
Cellular One Mark only on or in connection with first class, high quality
telecommunications equipment and related devices further described as an
Additional Product on Exhibit D hereto (collectively, the "Wireless
Communications Equipment"). Any such Wireless Communications Equipment shall be
sold or distributed only in accordance with all applicable federal, state and
local laws, including, without limitation, all applicable FCC directives and
other industry standards issued from time to time by the CTIA, the Electronics
Industries Association and comparable industry groups, and which, if available
for the type of Wireless Communications Equipment in question, has earned a
certification seal issued by the CTIA. Licensee shall, upon execution of this
Agreement, and from time to time thereafter upon request by Licensor, promptly
furnish to Licensor, at no charge, a listing of all of the various types of
Wireless Communications Equipment sold or otherwise distributed by Licensee, and
upon which or in connection with which the Cellular One Mark is used. The nature
and quality of such Wireless Communications Equipment shall be subject to review
by Licensor to insure compliance with this Agreement.
J. Consumer Service Number
Licensee shall have the obligation to use and promote and a
nonexclusive right to make use of a toll free national consumer service number
designated by Licensor (the "Consumer Service Number"). as a toll free service
to Licensee's customers and prospective customers in the Licensed Territory, to
use the 1-800-CELL ONE Mark and marks associated therewith and to pay an annual
fee to Licensor described in Section V.E. and in accordance with the following
terms and conditions:
1. (a) Licensor will, from time to time, establish and
maintain a national consumer service telephone number, operated twenty-four
hours a day, seven days a week. Currently the number established by Licensor
is 1-800-CELL ONE (1-800-235-5663). Licensee shall arrange with a long
distance carrier (the "Long Distance Carrier") for a network-based routing
system to cause such calls to the Consumer Service Number from customers and
prospective/customers of Licensee in the Licensed Territory (including
customers of Licensee roaming from the Licensed Territory) to be
automatically (i) routed to Licensee, or to a designated center as further
described below or (ii) provided with a prerecorded intercept announcement or
(iii) routed as may be required pursuant to Section IV.J.3. or any agreement
entered into by Licensee pursuant thereto. All arrangements necessary for the
routing of calls to Licensee or the delivery of prerecorded intercept
announcements shall be made between Licensee and the Long Distance Carrier.
In no event will Licensor route calls made to the Consumer Service Number to
Licensee, or cause any such calls to be so routed. It is anticipated that
Licensee will provide customers and prospective customers calling the
Consumer Service Number with assistance, information and/or promotional
literature in response to inquiries concerning such matters as activation,
suspension or disconnection of service, service plans, promotions, billing,
pricing, roaming, dialing instructions, access numbers, feature codes, the
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locations, hours of operation and telephone numbers of offices, authorized
repair facilities and sources for batteries, parts and accessories, and such
other matters as may be set forth in the 800 Number Supplement (hereinafter
defined).
(b) Licensor will provide Licensee with a supplement to
Exhibit E (the Quality Standards) and the Guide to Quality Operations
(collectively, the "800 Number Supplement"), containing requirements and
suggestions for the operation of the Consumer Service Number program, including
the services which Licensee must have the capability of offering during various
times to callers to the Consumer Service Number which are routed to the Licensee
by the Long Distance Carrier, and other materials as Licensor deems appropriate.
Licensor may from time to time, in its discretion, issue additional supplements,
modifications and additions to the Guide to Quality Operations or the 800 Number
Supplement. Licensor may, in its discretion, expand or introduce new features to
the Consumer Service Number program and may afford Licensee the opportunity to
participate therein by executing an addendum to this Agreement or other suitable
document.
(c) From time to time, at its sole election, Licensor may
select and designate a substitute telephone number to serve as the Consumer
Service Number and Licensee shall take such steps as shall be necessary to
utilize such substituted number in place of the prior telephone number serving
as the Consumer Service Number and shall cease any use of such prior number in
accordance with any schedule reasonably promulgated by Licensor with regard
thereto.
2. Licensee shall establish and maintain adequate staffing and
telephone capacity in relation to the subscriber base and call volume of the
Licensed Territory, in order to promptly and adequately receive and respond to
calls routed to Licensee through the Consumer Service Number; provided however,
that Licensee may establish a centralized location with such capabilities to
serve multiple markets for which Licensee has entered into a License Agreement
with Licensor, if applicable. Licensee agrees that it will not impose any
airtime charges or other charges upon the caller for calls made to the Consumer
Service Number, whether such calls are made by customers, prospective customers,
roamers or otherwise. Licensee shall cause its billing department or, if
applicable, use its best efforts to cause each of its billing companies or
providers of Primary Services, to nonrate calls to the Consumer Service Number
made from the Licensed Territory, and to delete any per diem roaming fees if
calls from the Licensed Territory to the Consumer Service Number are the only
roamer calls made during the twenty-four hour daily billing period. Licensee
shall offer credit card roaming capability for its customers, with respect to
the Licensed Territory, for the purpose of allowing call processing for
customers with validation problems when the serving switch in the home market is
not accessible.
3. Within thirty (30) days of the Effective Date of this
License Agreement, Licensee shall make appropriate arrangements with the Long
Distance Carrier for the routing of calls to the Licensed Territory and, in
conjunction therewith, shall be providing service to customers and prospective
customers in accordance with the Quality Standards and the Guide
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to Quality Operations (including the 800 Number Supplement) twenty four hours a
day, three hundred sixty-five days a year. Licensee may phase in such customer
service operations over a period not to exceed six (6) months following the
Effective Date hereof, but within (30) days after the Effective Date of this
Agreement, Licensee shall, at a minimum, promptly accept and fully respond to
all calls routed to Licensee through the Consumer Service Number from 8:00 a.m.
to 6:00 p.m., local time, Monday through Friday, excluding national holidays.
During such times, the calls routed to the Licensed Territory by the Long
Distance Carrier must be handled by Licensee's own or contracted service
personnel (other than answering services) unless other arrangements satisfactory
to Licensor are made, and the various types of callers (customers, roamers,
prospects, etc.) must be provided with service respecting at least those
categories as set forth in the Guide to Quality Operations (including the 800
Number Supplement). Outside of such times, (i) Licensee has the option of
handling the calls with its own or contracted service personnel (other than
answering services), arranging for other licensees in good standing of the Marks
to handle the calls, arranging for third parties acceptable to Licensor to
handle the calls, or arranging for the calls to be answered by an automated
voice response system, with live operator backup preferred (although a response
system with the capability for the caller to leave a recorded message will be
acceptable); and (ii) not later than six (6) complete calendar months following
the Effective Date of this License Agreement, such callers must be provided with
service respecting at least those categories as set forth in the Guide to
Quality Operations (including the 800 Number Supplement) for such times.
4. Licensee shall at its own expense include the Consumer
Service Number in Licensee's telephone directory listings for the Licensed
Territory, including "White Pages" and "Yellow Pages" listings (under "Cellular
Telephones," "Mobile Telephones," "Radiotelephones" or other category denoting
telecommunications services and equipment, as appropriate), and in Licensee's
promotional and marketing materials. Licensee agrees to actively promote the
Consumer Service Number in the Licensed Territory, but may also utilize its own
toll free numbers or other numbers in the Licensed Territory.
5. Licensor shall in no event be liable by reason of any act
or omission of Licensee or any third party licensee in the conduct of its
business or for any claim or judgment arising therefrom or for any claim or
judgment by third parties (including without limitation, the Long Distance
Carrier, Licensee's customers, prospective customers, dealers, retailers,
agents, resellers, or the like) arising from or relating to the establishment
and the operation of the Consumer Service Number, and Licensee shall indemnify
and hold Licensor, Licensor's employees, the Partnership Partners and their
affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims and judgments, as
well as the costs, including attorneys' fees, of defending against them.
Licensee acknowledges that Licensor shall not be responsible for any direct,
consequential or incidental damages of any kind resulting from or relating to
the Consumer Service Number, the related program or the operation thereof, or
the acts or omissions of the Long Distance Carrier, including without
limitation, damages relating to possible loss of customers or prospective
customers by Licensee or its dealers, retailers, agents, resellers, or the like.
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6. Licensee agrees to promptly provide the Long Distance
Carrier with such complete current and reserve cellular NPA/NXX listings and
other information and data as may be reasonably requested by the Long Distance
Carrier to permit the Long Distance Carrier to provide an efficient and
effective routing of calls and delivery of intercept announcements to Licensee
and to assure that calls which should be routed to other licensees of the
Consumer Service Number are not being affected by Licensee's arrangements with
the Long Distance Carrier. All payments and other similar arrangements which may
be necessary to permit the Long Distance Carrier to route calls or provide
intercept services and prerecorded announcements to callers shall also be the
responsibility of Licensee, shall be determined by and between Licensee and the
Long Distance Carrier, and Licensor shall have no obligation or liability
whatsoever with respect thereto. Licensee agrees to promptly provide directly to
Licensor and/or to cause the Long Distance Carrier to promptly provide to
Licensor such information as Licensor may from time to time reasonably request
in order to permit Licensor to protect the Marks and/or to ascertain Licensee's
compliance with Licensee's obligations under this Agreement.
7. In the event Licensee's agreement with the Long Distance
Carrier expires or is terminated for any reason with respect to any market in
the Licensed Territory, Licensee's rights with respect to the Consumer Service
Number and the 1-800-CELL ONE Mark shall automatically terminate with respect to
such market. In the event Licensor decides to discontinue the Consumer Service
Number or the related program, Licensor may terminate Licensee's rights with
respect to the Consumer Service Number and the 1-800-CELL ONE Mark upon ninety
(90) days prior written notice to Licensee.
8. The parties agree that Licensor is not offering herein to
resell 800 service or other telecommunications services, and no portion of the
annual Consumer Service Number Fee is compensation for any such resale. Licensee
shall have no right to resell 800 service using the Consumer Service Number to
any other person or entity. If Licensee chooses to permit its authorized
dealers, retailers or agents in the Licensed Territory to use the Consumer
Service Number and the 1-800-CELL ONE Mark, Licensee acknowledges, for itself
and on behalf of its dealers, retailers and agents, that the applicable calls by
callers to the Consumer Service Number will be routed by the Long Distance
Carrier to Licensee, and not to any such dealers, retailers and agents of
Licensee, and that the calls will be toll free and free of roaming and airtime
charges upon the callers as set forth above.
9. Licensee acknowledges and agrees that it shall have no
ownership interest in the Consumer Service Number, any telephone number, Mark or
acronym serving as or associated with a current or previous Consumer Service
Number or any agreements relating thereto, notwithstanding any actual or implied
agreements between Licensee and the Long Distance Carrier, any tariffs or
permits applicable or related to the Consumer Service Number or any contract or
course of dealing relating thereto. Without modifying the foregoing, Licensee
hereby grants Licensor an irrevocable power of attorney, which shall be coupled
with an interest, to act in Licensee's place and stead and to execute and
deliver any agreements, instruments, certificates, pleadings or the like
reasonably necessary to disclaim any interest by
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Licensee in the Consumer Service Number, any telephone number, Mark or acronym
serving as or associated with a current or previous Consumer Service Number or
any agreements relating thereto, and to vest in Licensor full title thereto. In
addition, Licensee shall, from time to time, at the request of Licensor or the
Long Distance Carrier, promptly execute and deliver such further agreements,
instruments, certificates, pleadings and the like as Licensor shall reasonably
deem necessary to give effect to this Section IV.J.9.
V. FEES AND REPORTING
A. Application Fee
Upon execution of this License Agreement by Licensee, Licensee
shall pay to Licensor a nonrefundable application fee (the "Application Fee") of
five hundred dollars ($500.00) per market in the Licensed Territory; provided,
however, that no Application Fee with respect to a particular market shall be
payable in the event that this License Agreement is being executed as a renewal,
extension or modification of an outstanding Cellular One License Agreement
between Licensee and Licensor covering such market in the Licensed Territory or
in the event of a market transfer or Change of Control (the latter events being
subject, however, to the transfer fee described in Section V.H. hereof).
B. Annual License Fee
Licensee agrees to pay to Licensor an annual license fee (the
"Annual License Fee") based on the total population of each of the markets in
the Licensed Territory (the "Pops") as determined by the most recent population
estimates produced by an independent company selected in good faith by Licensor,
with a minimum Annual License Fee of three thousand dollars ($3,000.00) per
market in the Licensed Territory for each year during the Term. If the Effective
Date of this License Agreement or the commencement of a Subsequent Year is on or
before December 31, 1997, the Annual License Fee for the Initial Year or the
Subsequent Year, as the case may be, shall be equal to two cents ($0.02) per
person in the Licensed Territory, but not less than the foregoing minimum. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is after December 31, 1997, the Annual License Fee for the Initial Year or
the Subsequent Year, as the case may be, shall be calculated in accordance with
Section V.E. below, but shall not be less than the foregoing minimum. The Annual
License Fee shall be due on each January 1 and payable on or before each January
31 of each Subsequent Year during the Term, for the full calendar year; provided
however, that the Annual License Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Annual License
Fee for the Initial Year (including the foregoing minimum fee, if applicable)
shall be prorated to reflect the portion of that calendar year included within
the Initial Year. The Annual License Fee will not be prorated or refunded in
whole or in part under any other circumstances; provided, however, that upon the
normal expiration of this License Agreement at the end of the Term or any
renewal Term (but in no other event, including without
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limitation, upon the voluntary or involuntary termination of this License
Agreement for any reason), Licensor agrees to refund a prorated portion of the
Annual License Fee reflecting that portion of that calendar year remaining after
the date of expiration, less any set off for any other fees owing to Licensor.
C. Annual Advertising Fee
Licensee agrees to pay to Licensor's Cellular One Promotional
Fund an annual advertising fee (the "Annual Advertising Fee") based upon the
population estimates described in Section V. B. above. If the Effective Date of
the License Agreement is on or before December 31, 1996, the Annual Advertising
Fee for the Initial Year shall be equal to five cents ($0.05) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1997 and December 31,
1997, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to six cents ($0.06) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1998 and December 31,
1998, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to seven cents ($0.07) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is after December 31, 1998, then the Annual
Advertising Fee for the Initial/Year or the Subsequent Year, as the case may
be, shall be calculated in accordance with Section V.E. below. The Annual
Advertising Fee shall be due on each January 1 and payable on or before each
January 31 of each Subsequent Year during the Term, for the full calendar year;
provided, however, the Annual Advertising Fee for the Initial Year shall be paid
upon execution of this License Agreement by Licensee. Notwithstanding the
foregoing, if the Initial Year commences on a day other than January 1, the
Annual Advertising Fee for the Initial Year shall be prorated to reflect the
portion of that calendar year included within the Initial Year. The Annual
Advertising Fee will not be prorated or refunded in whole or in part under any
other circumstances. For any Initial Year or Subsequent Year beginning on or
before January 1, 1998, if Licensee can demonstrate to the satisfaction of
Licensor that Licensee had less than three hundred thousand (300,000) billable
minutes of air time for each month in the preceding calendar year in a market in
the Licensed Territory, Licensee shall not be obligated to pay the Annual
Advertising Fee with respect to such market for such Initial Year or Subsequent
Year, as the case may be. Licensor agrees to accept, and may require, the bona
fide report of Licensee's independent outside auditing firm as appropriate
confirmation that Licensee has less than the three hundred thousand (300,000)
billable minutes of air time for each month as described above. The foregoing
exemption from payment of the Annual Advertising Fee shall in no event extend
beyond the Annual Advertising Fee due for 1998. To the extent that geographic,
demographic or social factors (such as a location of a market outside of the
continental U.S. or the use in a particular market in the Licensed Territory of
a dominant language other than English) limit the effectiveness of Licensor's
promotional efforts with respect to such market in the Licensed Territory,
Licensor may, but shall not be obligated to, consider an adjustment to the
Annual Advertising Fee payable under this Section V.C. or
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adjusting its promotional activities to improve the effectiveness thereof in
such market in the Licensed Territory.
D. Annual Administrative Fee
From time to time, upon not less than thirty (30) days written
notice to Licensee, Licensor shall be entitled to levy, and Licensee shall pay,
a nonrefundable annual administrative fee (the "Annual Administrative Fee"), not
to exceed, each calendar year, one-half of one cent ($0.005) per person in the
Licensed Territory as determined in a manner consistent with that applied to the
determination of the Annual License Fee, in the event that Licensor determines
that such a fee is necessary to defray Licensor's administrative costs,
including costs associated with professional fees and expenses, incurred in
connection with performing Licensor's duties under this License Agreement and
otherwise protecting and promoting the Marks and assuring that the Quality
Standards continue to be consistent with changing market conditions and
technological change. In the event that Licensee provides Primary Services as a
reseller for more than one provider of Cellular Telephone Services or any form
of Alternate Wireless Service, Licensor shall be entitled to receive an
additional Annual Administrative Fee (or such part thereof as Licensor shall
deem appropriate) with regard to each such reseller relationship, reflecting the
increased costs of conducting customer surveys and otherwise monitoring
Licensee's performance under this License Agreement.
E. Escalation of License and Advertising Fees
In addition to any other increases in the Annual License Fee
and the Annual Advertising Fee which are permitted herein, Licensor may, in its
sole discretion, increase the Annual License Fee payable for any Initial Year or
Subsequent Year commencing on or after January 1, 1998, and/or increase the
Annual Advertising Fee payable for any Initial Year or Subsequent Year
commencing on or after January 1, 1999, by amounts commensurate with the
increases In the Consumer Price Index or media expenses, as the case may be, in
accordance with the following:
1. Annual License Fee for the applicable Initial Year or
Subsequent Year (subject to the minimum Annual
License Fee of $3,000.00 per market in the Licensed
Territory)=
$0.02 X CPI-2 X Pops
-----
CPI-1
where:
(a) "CPI" shall mean the monthly National Consumer Price
Index for All Urban Consumers, U.S. City Average (All Items; 1982-84 equals 100)
issued by the U.S. Department of Labor, Bureau of Labor Statistics, or its
successor agency, or if such index is no longer in effect, the successor index
thereto;
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(b) "CPI-1" shall mean the monthly CPI for the month of
June, 1996; and
(c) "CPI-2" shall mean the higher of (i) CPI-1 or (ii)
the monthly CPI for the latest calendar month which ends at least six (6) months
before the commencement of the applicable Initial Year or Subsequent Year for
which the adjustment of fee(s) is being computed.
2. Annual Advertising Fee for the applicable Initial
Year or Subsequent Year=
$0.07 X MC-2 X Pops
----
MC-1
where:
(a) "MC-1" shall mean the actual media buy liabilities
incurred by Licensor in connection with Licensor's obligations and activities
under Section VIII of this License Agreement for the immediately preceding
annual period;
(b) "MC-2" shall mean the higher of (i) MC-1 or (ii) the
media buy liabilities Licensor would incur in the following annual period if it
engaged in the activities and purchased the goods and services giving rise to
the media buy liabilities constituting MC-1. In making the determination
required by the preceding sentence, Licensor shall utilize the "netcosts-TM-"
reports publication describing Broadcast Network, Cable Network and Syndication
CPM and CPP projections published by Ephron, Papazian & Ephron, Inc., or any
successor or equivalent index generally utilized by the industry to estimate
future costs associated with promotional activities.
F. Consumer Service Number Fee
During such time as Licensor makes the Consumer Service Number
program available to licensees, Licensee shall pay to Licensor an annual
Consumer Service Number fee (the "Consumer Service Number Fee") equal to one
thousand dollars ($1,000.00) for each MSA and five hundred dollars ($500.00) for
each RSA constituting a part of the Licensed Territory, subject to a maximum fee
payable under this Section V.F. of thirty thousand dollars ($30,000.00) with
respect to the Licensed Territory or all of Licensee's Licensed Territories
under other License Agreements with Licensor. The Consumer Service Number Fee
shall be due on each January 1 and payable on or before each January 31 of each
Subsequent Year during the Term, for the full calendar year; provided however,
the Consumer Service Number Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Consumer
Service Number Fee for the Initial Year shall be prorated to reflect the portion
of that calendar year included within the Initial Year. The Consumer Service
Number Fee will not be
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prorated or refunded in whole or in part under any other circumstances. The
Consumer Service Number Fee shall be in addition to any other charges or fees
that may be payable by Licensee to any Long Distance Carrier for the Consumer
Service Number program, as contemplated by Section IV.J. hereof. In addition to
the Consumer Service Number program, Licensor may establish similar programs for
other forms of wireless telephony (the "Other 800 Programs"). To the extent that
the Primary Services or Core Products include such forms of wireless telephony,
Licensee shall participate in the Other 800 Programs designed therefor. Licensor
shall be entitled to receive fees from Licensee for the Other 800 Programs
calculated in a similar manner as those for the Consumer Service Number program.
G. Additional Fees
From time to time following the date hereof, Licensor may
propose, pursuant to Section IV.E. hereof, changes to or the implementation of
one or more periodic fees to be payable by licensees with regard to the Primary
Services, Core Products, Additional Products or Additional Services, or other
fees deemed appropriate by Licensor. Upon approval thereof in accordance with
Section IV.E., such fees shall become an obligation of Licensee hereunder.
H. Special Licensee Related Expenses
Licensor shall be entitled to levy, and Licensee shall
promptly pay, a fee of not less than five hundred dollars ($500.00) per market
with regard to any Change of Control of Licensee or assignment by Licensee of
its rights and obligations hereunder (including any transfer or Change of
Control of a market constituting part of the Licensed Territory) or upon any
other assignment, transfer, pledge, Change of Control or other transaction
contemplated or permitted under Article X.
I. Payments, Interest on Late Payments
All fees and charges payable under this License Agreement
shall be payable in good funds at Licensor's address specified herein, or at
such other address as Licensor shall from time to time designate in writing.
Notwithstanding any other provision of this Article V, Licensor shall be
entitled for reasons of administrative convenience or otherwise to defer the
date by which any fee or charge payable by Licensee hereunder may be due. No
such deferral shall be a waiver of any of Licensor's rights hereunder. If
payment of any Application Fee, Annual License Fee, Annual Advertising Fee,
Consumer Service Number Fee, Annual Administrative Fee or other fee or charge
under this License Agreement is overdue, Licensee shall pay Licensor, in
addition to the overdue amount, interest on such overdue amount from the date it
was payable until paid at the rate which is two (2) points above the prime rate
published by the Wall Street Journal on the date payment was due, or the maximum
rate permitted by applicable law, whichever is less. Entitlement to such
interest shall be in addition to any other remedies Licensor may have.
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VI. MARKS
A. Ownership of Marks
Licensor is the owner of all right, title and interest in and
to the Marks (which shall include for the purposes of this Section VI. all of
the permits and contractual or other arrangements (including registrations of
trademarks, service marks and domain names) relating to ownership or control of
the Marks, the Consumer Service Number and the like). No sublicense by Licensee
pursuant to Sections IV.G. or X.C. shall create any ownership interest in the
Marks in Licensee or any sublicensee thereof nor any right by Licensee to
sublicense use of the Marks in the future.
B. General Use
With respect to Licensee's use of the Marks pursuant to this
License Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor
and shall use them only in the manner authorized and permitted by Licensor
herein, and only in accordance with the Graphic Standards Manual. Without
limiting the generality of the foregoing, Licensee shall comply with Licensor's
guidelines and directives (i) for use of certain Marks with specified Additional
Products and Additional Services, and (ii) concerning the use of the Marks or
derivatives thereof in, or as a part of, the domain name of any World Wide Web
pages or the names of any similar Internet locales or addresses owned by or on
behalf of Licensee.
2. Except to the extent permitted as Incidental Use, Licensee
shall use the Marks only in connection with providing Primary Services, Core
Products, Additional Services and Additional Products in the Licensed Territory,
in accordance with the Quality Standards and as otherwise set forth in this
License Agreement.
3. Licensee shall identify the Licensor as the registered
owner of the Marks in such ways as Licensor may direct, including but not
limited to the identification of Licensor as such on Licensee's invoices, order
forms, receipts and contracts.
4. Except as provided in Section IV.G. above and Section X.C.
below, Licensee shall have no right to sublicense the Marks to any other person
or entity, and Licensee shall have no right to allow its resellers, if any, to
make use of the Marks. Any use by a dealer, retailer or agent under Section
IV.G. or by an Affiliate under Section X.C. shall be consistent with Licensee's
rights and responsibilities hereunder with respect to the use of the Marks and,
in no event, shall any such permitted use exceed or extend beyond Licensee's
rights hereunder to use the Marks. Licensee agrees to monitor and be responsible
for the use of the Marks by its agents, retailers and dealers and its Affiliates
and to promptly provide or cause to be provided to Licensor upon request, from
time to time, such reasonable information concerning the use of the Marks by
such dealers, retailers and agents and Affiliates to permit Licensor to
ascertain
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Licensee's compliance hereunder. From time to time upon the reasonable request
of Licensor, Licensee shall promptly supply Licensor with a list of dealers,
retailers, agents and Affiliates authorized to use the Marks and/or promptly
confirm whether any particular dealers, retailers, agents or Affiliates remain
authorized and in good standing with respect to use of the Marks.
5. Licensee's right to use the Marks is limited to the uses
specifically authorized under this License Agreement.
6. Licensee shall not use the Marks or any of their
derivatives, or any marks confusingly similar thereto, as part of Licensee's
corporate or other legal name. Licensee and any dealers, retailers or agents
designated under Section IV.G. or Affiliates designated under Section X.C. may
file and maintain trade name or fictitious name registrations in the
jurisdictions within the Licensed Territory where legally required or otherwise
appropriate to reflect the fact that Licensee is doing business as "Cellular
One." If other licensees desire to file and maintain such a trade name or
fictitious name registration pursuant to a license agreement with Licensor,
Licensee shall consent or otherwise cooperate with Licensor and such licensees
in meeting the state or local requirements to permit such trade or fictitious
name registrations to coexist. Licensee shall execute any documents deemed
necessary or desirable by Licensor or its counsel to assist Licensor in the
protection or registration of the Marks or to maintain or defend Licensor's
title thereto, or their continued validity and enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should Licensee become aware. Licensor agrees, at its sole cost and expense, to
institute or otherwise defend proceedings as may be appropriate to protect the
Marks, including, to the extent necessary, defense of such proceedings following
termination of this License Agreement. In connection with any such proceedings,
Licensee agrees to execute any and all documents and to do whatever reasonable
acts and things as may, in the opinion of counsel for Licensor, be necessary or
advisable to assist Licensor in carrying out the prosecution or defense, and
Licensor agrees to reimburse Licensee for all direct costs incurred by Licensee
in doing these acts and things, except that Licensee shall bear the salary costs
of its employees. Licensor shall have the sole right to institute, defend and
direct proceedings relating to the Marks and Licensee shall not file or
institute any proceedings relating to the Marks without the prior written
consent of Licensor. In the event that Licensee does file or institute any
proceedings relating to the Marks, Licensee shall promptly supply Licensor with
copies of any and all papers and materials relating to such proceedings,
together with such information relating thereto as Licensor may reasonably
request. Notwithstanding anything to the contrary in Section VI.B., and whether
or not Licensor undertakes the prosecution or defense of a legal proceeding
relating to one or more of the Marks, Licensor's liability for damages and
losses to Licensee relating to use of one or more of the Marks (including any
loss resulting from Licensor's loss of title or ownership of the Marks or the
rights thereto) shall be limited to the amount of the Application Fee plus the
Annual License Fee paid by Licensee under this License Agreement for the
market(s) in which such liability is determined, for the year during which such
liability is determined.
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8. The Marks are valid and serve to identify the Primary
Services, the Core Products, the Additional Services and the Additional Products
provided by those who are authorized to operate under the Marks. Licensee shall
not directly or indirectly contest the validity, registration or Licensor's
ownership of the Marks, any of Their derivatives, any of the icons or other
marks owned by Licensor, and Licensee shall not directly or indirectly apply for
or otherwise seek to register as a trademark, service mark or design any mark or
other designation which incorporates, which is the same as or confusingly
similar to, or which may dilute Licensor's rights in and to, any of the Marks or
their derivatives, any of the icons or other marks owned by Licensor.
9. Licensee's use of the Marks, and the use thereof by its
agents, retailers, dealers and Affiliates, if any, pursuant to this License
Agreement does not give Licensee or any agent, retailer, dealer or Affiliate,
any ownership interest or other interest in or to the Marks, except the license
granted in this License Agreement. Any and all goodwill arising from use of the
Marks shall inure solely and exclusively to the benefit of Licensor, and upon
expiration or termination of this License Agreement and the license granted by
it, no monetary amount shall be assigned as attributable to any goodwill
associated with use of the Marks by Licensee or its agents, retailers, dealers
or Affiliates.
10. Licensor has and retains the following rights, among
others:
(i) To use the Marks itself, in connection with
local, regional and national advertising and promotion, including
conducting activities designed to enhance the goodwill associated with
the Marks, and, subject to the provisions of Section I hereof, with
directly or indirectly selling products and services (including
telecommunications products and services) both within and outside the
Licensed Territory;
(ii) To grant licenses for use of the Marks in
addition to those licenses already granted to existing licensees of the
Marks;
(iii) To use the Marks in any manner reserved for
Licensor pursuant to Section I; and
(iv) To create derivatives of the Marks and exploit,
promote and license such derivatives.
11. In the event that any of the Marks or icons, including any
trademarks, service marks and design logos adopted after execution of this
License Agreement which become Marks, can no longer be used, Licensor reserves
the right to provide a substitute mark or design with reasonable notice to
Licensee.
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C. INCIDENTAL USE
1. For the purposes of this License Agreement, the promotion,
sale and delivery of Primary Services, the Core Products, Additional Services
and Additional Products in accordance with this Section VI.C. shall be
considered "Incidental Use" of the Marks.
2. During the Term, and subject to the other provisions of
this License Agreement, Licensee shall be entitled to conduct its business of
providing Primary Services, Core Products, Additional Services and Additional
Products throughout the Licensed Territory, without the necessity of abandoning
or failing to serve any part of the Licensed Territory because such business
might become known to, or because Licensee might from time to time sell products
or services to, persons or businesses resident or located outside of the
Licensed Territory. Licensee shall not be prohibited by the terms of this
License Agreement from promoting Primary Services outside of the Licensed
Territory to the extent necessary to provide Primary Services in accordance with
the Quality Standards throughout the Licensed Territory. In addition, except
that Licensee shall not specifically direct its promotional activities to
potential customers outside of the Licensed Territory, Licensee shall be
entitled to utilize regional or other media in connection with promoting its
Primary Services, Core Products, Additional Services and Additional Products
within the Licensed Territory. Licensee shall not adopt promotional pricing or
otherwise seek to distribute Primary Services, Core Products, Additional
Services or Additional Products outside of the Licensed Territory, but shall not
be precluded from doing business with persons or entities it knows to be
resident outside of the Licensed Territory.
3. This Section VI.C. does not entitle Licensee to utilize the
Marks for products or services other tHan Primary Services, Core Products,
Additional Services and Additional Products, nor does it allow use of the Marks
by Licensee outside of the Licensed Territory except strictly in accordance with
Section VI.C.2. above. Licensor shall have the sole right to restrict Licensee's
Incidental Use of the Marks at any time and in such manner as Licensor shall
determine necessary or appropriate to prevent such Incidental Use from
breaching, infringing upon, or otherwise conflicting with, the rights of any
other current or future licensee of the Mark(s). Licensee's Incidental Use of
the Marks may also be restricted under Section VI.D. below, notwithstanding this
Section VI.C., to avoid or mitigate Potential Customer Confusion (as
subsequently defined).
D. POTENTIAL CUSTOMER CONFUSION
1. Notwithstanding any other provision of this Section VI. to
the contrary, in the event that as a result of economic, demographic or
technological changes within or affecting the Licensed Territory from and after
the date of this License Agreement, Licensor reasonably determines that actual
or potential customers of another licensee of the Marks, or any of them, are or
are likely to consider Licensee to be, or to be affiliated with, such other
licensee of the Marks or not readily distinguishable therefrom (such
circumstances being referred to as "Potential Customer Confusion"), Licensor
shall be entitled to modify the provisions of this
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License Agreement and any Exhibit hereto for the purpose of reducing the
circumstances giving rise to the Potential Customer Confusion.
2. In seeking to reduce Potential Customer Confusion, Licensor
shall consider requiring providers (including Licensee) of products or services
which are the source of Potential Customer Confusion to adopt tag lines or
otherwise differentiate such products or services before amending this License
Agreement in a manner that would require a material modification in the conduct
of Licensee's telecommunications business relating to the Marks.
3. Without limiting the generality of the foregoing, and
without limiting any other rights which Licensor may have hereunder with respect
to Additional Products or Additional Services, Licensor shall be entitled, with
or without the consent of Licensee, to reduce the size of the Licensed Territory
with regard to Additional Products or Additional Services or to delete or modify
the description of any Additional Product or Additional Service set forth on
Exhibit D hereto for the purpose of mitigating or eliminating Potential Customer
Confusion. Upon such reasonable written notice to Licensee as Licensor in its
discretion determines, but in no event to exceed sixty (60) days, regarding the
existence of Potential Customer Confusion resulting, in whole or in part, from
Licensee's promotional activities. Licensee shall modify such promotional
activities to the extent reasonably necessary to prevent or mitigate, to the
extent possible, the continuation of events or circumstances previously giving
rise to Potential Customer Confusion.
VII. CONFIDENTIAL INFORMATION
A. DEFINITION
Any and all information, knowledge, know-how, and techniques
which Licensor or Licensee designates as confidential shall be deemed
"Confidential Information" for purposes of this License Agreement, except:
1. Information which either party can demonstrate was known to
it prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by
one party to the other, had become or later becomes a part of the public domain,
through publication or communication by others through no fault of the party
receiving the information.
B. PROHIBITIONS
Licensor and Licensee each agree that it will use its best
efforts, during the term of this License Agreement and for one year following
expiration or termination of this License Agreement, to prevent the
communication or divulgence, to any other person, partnership, association,
corporation or business enterprise of any Confidential Information which may be
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communicated to it or of which it may be apprised pursuant to this License
Agreement. Licensor shall be deemed to have used its best efforts to prevent
such communication or divulgence if it has distributed guidelines to its
employees in an effort to maintain an information separation between Licensor
and the Partnership Partners and their affiliates, and, specifically, it has
instructed its employees not to divulge any Confidential Information, including
customer information, to the Partnership Partners or their affiliates, and shall
have obtained the executed confidentiality agreements referred to in Section
VII.C. from those persons designated in such Section. In circumstances where
Licensee is in direct competition with one of the Partnership Partners or their
affiliates in any one or more of the market(s) in the Licensed Territory,
Licensor will instruct its employees that no information regarding Licensee's
business of providing Primary Services, Core Products, Additional Products or
Additional Services in that market should be disclosed to that Partnership
Partner or its affiliates. The parties agree that statistical performance
information regarding licensees of the Marks which does not identify individual
markets may be reported to the Partnership Partners and their affiliates and
shall not be considered Confidential Information. Notwithstanding the foregoing,
either party to this License Agreement and the Partnership Partners and their
affiliates may disclose any Confidential Information which any such party may be
legally required to disclose to a government agency or in the context of
litigation or arbitration.
C. LICENSOR CONFIDENTIALITY AGREEMENTS
Licensor will execute, and will cause its employees, agents
and representatives, who are reasonably expected to have access to Confidential
Information of Licensee to execute, an appropriate confidentiality agreement,
which shall provide that any Confidential Information of Licensee made available
to Licensor, Licensor's employees, agents or representatives, pursuant to this
License Agreement, will be kept confidential by all such persons.
D. CONSEQUENCES OF BREACH
Licensor and Licensee each acknowledges that any failure to
comply with this Section VII will cause the other party irreparable injury, and
each party agrees to pay all court costs and reasonable attorneys' fees incurred
by the other party in obtaining specific performance of, or an injunction
against violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Marks, the parties agree as follows:
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A. LICENSEE'S ADVERTISING
All advertising and promotion by Licensee in any manner or
medium must be conducted in a dignified manner and must conform to the written
and graphic guidelines specified by Licensor from time to time, including the
Graphic Standards Manual. Licensee shall display or otherwise employ the Marks
in the manner prescribed by Licensor on all signs and all other advertising and
promotional materials used in connection with Licensee's business, to the extent
relating to Primary Services, Core Products, Additional Services and Additional
Products. If requested by Licensor, Licensee at its own expense shall promptly
provide to Licensor photocopies or other photographic, mechanical, magnetic or
other representations of all print advertisements and promotional materials,
radio/television advertising sequences, graphical interface presentations and
other media presentations using the Marks which Licensee has used at any time
during the six (6) months preceding Licensor's request.
B. MATERIALS PROVIDED BY LICENSOR
Licensor may provide from time to time, in its sole
discretion, advertising and promotional plans and materials, including without
limitation, newspaper mats, television and radio tapes, graphical interface
files, promotional brochures and sales aids. Licensee may use all or any of
these materials in its sole discretion
C. CELLULAR ONE PROMOTIONAL FUND, OTHER ADVERTISING FUNDS
Licensor has established, and Licensee agrees to
participate in a fund for national, local and regional advertising and
promotional and other public programs and activities (the "Cellular One
Promotional Fund" or the "Fund") for licensees of the Marks. Licensor shall
have the right to determine, in accordance with Section V.C. hereof, the
amount of contributions to be made by licensee with respect thereto for any
year or years during the Term hereof, including any renewal Term. Licensee
agrees to make contributions to the Cellular One Promotional Fund as required
hereunder and under Section V.C. hereof, and agrees that the Fund is to be
maintained and administered by Licensor or its designee as follows:
1. Licensor or its designee shall direct all advertising
and/or promotional programs with sole discretion over the concepts, materials,
and media used in such programs and the placement and allocation thereof.
Licensee agrees and acknowledges that the Cellular One Promotional Fund is
intended to maximize general public recognition, acceptance, and use of the
Marks for the benefit of all licensees of the Marks, and that Licensor or its
designee are not obligated, in administering the Fund, to undertake expenditures
for Licensee which are equivalent or proportionate to Licensee's contribution,
or to ensure that any particular licensee benefits directly or PRO RATA from
expenditures by the Fund.
2. The Cellular One Promotional Fund, all contributions
thereto, and any interest earnings thereon, shall be used for the purpose of
meeting any and all costs of administering, researching, directing, and
preparing advertising and/or promotional activities
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including the cost of preparing and conducting television, radio, magazine,
World Wide Web, e-mail and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; marketing surveys and other public relations
activities; use of advertising agencies to assist therein; promotional brochures
and other marketing materials for licensees of the Marks; and indirect costs,
including reasonable allocation of Licensor's administrative, personnel and
overhead expenses, associated with the implementation of advertising programs,
such as equipment costs and similar costs relating to special national or
regional programs or other similar programs contemplated by Section III.E. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Licensee shall contribute to the Cellular One Promotional
Fund in accordance with Section V.C. All sums paid by licensees of the Marks to
the Fund shall be maintained in an account separate from the other monies of
Licensor and shall not be used to defray any of Licensor's administrative
expenses, except for such reasonable administrative costs and overhead as
Licensor may incur in activities reasonably related to the administration or
direction of the Fund and advertising programs for licensees of the Marks, and
as further set forth in Section VIII.C.2. Except as set forth in this Section
VIII.C., the Fund and any incidental earnings shall not otherwise inure to the
benefit of Licensor. Licensor or its designee shall maintain separate
bookkeeping accounts for the Fund.
4. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however, excess
amounts remain in the Fund at the end of such taxable year, all expenditures in
the following taxable year(s) shall be made first out of accumulated interest
earnings from previous years, next out of interest earnings in the current year,
and finally from contributions.
5. The Cellular One Promotional Fund is not and shall not be
an asset of Licensor or its designee. A statement of the operations of the Fund
as shown on the books of the Fund shall be prepared annually by an independent
certified public accountant selected by Licensor and shall be made available to
Licensee upon written request.
6. Although the Fund is intended to be of perpetual duration,
Licensor maintains the right to terminate the Fund. The Fund shall not be
terminated, however, until all monies in the Fund have been expended for
advertising and/or promotional purposes or returned to contributors on the basis
of their respective contributions.
In addition, Licensor may establish and Licensee shall
contribute to one or more separate advertising funds for the purpose of
promoting types or groups of Primary Services, Core Products, Additional
Products or Additional Services, utilizing all or part of the fees collected
pursuant to Section V.C. hereof. Except as specifically provided by Licensor
when establishing such fund, or as may be permitted under this License
Agreement, such additional funds shall be
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subject to provisions identical to those applicable to the Cellular One
Promotional Fund described herein.
D. PRICE DISCRETION
Licensee shall have the right to sell its products and offer
services at any price Licensee may determine, and shall in no way be bound by
any price which may be recommended or suggested by Licensor.
IX. INSURANCE
A. REQUIREMENT
Licensee shall promptly procure, and shall maintain in full
force and effect at all times during the Term of this License Agreement, at
Licensee's expense, an insurance policy or policies protecting Licensee,
Licensor, and the Partnership Partners, and their respective affiliates, agents,
officers, directors, shareholders, and employees, against any demand or claim
with respect to personal injury, death, or property damage, or any loss,
liability, or expense whatsoever arising or occurring upon or in connection with
Licensee's business of providing and goods or services utilizing or in
connection with the Marks. Licensor and the Partnership Partners, and their
respective affiliates, agents, officers, directors, shareholders, and employees,
shall be named additional insureds in each such policy.
B. MINIMUM COVERAGE
The policy or policies shall be written by an insurance
company with an Alfred M. Best rating of A or A+, or such other insurance
company as Licensor may reasonably approve, and shall include, at a minimum,
such coverages and policy limits as may reasonably be specified by Licensor from
time to time, which coverages may include, without limitation, comprehensive
general liability insurance, including personal injury, as well as comprehensive
automobile liability coverage for both owned and non-owned vehicles, and
property damage liability coverage, naming Licensor and the Partnership
Partners, and their respective affiliates, agents, officers, directors,
shareholders and employees, as additional insureds in each such policy or
policies. Until such time as Licensor shall in good faith determine that
economic or other circumstances affecting the Cellular One license program
require increased insurance coverage, the following minimum insurance
requirements shall be applicable.
1: General liability: $1,000,000 per occurrence or $2,000,000
in the aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
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4. Automobile liability: $1,000,000 per occurrence for owned
and operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy
limit;
6. Disease: $500,000; and
7. Accident: $500,000
C. CERTIFICATES OF INSURANCE
Within thirty (30) days after this License Agreement is
executed, and thereafter at least thirty (30) days prior to the expiration of
any such policy, Licensee shall deliver to Licensor Certificates of Insurance
evidencing the proper coverage with limits not less than those required
hereunder. All Certificates shall expressly provide that not less than thirty
(30) days prior written notice shall be given Licensor in the event of material
alteration to, or cancellation of, the coverages. evidenced by such
Certificates.
X. TRANSFER OF INTEREST
A. TRANSFER BY LICENSOR
Licensor shall have the right to transfer or assign all or any
part of its rights or obligations herein to any person or legal entity. If
Licensor's assignee assumes all of the obligations of Licensor under this
License Agreement and sends written notice of the assignment so attesting,
Licensee shall promptly execute a general release of Licensor and the
Partnership Partners, and any affiliates thereof, from any claims against or
liabilities of Licensor, the Partnership Partners or such affiliates arising
under this License Agreement.
B. TRANSFER AND PLEDGE BY LICENSEE
If Licensee desires in the Licensed Territory (i) to sell its
Primary Services business for one or more markets and assign its rights under
this License Agreement with respect to such market(s), (ii) to pledge or assign
its rights under this License Agreement to a financial institution or other
party in connection with a financing transaction involving Licensee, or (iii)
enter into a transaction resulting in a Change of Control of Licensee, Licensee
shall notify Licensor in writing and Licensee shall be entitled to transfer,
assign, or pledge its rights under this License Agreement, or effect the Change
of Control, as the case may be, provided:
1. Licensee shall not be in default under this License
Agreement.
2. The transferee shall enter into a written assignment, in a
form satisfactory to Licensor, assuming and agreeing to comply with, at
Licensor's option, either this License
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Agreement or Licensor's then current form or forms of license agreement relating
to the Marks, except that in the case of a pledge or collateral assignment to a
financial institution referred to in Section X.B.(ii), such pledge or collateral
assignment need only be made subject to all of the terms and conditions of this
License Agreement. In the case of a Change of Control, Licensee and the new
controlling entity shall enter into a written agreement, in a form satisfactory
to Licensor, agreeing that Licensee shall continue to be entitled to the rights
and subject to the obligations of a licensee hereunder.
3. Licensee shall remain liable for all of the obligations to
Licensor under this License Agreement prior to the effective date of transfer
and shall execute any and all instruments reasonably requested by Licensor to
evidence such liability. The transfer or Change of Control shall not affect any
of the terms or provisions of this License Agreement or the status of the
market(s) in the Licensed Territory pursuant hereto (including without
limitation, a market's default or probation status under this License
Agreement), all of which shall be or remain fully applicable to the transferee
or Licensee, as the case may be.
4. Where Licensee provides Primary Services in more than one
market and the transfer or Change of Control involves market(s) comprising less
than all of the markets in the Licensed Territory, the transferee or Licensee,
as the case may be, shall, at Licensor's option, enter into Licensor's then
current form of license agreement for the market(s) being transferred or to
which the Change of Control relates; in such event, this License Agreement shall
remain in full force and effect with respect to Licensee's remaining market(s),
if any, following the transfer or Change of Control.
5. The transferee or new controlling entity, or proposed
transferee or new controlling entity, as the case may be, shall provide Licensor
with such financial data, certificates of insurance, copies of Permits, and
other information as are required to be provided by Licensee hereunder in
connection with entering into this License Agreement, or otherwise, and such
materials and information shall be current and complete as of the effective date
of such transfer or Change of Control.
6. The transferee shall promptly pay Licensor any transfer
fees or charges then being charged generally by Licensor to transferees of
licenses to use the Marks. In the case of a Change of Control, Licensee shall
pay Licensor any similar fees then being charged generally by Licensor for such
Changes of Control with respect to licensees of the Marks.
Licensee shall be entitled to transfer, assign or pledge its rights
under this License Agreement, or enter into a transaction resulting in a Change
of Control of Licensee, with respect to a portion of a market in the Licensed
Territory, pursuant to the provisions of this Section X.B.
Licensee shall not be entitled to transfer, assign or pledge any of its
rights or obligations under this License Agreement, except by complying with the
provisions of this Section X.B.
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relating thereto, nor shall Licensee permit a Change of Control to occur without
complying with the provisions of this Section X.B.
C. RIGHT TO ADD AFFILIATE AS PARTY
Subject to Section V.H., with the consent of Licensor,
Licensee shall be entitled to assign any or all of its rights under this License
Agreement to use the Marks in connection with the provision of Primary Services,
Core Products, Additional Services or Additional Products in the Licensed
Territory, or any part thereof, to an "Affiliate," which shall mean any business
entity Controlling, under the Control of, or under common Control with Licensee.
No assignment by Licensee of any rights pursuant to this Section X.C. shall
relieve Licensee of its obligations hereunder. In addition, Licensor's consent
to such assignment shall cease to be effective upon the occurrence of a Change
of Control with regard to Licensee or its assignee which results in Licensee or
its assignee no longer being Affiliates. Licensor shall be entitled, from time
to time and upon its reasonable request, to receive from Licensee and any
assignee thereof a certification that assignee continues to be entitled, under
this Section X.C. to utilize the Marks, together with the facts supporting such
entitlement. No assignee of Licensee shall be entitled to any vote pursuant to
Section IV.E. or to any notices from Licensor hereunder. No conduct on the part
of Licensor with regard to any assignee of Licensee shall be deemed to cause
such assignee to become a licensee hereunder or to have any ownership interest
in this License Agreement. Licensee shall give Licensor prior written notice of
any Change of Control, as defined below, of Licensee or any assignee of
Licensee.
D. CHANGE OF CONTROL
For the purposes of this License Agreement, a "Change of
Control" with regard to any entity shall mean the disposition or acquisition,
directly or indirectly, of Control with regard to such entity. "Control" or
"Controlling" with regard to an entity shall mean the record or beneficial
ownership, directly or indirectly, by any person or entity, or group of persons
or entities, of in excess of a majority of the equity securities of the entity
in question, or the power to designate a majority of the members of the Board of
Directors or other governing body thereof or to otherwise determine the
management and policies of the entity in question.
XI. DEFAULT AND TERMINATION
A. TERMINATION BY LICENSEE
Licensee shall have the right to terminate this License
Agreement without cause at any time upon at least one hundred eighty (180) days
advance written notice to Licensor. Licensee shall remain fully responsible for
any fees and other obligations accruing to Licensor during such notice period.
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B. TERMINATION BY LICENSOR - WITHOUT NOTICE
Licensee shall be deemed to be in default under this License
Agreement, and all rights granted herein shall automatically terminate without
notice to Licensee, if Licensee becomes insolvent or makes a general assignment
for the benefit of creditors; or if a petition in bankruptcy is filed by
Licensee or against Licensee and not actively opposed by Licensee; or if
Licensee is adjudicated as bankrupt or insolvent; or if a bill in equity or
other proceeding for the appointment of a receiver of Licensee or other
custodian for Licensee's business or assets is filed and consented to by
Licensee; or if a receiver or other permanent or temporary custodian of
Licensee's assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; or if proceedings for a composition with creditors under
any state or federal law should be instituted by Licensee or against Licensee
and not actively opposed by Licensee; or if a final judgment remains unsatisfied
or of record for thirty (30) days or longer (unless supersedeas bond is filed);
or if Licensee is dissolved except where the Licensee is a limited partnership
and, promptly following dissolution, such limited partnership is reconstituted
with the same general partners; or if a suit to foreclose any lien or mortgage
against real or personal property used in the operation of Licensee's Primary
Services business is instituted against Licensee and not dismissed within thirty
(30) days or, if actively being opposed by Licensee, within one hundred eighty
(180) days; or if execution is levied against Licensee's Primary Services
business, or any of the property related thereto; or if any material real or
personal property of Licensee used in its Primary Services business shall be
sold after levy thereupon by any sheriff, marshal, or constable; or if Licensee
at any time ceases to operate or otherwise abandons its Primary Services
business or otherwise forfeits the right to do or transact business in any
market(s) in the Licensed Territory; or if Licensee loses its FCC license or FCC
construction permit or any other material Permit for one or more market(s) in
the Licensed Territory or otherwise forfeits the right to do or transact
business in one or more market(s), in which event Licensee's rights under this
License Agreement with respect to such market(s) shall automatically terminate
and this License Agreement shall continue with respect to the remaining
market(s) in the Licensed Territory for which Licensee continues to hold all
necessary FCC license(s) and Permits.
C. TERMINATION BY LICENSOR - UPON NOTICE
Upon the occurrence of any of the following events, Licensee
shall be deemed to be in default and Licensor may, at its option, terminate this
License Agreement and all rights granted hereunder without affording Licensee
any opportunity to cure the default. Said termination shall be effective
immediately upon receipt of notice by Licensee (and Licensee shall remain fully
responsible for any fees and other obligations accruing to Licensor until such
termination becomes effective):
1. If Licensee has been advised of its probation status
pursuant to Section XI.E. and Licensee does not make a good faith effort to
formulate and implement a plan during the term of probation, or, at the end of
the term of probation, Licensee fails to meet the 85% overall minimum customer
satisfaction rating (or the higher percentage established by
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Licensor under Section IV.A.) required in the Licensed Territory as a whole by
the Quality Standards for Primary Services and Core Products;
2. If with regard to the Licensed Territory or any market
constituting a part thereof, Licensee fails in any customer satisfaction survey
conducted pursuant to Section III.C. to attain an overall customer satisfaction
rating of more than 70%, regardless of the terms of any probation;
3. If any principal stockholder or officer of Licensee is
convicted of a felony, a fraud, or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the Marks, the
goodwill associated therewith, or Licensor's interest therein;
4. If a threat or danger to public health or safety results
from the operation of the Licensee's Primary Services business or any of its
businesses relating to the delivery of any Primary Services, Core Products,
Additional Products or Additional Services;
5. If Licensee purports to assign or transfer any rights or
obligations under this License Agreement to any third party (including without
limitation, any reseller) or to effect a Change of Control, contrary to the
terms of Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof, Licensee
discloses or divulges Confidential Information provided to Licensee by Licensor;
7. If Licensee knowingly submits any false reports of
information to Licensor or any entity conducting a customer satisfaction survey
either during the application process or subsequent to the execution of this
License Agreement; or
8. If Licensee directly or indirectly contests in any court
or proceeding the validity or registration of, or Licensor's ownership of,
any of the Marks or other rights licensed hereunder.
D. TERMINATION BY LICENSOR - AFTER NOTICE AND OPPORTUNITY TO CURE
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from Licensor
of a written notice of termination within which to remedy any default hereunder
(or, if the default cannot reasonably be cured within such thirty (30) days, to
initiate within that time substantial and continuing action to cure the
default), and to provide evidence thereof to Licensor. If any such default is
not cured within that time (or, if appropriate, substantial and continuing
action to cure the default is not initiated within that time), or such longer
period as applicable law may require, this License Agreement shall terminate
without further notice to Licensee effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require (and
Licensee shall remain fully responsible for any fees and other obligations
accruing to
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Licensor until such termination occurs). Licensee shall be in default hereunder
for any failure to comply with any of the requirements imposed by this License
Agreement or to carry out the terms of this License Agreement in good faith.
Such defaults shall include, without limitation, the occurrence of any of the
following events:
1. If Licensee fails to offer the Primary Services and the
Core Products of nationwide call delivery and nationwide roaming, or any of
them, under the specified Marks on a continuous basis and in a manner reasonably
appropriate to promote and further the goodwill of the Marks, throughout the
Licensed Territory in accordance with this License Agreement;
2. If Licensee fails, refuses or neglects promptly to pay when
due any monies, fees or charges due to Licensor or the Fund, or under this
License Agreement, or fails, refuses or neglects promptly to submit information
as required under this License Agreement, or makes any false statements in
connection therewith;
3. If Licensee fails to comply, in any material respect, with
the Graphic Standards Manual or the Quality Standards;
4. If Licensee directly or indirectly misuses or makes any
unauthorized use of the Marks or otherwise materially impairs the goodwill
associated therewith or Licensor's rights therein;
5. If Licensee directly or indirectly engages in any business
or markets any service or product under a name or mark which, in Licensor's
opinion, is confusingly similar to, or may have a tendency to dilute, the Marks;
6. If Licensee shall breach or fail to timely perform any of
its covenants or obligations under this License Agreement including, without
limitation, the covenants of Licensee relating to the Consumer Service Number
program and the Other 800 Programs;
7. If Licensee fails, refuses or neglects promptly to pay when
due any fees or charges or otherwise timely perform its obligations to the Long
Distance Carrier with regard to the Consumer Service Number;
8. If Licensee, by act or omission, permits a continued
violation in connection with the operation of its business of any Permit, law,
ordinance, rule or regulation of a governmental agency, in the absence of a good
faith dispute over its application or legality and without promptly resorting to
an appropriate administrative or judicial forum for relief therefrom; or
9. If any dealer, agent, retailer or Affiliate of Licensee
misuses the Marks or otherwise fails to comply with this License Agreement, and
Licensee, upon request by Licensor, does not promptly (i) cause such dealer,
agent, retailer or Affiliate to cease the misuse
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and to otherwise fully comply with this License Agreement, or (ii) terminate its
business relationship with such dealer, agent, retailer or Affiliate.
E. PROBATION
In the event that a customer satisfaction survey, conducted
pursuant to Section III.C., reveals an overall minimum customer satisfaction
rating less than required pursuant to Section IV.A.2., Licensor shall advise
Licensee of an imposition of probation status for a stated period of time,
typically one (1) year for Primary Services and Core Products. Promptly on
receipt of this written notice, Licensee agrees to formulate and implement a
written plan to improve the quality of Licensee's Primary Services and Core
Products, so that a subsequent customer satisfaction survey will indicate
compliance with the provisions of this License Agreement. Licensor shall be
entitled to review Licensee's plan upon reasonable request therefor. The
guidelines contained in the Guide to Quality Operations provided to Licensee by
Licensor and the Quality Standards set forth in Exhibit E are designed to assist
Licensee in improving its customer satisfaction rating. If Licensor determines,
in its sole discretion, that Licensee is not making a good faith effort to
formulate and implement such a plan, or after a reasonable probation period the
goals of the plan are not achieved, then Licensor may elect to extend the term
of the probation or terminate this License Agreement effective upon written
notice to Licensee pursuant to Section XI.C. Any extension of the Term of this
License Agreement by Licensor during any probationary period shall not waive
Licensor's rights under this Section XI.E. or under Section XI.C., and such
probationary period, and any agreements relating thereto, shall continue
unaffected.
F. PARTIAL TERMINATION
In addition to any other rights Licensor may have under
this License Agreement with respect to the termination of Licensee's right to
utilize the Marks in connection with Additional Services or Additional
Products, or to amend Exhibit D to delete Additional Services or Additional
Products therefrom, Licensor shall have the rights set forth in this Section
XI.F. From time to time, Licensor may conduct customer satisfaction surveys
specifically relating to Additional Products or Additional Services. In
addition, surveys conducted by Licensor with regard to the Primary Services
may be designed to determine customer satisfaction levels with regard to
Licensee's Additional Products or Additional Services. In the event that any
such customer satisfaction survey reveals an overall minimum customer
satisfaction rating of less than 85% (or such higher percentage as may be
established by Licensor under Section IV.A.), but more than 70%, with regard
to one or more markets constituting a part of the Licensed Territory,
Licensor shall be entitled to impose a probation status with regard to the
Additional Product or Additional Service and the market or markets in
question. Licensor shall advise Licensee of the period of time, typically one
(1) year, of such probation. Promptly upon receipt of this written notice,
Licensee agrees to formulate and implement a written plan to improve the
quality of Licensee's Additional Product or Additional Service in question in
the market or markets in question, so that a subsequent customer satisfaction
survey will indicate compliance with the provisions of this License
Agreement. Licensor shall be entitled to review Licensee's
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<PAGE>
plan upon reasonable request therefor. The Guide to Quality Operations
provided to Licensee by Licensor and the Quality Standards set forth in
Exhibit E hereto are designed to assist Licensee in improving its customer
satisfaction rating. Additional customer satisfaction surveys will be
commissioned in the market or markets in question from time to time
thereafter as Licensor deems appropriate, and Licensee agrees to pay the
reasonable direct costs of conducting such additional customer satisfaction
surveys. If Licensor determines, in its sole discretion, that Licensee is not
making a good faith effort to formulate and implement such a plan, or after a
reasonable probation period the goals of the plan are not achieved, then
Licensor may elect to extend the term of the probation or terminate
Licensee's right to utilize the Marks in connection with the Additional
Products or Additional Services in question in the market or markets in
question or in the Licensed Territory as a whole. In the event of such a
termination, Exhibit D hereto shall be amended appropriately. In addition, if
a customer satisfaction survey shall reveal an overall customer satisfaction
rating of 70% or less with regard to any Additional Product or Additional
Service in any market or markets in the Licensed Territory, Licensor, upon
thirty (30) days prior written notice to Licensee, shall be entitled to
terminate Licensee's right to utilize the Marks in connection with such
Additional Services or Additional Products, or any of them, in the market or
markets in question or in the Licensed Territory as a whole, and Exhibit D
hereto shall be amended to delete such Additional Products or Additional
Services therefrom. Any extension of the Term of this License Agreement by
Licensor during any such probationary period shall not waive Licensor's
rights under this Section XI.F., and such probationary period, and any
agreements relating thereto, shall continue unaffected.
G. FORCE MAJEURE
Neither Licensor nor Licensee shall be liable or deemed to be
in default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God or the public enemy. Any delay resulting from any such cause shall
extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable; provided however, that (i) said causes shall not excuse
payment of any amount due or owed at the time of such occurrence or payment of
Annual License Fees, Annual Advertising Fees, Consumer Service Number Fees or
other amounts due thereafter, (ii) the party asserting any such cause shall
promptly commence and diligently pursue action to remedy its inability or
failure to perform hereunder, and (iii) in no event shall said causes extend or
excuse performance for more than one hundred twenty (120) days from the time of
performance set forth in this License Agreement. The party asserting the
existence of a force majeure condition under this Section XI.G. shall promptly
notify the other party in writing of the occurrence and nature of any such cause
and shall thereafter regularly inform the other party in writing of the progress
of actions to remedy the inability or failure to perform hereunder.
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<PAGE>
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect
to one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s)"), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. DEIDENTIFICATION
1. Licensee shall immediately cease to hold itself out as a
present or former licensee of Licensor with respect to the Terminated Market(s).
2. Licensee shall immediately cease to participate in the
Consumer Service Number program, any Other 800 Programs or any similar national
call or customer routing program utilizing the Marks.
3. Licensee shall immediately and permanently cease to use, in
any manner whatsoever, in the Terminated Market(s) any of the Marks and
derivatives thereof, and all other marks and distinctive forms, slogans, signs,
icons, symbols, monograms and devices associated with the Marks. Without
limiting the foregoing, Licensee shall cease to use all signs, advertising
materials, World Wide Web sites, displays, stationery, forms, and any other
articles or clothing which display or incorporate any of the Marks or any
derivatives thereof.
4. Licensee shall take such action as may be necessary to
cancel in the Terminated Market(s) any trade name, fictitious name or equivalent
registration which contains any of the Marks or any other service mark or
trademark of Licensor, and Licensee shall furnish Licensor with proof of
compliance with this obligation within thirty (30) days after termination or
expiration of this License Agreement with respect to the Terminated Market(s).
5. Licensee agrees, in the event it continues to operate a
business in the Terminated Market(s), not to use any reproduction, counterfeit,
copy, or colorable imitation of the Marks or derivatives thereof, either in
connection with such other business or the promotion thereof, which is likely to
cause confusion, mistake, or deception, or which is likely to dilute Licensor's
rights in and to the Marks or derivatives thereof. Further, Licensee agrees not
to utilize any designation of origin or description or representation which
falsely suggests or represents an association or connection with Licensor or any
of the Marks or derivatives thereof in the Terminated Market(s).
6. Licensee shall immediately notify and cause its dealers,
agents, retailers and Affiliates that are using the Marks in the Terminated
Market(s) to immediately cease all use of the Marks and participation in the
Consumer Service Number program and any Other 800 Programs, and further cause
its dealers, agents, retailers and Affiliates to fully comply with all the
obligations applicable to Licensee under this Section XII. with respect to the
Terminated Market(s).
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B. PAYMENT OF MONIES DUE
1. Licensee shall promptly pay all sums owing to Licensor, the
Cellular One Promotional Fund and any other advertising fund established
hereunder. If and when this License Agreement is terminated as a result of any
default of Licensee, such sums shall include all damages, costs and expenses,
including reasonable attorney's fees, incurred by Licensor as a result of the
default.
2. Licensee shall pay to Licensor all damages, costs and
expenses, including reasonable attorney's fees, incurred by Licensor subsequent
to the termination or expiration of this License Agreement in obtaining
injunctive or other relief for the enforcement of any provisions of this Section
XII.
C. RETURN OF CERTAIN CONFIDENTIAL DOCUMENTS
If this License Agreement has expired or been terminated with
respect to all of the market(s) in the Licensed Territory, then Licensor and
Licensee shall immediately deliver to the other party all documents which
contain Confidential Information of the other party as defined in Section VII.
hereof, including without limitation, the Guide to Quality Operations (including
the 800 Number Supplement) and the Graphic Standards Manual.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this License
Agreement does not create a fiduciary relationship between them; that Licensee
shall remain an independent business: and that nothing in this License Agreement
is intended to constitute either party as an agent, legal representative
subsidiary, joint venturer, partner, employee or servant of the other for any
purpose whatsoever.
B. During the term of this License Agreement and any renewal hereof,
Licensee shall hold itself out to the public as an independent business using
the Marks pursuant to a license from Licensor. Licensee agrees to take such
action as may be necessary to so notify the public.
C. It is understood and agreed that nothing in this License
Agreement authorizes Licensee to make any contract, agreement, warranty or
representation on Licensor's behalf, or to incur any debt or other obligation
in Licensor's name. Licensor shall in no event assume liability for, or be
deemed liable hereunder as a result of, any such action; nor shall Licensor
be liable by reason of any act or omission of Licensee, its dealers, agents,
retailers or Affiliates in the conduct of their businesses or for any claim
or judgment arising therefrom against Licensee or Licensor. Licensee shall
indemnify and hold Licensor, Licensor's employees, the Partnership Partners
and their affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims arising directly
or indirectly from, as a result of, or in connection with, the operation of
the businesses of Licensee, its dealers,
51
<PAGE>
agents, retailers and Affiliates, as well as the costs, including attorney's
fees, of defending against them.
D. It is understood and agreed that Licensor does not establish or
certify manufacturing, technical or performance standards for
telecommunications equipment or customer premises equipment and Licensee will
not represent otherwise to third parties.
XIV. APPROVAL AND WAIVERS
A. Whenever this License Agreement requires the prior approval or
consent of Licensor, Licensee shall make a timely written request to Licensor
therefor, and such approval or consent shall be obtained in writing. Licensor
will process all such requests for approvals and consents in a reasonable and
timely manner.
B. Licensor makes no warranties or guarantees upon which Licensee may
rely, and assumes no liability or obligation to Licensee, by providing any
waiver, approval, consent or suggestion to Licensee in connection with this
License Agreement, or by reason of any neglect, delay or denial of any request
therefor.
C. No failure of Licensor or Licensee to exercise any power reserved to
it in this License Agreement, or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of
either party's rights to demand exact compliance with any of the terms of this
License Agreement. Waiver by Licensor or Licensee of any particular default on
the part of the other party shall not affect or impair the non-defaulting
party's right with respect to any subsequent default of the same or of a
different nature; nor shall any delay, forbearance or omission by Licensor or
Licensee to exercise any power or right arising out of any breach or default by
the other party of any of the terms, provisions or covenants of this License
Agreement affect or impair such party's rights, nor shall such constitute a
waiver by Licensor or Licensee, as the case may be, of any rights hereunder or
rights to declare any subsequent breach or default.
D. Subsequent acceptance by Licensor of any payments due to it shall
not be deemed to be a waiver by Licensor of any preceding breach by Licensee of
any terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under this License Agreement
shall be in writing and shall be personally delivered, delivered by reputable
overnight courier, proof of delivery requested, or by certified mail, postage
prepaid and return receipt requested, to the
52
<PAGE>
respective parties at the following addresses unless and until a different
address has been designated by written notice to the other party:
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: President
Copy (which shall not
constitute notice) to: Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the signature page
hereof.
Any notice by overnight courier or certified mail shall be deemed to
have been given at the date and time such notice is accepted by the overnight
courier or deposited with the U.S. Postal Service, respectively. No failure to
address any notice hereunder to a particular individual shall render such notice
invalid.
XVI. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this License
Agreement shall be deemed to amend and restate in its entirety and to supersede,
for all purposes, any prior license agreement between the parties hereto which
contemplates or has as its primary purpose the grant of a license to use any of
the Marks. Except for those permitted to be made unilaterally by Licensor
hereunder, no amendment, change or variance from this License Agreement shall be
binding on either party unless mutually agreed to by the parties and executed by
their authorized officers or agents in writing.
XVI. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and/or provision of this License Agreement shall be
considered severable; and if, for any reason, a portion, section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any
other effect upon,
53
<PAGE>
such other portions, sections, parts, terms and/or provisions of this License
Agreement as may remain otherwise intelligible; and the latter shall continue to
be given full force and effect and bind the parties hereof; and said invalid
portions, sections, parts, terms and/or provisions shall be deemed not to be a
part of this License Agreement.
B. Nothing in this License Agreement is intended, nor shall be deemed,
to confer any rights or remedies upon any person or legal entity other than
Licensor or Licensee, and their respective successors and assigns as permitted
by this License Agreement.
C. In the event a court in a final decision rules that any provision of
this License Agreement or portion thereof is unenforceable, Licensee agrees to
be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
F. This License Agreement may be executed in several counterparts, and
each copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND
EXECUTION BY LICENSOR IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED UNDER, THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN
THE EVENT OF ANY CONFLICT OF LAW; PROVIDED, HOWEVER, THAT IF ANY OF THE
PROVISIONS OF THIS LICENSE AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS OF
THE STATE OF TEXAS, THEN SUCH PROVISIONS SHALL BE GOVERNED BY, AND INTERPRETED
AND CONSTRUED UNDER, THE LAWS OF THE STATE IN WHICH THE LICENSED TERRITORY IS
LOCATED (IF THE LICENSED TERRITORY CONTAINS PORTIONS OF MORE THAN ONE STATE OR
THE DISTRICT OF COLUMBIA, THEN THE APPLICABLE LAW SHALL BE THAT OF THE STATE IN
WHICH THE LARGEST PORTION OF THE LICENSED TERRITORY IS LOCATED).
B. No right or remedy conferred upon or reserved to Licensor or
Licensee by this License Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or by law or equity provided or
permitted, but each shall be cumulative of every other right or remedy.
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<PAGE>
C. Nothing herein contained shall bar Licensor's right to apply for
injunctive relief against threatened conduct that will cause it loss or damages,
under applicable equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in the
telecommunications business and that such business involves substantial
investment and risks and that its success is largely dependent upon the ability
of Licensee's management and technical personnel. Licensor expressly disclaims
the making of, and Licensee acknowledges that it has not received, any warranty
or guarantee, express or implied, as to the potential volume, profits, or
success resulting from the utilization of the Marks by Licensee in its
telecommunications business.
B. Licensee acknowledges that it received a copy of the complete
Cellular One License Agreement and the Exhibits thereto at least five (5)
business days prior to the date on which this License Agreement is signed by
Licensee. Licensee further acknowledges that it received the disclosure document
required by the Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures" at least ten (10) business days prior to the date on which
this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood this License
Agreement and the attachments hereto, and that Licensor has accorded Licensee
ample time and opportunity to consult with advisors of Licensee's own choosing
about the potential benefits and risks of entering into this License Agreement
on the effective date set forth below.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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<PAGE>
WITNESS WHEREOF, the parties hereto have duly executed this License Agreement
to be effective on the date shown below.
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
----------------
Title: President
Effective Date: 12/01/96
--------
Primary Contact in Ordinary Course of Business:
Richard J. Lyons, President
Cellular One Group
5001 LBJ Freeway, Suite 700
Dallas, TX 752244
972/387-5225
972/387-5275 (Fax)
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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LICENSEE: Erie Cellular Tel. Co.
By: /s/ William Zlotnick
--------------------
Title: Vice-President
--------------
Date of Signature: 1/6/97
-------
PRIMARY CONTACT IN ORDINARY COURSE OF BUSINESS:
William Zlotnick VP & Chief Operation Officer
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
ADDRESS FOR NOTICE AND VOTING PURPOSES:
William Zlotnick VP & Chief Operation Officer
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
CONTACT FOR BILLING PURPOSES:
John Anderson Controller
SYGNET Communications
6550-B Seville Dr.
Canfield, Ohio 44406
Phone: 330/565-9505 Fax: 330/565-9519
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<PAGE>
EXHIBIT A
CELLULAR ONE LICENSE AGREEMENT
The Marks currently designated by Licensor for use hereunder are as
follows:
<TABLE>
<CAPTION>
Registration or
Marks Application Number
----- ------------------
<S> <C>
CELLULAR ONE (service mark) 1,839,076
1-800-CELL ONE(1) 75/105,170
CELLULAR ONE NETWORK(2) 74/495,960
LONG DISTANCE BY CELLULAR ONE(2) 75/017,997
PCS BY CELLULAR ONE(2) 75/010,430
PAGING BY CELLULAR ONE(2) 75/010,429
TELCOM BY CELLULAR ONE(2) 75/010,427
DISPATCH BY CELLULAR ONE(2) 75/010,428
DATA BY CELLULAR ONE(2) 75/079,447
VIDEO BY CELLULAR ONE(2) 75/079,445
INTERNET BY CELLULAR ONE(2) 75/088,362
LOCAL CALLING BY CELLULAR ONE(2) -
CELLULAR ONE (trademark)(2) 1,947,105
</TABLE>
(1) Licensor may delete this Mark and/or Licensee's rights with respect to
this Mark may terminate under certain circumstances, as further
described in Section IV.J. of this License Agreement.
(2) Licensor may delete or modify any of these Marks or vary the Additional
Services or Additional Products in connection with which these Marks
may be used by Licensee, in accordance with the provisions of this
License Agreement or in furtherance of Licensor's rights hereunder.
OPTIONAL MARKS*
---------------
<TABLE>
<S> <C>
CLEAR ACROSS AMERICA 1,907,932
</TABLE>
- --------------------
* Licensee may utilize the optional Marks in accordance with the terms
and provisions of this License Agreement and the Graphic Standards
Manual, but Licensor shall have the right in its sole discretion to
terminate Licensee's use of any of the optional Marks upon thirty (30)
dads written notice to Licensee.
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
<TABLE>
<CAPTION>
OTHER
FCC MARKET
MARKET NAME MSA/RSA MARKET NO. DESCRIPTION
- ----------- ------- ---------- -----------
<S> <C> <C> <C>
Erie, PA MSA 130A1
</TABLE>
Total Population: 281760
<PAGE>
EXHIBIT C
CELLULAR ONE LICENSE AGREEMENT
PRIMARY SERVICES
<TABLE>
<CAPTION>
ASSOCIATED
MARK (IF ANY) PRIMARY SERVICES DESCRIPTION
- ------------- ---------------- -----------
<S> <C> <C>
Cellular One Cellular Telephone Services "A" Side Cellular Telephone Services
</TABLE>
<PAGE>
EXHIBIT D
Cellular One License Agreement
ADDITIONAL SERVICES
<TABLE>
<CAPTION>
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- ------------ ---- ------------------ -----------
<S> <C> <C> <C>
X Cellular One Nationwide Call The ability of customers to be reached on
Delivery their wireless phone anywhere in the
United States and its territories (including
Alaska, Hawaii, Puerto Rico and U.S.
Virgin Islands) by having the caller dial
their wireless phone number.
X Cellular One Nationwide The ability of customers to make calls in
Roaming other than "home markets" anywhere in the
United States and its territories
(including Alaska, Hawaii, Puerto Rico
and U.S. Virgin Islands) by dialing the
appropriate phone number.
Cellular One Nationwide Cellular NCCDN shall be a backbone network
Network Call Delivery Network which consists of hardware/software,
("NCCDN") transmission links and routing switches or
permitting protocols, and possessing the physical and
participating cellular intangible properties and functionality
customers to necessary to permit Licensee to offer
automatically Cellular Telephone Services customers the
receive calls dialed (i) service codes, (ii) dialing patterns, (iii)
to such customer's feature codes, and (iv) recorded messages
home cellular (the foregoing clauses (i) through (iv)
telephone number being hereafter collectively referred to as
when roaming. "Dialing Standards") described in the
Guide to Quality Operations, within
the United States and its territories (including
Alaska, Hawaii, Puerto Rico and U.S.
Virgin Islands).
</TABLE>
Exhibit D - Page 1
<PAGE>
<TABLE>
<S> <C> <C> <C>
Cellular One Primary Services The Cellular One Mark may be used for
provided in one or more Additional Services if they
combination with are provided in conjunction with the
one or more of the Primary Services; otherwise, the other
Additional Services Marks in this Exhibit are to be used for
the specified Additional Services in
accordance with Licensor's graphic
standards. If the Primary Services are
provided in conjunction with one or more
Additional Services under the Cellular One
Mark, Licensee must, in accordance with
Licensor's graphic standards (i) use the
Marks in this Exhibit for the Additional
Services in question or (ii) use Licensor's
designated form of the descriptive term for
the Primary Services and Additional
Services in question (e.g., Cellular, Long
Distance, PCS, Paging, Telcom, Dispatch,
Data, Video, Internet or Local Calling)
rather than the full Marks shown in this
Exhibit (e.g., Long Distance by Cellular One,
Paging by Cellular One, etc.).
</TABLE>
Exhibit D - Page 2
<PAGE>
<TABLE>
<S> <C> <C> <C>
Long Distance by Long Distance Service An intra-LATA or inter-LATA toll
Cellular One telecommunications service that is
primarily viewed as part of a public
switched telephone network providing
users in fixed (such as residences and
businesses) or mobile locations with two-
way voice, data, text, and image
communications. Minimum requirements
for Long Distance Service include:
- provisioning of
telecommunications service
- offering two-way voice,
data and text
communications
- being used as part of a
public switched telephone
network
- providing intra-LATA,
inter-LATA and
international service
- providing users with the
ability to terminate calls
nationally and
internationally
- allowing customers utilizing
any or all of the full
spectrum of
telecommunications services
such as Cellular, PCS,
Paging, Dispatch, Alternate
Wireless Services and
Telcom, to subscribe to this
service.
</TABLE>
Exhibit D - Page 3
<PAGE>
<TABLE>
<S> <C> <C> <C>
PCS by Cellular Personal communication A wireless telecommunications service that
One services is interconnected to a public switched
telephone network providing users with at
least intra-LATA and inter-LATA two-way
voice and data communications. Service
is provided through a mobile phone (car,
transportable, or portable) or through
wireless modems incorporated into devices
such as lap top computers and electronic
notebooks. Minimum requirements of PCS are:
- provisioning of wireless
telecommunications service
- offering two-way voice and
data communications
- interconnecting to a public
telephone network
- providing intra-LATA and
inter-LATA service
- supplying service through:
- mobile phones that
are mobile (car),
transportable or
portable, or
- wireless modems
incorporated into
devices such as lap
top computers and
electronic
notebooks.
</TABLE>
Exhibit D - Page 4
<PAGE>
<TABLE>
<S> <C> <C> <C>
Paging by Cellular Paging A wireless telecommunications messaging
One service providing users with at least one-way
voice and/or data communications such as
voice or data messaging or data transfer to
a pager or a device such as a lap top
computer, or mobile phone with a built in
pager. Minimum requirements of Paging are:
- provisioning of a wireless
telecommunications service
- offering at least one way
voice and/or data communications
- providing service through analog or
digital technology for paging
devices that either are stand-alone
or part of a device such as a lap
top computer or a mobile phone.
Telcom by A combination of Telecommunications products and
Cellular One telecommunications services that are part of or
products or services, interconnected primarily to a public
including products switched telephone network
such as handsets, providing users in fixed locations
modems and PBX- such as a residence and businesses
like devices and with local, intra-LATA and inter-
services such as LATA two-way voice, data, text,
Cellular Telephone and image communications.
Services, Alternate Minimum requirements for Telcom include:
Wireless Services,
private network - providing service to users in fixed
services, or local locations such as residences and
calling (exchange) businesses
services
- offering two-way voice, data and
text communications
- interconnecting to a public
switched telephone network
- providing local, intra-LATA or
inter-LATA service.
</TABLE>
Exhibit D - Page 5
<PAGE>
<TABLE>
<S> <C> <C> <C>
Dispatch by Dispatch Services A wireless telecommunications
Cellular One messaging service providing users
with "push to talk" two-way voice
dispatch and data broadcast that is
generally used in the public safety,
construction, and transportation industries,
and that can be interconnected to a public
telephone network. Minimum requirements for
Dispatch include:
- provisioning of wireless
analog telecommunications
service
- offering two-way voice and
data communications
- providing "push to talk"
technology for
organizations and multiple
vehicles or locations
- interconnecting with a
public telephone network.
Data by Cellular Data Transmission Transmission of information in a
One numerical form that is in either a
digital or analog format which can be
transmitted via local, intra-LATA and
inter-LATA facilities through a wireless
telecommunications network that is
interconnected to a public switched
telephone network and subsequently
processed.
Video by Cellular Video Delivery Services Providing full motion images and
One conversational audio transmission which
can be sent or received in synchronization
via wired and wireless facilities.
Internet by Internet Services A wired or wireless
Cellular One telecommunications access to a
database of articles, information
and entertainment through the
Internet/World Wide Web.
</TABLE>
Exhibit D - Page 6
<PAGE>
<TABLE>
<S> <C> <C> <C>
Local Calling by Local Calling (exchange) An intra-LATA telecommunications
Cellular One Services service that is primarily viewed as part of
a public switched telephone network
providing users in fixed (such as residences
and businesses) locations with two-way
voice, data, text, and image communications.
Minimum requirements for local calling
services include:
- provisioning of telecommunications
service
- offering two-way voice,
data and text communications
- being used as part of a
public switched telephone
network
- providing intra-LATA
service
- providing users with the
ability to terminate calls
nationally and internationally
- allowing customers utilizing
any or all of the full
spectrum of telecommunications
services, such as Cellular,
PCS, Paging Dispatch,
Alternate Wireless Services
and Telcom, to subscribe to
this service.
</TABLE>
ADDITIONAL PRODUCTS
<TABLE>
<CAPTION>
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- ------------ ---- ------------------ -----------
<S> <C> <C> <C>
Cellular One Wireless Communications Cellular telephones, handsets,
Equipment transceivers, pagers (remote data
receptors), personal digital
assistants (wireless data devices
which can receive and send data
messages), modems and facsimile
machines, and parts and accessories
therefor.
</TABLE>
Exhibit D - Page 7
<PAGE>
EXHIBIT E
Cellular One License Agreement
Quality Standards
<TABLE>
<CAPTION>
QUALITY STANDARDS MEASUREMENT
----------------- -----------
<S> <C>
- - Overall Minimum - 85% of surveyed respondents answered Licensor's
Customer Satisfaction commissioned satisfaction survey as "very satisfied" or
Rating "somewhat satisfied" with their Cellular One service overall
- - Reliability of placing and - Majority of surveyed respondents answered Licensor's
completing a call commissioned satisfaction survey "As Expected" or "Better
than Expected" for the reliability of placing and receiving a call
in home calling area ("Home Market")
- - Voice quality - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the quality of voice or sound during Cellular One
calls in Home Market
- - System Busy Signals - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the ability to place or receive calls without a
system busy signal in Home Market
- - Dropped Calls - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the ability to continue phone calls without being
dropped because of weak signal
- - Quickness of answering - Majority of surveyed respondents answered Licensor's
customer call commissioned satisfaction survey "As Expected" or "Better than
Expected" for the quickness of answering the phone
- - Ability to adequately - Majority of surveyed respondents answered Licensor's
answer customer's reason commissioned satisfaction survey "As Expected" or "Better than
for calling Expected" for ability to adequately answer reason for calling
- - Accuracy of Bill - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the accuracy of the bill
- - Clarity or - Majority of surveyed respondents answered Licensor's
Understandability of Bill commissioned satisfaction survey "As Expected" or "Better than
Expected" for the clarity or understandability of the bill
- - Data Quality - Accurately transmit or receive data at a rate of at least 9,600 bps
</TABLE>
Exhibit E - Page 1
<PAGE>
<TABLE>
<S> <C>
- - Seamless Network - Customers must be able to travel with their
wireless phones outside their Home Market and
make and receive calls without interruption when
they travel beyond their Home Market
- - Automatic Roaming - Customers must have the ability to make calls in markets outside
of their Home Market in the same manner as is done in their
Home Market, without any special dialing sequences or
instructions
- - 24 Hour Customer Service - Customer service must be able to be accessed inside or outside
of their Home Market 24 hours a day, 7 days a week
- - *611 Dialing From a - Customers with problems must he able to access customer
Wireless Phone service from their wireless phone within and outside their Home
Market by dialing *611
- - 1-800-CELL ONE - A 24 hour service which can be accessed by prospects and
customers for assistance with telecommunications products and
services by any type of telephone technology from local and
remote sites.
</TABLE>
Exhibit E - Page 2
<PAGE>
EXHIBIT G
Cellular One License Agreement
Special Reseller Provisions
[To be agreed to between Licensor and Licensee when applicable]
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
BETWEEN
CELLULAR ONE GROUP
AND
SYGNET COMMUNICATIONS, INC.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
<TABLE>
<CAPTION>
SECTION TITLE PAGE NO.
- ------- ----- --------
<S> <C> <C>
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS ..................... 8
II. TERM AND RENEWAL ........................................... 9
III. RIGHTS AND DUTIES OF LICENSOR ..............................11
IV. DUTIES OF LICENSEE .........................................18
V. FEES AND REPORTING .........................................28
VI. MARKS ......................................................33
VII. CONFIDENTIAL INFORMATION ...................................37
VIII. ADVERTISING ................................................38
IX. INSURANCE ..................................................41
X. TRANSFER OF INTEREST .......................................42
XI. DEFAULT AND TERMINATION ....................................44
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION .................50
XIII. INDEPENDENT STATUS AND INDEMNIFICATION .....................51
XIV. APPROVAL AND WAIVERS .......................................52
XV. NOTICES ....................................................52
XVI. ENTIRE AGREEMENT ...........................................53
XVII. SEVERABILITY AND CONSTRUCTION ..............................53
XVIII. APPLICABLE LAW .............................................54
XIX. ACKNOWLEDGMENTS ............................................55
</TABLE>
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CELLULAR ONE LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a Delaware
general partnership ("Licensor") and SYGNET Communications, Inc., a
corporation/partnership organized under the laws of OHIO ("Licensee").
PREAMBLE
Licensor is a Delaware general partnership (the "Partnership") with its
principal place of business in Dallas, Texas. The current general partners of
the Partnership are Cellular One Marketing, Inc., a Delaware corporation,
Cellular One Development, Inc., a Delaware corporation, and Vanguard Cellular
Corp., a North Carolina corporation. Additional partners may be admitted to the
Partnership from time to time. (The Partnership partners, as they may exist from
time to time, are referred to herein as the "Partnership Partners").
The Partnership is engaged in the business of licensing and promoting
the service mark "Cellular One" and certain related trademarks, service marks
and designs.
Licensee desires to receive a license from Licensor to use the
Cellular One -Registered Trademark- mark, together with the marks designated
on Exhibit A hereto and such other marks as Licensor may hereinafter
designate in writing (collectively referred to as the "Marks") within the
market(s) described on Exhibit B (the "Licensed Territory") in accordance
with the provisions of this License Agreement.
INTRODUCTORY STATEMENT
Licensor's goal has been and continues to be the promotion of the
Marks as being synonymous, in the minds of consumers of telecommunications
services, with nationwide, dependable, high quality telecommunications
services and related services, goods and equipment (the "National Brand
Goal"). Historically, Licensor's strategy to achieve the National Brand Goal
has been to license the Marks, and predecessors of the Marks, for use by
providers of Cellular Radiotelephone Services (as defined in 47 C.F.R Section
.22.99) ("Cellular Telephone Services") on the so-called "A" side in certain
Federal Communications Commission ("FCC") designated markets. The competition
to licensees of the Marks has historically come primarily from "B" side
providers of Cellular Telephone Services (who constitute the other providers
of Cellular Telephone Services under the duopoly created by the FCC for such
service). Given this duopoly, Licensor believes that its strategy for
achieving the National Brand Goal has been effective to date. However, the
telecommunications landscape has changed dramatically in
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recent periods and Licensor believes that its strategy may need to be modified
or entirely new strategies adopted to achieve and maintain the National Brand
Goal.
Licensor believes that these modified or new strategies will be
essential if its licensees are to enjoy the competitive benefits afforded by a
widely recognized national brand as other powerful national brand competitors,
which have not historically competed with licensees of the Marks, enter their
markets directly. Licensor believes that the emergence of these major new
competitors, with powerful national brands, will be accompanied by technological
changes that will render the distinction between Cellular Telephone Services and
other telecommunications services increasingly less important to consumers.
Licensor expects that consumers will begin to focus on applications, utilities,
brand names and distribution channels and will demand that a provider of
telecommunications services, either directly or through alliances, offer a full
menu of communications, such as long distance, cellular (or other wireless)
service, internet access, satellite television and local service, all under one
name and perhaps billed by a single source. Licensor believes that its current
and future strategies must be sufficiently flexible to permit it to respond to
these expected changes in the industry and to provide its licensees with a
national brand that can be used in a manner that will allow those licensees to
meet consumer expectations.
Licensor plans to continue, as its primary strategy, granting licenses
to "A" side Cellular Telephone Services providers (both in newly licensed
markets or in connection with the renewal of currently outstanding Cellular One
"A" side licenses), and to begin attempting to grant licenses to "B" side
providers of Cellular Telephone Services or to resellers of Cellular Telephone
Services in FCC licensed markets not served by an "A" side Cellular One
licensee. Licensor may also consider, however, licensing a provider of Alternate
Wireless Services (as defined below), such as a personal communications service
provider, the right to utilize the Marks in a market or markets where no
Cellular Telephone Services provider utilizes the Marks to promote such
services.
Licensor has, from time to time, granted licensees of the Marks the
right to use one or more of such Marks in connection with products or services
other than those constituting Cellular Telephone Services. Among other things,
Licensor has permitted licensees of the Marks to incorporate one or more of the
Marks onto cellular telephone equipment or to utilize one or more of the Marks
in connection with the nationwide delivery of calls to cellular telephones.
Licensor has also granted licensees the right to continue to use or to begin
using one or more of the Marks in connection with some of the products and
services (the "Additional Products" and "Additional Services") described on
Exhibit D hereto. Licensor anticipates that consumers of wireless
telecommunications services may come to expect that high quality offerings of
services such as Cellular Telephone Services or other Primary Services (as
defined below) will include uniform functionality and service features and
bundles of Additional Products, Additional Services and Cellular Telephone
Services or other Primary Services. As such demand develops, Licensor expects to
designate standards for the offering and delivery of the Cellular Telephone
Services or other Primary Services and related Additional Products and
Additional Services, and to identify one or more Additional Products or
Additional Services as
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<PAGE>
"Core Products," the offering of which will be subject to the provisions of this
License Agreement, as described in Section III.I. hereof.
As part of its plan to achieve and maintain the National Brand Goal,
Licensor will from time to time establish standards pursuant to Section III.B.
hereof, defining minimum acceptable operating and other criteria for offerings
by Licensee of the Cellular Telephone Services or other Primary Services and
related Additional Services and Additional Products. In light of market
conditions, as they change from time to time, Licensor may designate separate
standards for products offered under a particular Mark. Licensor has provided,
on Exhibit E to this License Agreement, a description of the technical standards
and service standards (collectively, the "Quality Standards") which will
initially be applicable to the Cellular Telephone Services or other primary
Services, Core Products, Additional Services and Additional Products displaying
or sold under the various Marks.
Licensor may, in the future, designate certain of the Additional
Products or Additional Services as Core Products where and when it determines
that consumers have come to expect that such products or services will be
offered in conjunction with any high quality offering of Cellular Telephone
Services or other Primary Services, and in order to achieve and maintain the
National Brand Goal. The existing required Core Products are nationwide call
delivery and roaming capability. Additional Core Products may include, by way of
example only, such products or services as long distance, voice messaging, local
exchange service, dispatch service and paging service, which offer consumers
nationwide consistency of operation or other benefits. Unless it elects not to
do so, Licensee will be obligated to offer the Core Products under the specified
Marks throughout the Licensed Territory in connection with its delivery of
Cellular Telephone Services or other Primary Services. If Licensee is unable or
elects not to so offer one or more Core Products in connection with Cellular
Telephone Services or other Primary Services, Licensor, subject to Section
III.I. of this License Agreement, may amend the License Agreement to terminate
Licensee's rights to utilize the Marks to promote the Core Products not then
being offered or, with respect to the existing Core Products of nationwide call
delivery and roaming capability, may terminate this License Agreement.
The development of the wireless telecommunications industry and the
regulatory patterns relating to that industry have resulted in overlaps or
conflicts between licensees of the Marks with regard to certain promotional
activities. In order to permit licensees of the Marks to make full use of such
Marks in their promotional and other activities and in order to reduce conflicts
between or the expense of resolving conflicts between such licensees, this
License Agreement permits licensees of the Marks to make certain incidental use
of the Marks outside of their respective licensed territories while permitting
Licensor to impose reasonably necessary restrictions, including requiring the
use of tag lines or other identifying mechanisms, where necessary to maintain
the integrity of the licensed territories and to avoid customer confusion
regarding the providers of Cellular Telephone Services or other Primary Services
therein. In addition, because the markets for wireless telecommunications
services vary from geographic area to geographic area for economic, demographic,
topographic, legal and other reasons, and because Licensor expects that certain
markets may develop at different rates from others, this
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<PAGE>
License Agreement permits Licensor to vary definitions of Cellular Telephone
Services or other Primary Services, Core Products, Additional Services and
Additional Products and to vary the Quality Standards and certain of the fees
payable hereunder in order to achieve or maintain progress toward the National
Brand Goal.
The foregoing is intended as an explanation of Licensor's goals and
planning, and shall not be deemed to affect the meaning or construction of any
of the following provisions. In the event of any conflict between the foregoing
and the following provisions, the following provisions shall prevail.
DEFINED TERMS
As used in this License Agreement, the capitalized terms set forth
below shall have the following meanings:
"1-800-CELL ONE MARK" shall mean the service mark denoted as such on
Exhibit A hereto.
"800 NUMBER SUPPLEMENT" shall have the meaning set forth in Section
IV.J.1.(b) of this License Agreement.
"A" SIDE" shall mean the Block A (non wire line) cellular frequencies
as designated by the FCC.
"ADDITIONAL FEES" shall mean any fees determined in accordance with
Section V.G. of this License Agreement.
"ADDITIONAL PRODUCTS" shall mean the products described as "Additional
Products" on Exhibit D hereto.
"ADDITIONAL SERVICES" shall mean the services described as "Additional
Services" on Exhibit D hereto.
"ADVISORY COUNCIL" shall have the meaning set forth in Section III.D.
of this License Agreement.
"AFFILIATE" shall have the meaning set forth in Section X.C. of this
License Agreement.
"ALTERNATE WIRELESS SERVICES" shall mean any telecommunications service
offering simultaneous, two-way wireless transmission and receipt of voice dr
data, other than Cellular Telephone Services.
"ANNUAL ADMINISTRATIVE FEE" shall mean the fee determined in accordance
with Section V.D. of this License Agreement.
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<PAGE>
"ANNUAL ADVERTISING FEE" shall mean the fee determined in accordance
with Section V.C. of this License Agreement.
"ANNUAL LICENSE FEE" shall mean the fee determined in accordance with
Section V.B. of this License Agreement.
"APPLICATION FEE" shall mean the fee determined in accordance with
Section V.A. of this License Agreement.
"B" SIDE" shall mean the Block B (wireline) cellular frequencies as
designated by the FCC.
"CELLULAR ONE MARK" shall mean the trademark or service mark "Cellular
One" denoted as such on Exhibit A hereto.
"CELLULAR ONE PROMOTIONAL FUND" shall have the meaning set forth in
Sections III.E. and VIII.C. of this License Agreement.
"CELLULAR TELEPHONE SERVICES" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
"CERTIFICATES OF INSURANCE" shall mean certificates designating
insurance coverages required to be delivered to Licensor pursuant to Section
IX.C. of this License Agreement.
"C.F.R." shall mean the Code of Federal Regulations, as may be amended
from time to time.
"CHANGE OF CONTROL" shall have the meaning set forth in Section X.D. of
this License Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
VII.A. of this License Agreement.
"CONSUMER SERVICE NUMBER" shall have the meaning set forth in Section
IV.J. of this License Agreement.
"CONSUMER SERVICE NUMBER FEE" shall mean the fee determined in
accordance with Section V.F. of this License Agreement.
"CORE PRODUCTS" shall mean those Additional Products and Additional
Services designated as "Core Products" on Exhibit D to this License Agreement,
as amended from time to time.
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<PAGE>
"CTIA" shall mean the Cellular Telecommunications Industry Association,
or any successor thereto recognized by Licensor as such.
"EFFECTIVE DATE" shall mean the date shown adjacent to Licensor's
signature on this License Agreement.
"FCC" shall have the meaning set forth in the Introductory Statement to
this License Agreement.
"FUND" shall have the meaning set forth in Section VIII.C. of this
License Agreement.
"GRAPHIC STANDARDS MANUAL" shall have the meaning set forth in Section
III.A. of this License Agreement.
"GUIDE TO QUALITY OPERATIONS" shall mean the guide and other materials
provided by Licensor to Licensee pursuant to Section III.B. hereto.
"INCIDENTAL USE" shall have the meaning set forth in Section VI.C. of
this License Agreement.
"INITIAL YEAR" shall have the meaning set forth in Section II.A.2. of
this License Agreement.
"LICENSED TERRITORY" shall mean the market(s) described on Exhibit B,
as amended from time to time pursuant to the provisions of this License
Agreement.
"LICENSEE" shall have the meaning set forth in the first paragraph of
this License Agreement.
"LICENSOR" shall mean Cellular One Group, a Delaware general
partnership, and its permitted successors and assigns under this License
Agreement.
"LONG DISTANCE CARRIER" shall have the meaning set forth in Section
IV.J.1.(a) of this License Agreement.
"MSA" shall mean the cellular Metropolitan Statistical Areas as
referred to in 47 C.F.R. Section .22.909.
"MARKS" shall have the meaning set forth in the Preamble to this
License Agreement.
"NATIONAL BRAND GOAL" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
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<PAGE>
"OTHER 800 PROGRAMS" shall have the meaning set forth in Section V.F.
of this License Agreement.
"PARTNERSHIP" shall have the meaning set forth in the Preamble to this
License Agreement.
"PARTNERSHIP PARTNERS" shall have the meaning set forth in the Preamble
to this License Agreement.
"PERMITS" shall have the meaning set forth in Section IV.B. of this
License Agreement.
"PERSONAL COMMUNICATION SERVICES" shall have the meaning set forth in
Exhibit D hereto.
"POTENTIAL CUSTOMER CONFUSION" shall have the meaning set forth in
Section VI.D. of this License Agreement.
"PRIMARY SERVICES" shall mean the services specifically described on
Exhibit C hereto.
"QUALITY STANDARDS" shall mean the technical standards and service
standards applicable to Primary Services, Core Products, Additional Services and
Additional Products set forth on Exhibit E to this License Agreement, as amended
from time to time.
"RSA" shall mean the cellular Rural Service Areas as referred to in 47
C.F.R. Section .22.909.
"REVISED LICENSES" shall mean the license agreements between Licensor
and its licensees, which are entered into after July 31, 1996 as part of
Licensor's general licensing program utilizing the Marks for or in conjunction
with the provision of telecommunication services, including, without limitation,
the provision of Cellular Telephone Services and/or other telecommunication
services substantially the same as or reasonably similar to the Primary Services
being licensed to Licensee hereunder.
"STRATEGIC MARKET CHANGE" shall have the meaning set forth in Section
III.H.4. of this License Agreement.
"SUBSEQUENT YEAR" shall have the meaning set forth in Section II.A.2.
of this License Agreement.
"SURVEY COMPANY" shall have the meaning set forth in Section III.C. of
this License Agreement.
"TERM" shall have the meaning set forth in Section II of this License
Agreement.
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<PAGE>
"TERMINATED MARKET(S)" shall have the meaning set forth in the
introduction to Section XII of this License Agreement.
The parties therefore agree as follows:
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS
A. GRANT
1. Subject to the remainder of this License Agreement
(including without limitation, Licensor's rights described in Section I.B and
Sections III.E. through III.J. below), Licensor grants to Licensee, upon the
terms and conditions of this License Agreement, the exclusive right, license and
privilege to use the Marks in the Licensed Territory described on Exhibit B
during the Term of this License Agreement to promote the Primary Services,
consisting of Cellular Telephone Services on the "A" side, "B" side and/or the
other services described on Exhibit C hereto.
2. Subject to the remainder of this License Agreement,
Licensor grants to Licensee, upon the terms and conditions of this License
Agreement, the exclusive right, license and privilege to use the Marks during
the Term in connection with the promotion and sale of the Additional Services
and the Additional Products in the Licensed Territory.
3. Subject to the terms of this License Agreement, Licensor
grants to Licensee, upon the terms and conditions of this License Agreement, the
right, license and privilege to make Incidental Use (as defined in Section
VI.C.) of the Marks.
B. LIMITATIONS ON GRANT
1. If the Licensed Territory as described on Exhibit B
consists of multiple markets and the Licensee's rights under this License
Agreement are terminated with respect to one or more of such markets in
accordance with the provisions of this License Agreement, Exhibit B to this
License Agreement and specifically the term "Licensed Territory" shall
thereafter be deemed to apply only to the remaining market(s) as to which
Licensee's rights under this License Agreement continue. In addition, the
Licensed Territory may be modified, in accordance with the provisions of Section
VI.D., in the event that Licensor determines that Potential Customer Confusion
exists.
2. Notwithstanding Licensee's exclusive right to utilize the
Marks to promote the Primary Services, Additional Services and Additional
Products in the Licensed Territory, other persons possessing a license to use
the Marks may promote the Primary Services, Additional Products and Additional
Services provided by such parties outside of the Licensed Territory in media
receiving distribution within or accessible by persons located in the Licensed
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<PAGE>
Territory, such as regional magazines or newspapers, regional television and
radio and World Wide Web pages.
3. Subject to the provisions of Sections III.H. and III.I. of
this License Agreement, Licensor may terminate Licensee's right to use the Marks
to designate or promote certain Core Products, Additional Products and
Additional Services.
C. ACKNOWLEDGMENTS
1. Subject to the specific grants to Licensee set forth in
this Section I, Licensee acknowledges that Licensor has and retains the right to
use and license the Marks anywhere in the world, within or outside of the
Licensed Territory and that Licensee shall have no rights with regard to such
use or any benefits therefrom.
2. Licensor and Licensee agree that effective with the
commencement of the Term of this License Agreement, all prior licenses to which
Licensee is a party relating to the use of the Marks, or any of them, in the
Licensed Territory or any part thereof shall terminate, together with all of
Licensee's rights thereunder.
II. TERM AND RENEWAL
A. TERM
1. Except as otherwise provided in Section II.B. of this
License Agreement, the term (the "Term") of this License Agreement is five (5)
years, beginning on the Effective Date and ending on the day preceding the fifth
anniversary thereof. Licensee recognizes and agrees that Licensor may modify or
terminate the Term as it applies to Additional Products and Additional Services
or Core Products in accordance with Articles III and VI hereof.
2. The period from the Effective Date of this License
Agreement until December 31 of that calendar year shall be referred to herein as
the "Initial Year." Each subsequent calendar year commencing after the end of
the Initial Year shall be referred to herein as a "Subsequent Year."
B. RENEWAL
Licensee may, at its option, renew the license granted by this
License Agreement for two (2) additional terms (each, in turn, the "Term") of
five (5) years each provided that:
1. Licensee gives Licensor written notice of its election to
renew not less than six (6) months nor more than twelve (12) months before the
end of the expiring Term;
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<PAGE>
2. Licensee is neither in default of any of its obligations
under this License Agreement, nor on probation pursuant to Section XI.E.;
3. Licensee has not during the expiring Term received any
notice of default under Section XI.D. which relates to a default which has not
been cured;
4. At the end of the expiring Term, Licensee continues to hold
all of the Permits (as defined in Section IV.B.) necessary to provide the
Primary Services and those of the Core Products, Additional Services and
Additional Products being provided, sold or distributed by it;
5. No later than ninety (90) days before the end of the
expiring Term, Licensee executes Licensor's then-current form of license renewal
agreement, which agreement will supersede this License Agreement in all
respects, provided that such license renewal agreement shall not contain any
terms, provisions or conditions which differ materially from the terms,
provisions or conditions of this License Agreement, except terms, provisions and
conditions (i) which in the good faith judgment of Licensor are not materially
adverse to Licensee, (ii) which are appropriate, in the good faith judgment of
Licensor, to accommodate any material economic, technological, demographic, or
other market changes occurring during the prior five (5) year Term, (iii) which
Licensor deter::tines in good faith are necessary to protect the Marks, (iv)
which Licensor determines in good faith are necessary to prevent Potential
Customer Confusion (as defined in Section VI.D.), (v) which relate to charges
and fees (including increases) which Licensor believes in good faith are
necessary to provide adequate support for the promotion of the Marks consistent
with the National Brand Goal during the renewal Term in question, (vi) which are
reasonably necessary in Licensor's determination to maintain or achieve the
National Brand Goal, (vii) which Licensor adopts pursuant to Sections III.G.,
III.H. or III.I. hereof, or (viii) which relate or are enacted pursuant to
Section III.E.;
6. At the end of the expiring Term, Licensee shall be in
compliance with the provisions of Section IV.A.2. If Licensee has been assigned
probation status at such time as described in Section IV.A.2., then such
probation status shall continue and the required timely improvements shall be a
condition of effective renewal;
7. At the end of the expiring Term, Licensee is offering on a
good faith commercial basis the primary Services and all of the Core Products
for which Licensee is authorized to utilize the Marks, in substantially all of
the Licensed Territory in accordance with the Quality Standards and is promoting
such Primary Services and Core Products utilizing the applicable Marks in.
accordance with the Graphic Standards Manual; and
8. At the end of the expiring Term, Licensee shall have
satisfied all monetary obligations owed by Licensee to Licensor, and shall have
timely met such obligations throughout the term of this License Agreement.
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<PAGE>
III. RIGHTS AND DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee,
and no other parry is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. This License
Agreement is not intended to and shall not create any partnership, joint venture
or other business relationship, other than that of Licensor and Licensee,
between the parties hereto, or to vest any rights in any third party or group of
third parties. This License Agreement shall not create any rights on behalf of
Licensee against any third party, including any other licensee of the Marks.
Subject to the foregoing, and to the remainder of this License Agreement,
Licensor shall undertake the following duties:
A. MARKS USAGE GUIDELINES
1. Licensor will provide Licensee, from time to time, with a
Graphic Standards Manual (the "Graphic Standards Manual") containing written and
graphic guidelines for the correct reproduction, application and presentation of
the Marks. The Graphic Standards Manual may include, among other things, Mark
specimens, samples of advertisements and clip art indicating color, proportion,
and format. The Graphic Standards Manual may also provide for the use of one or
more tag lines to be used to differentiate or highlight a particular service or
offering or group of services or offerings, such as "Paging By Cellular One" and
require its usage in specific circumstances, including use on signage and
promotional materials referenced in Section III.F. The Graphic Standards Manual
may also provide guidelines for the proper use of tag lines and require such
usage in the event that two or more licensees of the Marks are permitted to make
use thereof within the Licensed Territory, or any part thereof, pursuant to
Sections VI.C. or VI.D.
2. From time to time, upon not less than one (1) year's
notice, Licensee shall be entitled to designate one or more icons to be used
with one or more of the Marks and the manner of their usage to signify an
association of such icon or icons with such Marks.
B. TECHNICAL GUIDELINES, QUALITY STANDARDS
1. Licensor will provide Licensee with a Guide to Quality
Operations (the "Guide to Quality Operations") containing suggestions for
providing customers with high quality Primary Services, Core Products,
Additional Services and Additional Products, and other materials, as Licensor
deems appropriate. The Guide to Quality Operations may be modified and
supplemented from time to time as Licensor deems appropriate.
2. Attached to this License Agreement as Exhibit E are the
Quality Standards (the "Quality Standards"), as of the date hereof, applicable
to Primary Services, Core Products, Additional Services and Additional Products,
respectively, to be sold or provided, as the case may be, utilizing the Marks.
The Quality Standards include, as a general matter, criteria for minimum
acceptable service delivery levels and encompass such matters as geographic
coverage requirements, participation in a nationwide call delivery network,
standardized dialing patterns
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and the availability of telephone customer assistance. The Quality Standards
also include required features and technical guidelines for minimum acceptable
system functionality (although specific equipment or system designs will not be
required) and may encompass such matters as required functionality for
telephones and other devices constituting Additional Products, required
compliance by equipment with designated industry standards, compliance by
switching equipment with uniform handoff requirements, and similar requirements
relating to the delivery of Primary Services and Additional Services or the
operation of Additional Products.
3. From time to time, Licensor, by written notice to Licensee
in accordance with Section III.A., shall have the right to amend the Quality
Standards with regard to any Mark to require added features or functionality for
Primary Services, to modify the minimum technical or operating standards
relating thereto or to require coordination and uniformity in the delivery of
Primary Services, Additional Services, Additional Products and Core Products
within the Licensed Territory and beyond. Licensor shall not be obligated to
consider the particular needs of Licensee or any group of licensees of the Marks
in connection with any amendment to the Quality Standards, except that Licensor
shall not propose amendments to the Quality Standards applicable to Licensee
only.
4. From time to time, Licensor, by written notice to Licensee
in accordance with Section III.A., shall have the right to amend Exhibit E with
regard to any Mark to designate features, technical or operating standards or
functionality appropriate under existing economic, market, demographic and
technological conditions in similarly situated markets directed to the
achievement and maintenance of the National Brand Goal. Although uniformity and
consistency will normally be required by Licensor throughout the Licensed
Territory and among the various territories or markets in which Licensee and
others are licensed to use the Marks, the Licensor may, from time to time, make
certain distinctions, based upon demographic, topographic, legal or other
considerations, and provide for differing Quality Standards with regard thereto.
5. In addition, Licensor may, upon at least six (6) months
written notice to Licensee, amend Exhibit E to amend the Quality Standards for
Additional Products, Additional Services and Core Products, to designate Quality
Standards for any new Marks added to Exhibit A hereto or to designate Quality
Standards for Additional Products, Additional Services and Core Products for
which separate Quality Standards do not exist. In the event that an Additional
Product or Additional Service becomes a Core Product, Licensor may further amend
Exhibit E to establish Quality Standards for the offering and delivery of the
Core Products, as a whole or as a package of Core Products or Primary Services
and Core Products.
6. Exhibit E to this License Agreement, as amended from time
to time, is incorporated herein by reference. All references to the Quality
Standards shall mean those standards established, as of such time, by Exhibit E.
7. At Licensee's request, Licensor shall be entitled, but in
no event shall be required, to waive compliance by Licensee with one or more of
the Quality Standards in one or
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more of the markets constituting a part of the Licensed Territory, in the event
that Licensor believes such a waiver to be consistent with the National Brand
Goal. Any waiver by Licensor of a Quality Standard must be in writing and may,
at Licensor's election, be for a limited period or subject to one or more
conditions.
C. CUSTOMER SATISFACTION SURVEYS
Licensor shall have the right, at its own expense, commission
an independent survey company ("Survey Company") to conduct a customer
satisfaction survey of Licensee's customers on a yearly basis for purposes of
assessing the quality of Licensee's Primary Services, Additional Services,
Additional Products or Core Products, or all of them. The methodology of the
survey will be determined by the Survey Company and Licensor. An outline of
current survey methodology for Primary Services, which may change from time to
time, is attached as Exhibit F. The results of all surveys of Licensee's
customers will be shared with Licensee to assist Licensee in improving its
business and complying with Licensee's obligations under this License Agreement,
including its obligations with regard to the Quality Standards described herein.
The results of surveys will be used to evaluate the general level of customer
satisfaction and to assist Licensor in determining whether or not Licensee is
meeting the Quality Standards. Licensor will instruct the Survey Company to
obtain all required survey information directly from the Licensee and not
through or in conjunction with Licensor. The Survey Company will be required to
execute an appropriate confidentiality agreement for the benefit of Licensee and
the other licensees of the Marks, which shall provide that the Survey Company
will not disclose any Confidential Information of Licensee to Licensor, the
Partnership Partners or affiliates, or their employees or to any other party
(except that the results of the survey for each market and other survey
information which is applicable generally to all licensees of the Marks or any
of them may be disclosed to Licensor and used by Licensor in connection with its
business operations).
D. LICENSEE ADVISORY COUNCIL
Licensor has established an elected council of licensees
("Advisory Council") comprised of licensees other than Partnership Partners from
a broad cross-section of markets throughout the United States, to advise and
consult with Licensor regarding material matters such as advertising, marketing
and Quality Standards relating to the Marks and to act as a liaison organization
between Licensor and the licensees of the Marks. The procedures and
responsibilities adopted for the operation of the Advisory Council are subject
to change, from time to time, as may be appropriate in the judgment of Licensor
to provide the most effective organization for performing the contemplated
functions of the Advisory Council. The representative of any licensee serving on
the Advisory Council shall be an officer of such licensee or other person
reasonably acceptable to Licensor. The charter of responsibility of the Advisory
Council provides that all members of the Advisory Council will be informed of
applicable antitrust laws and shall abide by any decisions of Licensor's
antitrust counsel in such regard.
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E. NATIONAL AND REGIONAL ADVERTISING
Licensor has established and maintains the Cellular One
Promotional Fund, as described in Section VIII.C. of this License Agreement.
Licensor administers the Fund with the goal of enhancing the image of the Marks
and achieving or maintaining the National Brand Goal. Licensor, in connection
with the Cellular One Promotional Fund, or otherwise, shall have the right, from
time to time, to promote the Marks in local, regional or national advertising
receiving distribution within the Licensed Territory and to engage in any other
promotional activities, including sponsoring sporting or other public events
within the Licensed Territory, as Licensor deems appropriate in connection with
the National Brand Goal. No consent of Licensee shall be necessary to any such
promotional activities.
F. NATIONAL/REGIONAL PROGRAMS
Licensor may, in its discretion, make available a national
and/or one or more regional account programs under which, through the voluntary
cooperation of its licensees in various markets, client companies with multiple
market operations may enter into a single contract arrangement for one or more
of the Primary Services or any of the Core Products, Additional Services or
Additional Products for their employees located in such markets. Licensor or its
designee may administer any such national or regional accounts program(s). In
addition, Licensor may, from time to time, utilize the Marks or permit third
party licensees of the Marks to utilize the Marks to promote the sale and
distribution of Additional Products or Additional Services in or by means of
media, such as, but not limited to, direct mail catalogs, World Wide Web pages
and radio and television broadcasts receiving wide distribution, both within and
outside of the Licensed Territory; provided, however, that no such promotional
activity shall have as its primary purpose the targeting of any single market or
territory. In addition, Licensor may also, from time to time, utilize the Marks
or permit third party licensees of the Marks to promote and sell Additional
Products or Additional Services as part of a coordinated regional or national
marketing effort including all or part.of the Licensed Territory; provided,
however, that no such promotional activity shall have as its primary purpose the
targeting of any single market or territory.
G. DESIGNATION OF PRIMARY SERVICES
1. Set forth on Exhibit C hereto are descriptions of the
Primary Services applicable to Licensee as of the dated of this License
Agreement. From and after the date hereof, Licensor and Licensee, by executing
an amendment to Exhibit C, shall be entitled to amend the description of the
Primary Services and to add or delete services therefrom. Licensor shall be
entitled to group the Primary Services into categories (for use, among other
things, in defining Quality Standards applicable to particular Primary Services)
and, with the consent of Licensee, to add or omit one or more services from the
definition of Primary Services with regard to one or more markets constituting
part of the Licensed Territory.
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2. Consistent with Section VI.D., to the extent necessary to
prevent Potential Customer Confusion, Licensor shall be entitled, with or
without the consent of Licensee, to amend Exhibit C hereto to modify the
description of Primary Services or to separate Primary Services into classes or
categories for the purpose of differentiating between the Primary Services (by
means of tag lines or otherwise) to be rendered in one or more markets
constituting a part of the Licensed Territory; provided, however, that any such
amendment of Exhibit C shall only become effective upon at least six (6) months
written notice to Licensee thereof.
H. DESIGNATION AND DELETION OF ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are descriptions
of products and services which, upon thirty (30) days written notice to
Licensor, Licensee may promote or sell utilizing the Marks which are applicable
;o the Additional Product or Additional Service in question, as may be
designated in Licensor's Graphic Standards Manual. Licensor may review, from
time to time, Exhibit D to this License Agreement in light of current
demographic, technological, regulatory and other circumstances (including,
without limitation, Strategic Market Changes) for the purpose of adding or
deleting products and services from the descriptions of Additional Products and
Additional Services, modifying the definitions assigned to one or more
Additional Products. or Additional Services or modifying the Term of this
License Agreement or any Licensed Territory with regard thereto. In undertaking
such review, the Licensor shall consider Exhibit D in light of the National
Brand Goal. Licensor shall not be obligated to consider the needs of any
particular licensee or group of licensees in connection with its review of
Exhibit D, nor shall it have an obligation, other than as specifically provided
for herein, to inform Licensee of the progress of such review. Any such
amendment of Exhibit D shall be made pursuant to Sections III.H.2 through
III.H.5 below or pursuant to Section VI.D. hereof.
2. Based upon the review contemplated by Section III.H.1.
above, or otherwise as deemed appropriate by Licensor in its sole discretion,
Licensor may at any time, or from time to time, during the Term, upon not less
than thirty (30) days written notice to Licensee designate one or more new or
additional services or products as Additional Services or Additional Products.
3. Based upon the review contemplated by Section III.H.1.
above, or as otherwise deemed appropriate by Licensor, at any time from and
after January 1, 1999, Licensor may modify or amend Exhibit D hereto, or any
description set forth therein, and may delete products or services constituting
Additional Products or Additional Services, reduce or extend the Term with
resect to one or more Additional Products or Additional Services or modify the
Licensed Territory with regard thereto (i) immediately upon written notice to
Licensee with respect to any Additional Product or Additional Service not then
being offered to the public throughout the Licensed Territory on a good faith,
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nondiscrinatory commercial basis by Licensee under the specified Marks at the
time of such written notice, (ii) upon not less than six (6) months written
notice with respect to any Additional Product or Additional Service which is
being offered to the public throughout the Licensed Territory on a good faith,
nondiscriminatory commercial basis by Licensee under the specified Marks at the
time of such written notice, provided that in the event of modification or
amendment pursuant to either (i) or (ii) preceding, Licensor shall have
determined that a Strategic Market Change has occurred and that such
modification or amendment is required to reasonably permit appropriate response
thereto. A written explanation of the reason for such modification or amendment
shall accompany the written notice referred to in (i) or (ii) preceding. During
such time as Licensee can demonstrate to the satisfaction of Licensor that
Licensee is offering and actively promoting the Primary Services, long distance
service and local calling service (as further described on Exhibit D) under the
specified Marks to the public (including business, residential and mobile
consumers) throughout the Licensed Territory on a good faith, nondiscriminatory
commercial basis, Licensor may agree to refrain from licensing others to use the
Marks for other Additional Products and Additional Services in the Licensed
Territory. Any such agreement shall be subject to those conditions and
limitations as Licensor may establish.
4. For the purposes of this Section III.H., a "Strategic
Market Change" shall mean any change in economic, demographic, technological,
regulatory or competitive conditions which Licensor reasonably believes requires
a material modification in the manner in which the Primary Services, the Core
Products, the Additional Products or the Additional Services, or any of them,
are marketed or delivered, in order to continue the successful promotion of the
Marks to achieve or maintain the National Brand Goal. While it is anticipated
that a Strategic Market Change will be national in scope, and that Licensor's
response thereto will be similarly uniform, Licensor shall be entitled, subject
to Section III.B.4., to respond under this Section III.H. to Strategic Market
Changes affecting a more limited class or classes of markets.
5. Notwithstanding Section III.H.3. above, Licensee shall have
a limited right to have Exhibit D amended to restore Additional Services or
Additional Products deleted under Section III.H.3. For the ninety (90) day
period following delivery of a notice of modification or amendment under Section
III.H.3., Licensee may submit a request to Licensor to reinstate an Additional
Product or Additional Service on Exhibit D or to rescind any other modification
of Exhibit D adopted pursuant to Section III.H.3, stating its reasons therefor.
Licensor shall consider Licensee's request for reinstatement in good faith, but
shall not be obligated to amend Exhibit D. Any reinstatement of an Additional
Product or Additional Service under this Section III.H.5. shall be subject to
such conditions as Licensor shall believe appropriate under the circumstances,
consistent with the achievement or maintenance of the National Brand Goal.
I. DESIGNATION AND DELETION OF CORE PRODUCTS
1. From time to time after the date hereof, to the extent that
Licensor determines that consumers have come to expect that one or more of the
Additional Products and Additional Services described on Exhibit D, as amended
from time to time, are commonly offered as a part of any offering of nationwide,
dependable, high quality telecommunications services or are otherwise
fundamental to the achievement or maintenance of the National Brand Goal,
Licensor may, upon six (6) months written notice to Licensee, amend Exhibit D
hereto to designate those Additional Products and Additional Services as "Core
Products" and may
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further designate an effective date for such designation. However, nationwide
call delivery and nationwide roaming as further described on Exhibit D are
existing required Core Products, and need not be further designated as such
pursuant to this Section III.H.1.
2. From and after the effective date of any designation of an
Additional Product or Additional Service as a Core Product, Licensee shall offer
such Additional Service or Additional Product under the specified Marks on a
good faith commercial basis in substantially all of the Licensed Territory, or
shall have adopted and provided to Licensor in writing a good faith plan
acceptable to Licensor for doing so promptly. Licensee shall promote using the
specified Marks and make all the Core Products available to its customers and to
the public generally in the Licensed Territory, in connection with promoting and
making the Primary Services available and shall not discriminate in terms of
price, availability or promotional efforts in favor of similar products or
services designated by other trademarks or service marks. Upon Licensor's
request. Licensee shall promptly provide a copy of its plans for offering any
Core Products under the specified Marks which it does not then offer.
3. In the event that Licensee shall fail to comply with its
obligations under Section III.1.2 above, or shall fail within six (6) months of
the effectiveness of the designation of any Additional Product or Additional
Service as a Core Product to offer (or plan to offer pursuant to a plan
submitted to and approved by Licensor and promptly thereafter implemented by
Licensee) such Core Product under the specified Marks in good faith, on a
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory, Licensor shall be entitled to immediately amend Exhibit D hereto to
delete therefrom the Core Products not being offered by Licensee under the
specified Marks on a good faith, nondiscriminatory, commercial basis in
substantially all of the Licensed Territory, and shall be entitled to use or
license others to use the Marks in connection with such Core Products in the
Licensed Territory. With respect to the existing Core Products of nationwide
call delivery and nationwide roaming as further described in Exhibit D, Licensor
shall also be entitled to terminate this License Agreement pursuant to Section
XI.D. if, within six (6) months from the Effective Date, such Core Products are
not being offered by Licensee under the specified Marks on a good faith,
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory.
J. OTHER LICENSES, COMPENSATION TO LICENSOR
Licensor has and may continue to license the Marks, or any of them, to
third parties for use in connection with products or services other than Primary
Services, Core Products, Additional Products, or Additional Services. (For
example, Licensor has licensed one of the Marks to a third party marketer of
children's toys). Such licenses, subject to Licensee's rights set forth in
Section I, may permit use of the Marks by such third party licensees to promote
and sell products and services, other than Primary Services, Core Products,
Additional Services and Additional Products, within the Licensed Territory. As
part of such licensing arrangements, Licensor has, and may, from time to time
hereafter, receive fees or other consideration from third parties who provide
goods and services to licensees of the Marks in connection with
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promotional or other programs arranged by Licensor. Licensee shall have no claim
or right with regard to any such fee or consideration or the arrangements giving
rise thereto.
K. RESELLER ARRANGEMENTS
In the event this License Agreement is being executed and delivered by
a licensee who is being licensed to resell Cellular Telephone Services or an
Alternate Wireless Service, it is anticipated that certain terms and conditions
applicable herein to providers of such services will need to be modified and
that certain additional terms and conditions may need to be added hereto to
accommodate the differences between the provision of such services directly by a
provider and by a reseller of such services. Accordingly, as necessary, in any
such event, the parties hereto shall complete and attach hereto an appropriate
Exhibit G to reflect such modified or additional terms and conditions and such
Exhibit G shall thereafter be deemed to be incorporated herein and made a part
hereof for all purposes.
IV. DUTIES OF LICENSEE
All duties of Licensee under this License Agreement are to Licensor,
and no other party is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. Licensee understands
and acknowledges that the high quality operation of its business under the Marks
is important to Licensee, Licensor and other licensees of the Marks in order to
maintain high operating standards and to protect the reputation of, and goodwill
associated with, the Marks. Toward that end, Licensee acknowledges and accepts
the following duties:
A. QUALITY OF SERVICE
1. Licensee agrees to provide high quality Primary Services
and Core Products and, to the extent provided, high quality Additional Services
and Additional Products, to its customers by, among other things, complying with
this License Agreement and the applicable Quality Standards Upon, six (6) months
written notice of the modification of or addition to the Quality Standards,
Licensee shall cause its Primary Services, Core Products, Additional Services or
Additional Products to comply therewith; provided, however,that Licensee shall
be entitled to adopt a plan reasonably acceptable to Licensor to discontinue the
offering of any Additional Services or Additional Products in lieu of complying
with the Quality Standards relating thereto, provided such Additional Products
or Additional Services do not constitute Core Products.
2. Licensee shall attain and maintain an overall minimum
customer satisfaction rating of at least 85% (or such increased level as may be
required pursuant to the provisions of this Section III.A.) with regard to the
Licensed Territory as a whole (on a population weighted basis) and more than 70%
with respect to any market constituting a part thereof, with regard to
Licensee's Primary Services and Core Products. If Licensee has licenses
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to use the Marks in more than one Licensed Territory pursuant to additional
license agreements with Licensor, Licensee shall be obligated to achieve an
overall minimum customer satisfaction rating of 85% (or any increased level
adopted) for all of such Licensed Territories (on a population weighted basis),
and more than 70% with respect to any market constituting a part thereof.
Licensor reserves the right to increase the overall minimum acceptable customer
satisfaction rating to a percentage greater than 85% if Licensor, in its
reasonable discretion, determines that such higher percentage is appropriate
given the technical state of the industry delivering Primary Services, Core
Products, Additional Products and/or Additional Services at such time; provided,
however, that the Advisory Council must approve any such increase in the minimum
acceptable customer satisfaction rating, and such increase shall not be
effective until the beginning of the next calendar year following the Advisory
Council's approval. In the event that a customer satisfaction survey conducted
by Licensor pursuant to Section III.C. of this License Agreement results in an
overall minimum customer satisfaction rating below 85% (or below any higher
percentage established by Licensor as described above), but more than 70%, in
Licensee's Licensed Territory or Licensed Territories as a whole (on a
population weighted basis), then Licensee will be assigned probation status
under Section XI.E. of this License Agreement and surveys will be commissioned
in the market(s) in the Licensed Territory or Licensed Territories, as the case
may be, which did not achieve a rating of at least ,85% (or any higher
percentage established by Licensor), from time to time thereafter as Licensor
deems appropriate until Licensee has achieved an overall minimum customer
satisfaction rating of at least 85% (or any higher percentage established by
Licensor as described above) and the probation status is removed, or until this
License Agreement is terminated, as herein provided, whichever shall first
occur. Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction survey(s).
3. During the Term, Licensee shall provide the Primary Services and
Core Products throughout the Licensed Territory, and shall maintain, or cause
others to maintain on its behalf, a sufficient number of customer service
locations and other facilities, including retail storefronts or similar
facilities, to permit customers and potential customers convenient access to
Primary Services, Core Products, Additional Products and Additional Services,
consistent with existing competitive conditions and in accordance with the
Quality Standards.
B. LEGAL COMPLIANCE
1. Licensee agrees to comply, at its own expense, with all
applicable laws, ordinances and regulations of federal, state, county or
municipal authorities. Licensee will also obtain and maintain, at its own
expense, all permits, approvals, licenses and franchises and shall make all
required filings, applications and reports to all government or administrative
entities or self regulatory organizations as shall be necessary, from time to
time, to provide those of the Primary Services, the Core Products, the
Additional Services or the Additional Products as Licensee may then be
providing, and to otherwise engage in business, generally, throughout the
Licensed Territory (collectively, the "Permits"). Without limiting the
generality of the foregoing, Licensee's obligation under this Section III.B.
shall include the maintaining of Licensee's qualification to do business
throughout the Licensed Territory, and the filing of all
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income and franchise tax returns with respect to Licensee's operations. In the
event that any of Licensee's material Permits is scheduled to expire during the
Term, including any renewal of such Term, Licensee agrees TO comply with all
requirements for extension of said Permit prior to such expiration. Licensee
shall notify Licensor in writing within five (5) days after receipt of any
notice from the FCC or any other governmental authority regarding an actual or
threatened termination or revocation of any Permit material to the provision of
the Primary Services, Core Products, Additional Products or Additional Services
by Licensee within the Licensed Territory, including any license by the FCC to
conduct business as a provider of telecommunications services or necessary to
construct facilities relating to telecommunications services, and shall within
such time provide a copy of any such notice to Licensor. In addition, Licensee
shall notify Licensor within five (5) days after becoming aware of the
commencement of any action, suit or proceeding, or the issuance of any order,
writ, injunction, award or decree of any court, agency or other governmental
instrumentality which could have a material adverse effect on the operation or
financial condition of Licensee's business as it relates to the Primary
Services, the Core Products, the Additional Services or the Additional Products.
2. To the extent that Licensee's business is dependent upon
one or more agreements with a provider of Primary Services, Core Products,
Additional Services or Additional Products for which Licensee acts as a
reseller, "Permits" shall include such contractual relationship and the license
granted hereunder shall be dependent upon the continuation thereof in good
standing.
3. Licensee represents and warrants that it possesses all
Permits necessary to the conduct of its business and to the business of
providing the Primary Services, Core Products, Additional Services and
Additional Products within the Licensed Territory, including, if applicable, any
Permits necessary to permit it to act as a reseller of services provided by
others.
C. BUSINESS PRACTICES
Licensee shall maintain a competent, conscientious, trained
staff. Neither Licensor nor Licensee shall engage in any trade practice or other
activity which is harmful to the goodwill or reflects unfavorably on the Marks
or on the reputation of Licensee, Licensor, Licensee's business or other
licensees of Licensor, or which constitutes deceptive or unfair competition,
consumer fraud or misrepresentation.
D. INFORMATION TO LICENSOR
1. Upon Licensor's request, subject to the confidentiality
requirements described in Section III.C., Licensee must, in connection with any
customer satisfaction survey Licensor elects to conduct in accordance with
Section III.C., promptly furnish to the Survey Company designated by Licensor a
complete and accurate customer list of all of its subscribers and customers for
its Primary Services, Core Products, Additional Products and Additional
Services, as a whole or separately, in a format reasonably prescribed by
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey
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Company shall require in connection with the performance of its duties. Licensee
hereby gives the Survey Company permission to contact any and all of its
subscribers and customers in conducting a customer survey to ascertain the
quality level of Licensee's services and products and obtain related market
research data in accordance with the methodology set forth in Exhibit F or as
Licensor may reasonably deem appropriate. Licensee shall promptly provide
Licensor with additional information reasonably requested by Licensor regarding
matters such as Licensee's legal status (for example, any Change in Control),
affiliated companies, dealers, agents, retailers, Primary Services, Core
Products, Additional Products and Additional Services being provided or sold
utilizing the Marks, Licensee's use of the Marks, including Incidental Use and
Potential Customer Confusion, and other matters which Licensor may reasonably
determine are relevant to Licensee's performance under this License Agreement.
2. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of each Permit necessary or related to its business of
providing Primary Services, Core Products, Additional Services or Additional
Products using the Marks (with the financial details thereof deleted or redacted
if Licensee so chooses), together with any amendments, termination or other
notices relating thereto.
3. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of Licensee's most recent financial statements for the most
recently completed fiscal year and any subsequent interim periods, including
reports of auditors, if any, and supporting schedules, relating to Licensee's
business of providing Primary Services, Core Products, Additional Services or
Additional Products using the Marks.
E. VOTING BY LICENSEES
Licensor shall be entitled, from time to time, during the
Term, or at any time with regard to a Term to commence in the future, to submit
a proposed amendment to this License Agreement and any Exhibits hereto, to all
of its licensees which have executed Revised Licenses, with a request that such
licensees indicate their approval or disapproval thereof by written ballot.
Unless licensees which have executed Revised Licenses with Licensor and which
are obligated to pay in excess of 50% of the aggregate of all Annual License
Fees payable by all similarly situated licensees shall vote against such
amendment, this License Agreement, and the applicable Exhibits hereto, shall be
amended as proposed by Licensor in die material submitted to the licensees.
Notwithstanding the foregoing, without the express written consent of Licensee,
no amendment to this License Agreement approved under this Section III.E. shall,
with regard to prior time periods or events taking place prior to the adoption
thereof, increase Licensee's obligations to pay any amounts to Licensor or
otherwise undertake any obligations ?o Licensor or any other party. In addition,
no amendment to this License Agreement approved solely pursuant to this Section
III.E. shall (i) modify the Licensed Territory, (ii) prohibit or prevent
Licensee from providing the Primary Services under the Marks in the Licensed
Territory, or (iii) permit Licensor to license others to use the Marks for
providing Alternate Wireless Services or Cellular Telephone Services in the
Licensed Territory. Any notice provided by Licensor hereunder requiring an
approval or disapproval of an amendment to this License Agreement or
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any Exhibits hereto shall be delivered to Licensee in accordance with the notice
provisions of this License Agreement not less than ninety (90) days prior to the
proposed effectiveness thereof. Licensor shall be entitled to set forth in any
notice proposing an amendment to this License Agreement or any Exhibits hereto
an effective date more than ninety (90) days following the delivery of notice
with regard thereto. Licensees which fall to respond to a request by Licensor to
approve or disapprove of an amendment to this License Agreement or any Exhibits
hereto within sixty (60) days after delivery of the proposed amendment shall be
deemed to have consented to such amendment. This Section III.E. shall not modify
or limit any of Licensor's other rights provided for in this License Agreement,
including but not limited to Licensor's rights to amend Exhibits to this
Agreement under Sections III or IV, to the extent permitted therein, or to
modify Jr impose the fees or other charges, to the extent such modification is
permitted, required of Licensee under Sections V or VIII hereof. Only Licensor
shall have the right to propose an amendment to this License Agreement or any
Exhibits under this Section III.E.
F. SIGNAGE, PROMOTION
1. For each market in the Licensed Territory, Licensee shall,
at its own expense, cause the Cellular One Mark to be used or incorporated with
such reasonable prominence in such advertising and other business references to
Licensee as may be appropriate to create a clear impression, among the general
public, that Licensee is affiliated with the Cellular One program. Without
limiting Licensee's obligation to comply with the foregoing, Licensee shall, for
each market in the Licensed Territory, associate Licensee and the Cellular One
name in the telephone "yellow pages" and "white pages" directory listings, and
at least cause the Cellular One Mark to be used or incorporated on or in each of
the following, insofar as they relate to Licensee's business utilizing the
Marks:
(i) Licensee's customer billing statements and the
accompanying envelopes;
(ii) Licensee's advertising media, including without
limitation, print advertising, brochures, marketing materials,
point-of-sale materials, billboards and broadcast media such as radio
and television advertising, on line advertising, home pages on the
World Wide Web and other computer accessible information;
(iii) The greetings, introductions or opening
messages of Licensee's telephone operators, voice mall, telephone
answering machines and other call answering services, in response to
customer and prospective customer inquiries;
(iv) Licensee's stationery, business cards, notices
and other mailouts, and, to the extent practicable, any press or other
media coverage afforded Licensee; and
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(v) Signs or displays on the exterior and interior of
each of Licensee's facilities which interface with customers or
prospective customers In the Licensed Territory.
2. To the extent required by this License Agreement, pursuant
to Sections III.A., VI.B.. VI.D. or otherwise, Licensee shall, at its own
expense, modify its usage of the Marks and adopt tag lines, icons or similar
marks or variations, and modify the signage and other items described in Section
III.F.1. above as may be appropriate, within one (1) year or such shorter period
as Licensor may reasonably require or as may be otherwise provided in this
License Agreement.
3. Licensee shall use the Cellular One Mark (or any mark
substituted therefor by Licensor) as the principal service mark or trademark, as
appropriate, designating Primary Services and Core Products sold or distributed
by it within the Licensed Territory and shall otherwise use the applicable Marks
in connection with Additional Products and Additional Services in the Licensed
Territory to the extent commercially reasonable and as required by this License
Agreement. Use of the Marks will be strictly in accordance with the Graphic
Standards Manual as amended from time to time. Licensee shall only use those
Marks as are specified by Licensor in connection with each of the Additional
Products and Additional Services.
G. DEALERS, AGENTS AND RETAILERS
In the event that, pursuant to this License Agreement,
Licensee permits its authorized dealers, agents or retailers to use the Marks in
the Licensed Territory, such dealers, agents and retailers shall be subject to
the obligations set forth in this License Agreement and those imposed upon such
parties by Licensee; provided, however, that unless required by Licensee, such
dealers, agents and retailers need not necessarily comply with the specific
obligations of Sections IV.F.1.(i), IV.F.1.(iii) and IV.F.1.(iv) hereof in
connection with each dealers', agents' or retailers' use or incorporation of the
Marks on or in the items therein listed.
H. ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are certain
products and services relating to the Primary Services with regard to which,
upon notice to Licensor, Licensee may promote or sell utilizing the Marks as
therein specified.
2. In the event that Licensee shall elect to use the Marks
within all or any part of the Licensed Territory in connection with one or more
of the specified Additional Products or Additional Services, Licensee shall
provide Licensor not less than thirty (30) days written notice of such intended
use, together with a description of Licensee's business and promotional plans
with regard thereto and the portion of the Licensed Territory to which such use
will relate.
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<PAGE>
I. USE OF THE CELLULAR ONE TRADEMARK
In order to protect and enhance the Cellular One Mark and the
goodwill pertaining thereto, Licensee shall, consistent with Exhibit D, use the
Cellular One Mark only on or in connection with first class, high quality
telecommunications equipment and related devices further described as an
Additional Product on Exhibit D hereto (collectively, the "Wireless
Communications Equipment"). Any such Wireless Communications Equipment shall be
sold or distributed only in accordance with all applicable federal, state and
local laws, including, without limitation, all applicable FCC directives and
other industry standards issued from time to time by the CTIA, the Electronics
Industries Association and comparable industry groups, and which, if available
for the type of Wireless Communications Equipment in question, has earned a
certification seal issued by the CTIA. Licensee shall, upon execution of this
Agreement, and from time to time thereafter upon request by Licensor, promptly
furnish to Licensor, at no charge, a listing of all of the various types of
Wireless Communications Equipment sold or otherwise distributed by Licensee, and
upon which or in connection with which the Cellular One Mark is used. The nature
and quality of such Wireless Communications Equipment shall be subject to review
by Licensor to insure compliance with this Agreement.
J. CONSUMER SERVICE NUMBER
Licensee shall have the obligation to use and promote and a
nonexclusive right to make use of a toll free national consumer service number
designated by Licensor (the "Consumer Service Number"). as a toll free service
to Licensee's customers and prospective customers in the Licensed Territory, to
use the 1-800-CELL ONE Mark and marks associated therewith and to pay an annual
fee to Licensor described in Section V.E. and in accordance with the following
terms and conditions:
1. (a) Licensor will, from time to time, establish and
maintain a national consumer service telephone number, operated twenty-four
hours a day, seven days a week. Currently the number established by Licensor is
1-800-CELL ONE (1-800-235-5663). Licensee shall arrange with a long distance
carrier (the "Long Distance Carrier") for a network-based routing system to
cause such calls to the Consumer Service Number from customers and
prospective.customers of Licensee ii; the Licensed Territory (including
customers of Licensee roaming from the Licensed Territory) to be automatically
(i) routed to Licensee, or to a designated center as further described below or
(ii) provided with a prerecorded intercept announcement or (iii) routed as may
be required pursuant to Section IV.J.3. or any agreement entered into by
Licensee pursuant thereto. All arrangements necessary for the routing of calls
to Licensee or the delivery of prerecorded intercept announcements shall be made
between Licensee and the Long Distance Carrier. In no event will Licensor route
calls made to the Consumer Service Number to Licensee, or cause any such calls
to be so routed. It is anticipated mat Licensee will provide customers and
prospective customers calling the Consumer Service Number with assistance,
information and/or promotional literature in response to inquiries concerning
such matters as activation, suspension or disconnection of service, service
plans, promotions, billing, pricing, roaming, dialing instructions, access
numbers, feature codes, the
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locations, hours of operation and telephone numbers of offices, authorized
repair facilities and sources for batteries, parts and accessories, and such
other matters as may be set forth in the 800 Number Supplement (hereinafter
defined).
(b) Licensor will provide Licensee with a supplement
to Exhibit E (the Quality Standards) and the Guide to Quality Operations
(collectively, the "800 Number Supplement"), containing requirements and
suggestions for the operation of the Consumer Service Number program, including
the services which Licensee must have the capability of offering during various
times to callers to the Consumer Service Number which are routed to the Licensee
by the Long Distance Carrier, and other materials as Licensor deems appropriate.
Licensor may from time to time, in its discretion, issue additional supplements,
modifications and additions to the Guide to Quality Operations or the 800 Number
Supplement. Licensor may, in its discretion, expand or introduce new features to
the Consumer Service Number program and may afford Licensee the opportunity to
participate therein by executing an addendum to this Agreement or other suitable
document.
(c) From time to time, at its sole election, Licensor
may select and designate a substitute telephone number to serve as the Consumer
Service Number and Licensee shall take such steps as shall be necessary to
utilize such substituted number in place of the prior telephone number serving
as the Consumer Service Number and shall cease any use of such prior number in
accordance with any schedule reasonably promulgated by Licensor with regard
thereto.
2. Licensee shall establish and maintain adequate staffing and
telephone capacity in relation to the subscriber base and call volume of the
Licensed Territory, in order to promptly and adequately receive and respond to
calls routed to Licensee through the Consumer Service Number; provided however,
that Licensee may establish a centralized location with such capabilities to
serve multiple markets for which Licensee has entered into a License Agreement
with Licensor, if applicable. Licensee agrees that it will not impose any
airtime charges or other charges upon the caller for calls made to the Consumer
Service Number, whether such calls are made by customers, prospective customers,
roamers or otherwise. Licensee shall cause its billing department or, if
applicable, use its best efforts to cause each of its billing companies or
providers of Primary Services, to nonrate calls to the Consumer Service Number
made from the Licensed Territory, and to delete any per diem roaming fees if
calls from the Licensed Territory to the Consumer Service Number are the only
roamer calls made during the twenty-four hour daily billing period. Licensee
shall offer credit card roaming capability for its customers, with respect to
the Licensed Territory, for the purpose of allowing call processing for
customers with validation problems when the serving switch in the home market is
not accessible.
3. Within thirty (30) days of the Effective Date of this
License Agreement, Licensee shall make appropriate arrangements with the Long
Distance Carrier for the routing of calls to the Licensed Territory and, in
conjunction therewith, shall be providing service to customers and prospective
customers in accordance with the Quality Standards and the Guide
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<PAGE>
to Quality Operations (including the 800 Number Supplement) twenty four hours a
day, three hundred sixty-five days a year. Licensee may phase in such customer
service operations over a period not to exceed six (6) months following the
Effective Date hereof, but within (30) days after the Effective Date of this
Agreement, Licensee shall, at a minimum, promptly accept and fully respond to
all calls routed to Licensee through the Consumer Service Number from 8:00 a.m.
to 6:00 p.m., local tim;, Monday through Friday, excluding national holidays.
During such times, the calls routed to the Licensed Territory by the Long
Distance Carrier must be handled by Licensee's own or contracted service
personnel (other than answering services) unless other arrangements satisfactory
to Licensor are made, and the various types of callers (customers, roamers,
prospects, etc.) must be provided with service respecting at least those
categories as set forth in the Guide to Quality Operations (including the 800
Number Supplement). Outside of such times, (i) Licensee has the option of
handling the calls with its own or contracted service personnel (other than
answering services), arranging for other licensees in good standing of the Marks
to handle the calls, arranging for third parties acceptable to Licensor to
handle the calls, or arranging for the calls to be answered by an automated
voice response system, with live operator backup preferred (although a response
system with the capability for the caller to leave a recorded message will be
acceptable); and (ii) not later than six (6) complete calendar months following
the Effective Date of this License Agreement; such callers must be provided with
service respecting at least those categories as set forth in the Guide to
Quality Operations (including the 800 Number Supplement) for such times.
4. Licensee shall at its own expense include the Consumer
Service Number in Licensee's telephone directory listings for the Licensed
Territory, including "White Pages" and "Yellow Pages" listings (under "Cellular
Telephones", "Mobile Telephones," "Radiotelephones" or other category denoting
telecommunications services and equipment, as appropriate), and in Licensee's
promotional and marketing materials. Licensee agrees to actively promote the
Consumer Service Number in the Licensed Territory, but may also utilize its own
toll free numbers or other numbers in the Licensed Territory.
5. Licensor shall in no event be liable by reason of any act
or omission of Licensee or any third party licensee in the conduct of its
business or for any claim or judgment arising therefrom or for any claim or
judgment by third parties (including without limitation, the Long Distance
Carrier, Licensee's customers, prospective customers, dealers, retailers,
agents, resellers, or the like) arising from or relating to the establishment
and the operation of the Consumer Service Number, and Licensee shall indemnify
and hold Licensor, Licensor's employees, the Partnership Partners and their
affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims and judgments, as
well as the costs, including attorneys' fees, of defending against them.
Licensee acknowledges that Licensor shall not be responsible for any direct,
consequential or incidental damages of any kind resulting from or relating to
the Consumer Service Number, the related program or the operation thereof, or
the acts or omissions of the Long Distance Carrier, including without
limitation, damages relating to possible loss of customers or prospective
customers by Licensee or its dealers, retailers, agents, resellers, or the like.
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<PAGE>
6. Licensee agrees to promptly provide the Long Distance
Carrier with such complete current and reserve cellular NPA/NXX listings and
other information and data as may be reasonably requested by the Long Distance
Carrier to permit the Long Distance Carrier to provide an efficient and
effective routing of calls and delivery of intercept announcements to Licensee
and to assure that calls which should be routed to other licensees of the
Consumer Service Number are not being affected by Licensee's arrangements with
the Long Distance Carrier. All payments and other similar arrangements which may
be necessary to permit the Long Distance Carrier to route calls or provide
intercept services and prerecorded announcements to callers shall also be the
responsibility of Licensee, shall be determined by and between Licensee and the
Long Distance Carrier, and Licensor shall have no obligation or liability
whatsoever with respect thereto. Licensee agrees to promptly provide directly to
Licensor and/or to cause the Long Distance Carrier to promptly provide to
Licensor such information as Licensor may from time to time reasonably request
in order to permit Licensor to protect the Marks and/or to ascertain Licensee's
compliance with Licensee's obligations under this Agreement.
7. In the event Licensee's agreement with the Long Distance
Carrier expires or is terminated for any reason with respect to any market in
the Licensed Territory, Licensee's rights with respect to the Consumer Service
Number and the 1-800-CELL ONE Mark shall automatically terminate with respect to
such market. In the event Licensor decides to discontinue the Consumer Service
Number or the related program, Licensor may terminate Licensee's rights with
respect to the Consumer Service Number and the 1-800-CELL ONE Mark upon ninety
(90) days prior written notice to Licensee.
8. The parties agree that Licensor is not offering herein to
resell 800 service or other telecommunications services, and no portion of the
annual Consumer Service Number Fee is compensation for any such resale. Licensee
shall have no right to resell 800 service using the Consumer Service Number to
any other person or entity. If Licensee chooses to permit its authorized
dealers, retailers or agents in the Licensed Territory to use the Consumer
Service Number and the 1-800-CELL ONE Mark, Licensee acknowledges, for itself
and on behalf of its dealers, retailers and agents, that the applicable calls by
callers to the Consumer Service Number will be routed by the Long Distance
Carrier to Licensee, and not to any such dealers, retailers and agents of
Lice=e, and that the calls will be toll free and free of roaming and airtime
charges upon the callers as set forth above.
9. Licensee acknowledges and agrees that it shall have no
ownership interest in the Consumer Service Number, any telephone number, Mark or
acronym serving as or associated with a current or previous Consumer Service
Number or any agreements relating thereto, notwithstanding any actual or implied
agreements between Licensee and the Long Distance Carrier, any tariffs or
permits applicable or related to the Consumer Service Number or any contract or
course of dealing relating thereto. Without modifying the foregoing, Licensee
hereby grants Licensor an irrevocable power of attorney, which shall be coupled
with an interest, to act in Licensee's place and stead and to execute and
deliver any agreements, instruments, certificates, pleadings or the like
reasonably necessary to disclaim any interest by
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<PAGE>
Licensee in the Consumer Service Number, any telephone number, Mark or acronym
serving as or associated with a current or previous Consumer Service Number or
any agreements relating thereto, and to vest in Licensor full title thereto. In
addition, Licensee shall, from time to time, at the request of Licensor or the
Long Distance Carrier, promptly execute and deliver such further agreements,
instruments, certificates, pleadings and the like as Licensor shall reasonably
deem necessary to give effect to this Section IV.J.9.
V. FEES AND REPORTING
A. APPLICATION FEE
Upon execution of this License Agreement by Licensee, Licensee
shall pay to Licensor a nonrefundable application fee (the "Application Fee") of
five hundred dollars ($500.00) per market in the Licensed Territory; provided,
however, that no Application Fee with respect to a particular market shall be
payable in the event that this License Agreement is being executed as a renewal,
extension or modification of an outstanding Cellular One License Agreement
between Licensee and Licensor covering such market in the Licensed Territory or
in the event of a market transfer or Change of Control (the latter events being
subject, however, to the transfer fee described in Section V.H. hereof).
B. ANNUAL LICENSE FEE
Licensee agrees to pay to Licensor an annual license fee (the
"Annual License Fee") based on the total population of each of the markets in
the Licensed Territory (the "Pops") as determined by the most recent population
estimates produced by an independent company selected in good faith by Licensor,
with a minimum Annual License Fee of three thousand dollars ($3,000.00) per
market in the Licensed Territory for each year during the Term. If the Effective
Date of this License Agreement or the commencement of a Subsequent Year is on or
before December 31, 1997, the Annual License Fee for the Initial Year or the
Subsequent Year, as the case may be, shall be equal to two cents ($0.02) per
person in the Licensed Territory, but not less than the foregoing minimum. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is after December 31, 1997, the Annual License Fee for the Initial Year or
the Subsequent Year, as the case may be, shall be calculated in accordance with
Section V.E. below, but shall not be less than the foregoing minimum. The Annual
License Fee shall be due on each January 1 and payable on or before each January
31 of each Subsequent Year during the Term, for the full calendar year; provided
however, that the Annual License Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Annual License
Fee for the Initial Year (including the foregoing minimum fee, if applicable)
shall be prorated to reflect the portion of that calendar year included within
the Initial Year. The Annual License Fee will not be prorated or refunded in
whole or in part under any other circumstances; provided, however, that upon the
normal expiration of this License Agreement at the end of the Term or any
renewal Term (but in no other event, including without
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limitation, upon the voluntary or involuntary termination of this License
Agreement for any reason), Licensor agrees to refund a prorated portion of the
Annual License Fee reflecting that portion of that calendar year remaining after
the date of expiration, less any set off for any other fees owing to Licensor.
C. ANNUAL ADVERTISING FEE
Licensee agrees to pay to Licensor's Cellular One Promotional
Fund an annual advertising fee (the "Annual Advertising Fee") based upon the
population estimates described in Section V. B. above. If the Effective Date of
the License Agreement is on or before December 31, 1996, the Annual Advertising
Fee for the Initial Year shall be equal to five cents ($0.05) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1997 and December 31,
1997, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to six cents ($0.06) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1998 and December 31,
1998, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to seven cents ($0.07) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is after December 31, 1998, then the Annual
Advertising Fee for the Initial. Year or the Subsequent Year, as the case may
be, shall be calculated in accordance with Section V.E. below. The Annual
Advertising Fee shall be due on each January 1 and payable on or before each
January 31 of each Subsequent Year during the Term, for the full calendar year;
provided, however, the Annual Advertising Fee for the Initial Year shall be paid
upon execution of this License Agreement by Licensee. Notwithstanding the
foregoing, if the Initial Year commences on a day other than January 1, the
Annual Advertising Fee for the Initial Year shall be prorated to reflect the
portion of that calendar year included within the Initial Year. The Annual
Advertising Fee will not be prorated or refunded in whole or in part under any
other circumstances. For any Initial Year or Subsequent Year beginning on or
before January 1, 1998, if Licensee can demonstrate to the satisfaction of
Licensor that Licensee had less than three hundred thousand (300,000) billable
minutes of air time for each month in the preceding calendar year in a market in
the Licensed Territory, Licensee shall not be obligated to pay the Annual
Advertising Fee with respect to such market for such Initial Year or Subsequent
Year, as the case may be. Licensor agrees to accept, and may require, the bona
fide report of Licensee's independent outside auditing firm as appropriate
confirmation that Licensee has less than the three hundred thousand (300,000)
billable minutes of air time for each month as described above. The foregoing
exemption from payment of the Annual Advertising Fee shall in no event extend
beyond the Annual Advertising Fee due for 1998. To the extent that geographic,
demographic or social factors (such as a location of a market outside of the
continental U.S. or the use in a particular market in the Licensed Territory of
a dominant language other than English) limit the effectiveness of Licensor's
promotional efforts with respect to such market in the Licensed Territory,
Licensor may, but shall not be obligated to, consider an adjustment to the
Annual Advertising Fee payable under this Section V.C. or
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adjusting its promotional activities to improve the effectiveness thereof in
such market in the Licensed Territory.
D. ANNUAL ADMINISTRATIVE FEE
From time to time, upon not less than thirty (30) days written
notice to Licensee, Licensor shall be entitled to levy, and Licensee shall pay,
a nonrefundable annual administrative fee (the "Annual Administrative Fee"), not
to exceed, each calendar year, one-half of one cent ($0.005) per person in the
Licensed Territory as determined in a manner consistent with that applied to the
determination of the Annual License Fee, in the event that Licensor determines
that such a fee is necessary to defray Licensor's administrative costs,
including costs associated with professional fees and expenses, incurred in
connection with performing Licensor's duties under this License Agreement and
otherwise protecting and promoting the Marks and assuring that the Quality
Standards continue to be consistent with changing market conditions and
technological change. In the event that Licensee provides Primary Services as a
reseller for more than one provider of Cellular Telephone Services or any form
of Alternate Wireless Service, Licensor shall be entitled to receive an
additional Annual Administrative Fee (or such part thereof as Licensor shall
deem appropriate) with regard to each such reseller relationship, reflecting the
increased costs of conducting customer surveys and otherwise monitoring
Licensee's performance under this License Agreement.
E. ESCALATION OF LICENSE AND ADVERTISING FEES
In addition to any other increases in the Annual License Fee
and the Annual Advertising Fee which are permitted herein, Licensor may, in its
sole discretion, increase the Annual License Fee payable for any Initial Year or
Subsequent Year commencing on or after January 1, 1998, and/or increase the
Annual Advertising Fee payable for any Initial Year or Subsequent Year
commencing on or after January 1, 1999, by amounts commensurate with the
increases In the Consumer Price Index or media expenses, as the case may be, in
accordance with the following:
1. Annual License Fee for the applicable Initial Year or
Subsequent Year (subject to the minimum Annual License
Fee of $3,000.00 per market in the Licensed Territory)=
<TABLE>
<S> <C> <C> <C> <C>
$0.02 X CPI-2 X Pops
-----
CPI-1
</TABLE>
where:
(a) "CPI" shall mean the monthly National Consumer Price
Index for All Urban Consumers, U.S. City Average (All Items; 1982-84 equals 100)
issued by the U.S. Department of Labor, Bureau of Labor Statistics, or its
successor agency, or if such index is no longer in effect, the successor index
thereto;
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(b) "CPI-1" shall mean the monthly CPI for the month of
June, 1996; and
(c) "CPI-2" shall mean the higher of (i) CPI-1 or (ii)
the monthly CPI for the latest calendar month which ends at least six (6) months
before the commencement of the applicable Initial Year or Subsequent Year for
which the adjustment of fee(s) is being computed.
2. Annual Advertising Fee for the applicable Initial Year
or Subsequent Year=
<TABLE>
<S> <C>
$0.07 X MC-2 X Pops
----
MC-1
</TABLE>
where:
(a) "MC-1" shall mean the actual media buy liabilities
incurred by Licensor in connection with Licensor's obligations and activities
under Section VIII of this License Agreement for the immediately preceding
annual period;
(b) "MC-2" shall mean the higher of (i) MC-1 or (ii) the
media buy liabilities Licensor would incur in the following annual period if it
engaged in the activities and purchased the goods and services giving rise to
the media buy liabilities constituting MC-1. In making the determination
required by the preceding sentence, Licensor shall utilize the "netcosts(TM)"
reports publication describing Broadcast Network, Cable Network and Syndication
CPM and CPP projections published by Ephron, Papazian & Ephron, Inc., or any
successor or equivalent index generally utilized by the industry to estimate
future costs associated with promotional activities.
F. CONSUMER SERVICE NUMBER FEE
During such time as Licensor makes the Consumer Service Number
program available to licensees, Licensee shall pay to Licensor an annual
Consumer Service Number fee (the "Consumer Service Number Fee") equal to one
thousand dollars ($1,000.00) for each MSA and five hundred dollars ($500.00) for
each RSA constituting a part of the Licensed Territory, subject to a maximum fee
payable under this Section V.F. of thirty thousand dollars ($30,000.00) with
respect to the Licensed Territory or all of Licensee's Licensed Territories
under other License Agreements with Licensor. The Consumer Service Number Fee
shall be due on each January 1 and payable on or before each January 31 of each
Subsequent Year during the Term, for the full calendar year; provided however,
the Consumer Service Number Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Consumer
Service Number Fee for the Initial Year shall be prorated to reflect the portion
of that calendar year included within the Initial Year. The Consumer Service
Number Fee will not be
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<PAGE>
prorated or refunded in whole or in part under any other circumstances. The
Consumer Service Number Fee shall be in addition to any other charges or fees
that may be payable by Licensee to any Long Distance Carrier for the Consumer
Service Number program, as contemplated by Section IV.J. hereof. In addition to
the Consumer Service Number program, Licensor may establish similar programs for
other forms of wireless telephony (the "Other 800 Programs"). To the extent that
the Primary Services or Core Products include such forms of wireless telephony,
Licensee shall participate in the Other 800 Programs designed therefor. Licensor
shall be entitled to receive fees from Licensee for the Other 800 Programs
calculated in a similar manner as those for the Consumer Service Number program.
G. ADDITIONAL FEES
From time to time following the date hereof, Licensor may
propose, pursuant to Section III.E. hereof, changes to or the implementation of
one or more periodic fees to be payable by licensees with regard to the Primary
Services, Core Products, Additional Products or Additional Services, or other
fees deemed appropriate by Licensor. Upon approval thereof in accordance with
Section III.E., such fees shall become an obligation of Licensee hereunder.
H. SPECIAL LICENSEE RELATED EXPENSES
Licensor shall be entitled to levy, and Licensee shall
promptly pay, a fee of not less thin five hundred dollars ($500.00) per market
with regard to any Change of Control of Licensee or assignment by Licensee of
its rights and obligations hereunder (including any transfer or Change of
Control of a market constituting part of the Licensed Territory) or upon any
other assignment, transfer, pledge, Change of Control or other transaction
contemplated or permitted under Article X.
I. PAYMENTS, INTEREST ON LATE PAYMENTS
All fees and charges payable under this License Agreement
shall be payable in good funds at Licensor's address specified herein, or at
such other address as Licensor shall from time to time designate in writing.
Notwithstanding any other provision of this Article V, Licensor shall be
entitled for reasons of administrative convenience or otherwise to defer the
date by which any fee or charge payable by Licensee hereunder may be due. No
such deferral shall be a waiver of any of Licensor's rights hereunder. If
payment of any Application Fee, Annual License Fee, Annual Advertising Fee,
Consumer Service Number Fee, Annual Administrative Fee or other fee or charge
under this License Agreement is overdue, Licensee shall pay Licensor, in
addition to the overdue amount, interest on such overdue amount from the date it
was payable until paid at the rate which is two (2) points above the prime rate
published by the Wall Street Journal on the date payment was due, or the maximum
rate permitted by applicable law, whichever is less. Entitlement to such
interest shall be in addition to any other remedies Licensor may have.
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VI. MARKS
A. OWNERSHIP OF MARKS
Licensor is the owner of all right, title and interest in and
to the Marks (which shall include for the purposes of this Section VI. all of
the permits and contractual or other arrangements (including registrations of
trademarks, service marks and domain names) relating to ownership or control of
the Marks, the Consumer Service Number and the like). No sublicense by Licensee
pursuant to Sections III.G. or X.C. shall create any ownership interest in the
Marks in Licensee or any sublicensee thereof nor any right by Licensee to
sublicense use of the Marks in the future.
B. GENERAL USE
With respect to Licensee's use of the Marks pursuant to this
License Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor
and shall use them only in the manner authorized and permitted by Licensor
herein, and only in accordance with the Graphic Standards Manual. Without
limiting the generality of the foregoing, Licensee shall comply with Licensor's
guidelines and directives (i) for use of certain Marks with specified Additional
Products and Additional Services, and (ii) concerning the use of the Marks or
derivatives thereof in, or as a part of, the domain name of any World Wide Web
pages or the names of any similar Internet locales or addresses owned by or on
behalf of Licensee.
2. Except to the extent permitted as Incidental Use, Licensee
shall use the Marks only in connection with providing Primary Services, Core
Products, Additional Services and Additional Products in the Licensed Territory,
in accordance with the Quality Standards and as otherwise set forth in this
License Agreement.
3. Licensee shall identify the Licensor as the registered
owner of the Marks in such ways as Licensor may direct, including but not
limited to the identification of Licensor as such on Licensee's invoices, order
forms, receipts and contracts.
4. Except as provided in Section IV.G. above and Section X.C.
below, Licensee shall have no right to sublicense the Marks to any other person
or entity, and Licensee shall have no right to allow its resellers, if any, to
make use of the Marks. Any use by a dealer, retailer or agent under Section
III.G. or by an Affiliate under Section X.C. shall be consistent with Licensee's
rights and responsibilities hereunder with respect to the use of the Marks and,
in no event, shall any such permitted use exceed or extend beyond Licensee's
rights hereunder to use the Marks. Licensee agrees to monitor and be responsible
for the use of the Marks by its agents, retailers and dealers and its Affiliates
and to promptly provide or cause to be provided to Licensor upon request, from
time to time, such reasonable information concerning the use of the Marks by
such dealers, retailers and agents and Affiliates to permit Licensor to
ascertain
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Licensee's compliance hereunder. From time to time upon the reasonable request
of Licensor, Licensee shall promptly supply Licensor with a list of dealers,
retailers, agents and Affiliates authorized to use the Marks and/or promptly
confirm whether any particular dealers, retailers, agents or Affiliates remain
authorized and in good standing with respect to use of the Marks.
5. Licensee's right to use the Marks is limited to the uses
specifically authorized under this License Agreement.
6. Licensee shall not use the Marks or any of their
derivatives, or any marks confusingly similar there;o, as part of Licensee's
corporate or other legal name. Licensee and any dealers, retailers or agents
designated under Section III.G. or Affiliates designated under Section X.C. may
file and maintain trade name or fictitious name registrations in the
jurisdictions within the Licensed Territory where legally required or otherwise
appropriate to reflect the fact that Licensee is doing business as "Cellular
One." If other licensees desire to file and maintain such a trade name or
fictitious name registration pursuant to a license agreement with Licensor,
Licensee shall consent or otherwise cooperate with Licensor and such licensees
in meeting the state or local requirements to permit such trade or fictitious
name registrations to coexist. Licensee shall execute any documents deemed
necessary or desirable by Licensor or its counsel to assist Licensor in the
protection or registration of the Marks or to maintain or defend Licensor's
title thereto, or their continued validity and enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should Licensee become aware. Licensor agrees, at its sole cost and expense, to
institute or otherwise defend proceedings as may be appropriate to protect the
Marks, including, to the extent necessary, defense of such proceedings following
termination of this License Agreement. In connection with any such proceedings,
Licensee agrees to execute any and all documents and to do whatever reasonable
acts and things as may, in the opinion of counsel for Licensor, be necessary or
advisable to assist Licensor in carrying out the prosecution or defense, and
Licensor agrees to reimburse Licensee for all direct costs incurred by Licensee
in doing these acts and things, except that Licensee shall bear the salary costs
of its employees. Licensor shall have the sole right to institute, defend and
direct proceedings relating to the Marks and Licensee shall not file or
institute any proceedings relating to the Marks without the prior written
consent of Licensor. In the event that Licensee does file or institute any
proceedings relating to the Marks, Licensee shall promptly supply Licensor with
copies of any and all papers and materials relating to such proceedings,
together with such information relating thereto as Licensor may reasonably
request. Notwithstanding anything to the contrary in Section VI.B., and whether
or not Licensor undertakes the prosecution or defense of a legal proceeding
relating to one or more of the Marks, Licensor's liability for damages and
losses to Licensee relating to use of one or more of the Marks (including any
loss resulting from Licensor's loss of title or ownership of the Marks or the
rights thereto) shall be limited to the amount of the Application Fee plus the
Annual License Fee paid by Licensee under this License Agreement for the
market(s) in which such liability is determined, for the year during which such
liability is determined.
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8. The Marks are valid and serve to identify the Primary
Services, the Core Products, the Additional Services and the Additional Products
provided by those who are authorized to operate under the Marks. Licensee shall
not directly or indirectly contest the validity, registration or Licensor's
ownership of the Marks, any of Their derivatives, any of the icons or other
marks owned by Licensor, and Licensee shall not directly or indirectly apply for
or otherwise seek to register as a trademark, service mark or design any mark or
other designation which incorporates, which is the same as or confusingly
similar to, or which may dilute Licensor's rights in and to, any of the Marks or
their derivatives, any of the icons or other marks owned by Licensor.
9. Licensee's use of the Marks, and the use thereof by its
agents, retailers, dealers and Affiliates, if any, pursuant to this License
Agreement does not give Licensee or any agent, retailer, dealer or Affiliate,
any ownership interest or other interest in or to the Marks, except the license
granted in this License Agreement. Any and all goodwill arising from use of the
Marks shall inure solely and exclusively to the benefit of Licensor, and upon
expiration or termination of this License Agreement and the license granted by
it, no monetary amount shall be assigned as attributable to any goodwill
associated with use of the Marks by Licensee or its agents, retailers, dealers
or Affiliates.
10. Licensor has and retains the following rights, among
others:
(i) To use the Marks itself, in connection with
local, regional and national advertising and promotion, including
conducting activities designed to enhance the goodwill associated with
the Marks, and, subject to the provisions of Section I hereof, with
directly or indirectly selling products and services (including
telecommunications products and services) both within and outside the
Licensed Territory;
(ii) To grant licenses for use of the Marks in
addition to those licenses already granted to existing licensees of the
Marks;
(iii) To use the Marks in any manner reserved for
Licensor pursuant to Section I; and
(iv) To create derivatives of the Marks and exploit,
promote and license such derivatives.
11. In the event that any of the Marks or icons, including any
trademarks, service marks and design logos adopted after execution of this
License Agreement which become Marks, can no longer be used, Licensor reserves
the right to provide a substitute mark or design with reasonable notice to
Licensee.
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C. INCIDENTAL USE
1. For the purposes of this License Agreement, the promotion,
sale and delivery of Primary Services, the Core Products, Additional Services
and Additional Products in accordance with this Section VI.C. shall be
considered "Incidental Use" of the Marks.
2. During the Term, and subject to the other provisions of
this License Agreement, Licensee shall be entitled to conduct its business of
providing Primary Services, Core Products, Additional Services and Additional
Products throughout the Licensed Territory, without the necessity of abandoning
or failing to serve any part of the Licensed Territory because such business
might become known to, or because Licensee might from time to time sell products
or services to, persons or businesses resident or located outside of the
Licensed Territory. Licensee shall not be prohibited by the terms of this
License Agreement from promoting Primary Services outside of the Licensed
Territory to the extent necessary to provide Primary Services in accordance with
the Quality Standards throughout the Licensed Territory. In addition, except
that Licensee shall not specifically direct its promotional activities to
potential customers outside of the Licensed Territory, Licensee shall be
entitled to utilize regional or other media in connection with promoting its
Primary Services, Core Products, Additional Services and Additional Products
within the Licensed Territory. Licensee shall not adopt.promotional pricing or
otherwise seek to distribute Primary Services, Core Products, Additional
Services or Additional Products outside of the Licensed Territory, but shall not
be precluded from doing business with persons or entities it knows to be
resident outside of the Licensed Territory.
3. This Section VI.C. does not entitle Licensee to utilize the
Marks for products or services other titan Primary Services, Core Products,
Additional Services and Additional Products, nor does it allow use of the Marks
by Licensee outside of the Licensed Territory except strictly in accordance with
Section VI.C.2. above. Licensor shall have the sole right to restrict Licensee's
Incidental Use of the Marks at any time and in such manner as Licensor shall
determine necessary or appropriate to prevent such Incidental Use from
breaching, infringing upon, or otherwise conflicting with, the rights of any
other current or future licensee of the Mark(s). Licensee's Incidental Use of
the Marks may also be restricted under Section VI.D. below, notwithstanding this
Section VI.C., to avoid or mitigate Potential Customer Confusion (as
subsequently defined).
D. POTENTIAL CUSTOMER CONFUSION
1. Notwithstanding any other provision of this Section VI. to
the contrary, in the event that as a result of economic, demographic or
technological changes within or affecting the Licensed Territory from and after
the date of this License Agreement, Licensor reasonably determines that actual
or potential customers of another licensee of the Marks, or any of them, are or
are likely to consider Licensee to be, or to be affiliated with, such other
licensee of the Marks or not readily distinguishable therefrom (such
circumstances being referred to as "Potential Customer Confusion"), Licensor
shall be entitled to modify the provisions of this
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License Agreement and any Exhibit hereto for the purpose of reducing the
circumstances giving rise to the Potential Customer Confusion.
2. In seeking to reduce Potential Customer Confusion, Licensor
shall consider requiring providers (including Licensee) of products or services
which are the source of Potential Customer Confusion to adopt tag lines or
otherwise differentiate such products or services before amending this License
Agreement in a manner that would require a material modification in the conduct
of Licensee's telecommunications business relating to the Marks.
3. Without limiting the generality of the foregoing, and
without limiting any other rights which Licensor may have hereunder with respect
to Additional Products or Additional Services, Licensor shall be entitled, with
or without the consent of Licensee, to reduce the size of the Licensed Territory
with regard to Additional Products or Additional Services or to delete or modify
the description of any Additional Product or Additional Service set forth on
Exhibit D hereto for the purpose of mitigating or eliminating Potential Customer
Confusion. Upon such reasonable written notice to Licensee as Licensor in its
discretion determines, but in no event to exceed sixty (60) days, regarding the
existence of Potential Customer Confusion resulting, in whole or in part, from
Licensee's promotional activities, Licensee shall modify such promotional
activities to the extent reasonably necessary to prevent or mitigate, to the
extent possible, the continuation of events or circumstances previously giving
rise to Potential Customer Confusion.
VII. CONFIDENTIAL INFORMATION
A. DEFINITION
Any and all information, knowledge, know-how, and techniques
which Licensor or Licensee designates as confidential shall be deemed
"Confidential Information" for purposes of this License Agreement, except:
1. Information which either party can demonstrate was
known to it prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by
one patty to the other, had become or later becomes a part of the public domain,
through publication or communication by others through no fault of the party
receiving the information.
B. PROHIBITIONS
Licensor and Licensee each agree that it will use its best
efforts, during the term of this License Agreement and for one year following
expiration or termination of this License Agreement, to prevent the
communication or divulgence, to any other person, partnership, association,
corporation or business enterprise of any Confidential Information which may be
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communicated to it or of which it may be apprised pursuant to this License
Agreement. Licensor shall be deemed to have used its best efforts to prevent
such communication or divulgence if it has distributed guidelines to its
employees in an effort to maintain an information separation between Licensor
and the Partnership Partners and their affiliates, and, specifically, it has
instructed its employees not to divulge any Confidential Information, including
customer information, to the Partnership Partners or their affiliates, and shall
have obtained the executed confidentiality agreements referred to in Section
VII.C. from those persons designated in such Section. In circumstances where
Licensee is in direct competition with one of the Partnership Partners or their
affiliates in any one or more of the market(s) in the Licensed Territory,
Licensor will instruct its employees that no information regarding Licensee's
business of providing Primary Services, Core Products, Additional Products or
Additional Services in that market should be disclosed to that Partnership
Partner or its affiliates. The parties agree that statistical performance
information regarding licensees of the Marks which does not identify individual
markets may be reported to the Partnership Partners and their affiliates and
shall not be considered Confidential Information. Notwithstanding the foregoing,
either party to this License Agreement and the Partnership Partners and their
affiliates may disclose any Confidential Information which any such party may be
legally required to disclose to a government agency or in the context of
litigation or arbitration.
C. LICENSOR CONFIDENTIALITY AGREEMENTS
Licensor will execute, and will cause its employees, agents
and representatives, who are reasonably expected to have access to Confidential
Information of Licensee to execute, an appropriate confidentiality agreement,
which shall provide that any Confidential Information of Licensee made available
to Licensor, Licensor's employees, agents or representatives, pursuant to this
License Agreement, will be kept confidential by all such persons.
D. CONSEQUENCES OF BREACH
Licensor and Licensee each acknowledges that any failure to
comply with this Section VII will cause the other party irreparable injury, and
each party agrees to pay all court costs and reasonable attorneys' fees incurred
by the other party in obtaining specific performance of, or an injunction
against violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Marks, the parties agree as follows:
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A. LICENSEE'S ADVERTISING
All advertising and promotion by Licensee in any manner or
medium must be conducted in a dignified manner and must conform to the written
and graphic guidelines specified by~Licensor from time to time, including the
Graphic Standards Manual. Licensee shall display or otherwise employ the Marks
in the manner prescribed by Licensor on all signs and all other advertising and
promotional materials used in connection with Licensee's business, to the extent
relating to Primary Services, Core Products, Additional Services and Additional
Products. If requested by Licensor, Licensee at its own expense shall promptly
provide to Licensor photocopies or other photographic, mechanical, magnetic or
other representations of all print advertisements and promotional materials,
radio/television advertising sequences, graphical interface presentations and
other media presentations using the Marks which Licensee has used at any time
during the six (6) months preceding Licensor's request.
B. MATERIALS PROVIDED BY LICENSOR
Licensor may provide from time to time, in its sole
discretion, advertising and promotional plans and materials, including without
limitation, newspaper mats, television and radio tapes, graphical interface
files, promotional brochures and sales aids. Licensee may use all or any of
these materials in its sole discretion
C. CELLULAR ONE PROMOTIONAL FUND, OTHER ADVERTISING FUNDS
Licensor has established, and Licensee agrees to participate
in a fund for national, local and regional advertising and promotional and other
public programs and activities (the "Cellular One Promotional Fund" or the
"Fund") for licensees of the Marks. Licensor shall have the right to determine,
in accordance with Section V.C. hereof the amount of contributions to be made by
licensee with respect thereto for any year or years during the Term hereof
including any renewal Term. Licensee agrees to make contributions to the
Cellular One Promotional Fund as required hereunder and under Section V.C.
hereof, and agrees that the Fund is to be maintained and administered by
Licensor or its designee as follows:
1. Licensor or its designee shall direct all advertising
and/or promotional programs with sole discretion over the concepts, materials,
and media used in such programs and the placement and allocation thereof.
Licensee agrees and acknowledges that the Cellular One Promotional Fund is
intended to maximize general public recognition, acceptance, and use of the
Marks for the benefit of all licensees of the Marks, and that Licensor or its
designee are not obligated, in administering the Fund, to undertake expenditures
for Licensee which are equivalent or proportionate to Licensee's contribution,
or to ensure that any particular licensee benefits directly or PRO RATA from
expenditures by the Fund.
2. The Cellular One Promotional Fund, all contributions
thereto, and any interest earnings thereon, shall be used for the purpose of
meeting any and all costs of administering, researching, directing, and
preparing advertising and/or promotional activities
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including the cost of preparing and conducting television, radio, magazine,
World Wide Web, e-mail and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; marketing surveys and other public relations
activities; use of advertising agencies to assist therein; promotional brochures
and other marketing materials for licensees of the Marks; and indirect costs,
including reasonable allocation of Licensor's administrative, personnel and
overhead expenses, associated with the implementation of advertising programs,
such as equipment costs and similar costs relating to special national or
regional programs or other similar programs contemplated by Section III.E. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Licensee shall contribute to the Cellular One Promotional
Fund in accordance with Section V.C. All sums paid by licensees of the Marks to
the Fund shall be maintained in an account separate from the other monies of
Licensor and shall not be used to defray any of Licensor's administrative
expenses, except for such reasonable administrative costs and overhead as
Licensor may incur in activities reasonably related to the administration or
direction of the Fund and advertising programs for licensees of the Marks, and
as further set forth in Section VIII.C.2. Except as set forth in this Section
VIII.C., the Fund and any incidental earnings shall not otherwise inure to the
benefit of Licensor. Licensor or its designee shall maintain separate
bookkeeping accounts for the Fund.
4. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however, excess
amounts retain in the Fund at the end of such taxable year, all expenditures in
the following taxable year(s) shall be made first out of accumulated interest
earnings from previous years, next out of interest earnings in the current year,
and finally from contributions.
5. The Cellular One Promotional Fund is not and shall not be
an asset of Licensor or its designee. A statement of the operations of the Fund
as shown on the books of the Fund shall be prepared annually by an independent
certified public accountant selected by Licensor and shall be made available to
Licensee upon written request.
6. Although the Fund is intended to be of perpetual duration,
Licensor maintains the right to terminate the Fund. The Fund shall not be
terminated, however, until all monies in the Fund have been expended for
advertising and/or promotional purposes or returned to contributors on the basis
of their respective contributions.
In addition, Licensor may establish and Licensee shall contribute to
one or,more separate advertising funds for the purpose of promoting types or
groups of primary Services, Core Products, Additional Products or Additional
Services, utilizing all or part of the fees collected pursuant to Section V.C.
hereof. Except as specifically provided by Licensor when establishing such fund,
or as may be permitted under this License Agreement, such additional funds shall
be
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subject to provisions identical to those applicable to the Cellular One
Promotional Fund described herein.
D. PRICE DISCRETION
Licensee shall have the rift to sell its products and offer
services at any price Licensee may determine, and shall in no way be bound by
any price which may be recommended or suggested by Licensor.
IX. INSURANCE
A. REQUIREMENT
Licensee shall promptly procure, and shall maintain in full
force and effect at all times during the Term of this License Agreement, at
Licensee's expense, an insurance policy or policies protecting Licensee,
Licensor, and the Partnership Partners, and their respective affiliates, agents,
officers, directors, shareholders, and employees, against any demand or claim
with respect to personal injury, death, or property damage, or any loss,
liability, or expense whatsoever arising or occurring upon or in connection with
Licensee's business of providing and goods or services utilizing or in
connection with the Marks. Licensor and the Partnership Partners, and their
respective affiliates, agents, officers, directors, shareholders, and employees,
shall be named additional insureds in each such policy.
B. MINIMUM COVERAGE
The policy or policies shall be written by an insurance
company with an Alfred M. Best rating of A or A+, or such other insurance
company as Licensor may reasonably approve, and shall include, at a minimum,
such coverages and policy limits as may reasonably be specified by Licensor from
time to time, which coverages may include, without limitation, comprehensive
general liability insurance, including personal injury, as well as comprehensive
automobile liability coverage for both owned and nonowned vehicles, and property
damage liability coverage, naming Licensor and the Partnership Partners, and
their respective affiliates, agents, officers, directors, shareholders and
employees, as additional insureds in each such policy or policies. Until such
time as Licensor shall in good faith determine that economic or other
circumstances affecting the Cellular One license program require increased
insurance coverage, the following minimum insurance requirements shall be
applicable.
1: General liability: $1,000,000 per occurrence or
$2,000,000 in the aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
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4. Automobile liability: $1,000,000 per occurrence for owned
and operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy
limit;
6. Disease: $500,000; and
7. Accident: $500,000
C. CERTIFICATES OF INSURANCE
Within thirty (30) days after this License Agreement is
executed, and thereafter at least thirty (30) days prior to the expiration of
any such policy, Licensee shall deliver to Licensor Certificates of Insurance
evidencing the proper coverage with limits not less than those required
hereunder. All Certificates shall expressly provide that not less than thirty
(30) days prior written notice shall be given Licensor in the event of material
alteration to, or cancellation of, the coverages. evidenced by such
Certificates.
X. TRANSFER OF INTEREST
A. TRANSFER BY LICENSOR
Licensor shall have the right to transfer or assign all or any
part of its rights or obligations herein to any person or legal entity. If
Licensor's assignee assumes all of the obligations of Licensor under this
License Agreement and sends written notice of the assignment so attesting,
Licensee shall promptly execute a general release of Licensor and the
Partnership Partners, and any affiliates thereof, from any claims against or
liabilities of Licensor, the Partnership Partners or such affiliates arising
under this License Agreement.
B. TRANSFER AND PLEDGE BY LICENSEE
If Licensee desires ii; the Licensed Territory (i) to sell its
Primary Services business for one or more markets and assign its rights under
this License Agreement with respect to such market(s), (ii) to pledge or assign
its rights under this License Agreement to a financial institution or other
party in connection with a financing transaction involving Licensee, or (iii)
enter into a transaction resulting in a Change of Control of Licensee, Licensee
shall notify Licensor in writing and Licensee shall be entitled to transfer,
assign, or pledge its rights under this License Agreement, or effect the Change
of Control, as the case may be, provided:
1. Licensee shall not be in default under this License
Agreement.
2. The transferee shall enter into a written assignment, in a
form satisfactory to Licensor, assuming and agreeing to comply with, at
Licensor's option, either this License
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Agreement or Licensor's then current form or forms of license agreement relating
to the Marks, except that in the case of a pledge or collateral assignment to a
financial institution referred to in Section X.B.(ii), such pledge or collateral
assignment need only be made subject to all of the terms and conditions of this
License Agreement. In the case of a Change of Control; Licensee and the new
controlling entity shall enter into a written agreement, in a form satisfactory
to Licensor, agreeing that Licensee shall continue to be entitled to the rights
and subject to the obligations of a licensee hereunder.
3. Licensee shall remain liable for all of the obligations to
Licensor under this License Agreement prior to the effective date of transfer
and shall execute any and all instruments reasonably requested by Licensor to
evidence such liability. The transfer or Change of Control shall not affect any
of the terms or provisions of this License Agreement or the status of the
market(s) in the Licensed Territory pursuant hereto (including without
limitation, a market's default or probation status under this License
Agreement), all of which shall be or remain fully applicable to the transferee
or Licensee, as the case may be.
4. Where Licensee provides Primary Services in more than one
market and the transfer or Change of Control involves market(s) comprising less
than all of the markets in the Licensed Territory, the transferee or Licensee,
as the case may be, shall, at Licensor's option, enter into Licensor's then
current form of license agreement for the market(s) being transferred or to
which the Change of Control relates; in such event, this License Agreement shall
remain in full force and effect with respect to Licensee's remaining market(s),
if any, following the transfer or change of Control.
5. The transferee or new controlling entity, or Proposed
transferee or new controlling entity, as the case may be, shall provide Licensor
with such financial data, certificates of insurance, copies of Permits, and
other information as are required to be provided by Licensee hereunder in
connection with entering into this License Agreement, or otherwise, and such
materials and information shall be current and complete as of the effective date
of such transfer or Change of Control.
6. The transferee shall promptly pay Licensor any transfer
fees or charges then being charged generally by Licensor to transferees of
licenses to use the Marks. In the case of a Change of Control, Licensee shall
pay Licensor any similar fees then being charged generally by Licensor for such
Changes of Control with respect to licensees of the Marks.
Licensee shall be entitled to transfer, assign or pledge its rights
under this License Agreement, or enter into a transaction resulting in a Change
of Control of Licensee, with respect to a portion of a market in the Licensed
Territory, pursuant to the provisions of this Section X.B.
Licensee shall not be entitled to transfer, assign or pledge any of its
rights or obligations under this License Agreement, except by complying with the
provisions of this Section X.B.
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relating thereto, nor shall Licensee permit a Change of Control to occur without
complying with the provisions of this Section X.B.
C. RIGHT TO ADD AFFILIATE AS PARTY
Subject to Section V.H., with the consent of Licensor,
Licensee shall be entitled to assign any or all of its rights under this License
Agreement to use the Marks in connection with the provision of Primary Services,
Core Products, Additional Services or Additional Products in the Licensed
Territory, or any part thereof, to an "Affiliate," which shall mean any business
entity Controlling, under the Control of or under common Control with Licensee.
No assignment by Licensee of any rights pursuant to this Section X.C. shall
relieve Licensee of its obligations hereunder. In addition, Licensor's consent
to such assignment shall cease to be effective upon the occurrence of a Change
of Control with regard to Licensee or its assignee which results in Licensee or
its assignee no longer being Affiliates. Licensor shall be entitled, from time
to time and upon its reasonable request, to receive from Licensee and any
assignee thereof a certification that assignee continues to be entitled, under
this Section X.C. to utilize the Marks, together with the facts supporting such
entitlement. No, assignee of Licensee shall be entitled to any vote pursuant to
Section III.E. or to any notices from Licensor hereunder. No conduct on the part
of Licensor with regard to any assignee of Licensee shall be deemed to cause
such assignee to become a licensee hereunder or to have any ownership interest
in this License Agreement. Licensee shall give Licensor prior written notice of
any Change of Control, as defined below, of Licensee or any assignee of
Licensee.
D. CHANGE OF CONTROL
For the puposes of this License Agreement, a "Change of
Control" with regard to any entity shall mean the disposition or acquisition,
directly or indirectly, of Control with regard to such entity. "Control" or
"Controlling" with regard to an entity shall mean the record or beneficial
ownership, directly or indirectly, by any person or entity, or group of persons
or entities, of in excess of a majority of the equity securities of the entity
in question, or the power to designate a majority of the members of the Board of
Directors or other governing body thereof or to otherwise determine the
management and policies of the entity in question.
XI. DEFAULT AND TERMINATION
A. TERMINATION BY LICENSEE
Licensee shall have the right to terminate this License
Agreement without cause at any time upon at least one hundred eighty (180) days
advance written notice to Licensor. Licensee shall remain fully responsible for
any fees and other obligations accruing to Licensor during such notice period.
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B. TERMINATION BY LICENSOR - WITHOUT NOTICE
Licensee shall be deemed to be in default under this License
Agreement, and all rights granted herein shall automatically terminate without
notice to Licensee, if Licensee becomes insolvent or makes a general assignment
for the benefit of creditors; or if a petition in bankruptcy is filed by
Licensee or against Licensee and not actively opposed by Licensee; or if
Licensee is adjudicated as bankrupt or insolvent; or if a bill in equity or
other proceeding for the appointment of a receiver of Licensee or other
custodian for Licensee's business or assets is filed and consented to by
Licensee: or if a receiver or other permanent or temporary custodian of
Licensee's assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; or if proceedings for a composition with creditors under
any state or federal law should be instituted by Licensee or against Licensee
and not actively opposed by Licensee; or if a final judgment remains unsatisfied
or of record for thirty (30) days or longer (unless supersedeas bond is filed);
or if Licensee is dissolved except where the Licensee is a limited partnership
and, promptly following dissolution, such limited partnership is reconstituted
with the same general partners: or if a suit to foreclose any lien or mortgage
against real or personal property used in the operation of Licensee's Primary
Services business is instituted against Licensee and not dismissed within thirty
(30) days or, if actively being opposed by Licensee, within one hundred eighty
(180) days; or if execution is levied against Licensee's Primary Services
business, or any of the property related thereto; or if any material real or
personal property of Licensee used in its Primary Services business shall be
sold after levy thereupon by any sheriff, marshal, or constable; or if Licensee
at any time ceases to operate or otherwise abandons its Primary Services
business or otherwise forfeits the right to do or transact business in any
market(s) in the Licensed Territory; or if Licensee loses its FCC license or FCC
construction permit or any other material Permit for one or more market(s) in
the Licensed Territory or otherwise forfeits the right to do or transact
business in one or more market(s), in which event Licensee's rights under this
License Agreement with respect to such market(s) shall automatically terminate
and this License Agreement shall continue with respect to the remaining
market(s) in the Licensed Territory for which Licensee continues to hold all
necessary FCC license(s) and Permits.
C. TERMINATION BY LICENSOR - UPON NOTICE
Upon the occurrence of any of the following events, Licensee
shall be deemed to be in default and Licensor may, at its option, terminate this
License Agreement and all rights granted hereunder without affording Licensee
any opportunity to cure the default. Said termination shall be effective
immediately upon receipt of notice by Licensee (and Licensee shall remain fully
responsible for any fees and other obligations accruing to Licensor until such
termination becomes effective):
1. If Licensee has been advised of its probation status
pursuant to Section XI.E. and Licensee does not make a good faith effort to
formulate and implement a plan during the term of probation, or, at the end of
the term of probation, Licensee fails to meet the 85% overall minimum customer
satisfaction rating (or the higher percentage established by
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Licensor under Section IV.A.) required in the Licensed Territory as a whole by
the Quality Standards for Primary Services and Core Products;
2. If with regard to the Licensed Territory or any market
constituting a part thereof, Licensee fails in any customer satisfaction survey
conducted pursuant to Section III.C. to attain an overall customer satisfaction
rating of more than 70%, regardless of the terms of any probation;
3. If any principal stockholder or officer of Licensee is
convicted of a felony, a fraud, or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the Marks, the
goodwill associated therewith, or Licensor's interest therein;
4. If a threat or danger to public health or safety results
from the operation of the Licensee's Primary Services business or any of its
businesses relating to the delivery of any Primary Services, Core Products,
Additional Products or Additional Services;
5. If Licensee purports to assign or transfer any rights or
obligations under this License Agreement to any third party (including without
limitation, any reseller) or to effect a Change of Control, contrary to the
terms of Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof, Licensee
discloses or divulges Confidential Information provided to Licensee by Licensor;
7. If Licensee knowingly submits any false reports of
information to Licensor or any entity conducting a customer satisfaction survey
either during the application process or subsequent to the execution of this
License Agreement; or
8. If Licensee directly or indirectly contests in any court or
proceeding the validity or registration of or Licensor's ownership of any of the
Marks or other rights licensed hereunder.
D. TERMINATION BY LICENSOR - AFTER NOTICE AND OPPORTUNITY TO CURE
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from Licensor
of a written notice of termination within which to remedy any default hereunder
(or, if the default cannot reasonably be cured within such thirty (30) days, to
initiate within that time substantial and continuing action to cure the
default), and to provide evidence thereof to Licensor. If after such default is
not cured within that time (or, if appropriate, substantial and continuing
action to cure the default is not initiated within that time), or such longer
period as applicable law may require, this License Agreement shall terminate
without further notice to Licensee effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require (and
Licensee shall remain fully responsible for any fees and other obligations
accruing to
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Licensor until such termination occurs). Licensee shall be in default hereunder
for any failure to comply with any of the requirements imposed by this License
Agreement or to carry out the terms of this License Agreement in good faith.
Such defaults shall include, without limitation, the occurrence of any of the
following events:
1. If Licensee fails to offer the Primary Services and the
Core Products of nationwide call delivery and nationwide roaming, or any of
them, under the specified Marks on a continuous basis and in a manner reasonably
appropriate to promote and further the goodwill of the Marks, throughout the
Licensed Territory in accordance with this License Agreement;
2. If Licensee fails, refuses or neglects promptly to pay when
due any monies, fees or charges due to Licensor or the Fund, or under this
License Agreement, or fails, refuses or neglects promptly to submit information
as required under this License Agreement, or makes any false statements in
connection therewith;
3. If Licensee fails to comply, in any material respect, with
the Graphic Standards Manual or the Quality Standards;
4. If Licensee directly or indirectly misuses or makes any
unauthorized use of the Marks or otherwise materially impairs the goodwill
associated therewith or Licensor's rights therein;
5. If Licensee directly or indirectly engages in any business
or markets any service or product under a name or mark which, in Licensor's
opinion, is confusingly similar to, or may have a tendency to dilute, the Marks;
6. If Licensee shall breach or fail to timely perform any of
its covenants or obligations under this License Agreement including, without
limitation, the covenants of Licensee relating to the Consumer Service Number
program and the Other 800 Programs;
7. If Licensee fails, refuses or neglects promptly to pay when
due any fees or charges or otherwise timely perform its obligations to the Long
Distance Carrier with regard to the Consumer Service Number;
8. If Licensee, by act or omission, permits a continued
violation in connection with the operation of its business of any Permit, law,
ordinance, rule or regulation of a governmental agency, in the absence of a good
faith dispute over its application or legality and without promptly resorting to
an appropriate administrative or judicial forum for relief therefrom; or
9. If any dealer, agent, retailer or Affiliate of Licensee
misuses the Marks or otherwise fails to comply with this License Agreement, and
Licensee, upon request by Licensor, does not promptly (i) cause such dealer,
agent, retailer or Affiliate to cease the misuse
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and to otherwise fully comply with this License Agreement, or (ii) terminate its
business relationship with such dealer, agent, retailer or Affiliate.
E. PROBATION
In the event that a customer satisfaction survey, conducted
pursuant to Section III.C., reveals an overall minimum customer satisfaction
rating less than required pursuant to Section IV.A.2., Licensor shall advise
Licensee of an imposition of probation status for a stated period of time,
typically one (1) year for primary Services and Core Products. Promptly on
receipt of this written notice, Licensee agrees to formulate and implement a
written plan to improve the quality of Licensee's Primary Services and Core
Products, so that a subsequent customer satisfaction survey will indicate
compliance with the provisions of this License Agreement. Licensor shall be
entitled to review Licensee's plan upon reasonable request therefor. The
guidelines contained in the Guide to Quality Operations provided to Licensee by
Licensor and the Quality Standards set forth in Exhibit E are designed to assist
Licensee in improving its customer satisfaction rating. If Licensor determines,
in its sole discretion, that Licensee is not making a good faith effort to
formulate and implement such a plan, or after a reasonable probation period the
goals of the plan are not achieved, then Licensor may elect to extend the term
of the probation or terminate this License Agreement effective upon written
notice to Licensee pursuant to Section XI.C. Any extension of the Term of this
License Agreement by Licensor during any probationary period shall not waive
Licensor's rights under this Section XI.E. or under Section XI.C., and such
probationary period, and any agreements relating thereto, shall continue
unaffected.
F. PARTIAL TERMINATION
In addition to any other rights Licensor may have under this
License Agreement with respect to the termination of Licensee's right to utilize
the Marks in connection with Additional Services or Additional Products, or to
amend Exhibit D to delete Additional Services or Additional Products therefrom,
Licensor shall have the rifts set forth in this Section XI.F. From time to time,
Licensor may conduct customer satisfaction surveys specifically relating to
Additional Products or Additional Services. In addition, surveys conducted by
Licensor with regard to the Primary Services may be designed to determine
customer satisfaction levels with regard to Licensee's Additional Products or
Additional Services. In the event that any such customer satisfaction survey
reveals an overall minimum customer satisfaction rating of less than 85% (or
such higher percentage as may be established by Licensor under Section IV.A.),
but more than 70%, with regard to one or more markets constituting a part of the
Licensed Territory, Licensor shall be entitled to impose a probation status with
regard to the Additional Product or Additional Service and the market or markets
in question. Licensor shall advise Licensee of the period of time, typically one
(1) year, of such probation. Promptly upon receipt of this written notice,
Licensee agrees to formulate and implement a written plan to improve the quality
of Licensee's Additional Product or Additional Service in question in the market
or markets in question, so that a subsequent customer satisfaction survey will
indicate compliance with the provisions of this License Agreement. Licensor
shall be entitled to review Licensee's
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plan upon reasonable request therefor. The Guide to Quality Operations provided
to Licensee by Licensor and the Quality Standards set forth in Exhibit E hereto
are designed to assist Licensee in improving its customer satisfaction rating.
Additional customer satisfaction surveys will be commissioned in the market or
markets in question from time to time thereafter as Licensor deems appropriate,
and Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction surveys. If Licensor determines, in its sole
discretion, that Licensee is not making a good faith effort to formulate and
implement such a plan, or after a reasonable probation period the goals of the
plan are not achieved, then Licensor may elect to extend the term of the
probation or terminate Licensee's right to utilIze the Marks in connection with
the Additional Products or Additional Services in question in the market or
markets in question or in the Licensed Territory as a whole. In the event of
such a termination, Exhibit D hereto shall be amended appropriately. In
addition, if a customer satisfaction survey shall reveal an overall customer
satisfaction rating of 70% or less with regard to any Additional Product or
Additional Service in any market or markets in the Licensed Territory, Licensor,
upon thirty (30) days prior written notice to Licensee, shall be entitled to
terminate Licensee's right to utilize the Marks in connection with such
Additional S&vices or Additional Products, or any of them, in the market or
markets in question or in the Licensed Territory as a whole, and Exhibit D
hereto shall be amended to delete such Additional Products or Additional
Services therefrom. Any extension of the Term of this License Agreement by
Licensor during any such probationary period shall not waive Licensor's rights
under this Section XI.F., and such probationary period, and any agreements
relating thereto, shall continue unaffected.
G. FORCE MAJEURE
Neither Licensor nor Licensee shall be liable or deemed to be
in default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God or the public enemy. Any delay resulting from any such cause shall
extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable; provided however, that (i) said causes shall not excuse
payment of any amount due or owed at the time of such occurrence or payment of
Annual License Fees, Annual Advertising Fees, Consumer Service Number Fees or
other amounts due thereafter, (ii)~the party asserting any such cause shall
promptly commence and diligently pursue action to remedy its inability or
failure to perform hereunder, and (iii) in no event shall said causes extend or
excuse performance for more than one hundred twenty (120) days from the time of
performance set forth in this License Agreement. The party asserting the
existence of a force majeure condition under this Section XI.G. shall promptly
notify the other party in writing of the occurrence and nature of any such cause
and shall thereafter regularly inform the other party in writing of the progress
of actions to remedy the inability or failure to perform hereunder.
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XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect
to one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s)"), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. DEIDENTIFICATION
1. Licensee shall immediately cease to hold itself out as a
present or former licensee of Licensor with respect to the Terminated Market(s).
2. Licensee shall immediately cease to participate in the
Consumer Service Number program, any Other 800 Programs or any similar national
call or customer routing program utilizing the Marks.
3. Licensee shall immediately and permanently cease to use, in
any manner whatsoever, in the Terminated Market(s) any of the Marks and
derivatives thereof, and all other marks and distinctive forms, slogans, signs,
icons, symbols, monograms and devices associated with the Marks. Without
limiting the foregoing, Licensee shall cease to use all signs, advertising
materials, World Wide Web sites, displays, stationery, forms, and any other
articles or clothing which display or incorporate any of the Marks or any
derivatives thereof.
4. Licensee shall take such action as may be necessary to
cancel in the Terminated Market(s) any trade name, fictitious name or equivalent
registration which contains any of the Marks or any other service mark or
trademark of Licensor, and Licensee shall furnish Licensor with proof of
compliance with this obligation within thirty (30) days after termination or
expiration of this License Agreement with respect to the Terminated Market(s).
5. Licensee agrees, in the event it continues to operate a
business in the Terminated Market(s), not to use any reproduction, counterfeit,
copy, or colorable imitation of the Marks or derivatives thereof, either in
connection with such other business or the promotion thereof, which is likely to
cause confusion, mistake, or deception, or which is likely to dilute Licensor's
rights in and to the Marks or derivatives thereof. Further, Licensee agrees not
to utilize any designation of origin or description or representation which
falsely suggests or represents an association or connection with Licensor or any
of the Marks or derivatives thereof in the Terminated Market(s).
6. Licensee shall immediately notify and cause its dealers,
agents, retailers and Affiliates that are using the Marks in the Terminated
Market(s) to immediately cease all use of the Marks and participation in the
Consumer Service Number program and any Other 800 Programs, and further cause
its dealers, agents, retailers and Affiliates to fully comply with all the
obligations applicable to Licensee under this Section XII. with respect to the
Terminated Market(s).
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B. PAYMENT OF MONIES DUE
1. Licensee shall promptly pay all sums owing to Licensor, the
Cellular One Promotional Fund and any other advertising fund established
hereunder. If and when this License Agreement is terminated as a result of any
default of Licensee, such sums shall include all damages, costs and expenses,
including reasonable attorney's fees, incurred by Licensor as a result of the
default.
2. Licensee shall pay to Licensor all damages, costs and
expenses, including reasonable attorney s fees, incurred by Licensor subsequent
to the termination or expiration of this License Agreement in obtaining
injunctive or other relief for the enforcement of any provisions of this Section
XII.
C. RETURN OF CERTAIN CONFIDENTIAL DOCUMENTS
If this License Agreement has expired or been terminated with
respect to all of the market(s) in the Licensed Territory, then Licensor and
Licensee shall immediately deliver to the other party all documents which
contain Confidential Information of the other party as defined in Section VII.
hereof, including without limitation, the Guide to Quality Operations (including
the 800 Number Supplement) and the Graphic Standards Manual.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this License
Agreement does not create a fiduciary relationship between them; that Licensee
shall remain an independent business: and,that nothing in this License Agreement
is intended to constitute either party as an agent, legal representative
subsidiary, joint venturer, partner, employee or servant of the other for any
purpose whatsoever.
B. During the term of this License Agreement and any renewal hereof,
Licensee shall hold itself out to the public as an independent business using
the Marks. pursuant to a license from Licensor. Licensee agrees to take such
action as may be necessary to so notify the public.
C. It is understood and agreed that nothing in this License Agreement
authorizes Licensee to make any contract, agreement, warranty or representation
on Licensor's behalf, or to incur any debt or other obligation in Licensor's
name. Licensor shall in no event assume liability for, or be deemed liable
hereunder as a result of any such action; nor shall Licensor be liable by reason
of any act or omission of Licensee, its dealers, agents, retailers or Affiliates
in the conduct of their businesses or for any claim or judgment arising
therefrom against Licensee or Licensor. Licensee shall indemnify and hold
Licensor, Licensor's employees, the Partnership Partners and their affiliates,
and their respective officers, directors, employees and stockholders, harmless
from and against any and all claims arising directly or indirectly from, as a
result of, or in connection with, the operation of the businesses of Licensee,
its dealers,
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agents, retailers and Affiliates, as well as the costs, including attorney's
fees, of defending against them.
D. It is understood and agreed that Licensor does not establish or
certify manufacturing, technical or performance standards for telecommunications
equipment or customer premises equipment and Licensee will not represent
otherwise to third parties.
XIV. APPROVAL AND WAIVERS
A. Whenever this License Agreement requires the prior approval or
consent of Licensor, Licensee shall make a timely written request to Licensor
therefor, and such approval or consent shall be obtained in writing. Licensor
will process all such requests for approvals and consents in a reasonable and
timely manner.
B. Licensor makes no warranties or guarantees upon which Licensee may
rely, and assumes no liability or obligation to Licensee, by providing any
waiver, approval, consent or suggestion to Licensee in connection with this
License Agreement, or by reason of any neglect, delay or denial of any request
therefor.
C. No failure of Licensor or Licensee to exercise any power reserved to
it in this License Agreement, or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of
either party's rights to demand exact compliance with any of the terms of this
License Agreement. Waiver by Licensor or Licensee of any particular default on
the part of the other party shall not affect or impair the non-defaulting
party's right with respect to any subsequent default of the same or of a
different nature; nor shall any delay, forbearance or omission by Licensor or
Licensee to exercise any power or right arising out of any breach or default by
the other party of any of the terms, provisions or covenants of this License
Agreement affect or impair such party's rights, nor shall such constitute a
waiver by Licensor or Licensee, as the case may be, of any rights hereunder or
rights to declare any subsequent breach or default.
D. Subsequent acceptance by Licensor of any payments due to it shall
not be deemed to be a waiver by Licensor of any preceding breach by Licensee of
any terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under,this License Agreement
shall be in writing and shall be personally delivered, delivered by reputable
overnight courier, proof of delivery requested, or by certified mail, postage
prepaid and return receipt requested, to the
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respective parties at the following addresses unless and until a different
address has been designated by written notice to the other party:
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: President
Copy (which shall not
constitute notice) to: Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the signature page hereof.
Any notice by overnight courier or certified mail shall be deemed to
have been given at the date and time such notice is accepted by the overnight
courier or deposited with the U.S. Postal Service, respectively. No failure to
address any notice hereunder to a particular individual shall render such notice
invalid.
XVI. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this License
Agreement shall be deemed to amend and restate in its entirety and to supersede,
for all purposes, any prior license agreement between the parties hereto which
contemplates or has as its primary purpose the grant of a license to use any of
the Marks. Except for those permitted to be made unilaterally by Licensor
hereunder, no amendment, change or variance from this License Agreement shall be
binding on either party unless mutually agreed to by the parties and executed by
their authorized officers or agents in writing.
XVI. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and/or provision of this License Agreement shall be
considered severable; and if, for any reason, a portion, section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any
other effect upon,
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such other portions, sections, parts, terms and/or provisions of this License
Agreement as may remain otherwise intelligible; and the latter shall continue to
be given full force and effect and bind the parties hereof; and said invalid
portions, sections, parts, terms and/or provisions shall be deemed not to be a
part of this License Agreement.
B. Nothing in this License Agreement is intended, nor shall be deemed,
to confer any rights or remedies upon any person or legal entity other than
Licensor or Licensee, and their respective successors and assigns as permitted
by this License Agreement.
C. In the event a court in a final decision rules that any provision of
this License Agreement or portion thereof is unenforceable, Licensee agrees to
be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
F. This License Agreement may be executed in several counterparts, and
each copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND
EXECUTION BY LICENSOR IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED UNDER, THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN
THE EVENT OF ANY CONFLICT OF LAW; PROVIDED, HOWEVER, THAT IF ANY OF THE
PROVISIONS OF THIS LICENSE AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS OF
THE STATE OF TEXAS, THEN SUCH PROVISIONS SHALL BE GOVERNED BY, AND INTERPRETED
AND CONSTRUED UNDER, THE LAWS OF THE STATE IN WHICH THE LICENSED TERRITORY IS
LOCATED (IF THE LICENSED TERRITORY CONTAINS PORTIONS OF MORE THAN ONE STATE OR
THE DISTRICT OF COLUMBIA, THEN THE APPLICABLE LAW SHALL BE THAT OF THE STATE IN
WHICH THE LARGEST PORTION OF THE LICENSED TERRITORY IS LOCATED).
B. No right or remedy conferred upon or reserved to Licensor or
Licensee by this License Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or by law or equity provided or
permitted, but each shall be cumulative of every other right or remedy.
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C. Nothing herein contained shall bar Licensor's right to apply for
injunctive relief against threatened conduct that will cause it loss or damages,
under applicable equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in the
telecommunications business and that such business involves substantial
investment and risks and that its success is largely dependent upon the ability
of Licensee's management and technical personnel. Licensor expressly disclaims
the making of, and Licensee acknowledges that it has not received, any warranty
or guarantee, express or implied, as to the potential volume, profits, or
success resulting from the utilization of the Marks by Licensee in its
telecommunications business.
B. Licensee acknowledges that it received a copy of the complete
Cellular One License Agreement and the Exhibits thereto at least five (5)
business days prior to the date on which this License Agreement is signed by
Licensee. Licensee further acknowledges that it received the disclosure document
required by the Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures" at least ten (10) business days prior to the date on which
this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood this License
Agreement and the attachments hereto, and that Licensor has accorded Licensee
ample time and opportunity to consult with advisors of Licensee's own choosing
about the potential benefits and risks of entering into this License Agreement
on the effective date set forth below.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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WITNESS WHEREOF, the parties hereto have duly executed this License Agreement
to be effective on the date shown below.
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
-------------------------------------
Title: President
Effective Date: 12/17/96
----------------------
Primary Contact in Ordinary Course of
Business:
Richard J. Lyons, President
Cellular One Group
5001 LBJ Freeway, Suite 700
Dallas, TX 752244
972/387-5225
972/387-5275 (Fax)
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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LICENSEE: SYGNET Communications, Inc.
By: /s/ William Zlotnick
--------------------------------------------
Title: Vice-President
-----------------------------------------
Date of Signature: 1/6/97
-----------------------------
PRIMARY CONTACT IN ORDINARY COURSE OF BUSINESS:
William Zlotnick VP & Chief Operating Officer
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
ADDRESS FOR NOTICE AND VOTING PURPOSES:
William Zlotnick VP & Chief Operating Officer
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
CONTACT FOR BILLING PURPOSES:
John Anderson Controller
SYGNET Communications
6550-B Seville Dr.
Canfield, Ohio 44406
Phone: 330/565-9505 Fax: 330/565-9519
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EXHIBIT A
CELLULAR ONE LICENSE AGREEMENT
The Marks currently designated by Licensor for use hereunder are as
follows:
<TABLE>
<CAPTION>
Registration or
Marks Application Number
----- ------------------
<S> <C>
CELLULAR ONE (service mark) 1,839,076
1-800-CELL ONE(1) 75/105,170
CELLULAR ONE NETWORK(2) 74/495,960
LONG DISTANCE BY CELLULAR ONE(2) 75/017,997
PCS BY CELLULAR ONE(2) 75/010,430
PAGING BY CELLULAR ONE(2) 75/010,429
TELCOM BY CELLULAR ONE(2) 75/010,427
DISPATCH BY CELLULAR ONE(2) 75/010,428
DATA BY CELLULAR ONE(2) 75/079,447
VIDEO BY CELLULAR ONE(2) 75/079,445
INTERNET BY CELLULAR ONE(2) 75/088,362
LOCAL CALLING BY CELLULAR ONE(2) --
CELLULAR ONE (trademark)(2) 1,947,105
</TABLE>
(1) Licensor may delete this Mark and/or Licensee's rights with respect to
this Mark may terminate under certain circumstances, as further
described in Section IV.J. of this License Agreement.
(2) Licensor may delete or modify any of these Marks or vary the Additional
Services or Additional Products in connection with which these Marks
may be used by Licensee, in accordance with the provisions of this
License Agreement or in furtherance of Licensor's rights hereunder.
OPTIONAL MARKS*
<TABLE>
<S> <C>
CLEAR ACROSS AMERICA 1,907,932
</TABLE>
- ----------
* Licensee may utilize the optional Marks in accordance with the terms
and provisions of this License Agreement and the Graphic Standards
Manual, but Licensor shall have the right in its sole discretion to
terminate Licensee's use of any of the optional Marks upon thirty (30)
dads written notice to Licensee.
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
<TABLE>
<CAPTION>
Other
FCC Market
Market Name MSA/RSA Market No. Description
- ----------- ------- ---------- -----------
<S> <C> <C> <C>
Pennsylvania 01 RSA 612A1
Total Population: 197624
</TABLE>
<PAGE>
EXHIBIT C
CELLULAR ONE LICENSE AGREEMENT
PRIMARY SERVICES
<TABLE>
<CAPTION>
Associated
Mark (If Any) Primary Services Description
- ------------- ---------------- -----------
<S> <C> <C>
Cellular One Cellular Telephone Services "A" Side Cellular Telephone Services
</TABLE>
<PAGE>
EXHIBIT D
CELLULAR ONE LICENSE AGREEMENT
ADDITIONAL SERVICES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
X Cellular One Nationwide Call Delivery The ability of customers to be reached on
their wireless phone anywhere in the
United States and its territories
(including Alaska, Hawaii, Puerto Rico and
U.S. Virgin Islands) by having the caller
dial their wireless phone number.
- ------------------------------------------------------------------------------------------------------------------------------------
X Cellular One Nationwide Roaming The ability of customers to make calls in
Roaming other than "home markets" anywhere
in the United States and its territories
(including Alaska, Hawaii, Puerto Rico and
U.S. Virgin Islands) by dialing the
appropriate phone number.
- ------------------------------------------------------------------------------------------------------------------------------------
Cellular One Network Nationwide Cellular Call Delivery NCCDN shall be a backbone network which
Network ("NCCDN") permitting consists of hardware/software,
participating cellular customers transmission links and routing switches or
to automatically receive calls protocols, and possessing the physical and
dialed to such customer's home intangible properties and functionality
cellular telephone number when necessary to permit Licensee to offer
roaming. Cellular Telephone Services customers the
(i) service codes, (ii) dialing patterns,
(iii) feature codes, and (iv) recorded
messages (the foregoing clauses (i)
through (iv) being hereafter collectively
referred to as "Dialing Standards"
described in the Guide to Quality
Operations, within the United States and
its territories (including Alaska, Hawaii,
Puerto Rico and U.S. Virgin Islands).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 1
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cellular One Primary Services provided in The Cellular One Mark may be used for one
combination with one or more of or more Additional Services if they are
the Additional Services provided in conjunction with the Primary
Services; otherwise, the other Marks
in this Exhibit are to be used for the
specified Additional Services in accordance
with Licensor's graphic standards. If the
Primary Services are provided in
conjunction with one or more Additional
Services under the Cellular One Mark,
Licensee must, in accordance with
Licensor's graphic standards (i) use the
Marks in this Exhibit for the Additional
Services in question or (ii) use Licensor's
designated form of the descriptive term
for the Primary Services and Additional
Services in question (e.g., Cellular, Long
Distance, PCS, Paging, Telcom, Dispatch,
Data, Video, Internet or Local Calling)
rather than the full Marks shown in this
Exhibit (e.g., Long Distance by Cellular
One, Paging by Cellular One, etc.).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 2
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Long Distance by Long Distance An intra-LATA or inter-LATA toll
Cellular One Service telecommunications service that is
primarily viewed as part of a public
switched telephone network providing users
in fixed (such as residences and
businesses) or mobile locations with two
way voice, data, text, and image
communications. Minimum requirements for
Long Distance Service include:
- provisioning of
telecommunications service
- offering two-way voice, data and
text communications
- being used as part of a public
switched telephone network
- providing intra-LATA, inter-LATA
and international service
- providing users with the ability to
terminate calls nationally and
internationally
- allowing customers utilizing any
or all of the full spectrum of
telecommunications services such
as Cellular, PCS, Paging, Dispatch,
Alternate Wireless Services and
Telcom, to subscribe to this
service.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 3
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PCS by Cellular One Personal A wireless telecommunications service that
communication is interconnected to a public switched
services telephone network providing users with at
least intra-LATA and inter-LATA two-way
voice and data communications. Service is
provided through a mobile phone (car,
transportable, or portable) or through
wireless modems incorporated into devices
such as lap top computers and electronic
notebooks. Minimum requirements are:
- provisioning of wireless
telecommunications service
- offering two-way voice and data
communications.
- interconnecting to a public
telephone network
- providing intra-LATA and inter-LATA
service
- supplying service through:
- mobile phones that are mobile
(car), transportable or
portable, or
- wireless modems incorporated
into devices such as lap top
computers and electronic
notebooks.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 4
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Paging by Paging A wireless telecommunications messaging
Cellular service providing users with at least
One one-way voice and/or data communications
such as voice or data messaging or data
transfer to a pager or a device such as a
lap top computer, or mobile phone with a
built in pager. Minimum requirements of
Paging are:
- provisioning of a wireless
telecommunications service
- offering at least one way voice
and/or data communications
- providing service through analog or
digital technology for paging
devices that either are stand-alone
or part of a device such as a lap
top computer or a mobile phone.
- ------------------------------------------------------------------------------------------------------------------------------------
Telcom by Cellular A combination of Telecommunications products and services
One telecommunications products or that are part of or interconnected
services, including products such primarily to a public switched telephone
as handsets, modems and PBX-like network providing users in fixed locations
devices and services such as such as a residence and businesses with
Cellular Telephone Services, local, intra-LATA and inter-LATA two-way
Alternate Wireless Services, voice, data, text, and image
private network services, or communications. Minimum requirements for
local calling (exchange) services Telcom include:
- providing service to users in fixed
locations such as residences and
businesses
- offering two-way voice, data and
text communications
- interconnecting to a public switched
telephone network
- providing local, intra-LATA or
inter-LATA service.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 5
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dispatch by Dispatch Services A wireless telecommunications messaging
Cellular One service providing users with "push to
talk" two-way voice dispatch and
data broadcast that is generally used in
the public safety, construction, and
transportation industries, and that can
be interconnected to a public telephone
network. Minimum requirements for
Dispatch include:
- provisioning of wireless analog
telecommunications service
- offering two-way voice and data
communications
- providing "push to talk" technology
for organizations and multiple
vehicles or locations
- interconnecting with a public
telephone network.
- ------------------------------------------------------------------------------------------------------------------------------------
Data by Cellular Data Transmission Transmission of information in a numerical
One form that is in either a digital or analog
format which can be transmitted via local,
intra-LATA and inter-LATA facilities
through a wireless telecommunications
network that is interconnected to a public
switched telephone network and
subsequently processed.
- ------------------------------------------------------------------------------------------------------------------------------------
Video by Cellular Video Delivery Providing full motion images and
One Services conversational audio transmission which
can be sent or received in synchronization
via wired and wireless facilities.
- ------------------------------------------------------------------------------------------------------------------------------------
Internet by Internet Services A wired or wireless telecommunications
Cellular One access to a data base of articles,
information and entertainment through the
Internet/World Wide Web.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 6
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Local Calling by Local Calling An intra-LATA telecommunications service
Cellular One (exchange) Services that is primarily viewed as part of a
public switched telephone network providing
users in fixed (such as residences and
businesses) locations with two-way voice,
data, text, and image communications.
Minimum requirements for local calling
services include:
- provisioning of telecommunications
service
- offering two-way voice, data and
text communications
- being used as part of a public
switched telephone network
- providing intra-LATA service
- providing users with the ability to
terminate calls nationally and
internationally
- allowing customers utilizing any or
all of the full spectrum of
telecommunications services, such as
Cellular, PCS, Paging Dispatch,
Alternate Wireless Services and
Telcom, to subscribe to this
service.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL PRODUCTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Core Product Mark Product or Service Description
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cellular One Wireless Cellular telephones, handsets,
Communications transceivers, pagers (remote data
Equipment receptors), personal digital assistants
(wireless data devices which can receive
and send data messages), modems and
facsimile machines, and parts and
accessories therefor.
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 7
<PAGE>
EXHIBIT E
CELLULAR ONE LICENSE AGREEMENT
QUALITY STANDARDS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
QUALITY STANDARDS MEASUREMENT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
- - Overall Minimum Customer - 85% of surveyed respondents answered Licensor's
Satisfaction Rating commissioned satisfaction survey as "very satisfied" or somewhat
satisfied" with their Cellular One service overall
- ------------------------------------------------------------------------------------------------------------------------------------
- - Reliability of placing and - Majority of surveyed respondents answered Licensor's commissioned
completing a call satisfaction survey "As Expected" or "Better than Expected" for the
reliability of placing and receiving a call in home calling area
("Home Market")
- ------------------------------------------------------------------------------------------------------------------------------------
- - Voice quality - Majority of surveyed respondents answered Licensor's commissioned
satisfaction survey "As Expected" or "Better than Expected" for the
quality of voice or sound during Cellular One calls in Home Market
- ------------------------------------------------------------------------------------------------------------------------------------
- - System Busy Signals - Majority of surveyed respondents answered Licensor's commissioned
satisfaction survey "As Expected" or "Better than Expected" for the
ability to place or receive calls without a system busy signal in Home
Market
- ------------------------------------------------------------------------------------------------------------------------------------
- - Dropped Calls - Majority of surveyed respondents answered Licensor's commissioned
satisfaction survey "As Expected" or "Better than Expected" for the
ability to continue phone calls without being dropped because of weak
signal
- ------------------------------------------------------------------------------------------------------------------------------------
- - Quickness of answering - Majority of surveyed respondents answered Licensor's commissioned
customer call satisfaction survey "As Expected" or "Better than Expected" for the
quickness of answering the phone
- ------------------------------------------------------------------------------------------------------------------------------------
- - Ability to adequately answer - Majority of surveyed respondents answered Licensor's commissioned
customer's reason for calling satisfaction survey "As Expected" or "Better than Expected" for
abilIty to adequately answer reason for calling
- ------------------------------------------------------------------------------------------------------------------------------------
- - Accuracy of Bill - Majority of surveyed respondents answered Licensor's commissioned
satisfaction survey "As Expected" or "Better than Expected" for the
accuracy of the bill
- ------------------------------------------------------------------------------------------------------------------------------------
- - Clarity or Understandability of - Majority of surveyed respondents answered Licensor's commissioned
Bill satisfaction survey "As Expected" or "Better than Expected" for the
clarity or understandability of the bill
- ------------------------------------------------------------------------------------------------------------------------------------
- - Data Quality - Accurately transmit or receive data at a rate of at least 9,600 bps
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit E - Page 1
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- - Seamless Network - Customers must be able to travel with their wireless phones outside
their Home Market and mike and receive calls without interruption when
they travel beyond their Home Market
- ------------------------------------------------------------------------------------------------------------------------------------
- - Automatic Roaming - Customers must have the ability to make calls in markets outside of
their Home Market in the same manner as is done in their Home Markets
without any special dialing sequences or instructions
- ------------------------------------------------------------------------------------------------------------------------------------
- - 24 Hour Customer Service - Customer service must be able to be accessed inside or outside of
their Home Market 24 hours a day, 7 days a week
- ------------------------------------------------------------------------------------------------------------------------------------
- - *611 Dialing From a Wireless - Customers with problems must he able to access customer service from
Phone their wireless phone within and outside their Home Market by dialing
*611
- ------------------------------------------------------------------------------------------------------------------------------------
- - 1-800-CELL ONE - A 24 hour service which can be accessed by prospects and customers for
assistance with telecommunications products and services by any type
of telephone technology from local and remote sites
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit E - Page 2
<PAGE>
EXHIBIT F
CELLULAR ONE LICENSE AGREEMENT
SURVEY METHODOLOGY
The methodology currently being employed by Licensor and its designated
Survey Company will be a telephone survey conducted from random probability
samples selected by the Survey Company from listings supplied by Licensee of all
of Licensee's customers in each market in the Licensed Territory.
Customer listings shall be provided to the Survey Company m magnetic
tape or disk medium in such common format as may be reasonably specified by
Licensor. (If Licensee is unable to comply, a half-size, high income probability
sample will be ordered at Licensee's expense).
A random probability sample will be utilized, sufficient in number for
economic completion of the satisfaction survey. The size of the samples will be
at the discretion of Licensor and the Survey Company, but will typically be
between approximately 50 and 200 depending on the size of the market being
surveyed.
<PAGE>
EXHIBIT G
CELLULAR ONE LICENSE AGREEMENT
SPECIAL RESELLER PROVISIONS
[To be agreed to between Licensor and Licensee when applicable]
<PAGE>
Exhibit 10.3.3
CELLULAR ONE LICENSE AGREEMENT
BETWEEN
CELLULAR ONE GROUP
AND
SYGNET COMMUNICATIONS, INC.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
<TABLE>
<CAPTION>
SECTION TITLE PAGE NO.
- ------- ----- --------
<S> <C> <C>
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS ............................ 8
II. TERM AND RENEWAL .................................................. 9
III. RIGHTS AND DUTIES OF LICENSOR ..................................... 11
IV. DUTIES OF LICENSEE ................................................ 18
V. FEES AND REPORTING ................................................ 28
VI. MARKS ............................................................. 33
VII. CONFIDENTIAL INFORMATION .......................................... 37
VIII. ADVERTISING ....................................................... 38
IX. INSURANCE ......................................................... 41
X. TRANSFER OF INTEREST .............................................. 42
XI. DEFAULT AND TERMINATION ........................................... 44
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION ........................ 50
XIII. INDEPENDENT STATUS AND INDEMNIFICATION ............................ 51
XIV. APPROVAL AND WAIVERS .............................................. 52
XV. NOTICES ........................................................... 52
XVI. ENTIRE AGREEMENT .................................................. 53
XVII. SEVERABILITY AND CONSTRUCTION ..................................... 53
XVIII. APPLICABLE LAW .................................................... 54
XIX. ACKNOWLEDGMENTS ................................................... 55
</TABLE>
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<PAGE>
CELLULAR ONE LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a Delaware
general partnership ("Licensor") and SYGNET Communications, Inc., a
corporation/partnership organized under the laws of _______ ("Licensee").
PREAMBLE
Licensor is a Delaware general partnership (the "Partnership") with its
principal place of business in Dallas, Texas. The current general partners of
the Partnership are Cellular One Marketing, Inc., a Delaware corporation,
Cellular One Development, Inc., a Delaware corporation, and Vanguard Cellular
Corp., a North Carolina corporation. Additional partners may be admitted to the
Partnership from time to time. (The Partnership partners, as they may exist from
time to time, are referred to herein as the "Partnership Partners").
The Partnership is engaged in the business of licensing and promoting
the service mark "Cellular One" and certain related trademarks, service marks
and designs.
Licensee desires to receive a license from Licensor to use the
Cellular One-Registered Trademark-, together with the marks designated on
Exhibit A hereto and such other marks as Licensor may hereinafter designate
in writing (collectively referred to as the "Marks") within the market(s)
described on Exhibit B (the "Licensed Territory") in accordance with the
provisions of this License Agreement.
INTRODUCTORY STATEMENT
Licensor's goal has been and continues to be the promotion of the
Marks as being synonymous, in the minds of consumers of telecommunications
services, with nationwide, dependable, high quality telecommunications
services and related services, goods and equipment (the "National Brand
Goal"). Historically, Licensor's strategy to achieve the National Brand Goal
has been to license the Marks, and predecessors of the Marks, for use by
providers of Cellular Radiotelephone Services (as defined in 47 C.F.R Section
22.99) ("Cellular Telephone Services") on the so-called "A" side in certain
Federal Communications Commission ("FCC") designated markets. The competition
to licensees of the Marks has historically come primarily from "B" side
providers of Cellular Telephone Services (who constitute the other providers
of Cellular Telephone Services under the duopoly created by the FCC for such
service). Given this duopoly, Licensor believes that its strategy for
achieving the National Brand Goal has been effective to date. However, the
telecommunications landscape has changed dramatically in
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<PAGE>
recent periods and Licensor believes that its strategy may need
to be modified or entirely new strategies adopted to achieve and maintain the
National Brand Goal.
Licensor believes that these modified or new strategies will be
essential if its licensees are to enjoy the competitive benefits afforded by a
widely recognized national brand as other powerful national brand competitors,
which have not historically competed with licensees of the Marks, enter their
markets directly. Licensor believes that the emergence of these major new
competitors, with powerful national brands, will be accompanied by technological
changes that will render the distinction between Cellular Telephone Services and
other telecommunications services increasingly less important to consumers.
Licensor expects that consumers will begin to focus on applications, utilities,
brand names and distribution channels and will demand that a provider of
telecommunications services, either directly or through alliances, offer a full
menu of communications, such as long distance, cellular (or other wireless)
service, internet access, satellite television and local service, all under one
name and perhaps billed by a single source. Licensor believes that its current
and future strategies must be sufficiently flexible to permit it to respond to
these expected changes in the industry and to provide its licensees with a
national brand that can be used in a manner that will allow those licensees to
meet consumer expectations.
Licensor plans to continue, as its primary strategy, granting licenses
to "A" side Cellular Telephone Services providers (both in newly licensed
markets or in connection with the renewal of currently outstanding Cellular One
"A" side licenses), and to begin attempting to grant licenses to "B" side
providers of Cellular Telephone Services or to resellers of Cellular Telephone
Services in FCC licensed markets not served by an "A" side Cellular One
licensee. Licensor may also consider, however, licensing a provider of Alternate
Wireless Services (as defined below), such as a personal communications service
provider, the right to utilize the Marks in a market or markets where no
Cellular Telephone Services provider utilizes the Marks to promote such
services.
Licensor has, from time to time, granted licensees of the Marks the
right to use one or more of such Marks in connection with products or services
other than those constituting Cellular Telephone Services. Among other things,
Licensor has permitted licensees of the Marks to incorporate one or more of the
Marks onto cellular telephone equipment or to utilize one or more of the Marks
in connection with the nationwide delivery of calls to cellular telephones.
Licensor has also granted licensees the right to continue to use or to begin
using one or more of the Marks in connection with some of the products and
services (the "Additional Products" and "Additional Services") described on
Exhibit D hereto. Licensor anticipates that consumers of wireless
telecommunications services may come to expect that high quality offerings of
services such as Cellular Telephone Services or other Primary Services (as
defined below) will include uniform functionality and service features and
bundles of Additional Products, Additional Services and Cellular Telephone
Services or other Primary Services. As such demand develops, Licensor expects to
designate standards for the offering and delivery of the Cellular Telephone
Services or other Primary Services and related Additional Products and
Additional Services, and to identify one or more Additional Products or
Additional Services as
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<PAGE>
"Core Products," the offering of which will be subject to the provisions of this
License Agreement, as described in Section III.I. hereof.
As part of its plan to achieve and maintain the National Brand Goal,
Licensor will from time to time establish standards pursuant to Section III.B.
hereof, defining minimum acceptable operating and other criteria for offerings
by Licensee of the Cellular Telephone Services or other Primary Services and
related Additional Services and Additional Products. In light of market
conditions, as they change from time to time, Licensor may designate separate
standards for products offered under a particular Mark. Licensor has provided,
on Exhibit E to this License Agreement, a description of the technical standards
and service standards (collectively, the "Quality Standards") which will
initially be applicable to the Cellular Telephone Services or other Primary
Services, Core Products, Additional Services and Additional Products displaying
or sold under the various Marks.
Licensor may, in the future, designate certain of the Additional
Products or Additional Services as Core Products where and when it determines
that consumers have come to expect that such products or services will be
offered in conjunction with any high quality offering of Cellular Telephone
Services or other Primary Services, and in order to achieve and maintain the
National Brand Goal. The existing required Core Products are nationwide call
delivery and roaming capability. Additional Core Products may include, by way of
example only, such products or services as long distance, voice messaging, local
exchange service, dispatch service and paging service, which offer consumers
nationwide consistency of operation or other benefits. Unless it elects not to
do so, Licensee will be obligated to offer the Core Products under the specified
Marks throughout the Licensed Territory in connection with its delivery of
Cellular Telephone Services or other Primary Services. If Licensee is unable or
elects not to so offer one or more Core Products in connection with Cellular
Telephone Services or other Primary Services, Licensor, subject to Section
III.I. of this License Agreement, may amend the License Agreement to terminate
Licensee's rights to utilize the Marks to promote the Core Products not then
being offered or, with respect to the existing Core Products of nationwide call
delivery and roaming capability, may terminate this License Agreement.
The development of the wireless telecommunications industry and the
regulatory patterns relating to that industry have resulted in overlaps or
conflicts between licensees of the Marks with regard to certain promotional
activities. In order to permit licensees of the Marks to make full use of such
Marks in their promotional and other activities and in order to reduce conflicts
between or the expense of resolving conflicts between such licensees, this
License Agreement permits licensees of the Marks to make certain incidental use
of the Marks outside of their respective licensed territories while permitting
Licensor to impose reasonably necessary restrictions, including requiring the
use of tag lines or other identifying mechanisms, where necessary to maintain
the integrity of the licensed territories and to avoid customer confusion
regarding the providers of Cellular Telephone Services or other Primary Services
therein. In addition, because the markets for wireless telecommunications
services vary from geographic area to geographic area for economic, demographic,
topographic, legal and other reasons, and because Licensor expects that certain
markets may develop at different rates from others, this
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<PAGE>
License Agreement permits Licensor to vary definitions of Cellular Telephone
Services or other Primary Services, Core Products, Additional Services and
Additional Products and to vary the Quality Standards and certain of the fees
payable hereunder in order to achieve or maintain progress toward the National
Brand Goal.
The foregoing is intended as an explanation of Licensor's goals and
planning, and shall not be deemed to affect the meaning or construction of any
of the following provisions. In the event of any conflict between the foregoing
and the following provisions, the following provisions shall prevail.
DEFINED TERMS
As used in this License Agreement, the capitalized terms set forth
below shall have the following meanings:
"1-800-CELL ONE MARK" shall mean the service mark denoted as such on
Exhibit A hereto.
"800 NUMBER SUPPLEMENT" shall have the meaning set forth in Section
IV.J.1.(b) of this License Agreement.
"A" SIDE" shall mean the Block A (nonwireline) cellular frequencies
as designated by the FCC.
"ADDITIONAL FEES" shall mean any fees determined in accordance with
Section V.G. of this License Agreement.
"ADDITIONAL PRODUCTS" shall mean the products described as "Additional
Products" on Exhibit D hereto.
"ADDITIONAL SERVICES" shall mean the services described as "Additional
Services" on Exhibit D hereto.
"ADVISORY COUNCIL" shall have the meaning set forth in Section III.D.
of this License Agreement.
"AFFILIATE" shall have the meaning set forth in Section X.C. of this
License Agreement.
"ALTERNATE WIRELESS SERVICES" shall mean any telecommunications service
offering simultaneous, two-way wireless transmission and receipt of voice or
data, other than Cellular Telephone Services.
"ANNUAL ADMINISTRATIVE FEE" shall mean the fee determined in accordance
with Section V.D. of this License Agreement.
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<PAGE>
"ANNUAL ADVERTISING FEE" shall mean the fee determined in accordance
with Section V.C. of this License Agreement.
"ANNUAL LICENSE FEE" shall mean the fee determined in accordance with
Section V.B. of this License Agreement.
"APPLICATION FEE" shall mean the fee determined in accordance with
Section V.A. of this License Agreement.
"B" SIDE" shall mean the Block B (wireline) cellular frequencies as
designated by the FCC.
"CELLULAR ONE MARK" shall mean the trademark or service mark "Cellular
One" denoted as such on Exhibit A hereto.
"CELLULAR ONE PROMOTIONAL FUND" shall have the meaning set forth in
Sections III.E. and VIII.C. of this License Agreement.
"CELLULAR TELEPHONE SERVICES" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
"CERTIFICATES OF INSURANCE" shall mean certificates designating
insurance coverages required to be delivered to Licensor pursuant to Section
IX.C. of this License Agreement.
"C.F.R." shall mean the Code of Federal Regulations, as may be amended
from time to time.
"CHANGE OF CONTROL" shall have the meaning set forth in Section X.D. of
this License Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in Section
VII.A. of this License Agreement.
"CONSUMER SERVICE NUMBER" shall have the meaning set forth in Section
IV.J. of this License Agreement.
"CONSUMER SERVICE NUMBER FEE" shall mean the fee determined in
accordance with Section V.F. of this License Agreement.
"CORE PRODUCTS" shall mean those Additional Products and Additional
Services designated as "Core Products" on Exhibit D to this License Agreement,
as amended from time to time.
-5-
<PAGE>
"CTIA" shall mean the Cellular Telecommunications Industry Association,
or any successor thereto recognized by Licensor as such.
"EFFECTIVE DATE" shall mean the date shown adjacent to Licensor's
signature on this License Agreement.
"FCC" shall have the meaning set forth in the Introductory Statement to
this License Agreement.
"FUND" shall have the meaning set forth in Section VIII.C. of this
License Agreement.
"GRAPHIC STANDARDS MANUAL" shall have the meaning set forth in Section
III.A. of this License Agreement.
"GUIDE TO QUALITY OPERATIONS" shall mean the guide and other materials
provided by Licensor to Licensee pursuant to Section III.B. hereto.
"INCIDENTAL USE" shall have the meaning set forth in Section VI.C. of
this License Agreement.
"INITIAL YEAR" shall have the meaning set forth in Section II.A.2. of
this License Agreement.
"LICENSED TERRITORY" shall mean the market(s) described on Exhibit B,
as amended from time to time pursuant to the provisions of this License
Agreement.
"LICENSEE" shall have the meaning set forth in the first paragraph of
this License Agreement.
"LICENSOR" shall mean Cellular One Group, a Delaware general
partnership, and its permitted successors and assigns under this License
Agreement.
"LONG DISTANCE CARRIER" shall have the meaning set forth in Section
IV.J.1.(a) of this License Agreement.
"MSA" shall mean the cellular Metropolitan Statistical Areas as
referred to in 47 C.F.R. Section 22.909.
"MARKS" shall have the meaning set forth in the Preamble to this
License Agreement.
"NATIONAL BRAND GOAL" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
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"OTHER 800 PROGRAMS" shall have the meaning set forth in Section V.F.
of this License Agreement.
"PARTNERSHIP" shall have the meaning set forth in the Preamble to this
License Agreement.
"PARTNERSHIP PARTNERS" shall have the meaning set forth in the Preamble
to this License Agreement.
"PERMITS" shall have the meaning set forth in Section IV.B. of this
License Agreement.
"PERSONAL COMMUNICATION SERVICES" shall have the meaning set forth in
Exhibit D hereto.
"POTENTIAL CUSTOMER CONFUSION" shall have the meaning set forth in
Section VI.D. of this License Agreement.
"PRIMARY SERVICES" shall mean the services specifically described on
Exhibit C hereto.
"QUALITY STANDARDS" shall mean the technical standards and service
standards applicable to Primary Services, Core Products, Additional Services and
Additional Products set forth on Exhibit E to this License Agreement, as amended
from time to time.
"RSA" shall mean the cellular Rural Service Areas as referred to in 47
C.F.R. Section 22.909.
"REVISED LICENSES" shall mean the license agreements between Licensor
and its licensees, which are entered into after July 31, 1996 as part of
Licensor's general licensing program utilizing the Marks for or in conjunction
with the provision of telecommunication services, including, without limitation,
the provision of Cellular Telephone Services and/or other telecommunication
services substantially the same as or reasonably similar to the Primary Services
being licensed to Licensee hereunder.
"STRATEGIC MARKET CHANGE" shall have the meaning set forth in Section
III.H.4. of this License Agreement.
"SUBSEQUENT YEAR" shall have the meaning set forth in Section II.A.2.
of this License Agreement.
"SURVEY COMPANY" shall have the meaning set forth in Section III.C. of
this License Agreement.
"TERM" shall have the meaning set forth in Section II of this License
Agreement.
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<PAGE>
"TERMINATED MARKET(S)" shall have the meaning set forth in the
introduction to Section XII of this License Agreement.
The parties therefore agree as follows:
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS
A. GRANT
1. Subject to the remainder of this License Agreement
(including without limitation, Licensor's rights described in Section I.B and
Sections III.E. through III.J. below). Licensor grants to Licensee, upon the
terms and conditions of this License Agreement, the exclusive right, license and
privilege to use the Marks in the Licensed Territory described on Exhibit B
during the Term of this License Agreement to promote the Primary Services,
consisting of Cellular Telephone Services on the "A" side, "B" side and/or the
other services described on Exhibit C hereto.
2. Subject to the remainder of this License Agreement,
Licensor grants to Licensee, upon the terms and conditions of this License
Agreement, the exclusive right, license and privilege to use the Marks during
the Term in connection with the promotion and sale of the Additional Services
and the Additional Products in the Licensed Territory.
3. Subject to the terms of this License Agreement, Licensor
grants to Licensee, upon the terms and conditions of this License Agreement, the
right, license and privilege to make Incidental Use (as defined in Section
VI.C.) of the Marks.
B. LIMITATIONS ON GRANT
1. If the Licensed Territory as described on Exhibit B
consists of multiple markets and the Licensee's rights under this License
Agreement are terminated with respect to one or more of such markets in
accordance with the provisions of this License Agreement. Exhibit B to this
License Agreement and specifically the term "Licensed Territory" shall
thereafter be deemed to apply only to the remaining market(s) as to which
Licensee's rights under this License Agreement continue. In addition, the
Licensed Territory may be modified, in accordance with the provisions of Section
VI.D., in the event that Licensor determines that Potential Customer Confusion
exists.
2. Notwithstanding Licensee's exclusive right to utilize the
Marks to promote the Primary Services, Additional Services and Additional
Products in the Licensed Territory, other persons possessing a license to use
the Marks may promote the Primary Services, Additional Products and Additional
Services provided by such parties outside of the Licensed Territory in media
receiving distribution within or accessible by persons located in the Licensed
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Territory, such as regional magazines or newspapers, regional television and
radio and World Wide Web pages.
3. Subject to the provisions of Sections III.H. and III.I. of
this License Agreement, Licensor may terminate Licensee's right to use the Marks
to designate or promote certain Core Products, Additional Products and
Additional Services.
C. ACKNOWLEDGMENTS
1. Subject to the specific grants to Licensee set forth in
this Section I, Licensee acknowledges that Licensor has and retains the right to
use and license the Marks anywhere in the world, within or outside of the
Licensed Territory and that Licensee shall have no rights with regard to such
use or any benefits therefrom.
2. Licensor and Licensee agree that effective with the
commencement of the Term of this License Agreement, all prior licenses to which
Licensee is a party relating to the use of the Marks, or any of them, in the
Licensed Territory or any part thereof shall terminate, together with all of
Licensee's rights thereunder.
II. TERM AND RENEWAL
A. TERM
1. Except as otherwise provided in Section II.B. of this
License Agreement, the term (the "Term") of this License Agreement is five (5)
years, beginning on the Effective Date and ending on the day preceding the fifth
anniversary thereof. Licensee recognizes and agrees that Licensor may modify or
terminate the Term as it applies to Additional Products and Additional Services
or Core Products in accordance with Articles III and VI hereof.
2. The period from the Effective Date of this License
Agreement until December 31 of that calendar year shall be referred to herein as
the "Initial Year." Each subsequent calendar year commencing after the end of
the Initial Year shall be referred to herein as a "Subsequent Year."
B. RENEWAL
Licensee may, at its option, renew the license granted by this
License Agreement for two (2) additional terms (each, in turn, the "Term") of
five (5) years each provided that:
1. Licensee gives Licensor written notice of its election to
renew not less than six (6) months nor more than twelve (12) months before the
end of the expiring Term;
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2. Licensee is neither in default of any of its obligations
under this License Agreement, nor on probation pursuant to Section XI.E.;
3. Licensee has not during the expiring Term received any
notice of default under Section XI.D. which relates to a default which has not
been cured;
4. At the end of the expiring Term, Licensee continues to hold
all of the Permits (as defined in Section IV.B.) necessary to provide the
Primary Services and those of the Core Products, Additional Services and
Additional Products being provided, sold or distributed by it;
5. No later than ninety (90) days before the end of the
expiring Term, Licensee executes Licensor's then-current form of license renewal
agreement, which agreement will supersede this License Agreement in all
respects, provided that such license renewal agreement shall not contain any
terms, provisions or conditions which differ materially from the terms,
provisions or conditions of this License Agreement, except terms, provisions and
conditions (i) which in the good faith judgment of Licensor are not materially
adverse to Licensee, (ii) which are appropriate, in the good faith judgment of
Licensor, to accommodate any material economic, technological, demographic, or
other market changes occurring during the prior five (5) year Term, (iii) which
Licensor determines in good faith are necessary to protect the Marks, (iv)
which Licensor determines in good faith are necessary to prevent Potential
Customer Confusion (as defined in Section VI.D.), (v) which relate to charges
and fees (including increases) which Licensor believes in good faith are
necessary to provide adequate support for the promotion of the Marks consistent
with the National Brand Goal during the renewal Term in question, (vi) which are
reasonably necessary in Licensor's determination to maintain or achieve the
National Brand Goal, (vii) which Licensor adopts pursuant to Sections III.G.,
III.H. or III.I. hereof, or (viii) which relate or are enacted pursuant to
Section III.E.;
6. At the end of the expiring Term, Licensee shall be in
compliance with the provisions of Section IV.A.2. If Licensee has been assigned
probation status at such time as described in Section IV.A.2., then such
probation status shall continue and the required timely improvements shall be a
condition of effective renewal;
7. At the end of the expiring Term, Licensee is offering on a
good faith commercial basis the Primary Services and all of the Core Products
for which Licensee is authorized to utilize the Marks, in substantially all of
the Licensed Territory in accordance with the Quality Standards and is promoting
such Primary Services and Core Products utilizing the applicable Marks in
accordance with the Graphic Standards Manual; and
8. At the end of the expiring Term, Licensee shall have
satisfied all monetary obligations owed by Licensee to Licensor, and shall have
timely met such obligations throughout the term of this License Agreement.
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III. RIGHTS AND DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee,
and no other party is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. This License
Agreement is not intended to and shall not create any partnership, joint venture
or other business relationship, other than that of Licensor and Licensee,
between the parties hereto, or to vest any rights in any third party or group of
third parties. This License Agreement shall not create any rights on behalf of
Licensee against any third party, including any other licensee of the Marks.
Subject to the foregoing, and to the remainder of this License Agreement,
Licensor shall undertake the following duties:
A. MARKS USAGE GUIDELINES
1. Licensor will provide Licensee, from time to time, with a
Graphic Standards Manual (the "Graphic Standards Manual") containing written and
graphic guidelines for the correct reproduction, application and presentation of
the Marks. The Graphic Standards Manual may include, among other things, Mark
specimens, samples of advertisements and clip art indicating color, proportion,
and format. The Graphic Standards Manual may also provide for the use of one or
more tag lines to be used to differentiate or highlight a particular service or
offering or group of services or offerings, such as "Paging By Cellular One" and
require its usage in specific circumstances, including use on signage and
promotional materials referenced in Section IV.F. The Graphic Standards Manual
may also provide guidelines for the proper use of tag lines and require such
usage in the event that two or more licensees of the Marks are permitted to make
use thereof within the Licensed Territory, or any part thereof, pursuant to
Sections VI.C. or VI.D.
2. From time to time, upon not less than one (1) year's
notice, Licensee shall be entitled to designate one or more icons to be used
with one or more of the Marks and the manner of their usage to signify an
association of such icon or icons with such Marks.
B. TECHNICAL GUIDELINES, QUALITY STANDARDS
1. Licensor will provide Licensee with a Guide to Quality
Operations (the "Guide to Quality Operations") containing suggestions for
providing customers with high quality Primary Services, Core Products,
Additional Services and Additional Products, and other materials, as Licensor
deems appropriate. The Guide to Quality Operations may be modified and
supplemented from time to time as Licensor deems appropriate.
2. Attached to this License Agreement as Exhibit E are the
Quality Standards (the "Quality Standards"), as of the date hereof, applicable
to Primary Services, Core Products, Additional Services and Additional Products,
respectively, to be sold or provided, as the case may be, utilizing the Marks.
The Quality Standards include, as a general matter, criteria for minimum
acceptable service delivery levels and encompass such matters as geographic
coverage requirements, participation in a nationwide call delivery network,
standardized dialing patterns
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and the availability of telephone customer assistance. The Quality Standards
also include required features and technical guidelines for minimum acceptable
system functionality (although specific equipment or system designs will not be
required) and may encompass such matters as required functionality for
telephones and other devices constituting Additional Products, required
compliance by equipment with designated industry standards, compliance by
switching equipment with uniform handoff requirements, and similar requirements
relating to the delivery of Primary Services and Additional Services or the
operation of Additional Products.
3. From time to time, Licensor, by written notice to Licensee
in accordance with Section III.A., shall have the right to amend the Quality
Standards with regard to any Mark to require added features or functionality for
Primary Services, to modify the minimum technical or operating standards
relating thereto or to require coordination and uniformity in the delivery of
Primary Services, Additional Services, Additional Products and Core Products
within the Licensed Territory and beyond. Licensor shall not be obligated to
consider the particular needs of Licensee or any group of licensees of the Marks
in connection with any amendment to the Quality Standards, except that Licensor
shall not propose amendments to the Quality Standards applicable to Licensee
only.
4. From time to time, Licensor, by written notice to Licensee
in accordance with Section IV.A., shall have the right to amend Exhibit E with
regard to any Mark to designate features, technical or operating standards or
functionality appropriate under existing economic, market, demographic and
technological conditions in similarly situated markets directed to the
achievement and maintenance of the National Brand Goal. Although uniformity and
consistency will normally be required by Licensor throughout the Licensed
Territory and among the various territories or markets in which Licensee and
others are licensed to use the Marks, the Licensor may, from time to time, make
certain distinctions, based upon demographic, topographic, legal or other
considerations, and provide for differing Quality Standards with regard thereto.
5. In addition, Licensor may, upon at least six (6) months
written notice to Licensee, amend Exhibit E to amend the Quality Standards for
Additional Products, Additional Services and Core Products, to designate Quality
Standards for any new Marks added to Exhibit A hereto or to designate Quality
Standards for Additional Products, Additional Services and Core Products for
which separate Quality Standards do not exist. In the event that an Additional
Product or Additional Service becomes a Core Product, Licensor may further amend
Exhibit E to establish Quality Standards for the offering and delivery of the
Core Products, as a whole or as a package of Core Products or Primary Services
and Core Products.
6. Exhibit E to this License Agreement, as amended from time
to time, is incorporated herein by reference. All references to the Quality
Standards shall mean those standards established, as of such time, by Exhibit E.
7. At Licensee's request, Licensor shall be entitled, but
in no event shall be required, to waive compliance by Licensee with one or
more of the Quality Standards in one or
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more of the markets constituting a part of the Licensed Territory, in the
event that Licensor believes such a waiver to be consistent with the National
Brand Goal. Any waiver by Licensor of a Quality Standard must be in writing
and may, at Licensor's election, be for a limited period or subject to one or
more conditions.
C. CUSTOMER SATISFACTION SURVEYS
Licensor shall have the right, at its own expense, commission
an independent survey company ("Survey Company") to conduct a customer
satisfaction survey of Licensee's customers on a yearly basis for purposes of
assessing the quality of Licensee's Primary Services, Additional Services,
Additional Products or Core Products, or all of them. The methodology of the
survey will be determined by the Survey Company and Licensor. An outline of
current survey methodology for Primary Services, which may change from time to
time, is attached as Exhibit F. The results of all surveys of Licensee's
customers will be shared with Licensee to assist Licensee in improving its
business and complying with Licensee's obligations under this License Agreement,
including its obligations with regard to the Quality Standards described herein.
The results of surveys will be used to evaluate the general level of customer
satisfaction and to assist Licensor in determining whether or not Licensee is
meeting the Quality Standards. Licensor will instruct the Survey Company to
obtain all required survey information directly from the Licensee and not
through or in conjunction with Licensor. The Survey Company will be required to
execute an appropriate confidentiality agreement for the benefit of Licensee and
the other licensees of the Marks, which shall provide that the Survey Company
will not disclose any Confidential Information of Licensee to Licensor, the
Partnership Partners or affiliates, or their employees or to any other party
(except that the results of the survey for each market and other survey
information which is applicable generally to all licensees of the Marks or any
of them may be disclosed to Licensor and used by Licensor in connection with its
business operations).
D. LICENSEE ADVISORY COUNCIL
Licensor has established an elected council of licensees
("Advisory Council") comprised of licensees other than Partnership Partners from
a broad cross-section of markets throughout the United States, to advise and
consult with Licensor regarding material matters such as advertising, marketing
and Quality Standards relating to the Marks and to act as a liaison organization
between Licensor and the licensees of the Marks. The procedures and
responsibilities adopted for the operation of the Advisory Council are subject
to change, from time to time, as may be appropriate in the judgment of Licensor
to provide the most effective organization for performing the contemplated
functions of the Advisory Council. The representative of any licensee serving on
the Advisory Council shall be an officer of such licensee or other person
reasonably acceptable to Licensor. The charter of responsibility of the Advisory
Council provides that all members of the Advisory Council will be informed of
applicable antitrust laws and shall abide by any decisions of Licensor's
antitrust counsel in such regard.
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E. NATIONAL AND REGIONAL ADVERTISING
Licensor has established and maintains the Cellular One Promotional
Fund, as described in Section VIII.C. of this License Agreement. Licensor
administers the Fund with the goal of enhancing the image of the Marks and
achieving or maintaining the National Brand Goal. Licensor, in connection with
the Cellular One Promotional Fund, or otherwise, shall have the right, from time
to time, to promote the Marks in local, regional or national advertising
receiving distribution within the Licensed Territory and to engage in any other
promotional activities, including sponsoring sporting or other public events
within the Licensed Territory, as Licensor deems appropriate in connection with
the National Brand Goal. No consent of Licensee shall be necessary to any such
promotional activities.
F. NATIONAL/REGIONAL PROGRAMS
Licensor may, in its discretion, make available a national
and/or one or more regional account programs under which, through the voluntary
cooperation of its licensees in various markets, client companies with multiple
market operations may enter into a single contract arrangement for one or more
of the Primary Services or any of the Core Products, Additional Services or
Additional Products for their employees located in such markets. Licensor or its
designee may administer any such national or regional accounts program(s). In
addition, Licensor may, from time to time, utilize the Marks or permit third
party licensees of the Marks to utilize the Marks to promote the sale and
distribution of Additional Products or Additional Services in or by means of
media, such as, but not limited to, direct mail catalogs, World Wide Web pages
and radio and television broadcasts receiving wide distribution, both within and
outside of the Licensed Territory; provided, however, that no such promotional
activity shall have as its primary purpose the targeting of any single market or
territory. In addition, Licensor may also, from time to time, utilize the Marks
or permit third party licensees of the Marks to promote and sell Additional
Products or Additional Services as part of a coordinated regional or national
marketing effort including all or part.of the Licensed Territory; provided,
however, that no such promotional activity shall have as its primary purpose the
targeting of any single market or territory.
G. DESIGNATION OF PRIMARY SERVICES
1. Set forth on Exhibit C hereto are descriptions of the
Primary Services applicable to Licensee as of the date of this License
Agreement. From and after the date hereof, Licensor and Licensee, by executing
an amendment to Exhibit C, shall be entitled to amend the description of the
Primary Services and to add or delete services therefrom. Licensor shall be
entitled to group the Primary Services into categories (for use, among other
things, in defining Quality Standards applicable to particular Primary Services)
and, with the consent of Licensee, to add or omit one or more services from the
definition of Primary Services with regard to one or more markets constituting
part of the Licensed Territory.
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2. Consistent with Section VI.D., to the extent necessary to
prevent Potential Customer Confusion, Licensor shall be entitled, with or
without the consent of Licensee, to amend Exhibit C hereto to modify the
description of Primary Services or to separate Primary Services into classes or
categories for the purpose of differentiating between the Primary Services (by
means of tag lines or otherwise) to be rendered in one or more markets
constituting a part of the Licensed Territory; provided, however, that any such
amendment of Exhibit C shall only become effective upon at least six (6) months
written notice to Licensee thereof.
H. DESIGNATION AND DELETION OF ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are descriptions
of products and services which, upon thirty (30) days written notice to
Licensor, Licensee may promote or sell utilizing the Marks which are applicable
to the Additional Product or Additional Service in question, as may be
designated in Licensor's Graphic Standards Manual. Licensor may review, from
time to time, Exhibit D to this License Agreement in light of current
demographic, technological, regulatory and other circumstances (including,
without limitation, Strategic Market Changes) for the purpose of adding or
deleting products and services from the descriptions of Additional Products and
Additional Services, modifying the definitions assigned to one or more
Additional Products or Additional Services or modifying the Term of this
License Agreement or any Licensed Territory with regard thereto. In undertaking
such review, the Licensor shall consider Exhibit D in light of the National
Brand Goal. Licensor shall not be obligated to consider the needs of any
particular licensee or group of licensees in connection with its review of
Exhibit D, nor shall it have an obligation, other than as specifically provided
for herein, to inform Licensee of the progress of such review. Any such
amendment of Exhibit D shall be made pursuant to Sections III.H.2 through
III.H.5 below or pursuant to Section VI.D. hereof.
2. Based upon the review contemplated by Section III.H.1.
above, or otherwise as deemed appropriate by Licensor in its sole discretion,
Licensor may at any time, or from time to time, during the Term, upon not less
than thirty (30) days written notice to Licensee designate one or more new or
additional services or products as Additional Services or Additional Products.
3. Based upon the review contemplated by Section III.H.1.
above, or as otherwise deemed appropriate by Licensor, at any time from and
after January 1, 1999, Licensor may modify or amend Exhibit D hereto, or any
description set forth therein, and may delete products or services constituting
Additional Products or Additional Services, reduce or extend the Term with
respect to one or more Additional Products or Additional Services or modify the
Licensed Territory with regard thereto (i) immediately upon written notice to
Licensee with respect to any Additional Product or Additional Service not then
being offered to the public throughout the Licensed Territory on a good faith,
nondiscrinatory commercial basis by Licensee under the specified Marks at the
time of such written notice, (ii) upon not less than six (6) months written
notice with respect to any Additional Product or Additional Service which is
being offered to the public throughout the Licensed Territory on a good faith,
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nondiscriminatory commercial basis by Licensee under the specified Marks at the
time of such written notice, provided that in the event of modification or
amendment pursuant to either (i) or (ii) preceding, Licensor shall have
determined that a Strategic Market Change has occurred and that such
modification or amendment is required to reasonably permit appropriate response
thereto. A written explanation of the reason for such modification or amendment
shall accompany the written notice referred to in (i) or (ii) preceding. During
such time as Licensee can demonstrate to the satisfaction of Licensor that
Licensee is offering and actively promoting the Primary Services, long distance
service and local calling service (as further described on Exhibit D) under the
specified Marks to the public (including business, residential and mobile
consumers) throughout the Licensed Territory on a good faith, nondiscriminatory
commercial basis, Licensor may agree to refrain from licensing others to use the
Marks for other Additional Products and Additional Services in the Licensed
Territory. Any such agreement shall be subject to those conditions and
limitations as Licensor may establish.
4. For the purposes of this Section III.H., a "Strategic
Market Change" shall mean any change in economic, demographic, technological,
regulatory or competitive conditions which Licensor reasonably believes requires
a material modification in the manner in which the Primary Services, the Core
Products, the Additional Products or the Additional Services, or any of them,
are marketed or delivered, in order to continue the successful promotion of the
Marks to achieve or maintain the National Brand Goal. While it is anticipated
that a Strategic Market Change will be national in scope, and that Licensor's
response thereto will be similarly uniform, Licensor shall be entitled, subject
to Section III.B.4., to respond under this Section III.H. to Strategic Market
Changes affecting a more limited class or classes of markets.
5. Notwithstanding Section III.H.3. above, Licensee shall have
a limited right to have Exhibit D amended to restore Additional Services or
Additional Products deleted under Section III.H.3. For the ninety (90) day
period following delivery of a notice of modification or amendment under Section
III.H.3., Licensee may submit a request to Licensor to reinstate an Additional
Product or Additional Service on Exhibit D or to rescind any other modification
of Exhibit D adopted pursuant to Section III.H.3, stating its reasons therefor.
Licensor shall consider Licensee's request for reinstatement in good faith, but
shall not be obligated to amend Exhibit D. Any reinstatement of an Additional
Product or Additional Service under this Section III.H.5. shall be subject to
such conditions as Licensor shall believe appropriate under the circumstances,
consistent with the achievement or maintenance of the National Brand Goal.
I. DESIGNATION AND DELETION OF CORE PRODUCTS
1. From time to time after the date hereof, to the extent that
Licensor determines that consumers have come to expect that one or more of the
Additional Products and Additional Services described on Exhibit D, as amended
from time to time, are commonly offered as a part of any offering of nationwide,
dependable, high quality telecommunications services or are otherwise
fundamental to the achievement or maintenance of the National Brand Goal,
Licensor may, upon six (6) months written notice to Licensee, amend Exhibit D
hereto to designate those Additional Products and Additional Services as "Core
Products" and may
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further designate an effective date for such designation. However, nationwide
call delivery and nationwide roaming as further described on Exhibit D are
existing required Core Products, and need not be further designated as such
pursuant to this Section III.H.1.
2. From and after the effective date of any designation of an
Additional Product or Additional Service as a Core Product, Licensee shall offer
such Additional Service or Additional Product under the specified Marks on a
good faith commercial basis in substantially all of the Licensed Territory, or
shall have adopted and provided to Licensor in writing a good faith plan
acceptable to Licensor for doing so promptly. Licensee shall promote using the
specified Marks and make all the Core Products available to its customers and to
the public generally in the Licensed Territory, in connection with promoting and
making the Primary Services available and shall not discriminate in terms of
price, availability or promotional efforts in favor of similar products or
services designated by other trademarks or service marks. Upon Licensor's
request. Licensee shall promptly provide a copy of its plans for offering any
Core Products under the specified Marks which it does not then offer.
3. In the event that Licensee shall fail to comply with its
obligations under Section III.1.2 above, or shall fail within six (6) months of
the effectiveness of the designation of any Additional Product or Additional
Service as a Core Product to offer (or plan to offer pursuant to a plan
submitted to and approved by Licensor and promptly thereafter implemented by
Licensee) such Core Product under the specified Marks in good faith, on a
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory, Licensor shall be entitled to immediately amend Exhibit D hereto to
delete therefrom the Core Products not being offered by Licensee under the
specified Marks on a good faith, nondiscriminatory, commercial basis in
substantially all of the Licensed Territory, and shall be entitled to use or
license others to use the Marks in connection with such Core Products in the
Licensed Territory. With respect to the existing Core Products of nationwide
call delivery and nationwide roaming as further described in Exhibit D, Licensor
shall also be entitled to terminate this License Agreement pursuant to Section
XI.D. if, within six (6) months from the Effective Date, such Core Products are
not being offered by Licensee under the specified Marks on a good faith,
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory.
J. OTHER LICENSES, COMPENSATION TO LICENSOR
Licensor has and may continue to license the Marks, or any of them, to
third parties for use in connection with products or services other than Primary
Services, Core Products, Additional Products, or Additional Services. (For
example, Licensor has licensed one of the Marks to a third party marketer of
children's toys). Such licenses, subject to Licensee's rights set forth in
Section I, may permit use of the Marks by such third party licensees to promote
and sell products and services, other than Primary Services, Core Products,
Additional Services and Additional Products, within the Licensed Territory. As
part of such licensing arrangements, Licensor has, and may, from time to time
hereafter, receive fees or other consideration from third parties who provide
goods and services to licensees of the Marks in connection with
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promotional or other programs arranged by Licensor. Licensee shall have no claim
or right with regard to any such fee or consideration or the arrangements giving
rise thereto.
K. RESELLER ARRANGEMENTS
In the event this License Agreement is being executed and delivered by
a licensee who is being licensed to resell Cellular Telephone Services or an
Alternate Wireless Service, it is anticipated that certain terms and conditions
applicable herein to providers of such services will need to be modified and
that certain additional terms and conditions may need to be added hereto to
accommodate the differences between the provision of such services directly by a
provider and by a reseller of such services. Accordingly, as necessary, in any
such event, the parties hereto shall complete and attach hereto an appropriate
Exhibit G to reflect such modified or additional terms and conditions and such
Exhibit G shall thereafter be deemed to be incorporated herein and made a part
hereof for all purposes.
IV. DUTIES OF LICENSEE
All duties of Licensee under this License Agreement are to Licensor,
and no other party is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. Licensee understands
and acknowledges that the high quality operation of its business under the Marks
is important to Licensee, Licensor and other licensees of the Marks in order to
maintain high operating standards and to protect the reputation of, and goodwill
associated with, the Marks. Toward that end, Licensee acknowledges and accepts
the following duties:
A. QUALITY OF SERVICE
1. Licensee agrees to provide high quality Primary Services
and Core Products and, to the extent provided, high quality Additional Services
and Additional Products, to its customers by, among other things, complying with
this License Agreement and the applicable Quality Standards. Upon six (6) months
written notice of the modification of or addition to the Quality Standards,
Licensee shall cause its Primary Services, Core Products, Additional Services or
Additional Products to comply therewith; provided, however,that Licensee shall
be entitled to adopt a plan reasonably acceptable to Licensor to discontinue the
offering of any Additional Services or Additional Products in lieu of complying
with the Quality Standards relating thereto, provided such Additional Products
or Additional Services do not constitute Core Products.
2. Licensee shall attain and maintain an overall minimum
customer satisfaction rating of at least 85% (or such increased level as may be
required pursuant to the provisions of this Section IV.A.) with regard to the
Licensed Territory as a whole (on a population weighted basis) and more than 70%
with respect to any market constituting a part thereof, with regard to
Licensee's Primary Services and Core Products. If Licensee has licenses
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to use the Marks in more than one Licensed Territory pursuant to additional
license agreements with Licensor, Licensee shall be obligated to achieve an
overall minimum customer satisfaction rating of 85% (or any increased level
adopted) for all of such Licensed Territories (on a population weighted basis),
and more than 70% with respect to any market constituting a part thereof.
Licensor reserves the right to increase the overall minimum acceptable customer
satisfaction rating to a percentage greater than 85% if Licensor, in its
reasonable discretion, determines that such higher percentage is appropriate
given the technical state of the industry delivering Primary Services, Core
Products, Additional Products and/or Additional Services at such time; provided,
however, that the Advisory Council must approve any such increase in the minimum
acceptable customer satisfaction rating, and such increase shall not be
effective until the beginning of the next calendar year following the Advisory
Council's approval. In the event that a customer satisfaction survey conducted
by Licensor pursuant to Section III.C. of this License Agreement results in an
overall minimum customer satisfaction rating below 85% (or below any higher
percentage established by Licensor as described above), but more than 70%, in
Licensee's Licensed Territory or Licensed Territories as a whole (on a
population weighted basis), then Licensee will be assigned probation status
under Section XI.E. of this License Agreement and surveys will be commissioned
in the market(s) in the Licensed Territory or Licensed Territories, as the case
may be, which did not achieve a rating of at least 85% (or any higher
percentage established by Licensor), from time to time thereafter as Licensor
deems appropriate until Licensee has achieved an overall minimum customer
satisfaction rating of at least 85% (or any higher percentage established by
Licensor as described above) and the probation status is removed, or until this
License Agreement is terminated, as herein provided, whichever shall first
occur. Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction survey(s).
3. During the Term, Licensee shall provide the Primary
Services and Core Products throughout the Licensed Territory, and shall
maintain, or cause others to maintain on its behalf, a sufficient number of
customer service locations and other facilities, including retail storefronts or
similar facilities, to permit customers and potential customers convenient
access to Primary Services, Core Products, Additional Products and Additional
Services, consistent with existing competitive conditions and in accordance with
the Quality Standards.
B. LEGAL COMPLIANCE
1. Licensee agrees to comply, at its own expense, with all
applicable laws, ordinances and regulations of federal, state, county or
municipal authorities. Licensee will also obtain and maintain, at its own
expense, all permits, approvals, licenses and franchises and shall make all
required filings, applications and reports to all government or administrative
entities or self-regulatory organizations as shall be necessary, from time to
time, to provide those of the Primary Services, the Core Products, the
Additional Services or the Additional Products as Licensee may then be
providing, and to otherwise engage in business, generally, throughout the
Licensed Territory (collectively, the "Permits"). Without limiting the
generality of the foregoing, Licensee's obligation under this Section IV.B.
shall include the maintaining of Licensee's qualification to do business
throughout the Licensed Territory, and the filing of all
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income and franchise tax returns with respect to Licensee's operations. In the
event that any of Licensee's material Permits is scheduled to expire during the
Term, including any renewal of such Term, Licensee agrees to comply with all
requirements for extension of said Permit prior to such expiration. Licensee
shall notify Licensor in writing within five (5) days after receipt of any
notice from the FCC or any other governmental authority regarding an actual or
threatened termination or revocation of any Permit material to the provision of
the Primary Services, Core Products, Additional Products or Additional Services
by Licensee within the Licensed Territory, including any license by the FCC to
conduct business as a provider of telecommunications services or necessary to
construct facilities relating to telecommunications services, and shall within
such time provide a copy of any such notice to Licensor. In addition, Licensee
shall notify Licensor within five (5) days after becoming aware of the
commencement of any action, suit or proceeding, or the issuance of any order,
writ, injunction, award or decree of any court, agency or other governmental
instrumentality which could have a material adverse effect on the operation or
financial condition of Licensee's business as it relates to the Primary
Services, the Core Products, the Additional Services or the Additional Products.
2. To the extent that Licensee's business is dependent upon
one or more agreements with a provider of Primary Services, Core Products,
Additional Services or Additional Products for which Licensee acts as a
reseller, "Permits" shall include such contractual relationship and the license
granted hereunder shall be dependent upon the continuation thereof in good
standing.
3. Licensee represents and warrants that it possesses all
Permits necessary to the conduct of its business and to the business of
providing the Primary Services, Core Products, Additional Services and
Additional Products within the Licensed Territory, including, if applicable, any
Permits necessary to permit it to act as a reseller of services provided by
others.
C. BUSINESS PRACTICES
Licensee shall maintain a competent, conscientious, trained
staff. Neither Licensor nor Licensee shall engage in any trade practice or other
activity which is harmful to the goodwill or reflects unfavorably on the Marks
or on the reputation of Licensee, Licensor, Licensee's business or other
licensees of Licensor, or which constitutes deceptive or unfair competition,
consumer fraud or misrepresentation.
D. INFORMATION TO LICENSOR
1. Upon Licensor's request, subject to the confidentiality
requirements described in Section III.C., Licensee must, in connection with any
customer satisfaction survey Licensor elects to conduct in accordance with
Section III.C., promptly furnish to the Survey Company designated by Licensor a
complete and accurate customer list of all of its subscribers and customers for
its Primary Services, Core Products, Additional Products and Additional
Services, as a whole or separately, in a format reasonably prescribed by
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey
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Company shall require in connection with the performance of its duties. Licensee
hereby gives the Survey Company permission to contact any and all of its
subscribers and customers in conducting a customer survey to ascertain the
quality level of Licensee's services and products and obtain related market
research data in accordance with the methodology set forth in Exhibit F or as
Licensor may reasonably deem appropriate. Licensee shall promptly provide
Licensor with additional information reasonably requested by Licensor regarding
matters such as Licensee's legal status (for example, any Change in Control),
affiliated companies, dealers, agents, retailers, Primary Services, Core
Products, Additional Products and Additional Services being provided or sold
utilizing the Marks, Licensee's use of the Marks, including Incidental Use and
Potential Customer Confusion, and other matters which Licensor may reasonably
determine are relevant to Licensee's performance under this License Agreement.
2. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of each Permit necessary or related to its business of
providing Primary Services, Core Products, Additional Services or Additional
Products using the Marks (with the financial details thereof deleted or redacted
if Licensee so chooses), together with any amendments, termination or other
notices relating thereto.
3. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of Licensee's most recent financial statements for the most
recently completed fiscal year and any subsequent interim periods, including
reports of auditors, if any, and supporting schedules, relating to Licensee's
business of providing Primary Services, Core Products, Additional Services or
Additional Products using the Marks.
E. VOTING BY LICENSEES
Licensor shall be entitled, from time to time, during the Term, or at
any time with regard to a Term to commence in the future, to submit a proposed
amendment to this License Agreement and any Exhibits hereto, to all of its
licensees which have executed Revised Licenses, with a request that such
licensees indicate their approval or disapproval thereof by written ballot.
Unless licensees which have executed Revised Licenses with Licensor and which
are obligated to pay in excess of 50% of the aggregate of all Annual License
Fees payable by all similarly situated licensees shall vote against such
amendment, this License Agreement, and the applicable Exhibits hereto, shall be
amended as proposed by Licensor in the material submitted to the licensees.
Notwithstanding the foregoing, without the express written consent of Licensee,
no amendment to this License Agreement approved under this Section IV.E. shall,
with regard to prior time periods or events taking place prior to the adoption
thereof, increase Licensee's obligations to pay any amounts to Licensor or
otherwise undertake any obligations to Licensor or any other party. In addition,
no amendment to this License Agreement approved solely pursuant to this Section
IV.E. shall (i) modify the Licensed Territory, (ii) prohibit or prevent
Licensee from providing the Primary Services under the Marks in the Licensed
Territory, or (iii) permit Licensor to license others to use the Marks for
providing Alternate Wireless Services or Cellular Telephone Services in the
Licensed Territory. Any notice provided by Licensor hereunder requiring an
approval or disapproval of an amendment to this License Agreement or
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any Exhibits hereto shall be delivered to Licensee in accordance with the
notice provisions of this License Agreement not less than ninety (90) days prior
to the proposed effectiveness thereof. Licensor shall be entitled to set forth
in any notice proposing an amendment to this License Agreement or any Exhibits
hereto an effective date more than ninety (90) days following the delivery of
notice with regard thereto. Licensees which fail to respond to a request by
Licensor to approve or disapprove of an amendment to this License Agreement or
any Exhibits hereto within sixty (60) days after delivery of the proposed
amendment shall be deemed to have consented to such amendment. This Section
IV.E. shall not modify or limit any of Licensor's other rights provided for in
this License Agreement, including but not limited to Licensor's rights to amend
Exhibits to this Agreement under Sections III or IV, to the extent permitted
therein, or to modify or impose the fees or other charges, to the extent such
modification is permitted, required of Licensee under Sections V or VIII hereof.
Only Licensor shall have the right to propose an amendment to this License
Agreement or any Exhibits under this Section IV.E.
F. SIGNAGE, PROMOTION
1. For each market in the Licensed Territory, Licensee shall,
at its own expense, cause the Cellular One Mark to be used or incorporated with
such reasonable prominence in such advertising and other business references to
Licensee as may be appropriate to create a clear impression, among the general
public, that Licensee is affiliated with the Cellular One program. Without
limiting Licensee's obligation to comply with the foregoing, Licensee shall, for
each market in the Licensed Territory, associate Licensee and the Cellular One
name in the telephone "yellow pages" and "white pages" directory listings, and
at least cause the Cellular One Mark to be used or incorporated on or in each of
the following, insofar as they relate to Licensee's business utilizing the
Marks:
(i) Licensee's customer billing statements and the
accompanying envelopes;
(ii) Licensee's advertising media, including without
limitation, print advertising, brochures, marketing materials,
point-of-sale materials, billboards and broadcast media such as radio and
television advertising, on line advertising, home pages on the World Wide
Web and other computer accessible information;
(iii) The greetings, introductions or opening messages of
Licensee's telephone operators, voice mail, telephone answering machines
and other call answering services, in response to customer and
prospective customer inquiries;
(iv) Licensee's stationery, business cards, notices and
other mailouts, and, to the extent practicable, any press or other media
coverage afforded Licensee; and
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(v) Signs or displays on the exterior and interior of each
of Licensee's facilities which interface with customers or prospective
customers in the Licensed Territory.
2. To the extent required by this License Agreement, pursuant
to Sections III.A., VI.B.. VI.D. or otherwise, Licensee shall, at its own
expense, modify its usage of the Marks and adopt tag lines, icons or similar
marks or variations, and modify the signage and other items described in Section
IV.F.1. above as may be appropriate, within one (1) year or such shorter period
as Licensor may reasonably require or as may be otherwise provided in this
License Agreement.
3. Licensee shall use the Cellular One Mark (or any mark
substituted therefor by Licensor) as the principal service mark or trademark, as
appropriate, designating Primary Services and Core Products sold or distributed
by it within the Licensed Territory and shall otherwise use the applicable Marks
in connection with Additional Products and Additional Services in the Licensed
Territory to the extent commercially reasonable and as required by this License
Agreement. Use of the Marks shall be strictly in accordance with the Graphic
Standards Manual as amended from time to time. Licensee shall only use those
Marks as are specified by Licensor in connection with each of the Additional
Products and Additional Services.
G. DEALERS, AGENTS AND RETAILERS
In the event that, pursuant to this License Agreement,
Licensee permits its authorized dealers, agents or retailers to use the Marks in
the Licensed Territory, such dealers, agents and retailers shall be subject to
the obligations set forth in this License Agreement and those imposed upon such
parties by Licensee; provided, however, that unless required by Licensee, such
dealers, agents and retailers need not necessarily comply with the specific
obligations of Sections IV.F.1.(i), IV.F.1.(iii) and IV.F.1.(iv) hereof in
connection with each dealers', agents' or retailers' use or incorporation of the
Marks on or in the items therein listed.
H. ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are certain
products and services relating to the Primary Services with regard to which,
upon notice to Licensor, Licensee may promote or sell utilizing the Marks as
therein specified.
2. In the event that Licensee shall elect to use the Marks
within all or any part of the Licensed Territory in connection with one or more
of the specified Additional Products or Additional Services, Licensee shall
provide Licensor not less than thirty (30) days written notice of such intended
use, together with a description of Licensee's business and promotional plans
with regard thereto and the portion of the Licensed Territory to which such use
will relate.
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<PAGE>
I. USE OF THE CELLULAR ONE TRADEMARK
In order to protect and enhance the Cellular One Mark and the
goodwill pertaining thereto, Licensee shall, consistent with Exhibit D, use the
Cellular One Mark only on or in connection with first class, high quality
telecommunications equipment and related devices further described as an
Additional Product on Exhibit D hereto (collectively, the "Wireless
Communications Equipment"). Any such Wireless Communications Equipment shall be
sold or distributed only in accordance with all applicable federal, state and
local laws, including, without limitation, all applicable FCC directives and
other industry standards issued from time to time by the CTIA, the Electronics
Industries Association and comparable industry groups, and which, if available
for the type of Wireless Communications Equipment in question, has earned a
certification seal issued by the CTIA. Licensee shall, upon execution of this
Agreement, and from time to time thereafter upon request by Licensor, promptly
furnish to Licensor, at no charge, a listing of all of the various types of
Wireless Communications Equipment sold or otherwise distributed by Licensee, and
upon which or in connection with which the Cellular One Mark is used. The nature
and quality of such Wireless Communications Equipment shall be subject to review
by Licensor to insure compliance with this Agreement.
J. CONSUMER SERVICE NUMBER
Licensee shall have the obligation to use and promote and a
nonexclusive right to make use of a toll free national consumer service number
designated by Licensor (the "Consumer Service Number") as a toll free service
to Licensee's customers and prospective customers in the Licensed Territory, to
use the 1-800-CELL ONE Mark and marks associated therewith and to pay an annual
fee to Licensor described in Section V.E. and in accordance with the following
terms and conditions:
1. (a) Licensor will, from time to time, establish and
maintain a national consumer service telephone number, operated twenty-four
hours a day, seven days a week. Currently the number established by Licensor is
1-800-CELL ONE (1-800-235-5663). Licensee shall arrange with a long distance
carrier (the "Long Distance Carrier") for a network-based routing system to
cause such calls to the Consumer Service Number from customers and
prospective customers of Licensee in the Licensed Territory (including
customers of Licensee roaming from the Licensed Territory) to be automatically
(i) routed to Licensee, or to a designated center as further described below or
(ii) provided with a prerecorded intercept announcement or (iii) routed as may
be required pursuant to Section IV.J.3. or any agreement entered into by
Licensee pursuant thereto. All arrangements necessary for the routing of calls
to Licensee or the delivery of prerecorded intercept announcements shall be made
between Licensee and the Long Distance Carrier. In no event will Licensor route
calls made to the Consumer Service Number to Licensee, or cause any such calls
to be so routed. It is anticipated that Licensee will provide customers and
prospective customers calling the Consumer Service Number with assistance,
information and/or promotional literature in response to inquiries concerning
such matters as activation, suspension or disconnection of service, service
plans, promotions, billing, pricing, roaming, dialing instructions, access
numbers, feature codes, the
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locations, hours of operation and telephone numbers of offices, authorized
repair facilities and sources for batteries, parts and accessories, and such
other matters as may be set forth in the 800 Number Supplement (hereinafter
defined).
(b) Licensor will provide Licensee with a supplement to
Exhibit E (the Quality Standards) and the Guide to Quality Operations
(collectively, the "800 Number Supplement"), containing requirements and
suggestions for the operation of the Consumer Service Number program, including
the services which Licensee must have the capability of offering during various
times to callers to the Consumer Service Number which are routed to the Licensee
by the Long Distance Carrier, and other materials as Licensor deems appropriate.
Licensor may from time to time, in its discretion, issue additional supplements,
modifications and additions to the Guide to Quality Operations or the 800 Number
Supplement. Licensor may, in its discretion, expand or introduce new features to
the Consumer Service Number program and may afford Licensee the opportunity to
participate therein by executing an addendum to this Agreement or other suitable
document.
(c) From time to time, at its sole election, Licensor may
select and designate a substitute telephone number to serve as the Consumer
Service Number and Licensee shall take such steps as shall be necessary to
utilize such substituted number in place of the prior telephone number serving
as the Consumer Service Number and shall cease any use of such prior number in
accordance with any schedule reasonably promulgated by Licensor with regard
thereto.
2. Licensee shall establish and maintain adequate staffing and
telephone capacity in relation to the subscriber base and call volume of the
Licensed Territory, in order to promptly and adequately receive and respond to
calls routed to Licensee through the Consumer Service Number; provided however,
that Licensee may establish a centralized location with such capabilities to
serve multiple markets for which Licensee has entered into a License Agreement
with Licensor, if applicable. Licensee agrees that it will not impose any
airtime charges or other charges upon the caller for calls made to the Consumer
Service Number, whether such calls are made by customers, prospective customers,
roamers or otherwise. Licensee shall cause its billing department or, if
applicable, use its best efforts to cause each of its billing companies or
providers of Primary Services, to nonrate calls to the Consumer Service Number
made from the Licensed Territory, and to delete any per diem roaming fees if
calls from the Licensed Territory to the Consumer Service Number are the only
roamer calls made during the twenty-four hour daily billing period. Licensee
shall offer credit card roaming capability for its customers, with respect to
the Licensed Territory, for the purpose of allowing call processing for
customers with validation problems when the serving switch in the home market is
not accessible.
3. Within thirty (30) days of the Effective Date of this
License Agreement, Licensee shall make appropriate arrangements with the Long
Distance Carrier for the routing of calls to the Licensed Territory and, in
conjunction therewith, shall be providing service to customers and prospective
customers in accordance with the Quality Standards and the Guide
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to Quality Operations (including the 800 Number Supplement) twenty four hours a
day, three hundred sixty-five days a year. Licensee may phase in such customer
service operations over a period not to exceed six (6) months following the
Effective Date hereof, but within (30) days after the Effective Date of this
Agreement, Licensee shall, at a minimum, promptly accept and fully respond to
all calls routed to Licensee through the Consumer Service Number from 8:00 a.m.
to 6:00 p.m., local time, Monday through Friday, excluding national holidays.
During such times, the calls routed to the Licensed Territory by the Long
Distance Carrier must be handled by Licensee's own or contracted service
personnel (other than answering services) unless other arrangements satisfactory
to Licensor are made, and the various types of callers (customers, roamers,
prospects, etc.) must be provided with service respecting at least those
categories as set forth in the Guide to Quality Operations (including the 800
Number Supplement). Outside of such times, (i) Licensee has the option of
handling the calls with its own or contracted service personnel (other than
answering services), arranging for other licensees in good standing of the Marks
to handle the calls, arranging for third parties acceptable to Licensor to
handle the calls, or arranging for the calls to be answered by an automated
voice response system, with live operator backup preferred (although a response
system with the capability for the caller to leave a recorded message will be
acceptable); and (ii) not later than six (6) complete calendar months following
the Effective Date of this License Agreement, such callers must be provided with
service respecting at least those categories as set forth in the Guide to
Quality Operations (including the 800 Number Supplement) for such times.
4. Licensee shall at its own expense include the Consumer
Service Number in Licensee's telephone directory listings for the Licensed
Territory, including "White Pages" and "Yellow Pages" listings (under "Cellular
Telephones", "Mobile Telephones," "Radiotelephones" or other category denoting
telecommunications services and equipment, as appropriate), and in Licensee's
promotional and marketing materials. Licensee agrees to actively promote the
Consumer Service Number in the Licensed Territory, but may also utilize its own
toll free numbers or other numbers in the Licensed Territory.
5. Licensor shall in no event be liable by reason of any act
or omission of Licensee or any third party licensee in the conduct of its
business or for any claim or judgment arising therefrom or for any claim or
judgment by third parties (including without limitation, the Long Distance
Carrier, Licensee's customers, prospective customers, dealers, retailers,
agents, resellers, or the like) arising from or relating to the establishment
and the operation of the Consumer Service Number, and Licensee shall indemnify
and hold Licensor, Licensor's employees, the Partnership Partners and their
affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims and judgments, as
well as the costs, including attorneys' fees, of defending against them.
Licensee acknowledges that Licensor shall not be responsible for any direct,
consequential or incidental damages of any kind resulting from or relating to
the Consumer Service Number, the related program or the operation thereof, or
the acts or omissions of the Long Distance Carrier, including without
limitation, damages relating to possible loss of customers or prospective
customers by Licensee or its dealers, retailers, agents, resellers, or the like.
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<PAGE>
6. Licensee agrees to promptly provide the Long Distance
Carrier with such complete current and reserve cellular NPA/NXX listings and
other information and data as may be reasonably requested by the Long Distance
Carrier to permit the Long Distance Carrier to provide an efficient and
effective routing of calls and delivery of intercept announcements to Licensee
and to assure that calls which should be routed to other licensees of the
Consumer Service Number are not being affected by Licensee's arrangements with
the Long Distance Carrier. All payments and other similar arrangements which may
be necessary to permit the Long Distance Carrier to route calls or provide
intercept services and prerecorded announcements to callers shall also be the
responsibility of Licensee, shall be determined by and between Licensee and the
Long Distance Carrier, and Licensor shall have no obligation or liability
whatsoever with respect thereto. Licensee agrees to promptly provide directly to
Licensor and/or to cause the Long Distance Carrier to promptly provide to
Licensor such information as Licensor may from time to time reasonably request
in order to permit Licensor to protect the Marks and/or to ascertain Licensee's
compliance with Licensee's obligations under this Agreement.
7. In the event Licensee's agreement with the Long Distance
Carrier expires or is terminated for any reason with respect to any market in
the Licensed Territory, Licensee's rights with respect to the Consumer Service
Number and the 1-800-CELL ONE Mark shall automatically terminate with respect to
such market. In the event Licensor decides to discontinue the Consumer Service
Number or the related program, Licensor may terminate Licensee's rights with
respect to the Consumer Service Number and the 1-800-CELL ONE Mark upon ninety
(90) days prior written notice to Licensee.
8. The parties agree that Licensor is not offering herein to
resell 800 service or other telecommunications services, and no portion of the
annual Consumer Service Number Fee is compensation for any such resale. Licensee
shall have no right to resell 800 service using the Consumer Service Number to
any other person or entity. If Licensee chooses to permit its authorized
dealers, retailers or agents in the Licensed Territory to use the Consumer
Service Number and the 1-800-CELL ONE Mark, Licensee acknowledges, for itself
and on behalf of its dealers, retailers and agents, that the applicable calls by
callers to the Consumer Service Number will be routed by the Long Distance
Carrier to Licensee, and not to any such dealers, retailers and agents of
Licensee, and that the calls will be toll free and free of roaming and airtime
charges upon the callers as set forth above.
9. Licensee acknowledges and agrees that it shall have no
ownership interest in the Consumer Service Number, any telephone number, Mark or
acronym serving as or associated with a current or previous Consumer Service
Number or any agreements relating thereto, notwithstanding any actual or implied
agreements between Licensee and the Long Distance Carrier, any tariffs or
permits applicable or related to the Consumer Service Number or any contract or
course of dealing relating thereto. Without modifying the foregoing, Licensee
hereby grants Licensor an irrevocable power of attorney, which shall be coupled
with an interest, to act in Licensee's place and stead and to execute and
deliver any agreements, instruments, certificates, pleadings or the like
reasonably necessary to disclaim any interest by
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Licensee in the Consumer Service Number, any telephone number, Mark or acronym
serving as or associated with a current or previous Consumer Service Number or
any agreements relating thereto, and to vest in Licensor full title thereto. In
addition, Licensee shall, from time to time, at the request of Licensor or the
Long Distance Carrier, promptly execute and deliver such further agreements,
instruments, certificates, pleadings and the like as Licensor shall reasonably
deem necessary to give effect to this Section IV.J.9.
V. FEES AND REPORTING
A. APPLICATION FEE
Upon execution of this License Agreement by Licensee, Licensee
shall pay to Licensor a nonrefundable application fee (the "Application Fee") of
five hundred dollars ($500.00) per market in the Licensed Territory; provided,
however, that no Application Fee with respect to a particular market shall be
payable in the event that this License Agreement is being executed as a renewal,
extension or modification of an outstanding Cellular One License Agreement
between Licensee and Licensor covering such market in the Licensed Territory or
in the event of a market transfer or Change of Control (the latter events being
subject, however, to the transfer fee described in Section V.H. hereof).
B. ANNUAL LICENSE FEE
Licensee agrees to pay to Licensor an annual license fee (the
"Annual License Fee") based on the total population of each of the markets in
the Licensed Territory (the "Pops") as determined by the most recent population
estimates produced by an independent company selected in good faith by Licensor,
with a minimum Annual License Fee of three thousand dollars ($3,000.00) per
market in the Licensed Territory for each year during the Term. If the Effective
Date of this License Agreement or the commencement of a Subsequent Year is on or
before December 31, 1997, the Annual License Fee for the Initial Year or the
Subsequent Year, as the case may be, shall be equal to two cents ($0.02) per
person in the Licensed Territory, but not less than the foregoing minimum. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is after December 31, 1997, the Annual License Fee for the Initial Year or
the Subsequent Year, as the case may be, shall be calculated in accordance with
Section V.E. below, but shall not be less than the foregoing minimum. The Annual
License Fee shall be due on each January 1 and payable on or before each January
31 of each Subsequent Year during the Term, for the full calendar year; provided
however, that the Annual License Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Annual License
Fee for the Initial Year (including the foregoing minimum fee, if applicable)
shall be prorated to reflect the portion of that calendar year included within
the Initial Year. The Annual License Fee will not be prorated or refunded in
whole or in part under any other circumstances; provided, however, that upon the
normal expiration of this License Agreement at the end of the Term or any
renewal Term (but in no other event, including without
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limitation, upon the voluntary or involuntary termination of this License
Agreement for any reason), Licensor agrees to refund a prorated portion of the
Annual License Fee reflecting that portion of that calendar year remaining after
the date of expiration, less any set off for any other fees owing to Licensor.
C. ANNUAL ADVERTISING FEE
Licensee agrees to pay to Licensor's Cellular One Promotional
Fund an annual advertising fee (the "Annual Advertising Fee") based upon the
population estimates described in Section V.B. above. If the Effective Date of
the License Agreement is on or before December 31, 1996, the Annual Advertising
Fee for the Initial Year shall be equal to five cents ($0.05) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1997 and December 31,
1997, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to six cents ($0.06) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1998 and December 31,
1998, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to seven cents ($0.07) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is after December 31, 1998, then the Annual
Advertising Fee for the Initial Year or the Subsequent Year, as the case may
be, shall be calculated in accordance with Section V.E. below. The Annual
Advertising Fee shall be due on each January 1 and payable on or before each
January 31 of each Subsequent Year during the Term, for the full calendar year;
provided, however, the Annual Advertising Fee for the Initial Year shall be paid
upon execution of this License Agreement by Licensee. Notwithstanding the
foregoing, if the Initial Year commences on a day other than January 1, the
Annual Advertising Fee for the Initial Year shall be prorated to reflect the
portion of that calendar year included within the Initial Year. The Annual
Advertising Fee will not be prorated or refunded in whole or in part under any
other circumstances. For any Initial Year or Subsequent Year beginning on or
before January 1, 1998, if Licensee can demonstrate to the satisfaction of
Licensor that Licensee had less than three hundred thousand (300,000) billable
minutes of air time for each month in the preceding calendar year in a market in
the Licensed Territory, Licensee shall not be obligated to pay the Annual
Advertising Fee with respect to such market for such Initial Year or Subsequent
Year, as the case may be. Licensor agrees to accept, and may require, the bona
fide report of Licensee's independent outside auditing firm as appropriate
confirmation that Licensee has less than the three hundred thousand (300,000)
billable minutes of air time for each month as described above. The foregoing
exemption from payment of the Annual Advertising Fee shall in no event extend
beyond the Annual Advertising Fee due for 1998. To the extent that geographic,
demographic or social factors (such as a location of a market outside of the
continental U.S. or the use in a particular market in the Licensed Territory of
a dominant language other than English) limit the effectiveness of Licensor's
promotional efforts with respect to such market in the Licensed Territory,
Licensor may, but shall not be obligated to, consider an adjustment to the
Annual Advertising Fee payable under this Section V.C. or
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adjusting its promotional activities to improve the effectiveness thereof in
such market in the Licensed Territory.
D. ANNUAL ADMINISTRATIVE FEE
From time to time, upon not less than thirty (30) days written
notice to Licensee, Licensor shall be entitled to levy, and Licensee shall pay,
a nonrefundable annual administrative fee (the "Annual Administrative Fee"), not
to exceed, each calendar year, one-half of one cent ($0.005) per person in the
Licensed Territory as determined in a manner consistent with that applied to the
determination of the Annual License Fee, in the event that Licensor determines
that such a fee is necessary to defray Licensor's administrative costs,
including costs associated with professional fees and expenses, incurred in
connection with performing Licensor's duties under this License Agreement and
otherwise protecting and promoting the Marks and assuring that the Quality
Standards continue to be consistent with changing market conditions and
technological change. In the event that Licensee provides Primary Services as a
reseller for more than one provider of Cellular Telephone Services or any form
of Alternate Wireless Service, Licensor shall be entitled to receive an
additional Annual Administrative Fee (or such part thereof as Licensor shall
deem appropriate) with regard to each such reseller relationship, reflecting the
increased costs of conducting customer surveys and otherwise monitoring
Licensee's performance under this License Agreement.
E. ESCALATION OF LICENSE AND ADVERTISING FEES
In addition to any other increases in the Annual License Fee
and the Annual Advertising Fee which are permitted herein, Licensor may, in its
sole discretion, increase the Annual License Fee payable for any Initial Year or
Subsequent Year commencing on or after January 1, 1998, and/or increase the
Annual Advertising Fee payable for any Initial Year or Subsequent Year
commencing on or after January 1, 1999, by amounts commensurate with the
increases In the Consumer Price Index or media expenses, as the case may be, in
accordance with the following:
1. Annual License Fee for the applicable Initial Year or
Subsequent Year (subject to the minimum Annual License
Fee of $3,000.00 per market in the Licensed Territory)=
<TABLE>
<S> <C> <C> <C> <C>
$0.02 X CPI-2 X Pops
-----
CPI-1
</TABLE>
where:
(a) "CPI" shall mean the monthly National Consumer Price
Index for All Urban Consumers, U.S. City Average (All Items; 1982-84 equals 100)
issued by the U.S. Department of Labor, Bureau of Labor Statistics, or its
successor agency, or if such index is no longer in effect, the successor index
thereto;
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(b) "CPI-1" shall mean the monthly CPI for the month of
June, 1996; and
(c) "CPI-2" shall mean the higher of (i) CPI-1 or (ii)
the monthly CPI for the latest calendar month which ends at least six (6) months
before the commencement of the applicable Initial Year or Subsequent Year for
which the adjustment of fee(s) is being computed.
2. Annual Advertising Fee for the applicable Initial Year or
Subsequent Year=
<TABLE>
<S> <C> <C> <C> <C>
$0.07 X MC-2 X Pops
----
MC-1
</TABLE>
where:
(a) "MC-1" shall mean the actual media buy liabilities
incurred by Licensor in connection with Licensor's obligations and activities
under Section VIII of this License Agreement for the immediately preceding
annual period;
(b) "MC-2" shall mean the higher of (i) MC-1 or (ii) the
media buy liabilities Licensor would incur in the following annual period if it
engaged in the activities and purchased the goods and services giving rise to
the media buy liabilities constituting MC-1. In making the determination
required by the preceding sentence, Licensor shall utilize the "netcosts(TM)"
reports publication describing Broadcast Network, Cable Network and Syndication
CPM and CPP projections published by Ephron, Papazian & Ephron, Inc., or any
successor or equivalent index generally utilized by the industry to estimate
future costs associated with promotional activities.
F. CONSUMER SERVICE NUMBER FEE
During such time as Licensor makes the Consumer Service Number
program available to licensees, Licensee shall pay to Licensor an annual
Consumer Service Number fee (the "Consumer Service Number Fee") equal to one
thousand dollars ($1,000.00) for each MSA and five hundred dollars ($500.00) for
each RSA constituting a part of the Licensed Territory, subject to a maximum fee
payable under this Section V.F. of thirty thousand dollars ($30,000.00) with
respect to the Licensed Territory or all of Licensee's Licensed Territories
under other License Agreements with Licensor. The Consumer Service Number Fee
shall be due on each January 1 and payable on or before each January 31 of each
Subsequent Year during the Term, for the full calendar year; provided however,
the Consumer Service Number Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Consumer
Service Number Fee for the Initial Year shall be prorated to reflect the portion
of that calendar year included within the Initial Year. The Consumer Service
Number Fee will not be
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prorated or refunded in whole or in part under any other circumstances. The
Consumer Service Number Fee shall be in addition to any other charges or fees
that may be payable by Licensee to any Long Distance Carrier for the Consumer
Service Number program, as contemplated by Section IV.J. hereof. In addition to
the Consumer Service Number program, Licensor may establish similar programs for
other forms of wireless telephony (the "Other 800 Programs"). To the extent that
the Primary Services or Core Products include such forms of wireless telephony,
Licensee shall participate in the Other 800 Programs designed therefor. Licensor
shall be entitled to receive fees from Licensee for the Other 800 Programs
calculated in a similar manner as those for the Consumer Service Number program.
G. ADDITIONAL FEES
From time to time following the date hereof, Licensor may
propose, pursuant to Section IV.E. hereof, changes to or the implementation of
one or more periodic fees to be payable by licensees with regard to the Primary
Services, Core Products, Additional Products or Additional Services, or other
fees deemed appropriate by Licensor. Upon approval thereof in accordance with
Section IV.E., such fees shall become an obligation of Licensee hereunder.
H. SPECIAL LICENSEE RELATED EXPENSES
Licensor shall be entitled to levy, and Licensee shall
promptly pay, a fee of not less than five hundred dollars ($500.00) per market
with regard to any Change of Control of Licensee or assignment by Licensee of
its rights and obligations hereunder (including any transfer or Change of
Control of a market constituting part of the Licensed Territory) or upon any
other assignment, transfer, pledge, Change of Control or other transaction
contemplated or permitted under Article X.
I. PAYMENTS, INTEREST ON LATE PAYMENTS
All fees and charges payable under this License Agreement
shall be payable in good funds at Licensor's address specified herein, or at
such other address as Licensor shall from time to time designate in writing.
Notwithstanding any other provision of this Article V, Licensor shall be
entitled for reasons of administrative convenience or otherwise to defer the
date by which any fee or charge payable by Licensee hereunder may be due. No
such deferral shall be a waiver of any of Licensor's rights hereunder. If
payment of any Application Fee, Annual License Fee, Annual Advertising Fee,
Consumer Service Number Fee, Annual Administrative Fee or other fee or charge
under this License Agreement is overdue, Licensee shall pay Licensor, in
addition to the overdue amount, interest on such overdue amount from the date it
was payable until paid at the rate which is two (2) points above the prime rate
published by the Wall Street Journal on the date payment was due, or the maximum
rate permitted by applicable law, whichever is less. Entitlement to such
interest shall be in addition to any other remedies Licensor may have.
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VI. MARKS
A. OWNERSHIP OF MARKS
Licensor is the owner of all right, title and interest in and
to the Marks (which shall include for the purposes of this Section VI. all of
the permits and contractual or other arrangements (including registrations of
trademarks, service marks and domain names) relating to ownership or control of
the Marks, the Consumer Service Number and the like). No sublicense by Licensee
pursuant to Sections IV.G. or X.C. shall create any ownership interest in the
Marks in Licensee or any sublicensee thereof nor any right by Licensee to
sublicense use of the Marks in the future.
B. GENERAL USE
With respect to Licensee's use of the Marks pursuant to this
License Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor
and shall use them only in the manner authorized and permitted by Licensor
herein, and only in accordance with the Graphic Standards Manual. Without
limiting the generality of the foregoing, Licensee shall comply with Licensor's
guidelines and directives (i) for use of certain Marks with specified Additional
Products and Additional Services, and (ii) concerning the use of the Marks or
derivatives thereof in, or as a part of, the domain name of any World Wide Web
pages or the names of any similar Internet locales or addresses owned by or on
behalf of Licensee.
2. Except to the extent permitted as Incidental Use, Licensee
shall use the Marks only in connection with providing Primary Services, Core
Products, Additional Services and Additional Products in the Licensed Territory,
in accordance with the Quality Standards and as otherwise set forth in this
License Agreement.
3. Licensee shall identify the Licensor as the registered
owner of the Marks in such ways as Licensor may direct, including but not
limited to the identification of Licensor as such on Licensee's invoices, order
forms, receipts and contracts.
4. Except as provided in Section IV.G. above and Section X.C.
below, Licensee shall have no right to sublicense the Marks to any other person
or entity, and Licensee shall have no right to allow its resellers, if any, to
make use of the Marks. Any use by a dealer, retailer or agent under Section
IV.G. or by an Affiliate under Section X.C. shall be consistent with Licensee's
rights and responsibilities hereunder with respect to the use of the Marks and,
in no event, shall any such permitted use exceed or extend beyond Licensee's
rights hereunder to use the Marks. Licensee agrees to monitor and be responsible
for the use of the Marks by its agents, retailers and dealers and its Affiliates
and to promptly provide or cause to be provided to Licensor upon request, from
time to time, such reasonable information concerning the use of the Marks by
such dealers, retailers and agents and Affiliates to permit Licensor to
ascertain
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Licensee's compliance hereunder. From time to time upon the reasonable request
of Licensor, Licensee shall promptly supply Licensor with a list of dealers,
retailers, agents and Affiliates authorized to use the Marks and/or promptly
confirm whether any particular dealers, retailers, agents or Affiliates remain
authorized and in good standing with respect to use of the Marks.
5. Licensee's right to use the Marks is limited to the uses
specifically authorized under this License Agreement.
6. Licensee shall not use the Marks or any of their
derivatives, or any marks confusingly similar thereto, as part of Licensee's
corporate or other legal name. Licensee and any dealers, retailers or agents
designated under Section IV.G. or Affiliates designated under Section X.C. may
file and maintain trade name or fictitious name registrations in the
jurisdictions within the Licensed Territory where legally required or otherwise
appropriate to reflect the fact that Licensee is doing business as "Cellular
One." If other licensees desire to file and maintain such a trade name or
fictitious name registration pursuant to a license agreement with Licensor,
Licensee shall consent or otherwise cooperate with Licensor and such licensees
in meeting the state or local requirements to permit such trade or fictitious
name registrations to coexist. Licensee shall execute any documents deemed
necessary or desirable by Licensor or its counsel to assist Licensor in the
protection or registration of the Marks or to maintain or defend Licensor's
title thereto, or their continued validity and enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should Licensee become aware. Licensor agrees, at its sole cost and expense,
to institute or otherwise defend proceedings as may be appropriate to protect
the Marks, including, to the extent necessary, defense of such proceedings
following termination of this License Agreement. In connection with any such
proceedings, Licensee agrees to execute any and all documents and to do
whatever reasonable acts and things as may, in the opinion of counsel for
Licensor, be necessary or advisable to assist Licensor in carrying out the
prosecution or defense, and Licensor agrees to reimburse Licensee for all
direct costs incurred by Licensee in doing these acts and things, except that
Licensee shall bear the salary costs of its employees. Licensor shall have
the sole right to institute, defend and direct proceedings relating to the
Marks and Licensee shall not file or institute any proceedings relating to
the Marks without the prior written consent of Licensor. In the event that
Licensee does file or institute any proceedings relating to the Marks,
Licensee shall promptly supply Licensor with copies of any and all papers and
materials relating to such proceedings, together with such information
relating thereto as Licensor may reasonably request. Notwithstanding anything
to the contrary in Section VI.B., and whether or not Licensor undertakes the
prosecution or defense of a legal proceeding relating to one or more of the
Marks, Licensor's liability for damages and losses to Licensee relating to
use of one or more of the Marks (including any loss resulting from Licensor's
loss of title or ownership of the Marks or the rights thereto) shall be
limited to the amount of the Application Fee plus the Annual License Fee paid
by Licensee under this License Agreement for the market(s) in which such
liability is determined, for the year during which such liability is
determined.
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8. The Marks are valid and serve to identify the Primary
Services, the Core Products, the Additional Services and the Additional Products
provided by those who are authorized to operate under the Marks. Licensee shall
not directly or indirectly contest the validity, registration or Licensor's
ownership of the Marks, any of their derivatives, any of the icons or other
marks owned by Licensor, and Licensee shall not directly or indirectly apply for
or otherwise seek to register as a trademark, service mark or design any mark or
other designation which incorporates, which is the same as or confusingly
similar to, or which may dilute Licensor's rights in and to, any of the Marks or
their derivatives, any of the icons or other marks owned by Licensor.
9. Licensee's use of the Marks, and the use thereof by its
agents, retailers, dealers and Affiliates, if any, pursuant to this License
Agreement does not give Licensee or any agent, retailer, dealer or Affiliate,
any ownership interest or other interest in or to the Marks, except the license
granted in this License Agreement. Any and all goodwill arising from use of the
Marks shall inure solely and exclusively to the benefit of Licensor, and upon
expiration or termination of this License Agreement and the license granted by
it, no monetary amount shall be assigned as attributable to any goodwill
associated with use of the Marks by Licensee or its agents, retailers, dealers
or Affiliates.
10. Licensor has and retains the following rights, among
others:
(i) To use the Marks itself, in connection with
local, regional and national advertising and promotion, including
conducting activities designed to enhance the goodwill associated with
the Marks, and, subject to the provisions of Section I hereof, with
directly or indirectly selling products and services (including
telecommunications products and services) both within and outside the
Licensed Territory;
(ii) To grant licenses for use of the Marks in
addition to those licenses already granted to existing licensees of the
Marks;
(iii) To use the Marks in any manner reserved for
Licensor pursuant to Section I; and
(iv) To create derivatives of the Marks and exploit,
promote and license such derivatives.
11. In the event that any of the Marks or icons, including any
trademarks, service marks and design logos adopted after execution of this
License Agreement which become Marks, can no longer be used, Licensor reserves
the right to provide a substitute mark or design with reasonable notice to
Licensee.
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C. INCIDENTAL USE
1. For the purposes of this License Agreement, the promotion,
sale and delivery of Primary Services, the Core Products, Additional Services
and Additional Products in accordance with this Section VI.C. shall be
considered "Incidental Use" of the Marks.
2. During the Term, and subject to the other provisions of
this License Agreement, Licensee shall be entitled to conduct its business of
providing Primary Services, Core Products, Additional Services and Additional
Products throughout the Licensed Territory, without the necessity of abandoning
or failing to serve any part of the Licensed Territory because such business
might become known to, or because Licensee might from time to time sell products
or services to, persons or businesses resident or located outside of the
Licensed Territory. Licensee shall not be prohibited by the terms of this
License Agreement from promoting Primary Services outside of the Licensed
Territory to the extent necessary to provide Primary Services in accordance with
the Quality Standards throughout the Licensed Territory. In addition, except
that Licensee shall not specifically direct its promotional activities to
potential customers outside of the Licensed Territory, Licensee shall be
entitled to utilize regional or other media in connection with promoting its
Primary Services, Core Products, Additional Services and Additional Products
within the Licensed Territory. Licensee shall not adopt promotional pricing or
otherwise seek to distribute Primary Services, Core Products, Additional
Services or Additional Products outside of the Licensed Territory, but shall not
be precluded from doing business with persons or entities it knows to be
resident outside of the Licensed Territory.
3. This Section VI.C. does not entitle Licensee to utilize the
Marks for products or services other than Primary Services, Core Products,
Additional Services and Additional Products, nor does it allow use of the Marks
by Licensee outside of the Licensed Territory except strictly in accordance with
Section VI.C.2. above. Licensor shall have the sole right to restrict Licensee's
Incidental Use of the Marks at any time and in such manner as Licensor shall
determine necessary or appropriate to prevent such Incidental Use from
breaching, infringing upon, or otherwise conflicting with, the rights of any
other current or future licensee of the Mark(s). Licensee's Incidental Use of
the Marks may also be restricted under Section VI.D. below, notwithstanding this
Section VI.C., to avoid or mitigate Potential Customer Confusion (as
subsequently defined).
D. POTENTIAL CUSTOMER CONFUSION
1. Notwithstanding any other provision of this Section VI. to
the contrary, in the event that as a result of economic, demographic or
technological changes within or affecting the Licensed Territory from and after
the date of this License Agreement, Licensor reasonably determines that actual
or potential customers of another licensee of the Marks, or any of them, are or
are likely to consider Licensee to be, or to be affiliated with, such other
licensee of the Marks or not readily distinguishable therefrom (such
circumstances being referred to as "Potential Customer Confusion"), Licensor
shall be entitled to modify the provisions of this
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License Agreement and any Exhibit hereto for the purpose of reducing the
circumstances giving rise to the Potential Customer Confusion.
2. In seeking to reduce Potential Customer Confusion, Licensor
shall consider requiring providers (including Licensee) of products or services
which are the source of Potential Customer Confusion to adopt tag lines or
otherwise differentiate such products or services before amending this License
Agreement in a manner that would require a material modification in the conduct
of Licensee's telecommunications business relating to the Marks.
3. Without limiting the generality of the foregoing, and
without limiting any other rights which Licensor may have hereunder with respect
to Additional Products or Additional Services, Licensor shall be entitled, with
or without the consent of Licensee, to reduce the size of the Licensed Territory
with regard to Additional Products or Additional Services or to delete or modify
the description of any Additional Product or Additional Service set forth on
Exhibit D hereto for the purpose of mitigating or eliminating Potential Customer
Confusion. Upon such reasonable written notice to Licensee as Licensor in its
discretion determines, but in no event to exceed sixty (60) days, regarding the
existence of Potential Customer Confusion resulting, in whole or in part, from
Licensee's promotional activities. Licensee shall modify such promotional
activities to the extent reasonably necessary to prevent or mitigate, to the
extent possible, the continuation of events or circumstances previously giving
rise to Potential Customer Confusion.
VII. CONFIDENTIAL INFORMATION
A. DEFINITION
Any and all information, knowledge, know-how, and techniques
which Licensor or Licensee designates as confidential shall be deemed
"Confidential Information" for purposes of this License Agreement, except:
1. Information which either party can demonstrate was known to
it prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by
one party to the other, had become or later becomes a part of the public domain,
through publication or communication by others through no fault of the party
receiving the information.
B. PROHIBITIONS
Licensor and Licensee each agree that it will use its best
efforts, during the term of this License Agreement and for one year following
expiration or termination of this License Agreement, to prevent the
communication or divulgence, to any other person, partnership, association,
corporation or business enterprise of any Confidential Information which may be
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communicated to it or of which it may be apprised pursuant to this License
Agreement. Licensor shall be deemed to have used its best efforts to prevent
such communication or divulgence if it has distributed guidelines to its
employees in an effort to maintain an information separation between Licensor
and the Partnership Partners and their affiliates, and, specifically, it has
instructed its employees not to divulge any Confidential Information, including
customer information, to the Partnership Partners or their affiliates, and shall
have obtained the executed confidentiality agreements referred to in Section
VII.C. from those persons designated in such Section. In circumstances where
Licensee is in direct competition with one of the Partnership Partners or their
affiliates in any one or more of the market(s) in the Licensed Territory,
Licensor will instruct its employees that no information regarding Licensee's
business of providing Primary Services, Core Products, Additional Products or
Additional Services in that market should be disclosed to that Partnership
Partner or its affiliates. The parties agree that statistical performance
information regarding licensees of the Marks which does not identify individual
markets may be reported to the Partnership Partners and their affiliates and
shall not be considered Confidential Information. Notwithstanding the foregoing,
either party to this License Agreement and the Partnership Partners and their
affiliates may disclose any Confidential Information which any such party may be
legally required to disclose to a government agency or in the context of
litigation or arbitration.
C. LICENSOR CONFIDENTIALITY AGREEMENTS
Licensor will execute, and will cause its employees, agents
and representatives, who are reasonably expected to have access to Confidential
Information of Licensee to execute, an appropriate confidentiality agreement,
which shall provide that any Confidential Information of Licensee made available
to Licensor, Licensor's employees, agents or representatives, pursuant to this
License Agreement, will be kept confidential by all such persons.
D. CONSEQUENCES OF BREACH
Licensor and Licensee each acknowledges that any failure to
comply with this Section VII will cause the other party irreparable injury, and
each party agrees to pay all court costs and reasonable attorneys' fees incurred
by the other party in obtaining specific performance of, or an injunction
against violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Marks, the parties agree as follows:
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A. LICENSEE'S ADVERTISING
All advertising and promotion by Licensee in any manner or
medium must be conducted in a dignified manner and must conform to the written
and graphic guidelines specified by Licensor from time to time, including the
Graphic Standards Manual. Licensee shall display or otherwise employ the Marks
in the manner prescribed by Licensor on all signs and all other advertising and
promotional materials used in connection with Licensee's business, to the extent
relating to Primary Services, Core Products, Additional Services and Additional
Products. If requested by Licensor, Licensee at its own expense shall promptly
provide to Licensor photocopies or other photographic, mechanical, magnetic or
other representations of all print advertisements and promotional materials,
radio/television advertising sequences, graphical interface presentations and
other media presentations using the Marks which Licensee has used at any time
during the six (6) months preceding Licensor's request.
B. MATERIALS PROVIDED BY LICENSOR
Licensor may provide from time to time, in its sole
discretion, advertising and promotional plans and materials, including without
limitation, newspaper mats, television and radio tapes, graphical interface
files, promotional brochures and sales aids. Licensee may use all or any of
these materials in its sole discretion
C. CELLULAR ONE PROMOTIONAL FUND, OTHER ADVERTISING FUNDS
Licensor has established, and Licensee agrees to participate
in a fund for national, local and regional advertising and promotional and other
public programs and activities (the "Cellular One Promotional Fund" or the
"Fund") for licensees of the Marks. Licensor shall have the right to determine,
in accordance with Section V.C. hereof the amount of contributions to be made by
Licensee with respect thereto for any year or years during the Term hereof
including any renewal Term. Licensee agrees to make contributions to the
Cellular One Promotional Fund as required hereunder and under Section V.C.
hereof, and agrees that the Fund is to be maintained and administered by
Licensor or its designee as follows:
1. Licensor or its designee shall direct all advertising
and/or promotional programs with sole discretion over the concepts, materials,
and media used in such programs and the placement and allocation thereof.
Licensee agrees and acknowledges that the Cellular One Promotional Fund is
intended to maximize general public recognition, acceptance, and use of the
Marks for the benefit of all licensees of the Marks, and that Licensor or its
designee are not obligated, in administering the Fund, to undertake expenditures
for Licensee which are equivalent or proportionate to Licensee's contribution,
or to ensure that any particular licensee benefits directly or PRO RATA from
expenditures by the Fund.
2. The Cellular One Promotional Fund, all contributions
thereto, and any interest earnings thereon, shall be used for the purpose of
meeting any and all costs of administering, researching, directing, and
preparing advertising and/or promotional activities
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including the cost of preparing and conducting television, radio, magazine,
World Wide Web, e-mail and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; marketing surveys and other public relations
activities; use of advertising agencies to assist therein; promotional brochures
and other marketing materials for licensees of the Marks; and indirect costs,
including reasonable allocation of Licensor's administrative, personnel and
overhead expenses, associated with the implementation of advertising programs,
such as equipment costs and similar costs relating to special national or
regional programs or other similar programs contemplated by Section III.E. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Licensee shall contribute to the Cellular One Promotional
Fund in accordance with Section V.C. All sums paid by licensees of the Marks to
the Fund shall be maintained in an account separate from the other monies of
Licensor and shall not be used to defray any of Licensor's administrative
expenses, except for such reasonable administrative costs and overhead as
Licensor may incur in activities reasonably related to the administration or
direction of the Fund and advertising programs for licensees of the Marks, and
as further set forth in Section VIII.C.2. Except as set forth in this Section
VIII.C., the Fund and any incidental earnings shall not otherwise inure to the
benefit of Licensor. Licensor or its designee shall maintain separate
bookkeeping accounts for the Fund.
4. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however, excess
amounts remain in the Fund at the end of such taxable year, all expenditures in
the following taxable year(s) shall be made first out of accumulated interest
earnings from previous years, next out of interest earnings in the current year,
and finally from contributions.
5. The Cellular One Promotional Fund is not and shall not be
an asset of Licensor or its designee. A statement of the operations of the Fund
as shown on the books of the Fund shall be prepared annually by an independent
certified public accountant selected by Licensor and shall be made available to
Licensee upon written request.
6. Although the Fund is intended to be of perpetual duration,
Licensor maintains the right to terminate the Fund. The Fund shall not be
terminated, however, until all monies in the Fund have been expended for
advertising and/or promotional purposes or returned to contributors on the basis
of their respective contributions.
In addition, Licensor may establish and Licensee shall contribute to
one or more separate advertising funds for the purpose of promoting types or
groups of Primary Services, Core Products, Additional Products or Additional
Services, utilizing all or part of the fees collected pursuant to Section V.C.
hereof. Except as specifically provided by Licensor when establishing such fund,
or as may be permitted under this License Agreement, such additional funds shall
be
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subject to provisions identical to those applicable to the Cellular One
Promotional Fund described herein.
D. PRICE DISCRETION
Licensee shall have the rift to sell its products and offer
services at any price Licensee may determine, and shall in no way be bound by
any price which may be recommended or suggested by Licensor.
IX. INSURANCE
A. REQUIREMENT
Licensee shall promptly procure, and shall maintain in full
force and effect at all times during the Term of this License Agreement, at
Licensee's expense, an insurance policy or policies protecting Licensee,
Licensor, and the Partnership Partners, and their respective affiliates, agents,
officers, directors, shareholders, and employees, against any demand or claim
with respect to personal injury, death, or property damage, or any loss,
liability, or expense whatsoever arising or occurring upon or in connection with
Licensee's business of providing and goods or services utilizing or in
connection with the Marks. Licensor and the Partnership Partners, and their
respective affiliates, agents, officers, directors, shareholders, and employees,
shall be named additional insureds in each such policy.
B. MINIMUM COVERAGE
The policy or policies shall be written by an insurance
company with an Alfred M. Best rating of A or A+, or such other insurance
company as Licensor may reasonably approve, and shall include, at a minimum,
such coverages and policy limits as may reasonably be specified by Licensor from
time to time, which coverages may include, without limitation, comprehensive
general liability insurance, including personal injury, as well as comprehensive
automobile liability coverage for both owned and nonowned vehicles, and property
damage liability coverage, naming Licensor and the Partnership Partners, and
their respective affiliates, agents, officers, directors, shareholders and
employees, as additional insureds in each such policy or policies. Until such
time as Licensor shall in good faith determine that economic or other
circumstances affecting the Cellular One license program require increased
insurance coverage, the following minimum insurance requirements shall be
applicable.
1. General liability: $1,000,000 per occurrence or $2,000,000
in the aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
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4. Automobile liability: $1,000,000 per occurrence for owned
and operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy
limit;
6. Disease: $500,000; and
7. Accident: $500,000
C. CERTIFICATES OF INSURANCE
Within thirty (30) days after this License Agreement is
executed, and thereafter at least thirty (30) days prior to the expiration of
any such policy, Licensee shall deliver to Licensor Certificates of Insurance
evidencing the proper coverage with limits not less than those required
hereunder. All Certificates shall expressly provide that not less than thirty
(30) days' prior written notice shall be given Licensor in the event of material
alteration to, or cancellation of, the coverages evidenced by such
Certificates.
X. TRANSFER OF INTEREST
A. TRANSFER BY LICENSOR
Licensor shall have the right to transfer or assign all or any
part of its rights or obligations herein to any person or legal entity. If
Licensor's assignee assumes all of the obligations of Licensor under this
License Agreement and sends written notice of the assignment so attesting,
Licensee shall promptly execute a general release of Licensor and the
Partnership Partners, and any affiliates thereof, from any claims against or
liabilities of Licensor, the Partnership Partners or such affiliates arising
under this License Agreement.
B. TRANSFER AND PLEDGE BY LICENSEE
If Licensee desires in the Licensed Territory (i) to sell its
Primary Services business for one or more markets and assign its rights under
this License Agreement with respect to such market(s), (ii) to pledge or assign
its rights under this License Agreement to a financial institution or other
party in connection with a financing transaction involving Licensee, or (iii)
enter into a transaction resulting in a Change of Control of Licensee, Licensee
shall notify Licensor in writing and Licensee shall be entitled to transfer,
assign, or pledge its rights under this License Agreement, or effect the Change
of Control, as the case may be, provided:
1. Licensee shall not be in default under this License
Agreement.
2. The transferee shall enter into a written assignment, in a
form satisfactory to Licensor, assuming and agreeing to comply with, at
Licensor's option, either this License
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Agreement or Licensor's then current form or forms of license agreement relating
to the Marks, except that in the case of a pledge or collateral assignment to a
financial institution referred to in Section X.B.(ii), such pledge or collateral
assignment need only be made subject to all of the terms and conditions of this
License Agreement. In the case of a Change of Control; Licensee and the new
controlling entity shall enter into a written agreement, in a form satisfactory
to Licensor, agreeing that Licensee shall continue to be entitled to the rights
and subject to the obligations of a licensee hereunder.
3. Licensee shall remain liable for all of the obligations to
Licensor under this License Agreement prior to the effective date of transfer
and shall execute any and all instruments reasonably requested by Licensor to
evidence such liability. The transfer or Change of Control shall not affect any
of the terms or provisions of this License Agreement or the status of the
market(s) in the Licensed Territory pursuant hereto (including without
limitation, a market's default or probation status under this License
Agreement), all of which shall be or remain fully applicable to the transferee
or Licensee, as the case may be.
4. Where Licensee provides Primary Services in more than one
market and the transfer or Change of Control involves market(s) comprising less
than all of the markets in the Licensed Territory, the transferee or Licensee,
as the case may be, shall, at Licensor's option, enter into Licensor's then
current form of license agreement for the market(s) being transferred or to
which the Change of Control relates; in such event, this License Agreement shall
remain in full force and effect with respect to Licensee's remaining market(s),
if any, following the transfer or Change of Control.
5. The transferee or new controlling entity, or proposed
transferee or new controlling entity, as the case may be, shall provide Licensor
with such financial data, certificates of insurance, copies of Permits, and
other information as are required to be provided by Licensee hereunder in
connection with entering into this License Agreement, or otherwise, and such
materials and information shall be current and complete as of the effective date
of such transfer or Change of Control.
6. The transferee shall promptly pay Licensor any transfer
fees or charges then being charged generally by Licensor to transferees of
licenses to use the Marks. In the case of a Change of Control, Licensee shall
pay Licensor any similar fees then being charged generally by Licensor for such
Changes of Control with respect to licensees of the Marks.
Licensee shall be entitled to transfer, assign or pledge its rights
under this License Agreement, or enter into a transaction resulting in a Change
of Control of Licensee, with respect to a portion of a market in the Licensed
Territory, pursuant to the provisions of this Section X.B.
Licensee shall not be entitled to transfer, assign or pledge any of its
rights or obligations under this License Agreement, except by complying with the
provisions of this Section X.B.
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relating thereto, nor shall Licensee permit a Change of Control to occur without
complying with the provisions of this Section X.B.
C. RIGHT TO ADD AFFILIATE AS PARTY
Subject to Section V.H., with the consent of Licensor,
Licensee shall be entitled to assign any or all of its rights under this License
Agreement to use the Marks in connection with the provision of Primary Services,
Core Products, Additional Services or Additional Products in the Licensed
Territory, or any part thereof, to an "Affiliate," which shall mean any business
entity Controlling, under the Control of, or under common Control with Licensee.
No assignment by Licensee of any rights pursuant to this Section X.C. shall
relieve Licensee of its obligations hereunder. In addition, Licensor's consent
to such assignment shall cease to be effective upon the occurrence of a Change
of Control with regard to Licensee or its assignee which results in Licensee or
its assignee no longer being Affiliates. Licensor shall be entitled, from time
to time and upon its reasonable request, to receive from Licensee and any
assignee thereof a certification that assignee continues to be entitled, under
this Section X.C. to utilize the Marks, together with the facts supporting such
entitlement. No assignee of Licensee shall be entitled to any vote pursuant to
Section IV.E. or to any notices from Licensor hereunder. No conduct on the part
of Licensor with regard to any assignee of Licensee shall be deemed to cause
such assignee to become a licensee hereunder or to have any ownership interest
in this License Agreement. Licensee shall give Licensor prior written notice of
any Change of Control, as defined below, of Licensee or any assignee of
Licensee.
D. CHANGE OF CONTROL
For the purposes of this License Agreement, a "Change of
Control" with regard to any entity shall mean the disposition or acquisition,
directly or indirectly, of Control with regard to such entity. "Control" or
"Controlling" with regard to an entity shall mean the record or beneficial
ownership, directly or indirectly, by any person or entity, or group of persons
or entities, of in excess of a majority of the equity securities of the entity
in question, or the power to designate a majority of the members of the Board of
Directors or other governing body thereof or to otherwise determine the
management and policies of the entity in question.
XI. DEFAULT AND TERMINATION
A. TERMINATION BY LICENSEE
Licensee shall have the right to terminate this License
Agreement without cause at any time upon at least one hundred eighty (180) days
advance written notice to Licensor. Licensee shall remain fully responsible for
any fees and other obligations accruing to Licensor during such notice period.
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B. TERMINATION BY LICENSOR - WITHOUT NOTICE
Licensee shall be deemed to be in default under this License
Agreement, and all rights granted herein shall automatically terminate without
notice to Licensee, if Licensee becomes insolvent or makes a general assignment
for the benefit of creditors; or if a petition in bankruptcy is filed by
Licensee or against Licensee and not actively opposed by Licensee; or if
Licensee is adjudicated as bankrupt or insolvent; or if a bill in equity or
other proceeding for the appointment of a receiver of Licensee or other
custodian for Licensee's business or assets is filed and consented to by
Licensee; or if a receiver or other permanent or temporary custodian of
Licensee's assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; or if proceedings for a composition with creditors under
any state or federal law should be instituted by Licensee or against Licensee
and not actively opposed by Licensee; or if a final judgment remains unsatisfied
or of record for thirty (30) days or longer (unless supersedeas bond is filed);
or if Licensee is dissolved except where the Licensee is a limited partnership
and, promptly following dissolution, such limited partnership is reconstituted
with the same general partners; or if a suit to foreclose any lien or mortgage
against real or personal property used in the operation of Licensee's Primary
Services business is instituted against Licensee and not dismissed within thirty
(30) days or, if actively being opposed by Licensee, within one hundred eighty
(180) days; or if execution is levied against Licensee's Primary Services
business, or any of the property related thereto; or if any material real or
personal property of Licensee used in its Primary Services business shall be
sold after levy thereupon by any sheriff, marshal, or constable; or if Licensee
at any time ceases to operate or otherwise abandons its Primary Services
business or otherwise forfeits the right to do or transact business in any
market(s) in the Licensed Territory; or if Licensee loses its FCC license or FCC
construction permit or any other material Permit for one or more market(s) in
the Licensed Territory or otherwise forfeits the right to do or transact
business in one or more market(s), in which event Licensee's rights under this
License Agreement with respect to such market(s) shall automatically terminate
and this License Agreement shall continue with respect to the remaining
market(s) in the Licensed Territory for which Licensee continues to hold all
necessary FCC license(s) and Permits.
C. TERMINATION BY LICENSOR - UPON NOTICE
Upon the occurrence of any of the following events, Licensee
shall be deemed to be in default and Licensor may, at its option, terminate this
License Agreement and all rights granted hereunder without affording Licensee
any opportunity to cure the default. Said termination shall be effective
immediately upon receipt of notice by Licensee (and Licensee shall remain fully
responsible for any fees and other obligations accruing to Licensor until such
termination becomes effective):
1. If Licensee has been advised of its probation status
pursuant to Section XI.E. and Licensee does not make a good faith effort to
formulate and implement a plan during the term of probation, or, at the end of
the term of probation, Licensee fails to meet the 85% overall minimum customer
satisfaction rating (or the higher percentage established by
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Licensor under Section IV.A.) required in the Licensed Territory as a whole by
the Quality Standards for Primary Services and Core Products;
2. If with regard to the Licensed Territory or any market
constituting a part thereof, Licensee fails in any customer satisfaction survey
conducted pursuant to Section III.C. to attain an overall customer satisfaction
rating of more than 70%, regardless of the terms of any probation;
3. If any principal stockholder or officer of Licensee is
convicted of a felony, a fraud, or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the Marks, the
goodwill associated therewith, or Licensor's interest therein;
4. If a threat or danger to public health or safety results
from the operation of the Licensee's Primary Services business or any of its
businesses relating to the delivery of any Primary Services, Core Products,
Additional Products or Additional Services;
5. If Licensee purports to assign or transfer any rights or
obligations under this License Agreement to any third party (including without
limitation, any reseller) or to effect a Change of Control, contrary to the
terms of Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof, Licensee
discloses or divulges Confidential Information provided to Licensee by Licensor;
7. If Licensee knowingly submits any false reports of
information to Licensor or any entity conducting a customer satisfaction survey
either during the application process or subsequent to the execution of this
License Agreement; or
8. If Licensee directly or indirectly contests in any court
or proceeding the validity or registration of, or Licensor's ownership of,
any of the Marks or other rights licensed hereunder.
D. TERMINATION BY LICENSOR - AFTER NOTICE AND OPPORTUNITY TO CURE
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from Licensor
of a written notice of termination within which to remedy any default hereunder
(or, if the default cannot reasonably be cured within such thirty (30) days, to
initiate within that time substantial and continuing action to cure the
default), and to provide evidence thereof to Licensor. If any such default is
not cured within that time (or, if appropriate, substantial and continuing
action to cure the default is not initiated within that time), or such longer
period as applicable law may require, this License Agreement shall terminate
without further notice to Licensee effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require (and
Licensee shall remain fully responsible for any fees and other obligations
accruing to
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Licensor until such termination occurs). Licensee shall be in default hereunder
for any failure to comply with any of the requirements imposed by this License
Agreement or to carry out the terms of this License Agreement in good faith.
Such defaults shall include, without limitation, the occurrence of any of the
following events:
1. If Licensee fails to offer the Primary Services and the
Core Products of nationwide call delivery and nationwide roaming, or any of
them, under the specified Marks on a continuous basis and in a manner reasonably
appropriate to promote and further the goodwill of the Marks, throughout the
Licensed Territory in accordance with this License Agreement;
2. If Licensee fails, refuses or neglects promptly to pay when
due any monies, fees or charges due to Licensor or the Fund, or under this
License Agreement, or fails, refuses or neglects promptly to submit information
as required under this License Agreement, or makes any false statements in
connection therewith;
3. If Licensee fails to comply, in any material respect, with
the Graphic Standards Manual or the Quality Standards;
4. If Licensee directly or indirectly misuses or makes any
unauthorized use of the Marks or otherwise materially impairs the goodwill
associated therewith or Licensor's rights therein;
5. If Licensee directly or indirectly engages in any business
or markets any service or product under a name or mark which, in Licensor's
opinion, is confusingly similar to, or may have a tendency to dilute, the Marks;
6. If Licensee shall breach or fail to timely perform any of
its covenants or obligations under this License Agreement including, without
limitation, the covenants of Licensee relating to the Consumer Service Number
program and the Other 800 Programs;
7. If Licensee fails, refuses or neglects promptly to pay when
due any fees or charges or otherwise timely perform its obligations to the Long
Distance Carrier with regard to the Consumer Service Number;
8. If Licensee, by act or omission, permits a continued
violation in connection with the operation of its business of any Permit, law,
ordinance, rule or regulation of a governmental agency, in the absence of a good
faith dispute over its application or legality and without promptly resorting to
an appropriate administrative or judicial forum for relief therefrom; or
9. If any dealer, agent, retailer or Affiliate of Licensee
misuses the Marks or otherwise fails to comply with this License Agreement, and
Licensee, upon request by Licensor, does not promptly (i) cause such dealer,
agent, retailer or Affiliate to cease the misuse
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and to otherwise fully comply with this License Agreement, or (ii) terminate its
business relationship with such dealer, agent, retailer or Affiliate.
E. PROBATION
In the event that a customer satisfaction survey, conducted
pursuant to Section III.C., reveals an overall minimum customer satisfaction
rating less than required pursuant to Section IV.A.2., Licensor shall advise
Licensee of an imposition of probation status for a stated period of time,
typically one (1) year for primary Services and Core Products. Promptly on
receipt of this written notice, Licensee agrees to formulate and implement a
written plan to improve the quality of Licensee's Primary Services and Core
Products, so that a subsequent customer satisfaction survey will indicate
compliance with the provisions of this License Agreement. Licensor shall be
entitled to review Licensee's plan upon reasonable request therefor. The
guidelines contained in the Guide to Quality Operations provided to Licensee by
Licensor and the Quality Standards set forth in Exhibit E are designed to assist
Licensee in improving its customer satisfaction rating. If Licensor determines,
in its sole discretion, that Licensee is not making a good faith effort to
formulate and implement such a plan, or after a reasonable probation period the
goals of the plan are not achieved, then Licensor may elect to extend the term
of the probation or terminate this License Agreement effective upon written
notice to Licensee pursuant to Section XI.C. Any extension of the Term of this
License Agreement by Licensor during any probationary period shall not waive
Licensor's rights under this Section XI.E. or under Section XI.C., and such
probationary period, and any agreements relating thereto, shall continue
unaffected.
F. PARTIAL TERMINATION
In addition to any other rights Licensor may have under
this License Agreement with respect to the termination of Licensee's right to
utilize the Marks in connection with Additional Services or Additional
Products, or to amend Exhibit D to delete Additional Services or Additional
Products therefrom, Licensor shall have the rights set forth in this Section
XI.F. From time to time, Licensor may conduct customer satisfaction surveys
specifically relating to Additional Products or Additional Services. In
addition, surveys conducted by Licensor with regard to the Primary Services
may be designed to determine customer satisfaction levels with regard to
Licensee's Additional Products or Additional Services. In the event that any
such customer satisfaction survey reveals an overall minimum customer
satisfaction rating of less than 85% (or such higher percentage as may be
established by Licensor under Section IV.A.), but more than 70%, with regard
to one or more markets constituting a part of the Licensed Territory,
Licensor shall be entitled to impose a probation status with regard to the
Additional Product or Additional Service and the market or markets in
question. Licensor shall advise Licensee of the period of time, typically one
(1) year, of such probation. Promptly upon receipt of this written notice,
Licensee agrees to formulate and implement a written plan to improve the
quality of Licensee's Additional Product or Additional Service in question in
the market or markets in question, so that a subsequent customer satisfaction
survey will indicate compliance with the provisions of this License
Agreement. Licensor shall be entitled to review Licensee's
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plan upon reasonable request therefor. The Guide to Quality Operations provided
to Licensee by Licensor and the Quality Standards set forth in Exhibit E hereto
are designed to assist Licensee in improving its customer satisfaction rating.
Additional customer satisfaction surveys will be commissioned in the market or
markets in question from time to time thereafter as Licensor deems appropriate,
and Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction surveys. If Licensor determines, in its sole
discretion, that Licensee is not making a good faith effort to formulate and
implement such a plan, or after a reasonable probation period the goals of the
plan are not achieved, then Licensor may elect to extend the term of the
probation or terminate Licensee's right to utilIze the Marks in connection with
the Additional Products or Additional Services in question in the market or
markets in question or in the Licensed Territory as a whole. In the event of
such a termination, Exhibit D hereto shall be amended appropriately. In
addition, if a customer satisfaction survey shall reveal an overall customer
satisfaction rating of 70% or less with regard to any Additional Product or
Additional Service in any market or markets in the Licensed Territory, Licensor,
upon thirty (30) days prior written notice to Licensee, shall be entitled to
terminate Licensee's right to utilize the Marks in connection with such
Additional Services or Additional Products, or any of them, in the market or
markets in question or in the Licensed Territory as a whole, and Exhibit D
hereto shall be amended to delete such Additional Products or Additional
Services therefrom. Any extension of the Term of this License Agreement by
Licensor during any such probationary period shall not waive Licensor's rights
under this Section XI.F., and such probationary period, and any agreements
relating thereto, shall continue unaffected.
G. FORCE MAJEURE
Neither Licensor nor Licensee shall be liable or deemed to be
in default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God or the public enemy. Any delay resulting from any such cause shall
extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable; provided however, that (i) said causes shall not excuse
payment of any amount due or owed at the time of such occurrence or payment of
Annual License Fees, Annual Advertising Fees, Consumer Service Number Fees or
other amounts due thereafter, (ii) the party asserting any such cause shall
promptly commence and diligently pursue action to remedy its inability or
failure to perform hereunder, and (iii) in no event shall said causes extend or
excuse performance for more than one hundred twenty (120) days from the time of
performance set forth in this License Agreement. The party asserting the
existence of a force majeure condition under this Section XI.G. shall promptly
notify the other party in writing of the occurrence and nature of any such cause
and shall thereafter regularly inform the other party in writing of the progress
of actions to remedy the inability or failure to perform hereunder.
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XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect
to one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s)"), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. DEIDENTIFICATION
1. Licensee shall immediately cease to hold itself out as a
present or former licensee of Licensor with respect to the Terminated Market(s).
2. Licensee shall immediately cease to participate in the
Consumer Service Number program, any Other 800 Programs or any similar national
call or customer routing program utilizing the Marks.
3. Licensee shall immediately and permanently cease to use, in
any manner whatsoever, in the Terminated Market(s) any of the Marks and
derivatives thereof, and all other marks and distinctive forms, slogans, signs,
icons, symbols, monograms and devices associated with the Marks. Without
limiting the foregoing, Licensee shall cease to use all signs, advertising
materials, World Wide Web sites, displays, stationery, forms, and any other
articles or clothing which display or incorporate any of the Marks or any
derivatives thereof.
4. Licensee shall take such action as may be necessary to
cancel in the Terminated Market(s) any trade name, fictitious name or equivalent
registration which contains any of the Marks or any other service mark or
trademark of Licensor, and Licensee shall furnish Licensor with proof of
compliance with this obligation within thirty (30) days after termination or
expiration of this License Agreement with respect to the Terminated Market(s).
5. Licensee agrees, in the event it continues to operate a
business in the Terminated Market(s), not to use any reproduction, counterfeit,
copy, or colorable imitation of the Marks or derivatives thereof, either in
connection with such other business or the promotion thereof, which is likely to
cause confusion, mistake, or deception, or which is likely to dilute Licensor's
rights in and to the Marks or derivatives thereof. Further, Licensee agrees not
to utilize any designation of origin or description or representation which
falsely suggests or represents an association or connection with Licensor or any
of the Marks or derivatives thereof in the Terminated Market(s).
6. Licensee shall immediately notify and cause its dealers,
agents, retailers and Affiliates that are using the Marks in the Terminated
Market(s) to immediately cease all use of the Marks and participation in the
Consumer Service Number program and any Other 800 Programs, and further cause
its dealers, agents, retailers and Affiliates to fully comply with all the
obligations applicable to Licensee under this Section XII. with respect to the
Terminated Market(s).
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B. PAYMENT OF MONIES DUE
1. Licensee shall promptly pay all sums owing to Licensor, the
Cellular One Promotional Fund and any other advertising fund established
hereunder. If and when this License Agreement is terminated as a result of any
default of Licensee, such sums shall include all damages, costs and expenses,
including reasonable attorney's fees, incurred by Licensor as a result of the
default.
2. Licensee shall pay to Licensor all damages, costs and
expenses, including reasonable attorney's fees, incurred by Licensor subsequent
to the termination or expiration of this License Agreement in obtaining
injunctive or other relief for the enforcement of any provisions of this Section
XII.
C. RETURN OF CERTAIN CONFIDENTIAL DOCUMENTS
If this License Agreement has expired or been terminated with
respect to all of the market(s) in the Licensed Territory, then Licensor and
Licensee shall immediately deliver to the other party all documents which
contain Confidential Information of the other party as defined in Section VII.
hereof, including without limitation, the Guide to Quality Operations (including
the 800 Number Supplement) and the Graphic Standards Manual.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this License
Agreement does not create a fiduciary relationship between them; that Licensee
shall remain an independent business: and that nothing in this License Agreement
is intended to constitute either party as an agent, legal representative
subsidiary, joint venturer, partner, employee or servant of the other for any
purpose whatsoever.
B. During the term of this License Agreement and any renewal hereof,
Licensee shall hold itself out to the public as an independent business using
the Marks pursuant to a license from Licensor. Licensee agrees to take such
action as may be necessary to so notify the public.
C. It is understood and agreed that nothing in this License
Agreement authorizes Licensee to make any contract, agreement, warranty or
representation on Licensor's behalf, or to incur any debt or other obligation
in Licensor's name. Licensor shall in no event assume liability for, or be
deemed liable hereunder as a result of, any such action; nor shall Licensor
be liable by reason of any act or omission of Licensee, its dealers, agents,
retailers or Affiliates in the conduct of their businesses or for any claim
or judgment arising therefrom against Licensee or Licensor. Licensee shall
indemnify and hold Licensor, Licensor's employees, the Partnership Partners
and their affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims arising directly
or indirectly from, as a result of, or in connection with, the operation of
the businesses of Licensee, its dealers,
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agents, retailers and Affiliates, as well as the costs, including attorney's
fees, of defending against them.
D. It is understood and agreed that Licensor does not establish or
certify manufacturing, technical or performance standards for telecommunications
equipment or customer premises equipment and Licensee will not represent
otherwise to third parties.
XIV. APPROVAL AND WAIVERS
A. Whenever this License Agreement requires the prior approval or
consent of Licensor, Licensee shall make a timely written request to Licensor
therefor, and such approval or consent shall be obtained in writing. Licensor
will process all such requests for approvals and consents in a reasonable and
timely manner.
B. Licensor makes no warranties or guarantees upon which Licensee may
rely, and assumes no liability or obligation to Licensee, by providing any
waiver, approval, consent or suggestion to Licensee in connection with this
License Agreement, or by reason of any neglect, delay or denial of any request
therefor.
C. No failure of Licensor or Licensee to exercise any power reserved to
it in this License Agreement, or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of
either party's rights to demand exact compliance with any of the terms of this
License Agreement. Waiver by Licensor or Licensee of any particular default on
the part of the other party shall not affect or impair the non-defaulting
party's right with respect to any subsequent default of the same or of a
different nature; nor shall any delay, forbearance or omission by Licensor or
Licensee to exercise any power or right arising out of any breach or default by
the other party of any of the terms, provisions or covenants of this License
Agreement affect or impair such party's rights, nor shall such constitute a
waiver by Licensor or Licensee, as the case may be, of any rights hereunder or
rights to declare any subsequent breach or default.
D. Subsequent acceptance by Licensor of any payments due to it shall
not be deemed to be a waiver by Licensor of any preceding breach by Licensee of
any terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under this License Agreement
shall be in writing and shall be personally delivered, delivered by reputable
overnight courier, proof of delivery requested, or by certified mail, postage
prepaid and return receipt requested, to the
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respective parties at the following addresses unless and until a different
address has been designated by written notice to the other party:
<TABLE>
<S> <C>
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: President
Copy (which shall not
constitute notice) to: Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the signature page
hereof.
</TABLE>
Any notice by overnight courier or certified mail shall be deemed to
have been given at the date and time such notice is accepted by the overnight
courier or deposited with the U.S. Postal Service, respectively. No failure to
address any notice hereunder to a particular individual shall render such notice
invalid.
XVI. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this License
Agreement shall be deemed to amend and restate in its entirety and to supersede,
for all purposes, any prior license agreement between the parties hereto which
contemplates or has as its primary purpose the grant of a license to use any of
the Marks. Except for those permitted to be made unilaterally by Licensor
hereunder, no amendment, change or variance from this License Agreement shall be
binding on either party unless mutually agreed to by the parties and executed by
their authorized officers or agents in writing.
XVII. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and/or provision of this License Agreement shall be
considered severable; and if, for any reason, a portion, section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any
other effect upon,
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such other portions, sections, parts, terms and/or provisions of this License
Agreement as may remain otherwise intelligible; and the latter shall continue to
be given full force and effect and bind the parties hereof; and said invalid
portions, sections, parts, terms and/or provisions shall be deemed not to be a
part of this License Agreement.
B. Nothing in this License Agreement is intended, nor shall be deemed,
to confer any rights or remedies upon any person or legal entity other than
Licensor or Licensee, and their respective successors and assigns as permitted
by this License Agreement.
C. In the event a court in a final decision rules that any provision of
this License Agreement or portion thereof is unenforceable, Licensee agrees to
be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
F. This License Agreement may be executed in several counterparts, and
each copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND
EXECUTION BY LICENSOR IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED UNDER, THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN
THE EVENT OF ANY CONFLICT OF LAW; PROVIDED, HOWEVER, THAT IF ANY OF THE
PROVISIONS OF THIS LICENSE AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS OF
THE STATE OF TEXAS, THEN SUCH PROVISIONS SHALL BE GOVERNED BY, AND INTERPRETED
AND CONSTRUED UNDER, THE LAWS OF THE STATE IN WHICH THE LICENSED TERRITORY IS
LOCATED (IF THE LICENSED TERRITORY CONTAINS PORTIONS OF MORE THAN ONE STATE OR
THE DISTRICT OF COLUMBIA, THEN THE APPLICABLE LAW SHALL BE THAT OF THE STATE IN
WHICH THE LARGEST PORTION OF THE LICENSED TERRITORY IS LOCATED).
B. No right or remedy conferred upon or reserved to Licensor or
Licensee by this License Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or by law or equity provided or
permitted, but each shall be cumulative of every other right or remedy.
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C. Nothing herein contained shall bar Licensor's right to apply for
injunctive relief against threatened conduct that will cause it loss or damages,
under applicable equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in the
telecommunications business and that such business involves substantial
investment and risks and that its success is largely dependent upon the ability
of Licensee's management and technical personnel. Licensor expressly disclaims
the making of, and Licensee acknowledges that it has not received, any warranty
or guarantee, express or implied, as to the potential volume, profits, or
success resulting from the utilization of the Marks by Licensee in its
telecommunications business.
B. Licensee acknowledges that it received a copy of the complete
Cellular One License Agreement and the Exhibits thereto at least five (5)
business days prior to the date on which this License Agreement is signed by
Licensee. Licensee further acknowledges that it received the disclosure document
required by the Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures" at least ten (10) business days prior to the date on which
this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood this License
Agreement and the attachments hereto, and that Licensor has accorded Licensee
ample time and opportunity to consult with advisors of Licensee's own choosing
about the potential benefits and risks of entering into this License Agreement
on the effective date set forth below.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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WITNESS WHERE OF, the parties hereto have duly executed this License Agreement
to be effective on the date shown below.
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
---------------------------------
Title: President
Effective Date: 11/7/96
----------------------
Primary Contact in Ordinary Course of
Business:
Richard J. Lyons, President
Cellular One Group
5001 LBJ Freeway, Suite 700
Dallas, TX 75244
972/387-5225
972/387-5275 (Fax)
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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<PAGE>
LICENSEE: SYGNET Communications, Inc.
By: /s/ William Zlotnick
--------------------------------
Title: Vice President
----------------------------
Date of Signature: 1/6/97
----------------
PRIMARY CONTACT IN ORDINARY COURSE OF BUSINESS:
William Zlotnick VP & Chief Operating Operator
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
ADDRESS FOR NOTICE AND VOTING PURPOSES:
William Zlotnick VP & Chief Operating Officer
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
CONTACT FOR BILLING PURPOSES:
John Anderson Controller
SYGNET Communications
6550-B Seville Drive
Canfield, Ohio 44406
Phone: 330/565-9505 Fax: 330/565-9519
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<PAGE>
EXHIBIT A
CELLULAR ONE LICENSE AGREEMENT
The Marks currently designated by Licensor for use hereunder are as
follows:
<TABLE>
<CAPTION>
REGISTRATION OR
MARKS APPLICATION NUMBER
----- -------------------
<S> <C>
CELLULAR ONE (service mark) 1,839,076
1-800-CELL ONE(1) 75/105,170
CELLULAR ONE NETWORK(2) 74/495,960
LONG DISTANCE BY CELLULAR ONE(2) 75/017,997
PCS BY CELLULAR ONE(2) 75/010,430
PAGING BY CELLULAR ONE(2) 75/010,429
TELCOM BY CELLULAR ONE(2) 75/010,427
DISPATCH BY CELLULAR ONE(2) 75/010,428
DATA BY CELLULAR ONE(2) 75/079,447
VIDEO BY CELLULAR ONE(2) 75/079,445
INTERNET BY CELLULAR ONE(2) 75/088,362
LOCAL CALLING BY CELLULAR ONE(2) -
CELLULAR ONE (trademark)(2) 1,947,105
</TABLE>
(1) Licensor may delete this Mark and/or Licensee's rights with respect to
this Mark may terminate under certain circumstances, as further
described in Section IV.J. of this License Agreement.
(2) Licensor may delete or modify any of these Marks or vary the Additional
Services or Additional Products in connection with which these Marks
may be used by Licensee, in accordance with the provisions of this
License Agreement or in furtherance of Licensor's rights hereunder.
OPTIONAL MARKS*
<TABLE>
<S> <C>
CLEAR ACROSS AMERICA 1,907,932
</TABLE>
- -----------------
* Licensee may utilize the optional Marks in accordance with the terms
and provisions of this License Agreement and the Graphic Standards
Manual, but Licensor shall have the right in its sole discretion to
terminate Licensee's use of any of the optional Marks upon thirty (30)
dads written notice to Licensee.
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
<TABLE>
<CAPTION>
OTHER
FCC MARKET
MARKET NAME MSA/RSA MARKET NO. DESCRIPTION
- ----------- ------- ---------- ------------
<S> <C> <C>
Pennsylvania 06 RSA 617A1
</TABLE>
Total Population: 379808
<PAGE>
EXHIBIT C
CELLULAR ONE LICENSE AGREEMENT
PRIMARY SERVICES
<TABLE>
<CAPTION>
ASSOCIATED
MARK (IF ANY) PRIMARY SERVICES DESCRIPTION
- ------------ ---------------- ------------
<S> <C> <C>
Cellular One Cellular Telephone Services "A" Side Cellular
Telephone Services
</TABLE>
<PAGE>
EXHIBIT D
CELLULAR ONE LICENSE AGREEMENT
ADDITIONAL SERVICES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
X Cellular One Nationwide Call The ability of customers to be reached
Delivery on their wireless phone anywhere in the United
States and its territories (including Alaska,
Hawaii, Puerto Rico and U.S. Virgin Islands) by
having the caller dial their wireless phone
number.
- ---------------------------------------------------------------------------------------------------------
X Cellular One Nationwide Roaming The ability of customers to make calls in
other than "home markets" anywhere in the
United States and its territories (including
Alaska, Hawaii, Puerto Rico and U.S. Virgin
Islands) by dialing the appropriate phone
number.
- ---------------------------------------------------------------------------------------------------------
Cellular One Nationwide NCCDN shall be a backbone network which
Network Cellular Call consists of hardware/software, transmission links
Delivery Network and routing switches or protocols, and
("NCCDN") possessing the physical and intangible
permitting properties and functionality necessary
participating to permit Licensee to offer Cellular
cellular customers Telephone Services customers the
to automatically (i) service codes, (ii) dialing patterns,
receive calls (iii) feature codes, and (iv) recorded
dialed to such messages (the foregoing clauses (i) through
customer's home (iv) being hereafter collectively referred to as
cellular telephone "Dialing Standards") described in the Guide to
number when Quality Operations, within the United States and
roaming. its territories (including Alaska, Hawaii,
Puerto Rico and U.S. Virgin Islands).
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 1
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cellular One Primary Services The Cellular One Mark may be used for
provided in one or more Additional Services if they are
combination with provided in conjunction with the Primary
one or more of the Services; otherwise, the other Marks in
Additional Services this Exhibit are to be used for the
specified Additional Services in accordance with
Licensor's graphic standards. If the Primary
Services are provided in conjunction with one or
more Additional Services under the Cellular One
Mark, Licensee must, in accordance with
Licensor's graphic standards (i) use the Marks
in this Exhibit for the Additional Services in
question or (ii) use Licensor's designated form
of the descriptive term for the Primary Services
and Additional Services in question (e.g.,
Cellular, Long Distance, PCS, Paging, Telcom,
Dispatch, Data, Video, Internet or Local
Calling) rather than the full Marks shown in
this Exhibit (e.g., Long Distance by Cellular
One, Paging by Cellular One, etc.).
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 2
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long Distance Long Distance An intra-LATA or inter-LATA toll
by Cellular Service telecommunications service that is primarily
One viewed as part of a public switched telephone
network providing users in fixed (such as
residences and businesses) or mobile locations
with two way voice, data, text, and image
communications. Minimum requirements for Long
Distance Service include:
- provisioning of
telecommunications service
- offering two-way voice, data and
text communications
- being used as part of a public
switched telephone network
- providing intra-LATA, inter-LATA
and international service
- providing users with the ability
to terminate calls nationally and
internationally
- allowing customers utilizing any or
all of the full spectrum of
telecommunications services such as
Cellular, PCS, Paging, Dispatch,
Alternate Wireless Services and Telcom,
to subscribe to this service.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 3
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PCS by Personal A wireless telecommunications service that
Cellular One communication is interconnected to a public switched telephone
services network providing users with at least intra-LATA
and inter-LATA two-way voice and data
communications. Service is provided through a
mobile phone (car, transportable, or portable)
or through wireless modems incorporated into
devices such as lap top computers and electronic
notebooks. Minimum requirements of PCS are:
- provisioning of wireless telecommunications
service
- offering two-way voice and data
communications
- interconnecting to a public telephone
network
- providing intra-LATA and inter-
LATA service
- supplying service through:
- mobile phones that are
mobile (car), transportable
or portable, or
- wireless modems incorporated
into devices such as
lap top computers and
electronic notebooks.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 4
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paging by Paging A wireless telecommunications messaging
Cellular One service providing users with at least
one-way voice and/or data communications such as
voice or data messaging or data transfer to a
pager or a device such as a lap top computer, or
mobile phone with a built in pager. Minimum
requirements of Paging are:
- provisioning of a wireless
telecommunications service
- offering at least one way voice
and/or data communications
- providing service through analog or
digital technology for paging devices
that either are stand-alone or
part of a device such as a lap top
computer or a mobile phone.
- ---------------------------------------------------------------------------------------------------------
Telcom by A combination of Telecommunications products and services that
Cellular One telecommunications are part of or interconnected primarily to a
products or public switched telephone network providing
services, users in fixed locations such as a residence
including products and businesses with local, intra-LATA and
such as handsets, inter-LATA two-way voice, data, text, and image
modems and PBX- communications. Minimum requirements for Telcom
like devices and include:
services such as
Cellular Telephone
Services,
Alternate Wireless
Services, private
network services,
or local calling
(exchange)
services
- providing service
to users in fixed
locations such as
residences and
businesses
- offering two-way
voice, data and
text communications
- interconnecting to
a public switched
telephone network
- providing local,
intra-LATA or
inter-LATA service.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 5
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dispatch by Dispatch Services A wireless telecommunications messaging
Cellular One service providing users with "push to talk"
two-way voice dispatch and data broadcast
that is generally used in the public safety,
construction, and transportation industries, and
that can be interconnected to a public telephone
network. Minimum requirements for Dispatch
include:
- provisioning of wireless analog
telecommunications service
- offering two-way voice and data
communications
- providing "push to talk" technology
for organizations and multiple
vehicles or locations
- interconnecting with a public
telephone network.
- ---------------------------------------------------------------------------------------------------------
Data by Data Transmission Transmission of information in a numerical
Cellular One form that is in either a digital or analog
format which can be transmitted via local,
intra-LATA and inter-LATA facilities through a
wireless telecommunications network that is
interconnected to a public switched telephone
network and subsequently processed.
- ---------------------------------------------------------------------------------------------------------
Video by Video Delivery Providing full motion images and conversational
Cellular One Services audio transmission which can be sent or received
in synchronization via wired and wireless
facilities.
- ---------------------------------------------------------------------------------------------------------
Internet by Internet Services A wired or wireless telecommunications
Cellular One access to a data base of articles,
information and entertainment through the
Internet/World Wide Web.
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 6
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Local Local Calling An intra-LATA telecommunications service that is
Calling by (exchange) primarily viewed as part of a public switched
Cellular One Services telephone network providing users in fixed
(such as residences and businesses) locations
with two-way voice, data, text, and image
communications. Minimum requirements for local
calling services include:
- provisioning of telecommunications
service
- offering two-way voice, data and
text communications
- being used as part of a public
switched telephone network
- providing intra-LATA service
- providing users with the ability
to terminate calls nationally and
internationally
- allowing customers utilizing any or
all of the full spectrum of
telecommunications services, such as
Cellular, PCS, Paging, Dispatch,
Alternate Wireless Services and
Telcom, to subscribe to this service.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL PRODUCTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cellular One Wireless Cellular telephones, handsets, transceivers,
Communications pagers (remote data receptors), personal
Equipment digital assistants (wireless data devices
which can receive and send data messages),
modems and facsimile machines, and parts and
accessories therefor.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 7
<PAGE>
EXHIBIT E
CELLULAR ONE LICENSE AGREEMENT
QUALITY STANDARDS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
QUALITY STANDARDS MEASUREMENT
- ---------------------------------------------------------------------------------------------------------
<S> <C>
- - Overall Minimum - 85% of surveyed respondents answered
Customer Licensor's commissioned satisfaction
Satisfaction survey as "very satisfied" or "somewhat
Rating satisfied" with their Cellular One service
overall
- - Reliability of - Majority of surveyed respondents answered
placing and Licensor's commissioned satisfaction
completing a call survey "As Expected" or "Better than
Expected" for the reliability of placing
and receiving a call in home calling area
("Home Market")
- - Voice quality - Majority of surveyed respondents answered
Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the quality of voice or
sound during Cellular One calls in Home
Market
- - System Busy - Majority of surveyed respondents answered
Signals Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the ability to place or
receive calls without a system busy signal
in Home Market
- - Dropped Calls - Majority of surveyed respondents answered
Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the ability to continue
phone calls without being dropped because
of weak signal
- - Quickness of - Majority of surveyed respondents answered
answering Licensor's commissioned satisfaction
customer call survey "As Expected" or "Better than
Expected" for the quickness of answering
the phone
- - Ability to - Majority of surveyed respondents answered
adequately answer Licensor's commissioned satisfaction
customer's reason survey "As Expected" or "Better than
for calling Expected" for abilIty to adequately answer
reason for calling
- - Accuracy of Bill - Majority of surveyed respondents answered
Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the accuracy of the bill
- - Clarity or - Majority of surveyed respondents answered
Understandability Licensor's commissioned satisfaction
of Bill survey "As Expected" or "Better than
Expected" for the clarity or
understandability of the bill
- - Data Quality - Accurately transmit or receive data at a
rate of at least 9,600 bps
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit E - Page 1
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------
<S> <C>
- - Seamless Network - Customers must be able to travel with
their wireless phones outside their Home
Market and make and receive calls without
interruption when they travel beyond their
Home Market
- - Automatic Roaming - Customers must have the ability to make
calls in markets outside of their Home
Market in the same manner as is done in
their Home Market, without any special
dialing sequences or instructions
- - 24 Hour Customer - Customer service must be able to be
Service accessed inside or outside of their Home
Market 24 hours a day, 7 days a week
- - *611 Dialing From - Customers with problems must be able to
a Wireless Phone access customer service from their
wireless phone within and outside their
Home Market by dialing *611
- - 1-800-CELL ONE - A 24 hour service which can be accessed by
prospects and customers for assistance
with telecommunications products and
services by any type of telephone
technology from local and remote sites.
- ---------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit E - Page 2
<PAGE>
EXHIBIT F
CELLULAR ONE LICENSE AGREEMENT
SURVEY METHODOLOGY
The methodology currently being employed by Licensor and its designated
Survey Company will be a telephone survey conducted from random probability
samples selected by the Survey Company from listings supplied by Licensee of all
of Licensee's customers in each market in the Licensed Territory.
Customer listings shall be provided to the Survey Company in magnetic
tape or disk medium in such common format as may be reasonably specified by
Licensor. (If Licensee is unable to comply, a half-size, high income probability
sample will be ordered at Licensee's expense).
A random probability sample will be utilized, sufficient in number for
economic completion of the satisfaction survey. The size of the samples will be
at the discretion of Licensor and the Survey Company, but will typically be
between approximately 50 and 200 depending on the size of the market being
surveyed.
<PAGE>
EXHIBIT G
CELLULAR ONE LICENSE AGREEMENT
SPECIAL RESELLER PROVISIONS
[To be agreed to between Licensor and Licensee when applicable]
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
BETWEEN
CELLULAR ONE GROUP
AND
SYGNET COMMUNICATIONS, INC.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
<TABLE>
<CAPTION>
SECTION TITLE PAGE NO.
- ------- ----- --------
<S> <C> <C>
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS ........................ 8
II. TERM AND RENEWAL .............................................. 9
III. RIGHTS AND DUTIES OF LICENSOR ................................. 11
IV. DUTIES OF LICENSEE ............................................ 18
V. FEES AND REPORTING ............................................ 28
VI. MARKS ......................................................... 33
VII. CONFIDENTIAL INFORMATION ...................................... 37
VIII. ADVERTISING ................................................... 38
IX. INSURANCE ..................................................... 41
X. TRANSFER OF INTEREST .......................................... 42
XI. DEFAULT AND TERMINATION ....................................... 44
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION .................... 50
XIII. INDEPENDENT STATUS AND INDEMNIFICATION ........................ 51
XIV. APPROVAL AND WAIVERS .......................................... 52
XV. NOTICES ....................................................... 52
XVI. ENTIRE AGREEMENT .............................................. 53
XVII. SEVERABILITY AND CONSTRUCTION ................................. 53
XVIII. APPLICABLE LAW ................................................ 54
XIX. ACKNOWLEDGMENTS ............................................... 55
</TABLE>
-i-
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a
Delaware general partnership ("Licensor") and SYGNET Communications, Inc., a
corporation/partnership organized under the laws of ("Licensee").
PREAMBLE
Licensor is a Delaware general partnership (the "Partnership") with
its principal place of business in Dallas, Texas. The current general
partners of the Partnership are Cellular One Marketing, Inc., a Delaware
corporation, Cellular One Development, Inc., a Delaware corporation, and
Vanguard Cellular Corp., a North Carolina corporation. Additional partners
may be admitted to the Partnership from time to time. (The Partnership
partners, as they may exist from time to time, are referred to herein as the
"Partnership Partners").
The Partnership is engaged in the business of licensing and
promoting the service mark "Cellular One" and certain related trademarks,
service marks and designs.
Licensee desires to receive a license from Licensor to use the
Cellular One-Registered Trademark- mark, together with the marks designated
on Exhibit A hereto and such other marks as Licensor may hereinafter
designate in writing (collectively referred to as the "Marks") within the
market(s) described on Exhibit B (the "Licensed Territory") in accordance
with the provisions of this License Agreement.
INTRODUCTORY STATEMENT
Licensor's goal has been and continues to be the promotion of the
Marks as being synonymous, in the minds of consumers of telecommunications
services, with nationwide, dependable, high quality telecommunications
services and related services, goods and equipment (the "National Brand
Goal"). Historically, Licensor's strategy to achieve the National Brand Goal
has been to license the Marks, and predecessors of the Marks, for use by
providers of Cellular Radiotelephone Services (as defined in 47 C.F.R
Section 22.99) ("Cellular Telephone Services") on the so-called "A" side in
certain Federal Communications Commission ("FCC") designated markets. The
competition to licensees of the Marks has historically come primarily from
"B" side providers of Cellular Telephone Services (who constitute the other
providers of Cellular Telephone Services under the duopoly created by the FCC
for such service). Given this duopoly, Licensor believes that its strategy
for achieving the National Brand Goal has been effective to date. However,
the telecommunications landscape has changed dramatically in
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<PAGE>
recent periods and Licensor believes that its strategy may need to be
modified or entirely new strategies adopted to achieve and maintain the
National Brand Goal.
Licensor believes that these modified or new strategies will be
essential if its licensees are to enjoy the competitive benefits afforded by
a widely recognized national brand as other powerful national brand
competitors, which have not historically competed with licensees of the
Marks, enter their markets directly. Licensor believes that the emergence of
these major new competitors, with powerful national brands, will be
accompanied by technological changes that will render the distinction between
Cellular Telephone Services and other telecommunications services
increasingly less important to consumers. Licensor expects that consumers
will begin to focus on applications, utilities, brand names and distribution
channels and will demand that a provider of telecommunications services,
either directly or through alliances, offer a full menu of communications,
such as long distance, cellular (or other wireless) service, internet access,
satellite television and local service, all under one name and perhaps billed
by a single source. Licensor believes that its current and future strategies
must be sufficiently flexible to permit it to respond to these expected
changes in the industry and to provide its licensees with a national brand
that can be used in a manner that will allow those licensees to meet consumer
expectations.
Licensor plans to continue, as its primary strategy, granting
licenses to "A" side Cellular Telephone Services providers (both in newly
licensed markets or in connection with the renewal of currently outstanding
Cellular One "A" side licenses), and to begin attempting to grant licenses to
"B" side providers of Cellular Telephone Services or to resellers of Cellular
Telephone Services in FCC licensed markets not served by an "A" side Cellular
One licensee. Licensor may also consider, however, licensing a provider of
Alternate Wireless Services (as defined below), such as a personal
communications service provider, the right to utilize the Marks in a market
or markets where no Cellular Telephone Services provider utilizes the Marks
to promote such services.
Licensor has, from time to time, granted licensees of the Marks the
right to use one or more of such Marks in connection with products or
services other than those constituting Cellular Telephone Services. Among
other things, Licensor has permitted licensees of the Marks to incorporate
one or more of the Marks onto cellular telephone equipment or to utilize one
or more of the Marks in connection with the nationwide delivery of calls to
cellular telephones. Licensor has also granted licensees the right to
continue to use or to begin using one or more of the Marks in connection with
some of the products and services (the "Additional Products" and "Additional
Services") described on Exhibit D hereto. Licensor anticipates that consumers
of wireless telecommunications services may come to expect that high quality
offerings of services such as Cellular Telephone Services or other Primary
Services (as defined below) will include uniform functionality and service
features and bundles of Additional Products, Additional Services and Cellular
Telephone Services or other Primary Services. As such demand develops,
Licensor expects to designate standards for the offering and delivery of the
Cellular Telephone Services or other Primary Services and related Additional
Products and Additional Services, and to identify one or more Additional
Products or Additional Services as
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<PAGE>
"Core Products," the offering of which will be subject to the provisions of
this License Agreement, as described in Section III.I. hereof.
As part of its plan to achieve and maintain the National Brand Goal,
Licensor will from time to time establish standards pursuant to Section
III.B. hereof, defining minimum acceptable operating and other criteria for
offerings by Licensee of the Cellular Telephone Services or other Primary
Services and related Additional Services and Additional Products. In light of
market conditions, as they change from time to time, Licensor may designate
separate standards for products offered under a particular Mark. Licensor has
provided, on Exhibit E to this License Agreement, a description of the
technical standards and service standards (collectively, the "Quality
Standards") which will initially be applicable to the Cellular Telephone
Services or other primary Services, Core Products, Additional Services and
Additional Products displaying or sold under the various Marks.
Licensor may, in the future, designate certain of the Additional
Products or Additional Services as Core Products where and when it determines
that consumers have come to expect that such products or services will be
offered in conjunction with any high quality offering of Cellular Telephone
Services or other Primary Services, and in order to achieve and maintain the
National Brand Goal. The existing required Core Products are nationwide call
delivery and roaming capability. Additional Core Products may include, by way
of example only, such products or services as long distance, voice messaging,
local exchange service, dispatch service and paging service, which offer
consumers nationwide consistency of operation or other benefits. Unless it
elects not to do so, Licensee will be obligated to offer the Core Products
under the specified Marks throughout the Licensed Territory in connection
with its delivery of Cellular Telephone Services or other Primary Services.
If Licensee is unable or elects not to so offer one or more Core Products in
connection with Cellular Telephone Services or other Primary Services,
Licensor, subject to Section III.I. of this License Agreement, may amend the
License Agreement to terminate Licensee's rights to utilize the Marks to
promote the Core Products not then being offered or, with respect to the
existing Core Products of nationwide call delivery and roaming capability,
may terminate this License Agreement.
The development of the wireless telecommunications industry and the
regulatory patterns relating to that industry have resulted in overlaps or
conflicts between licensees of the Marks with regard to certain promotional
activities. In order to permit licensees of the Marks to make full use of
such Marks in their promotional and other activities and in order to reduce
conflicts between or the expense of resolving conflicts between such
licensees, this License Agreement permits licensees of the Marks to make
certain incidental use of the Marks outside of their respective licensed
territories while permitting Licensor to impose reasonably necessary
restrictions, including requiring the use of tag lines or other identifying
mechanisms, where necessary to maintain the integrity of the licensed
territories and to avoid customer confusion regarding the providers of
Cellular Telephone Services or other Primary Services therein. In addition,
because the markets for wireless telecommunications services vary from
geographic area to geographic area for economic, demographic, topographic,
legal and other reasons, and because Licensor expects that certain markets
may develop at different rates from others, this
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<PAGE>
License Agreement permits Licensor to vary definitions of Cellular Telephone
Services or other Primary Services, Core Products, Additional Services and
Additional Products and to vary the Quality Standards and certain of the fees
payable hereunder in order to achieve or maintain progress toward the
National Brand Goal.
The foregoing is intended as an explanation of Licensor's goals and
planning, and shall not be deemed to affect the meaning or construction of
any of the following provisions. In the event of any conflict between the
foregoing and the following provisions, the following provisions shall
prevail.
DEFINED TERMS
As used in this License Agreement, the capitalized terms set forth
below shall have the following meanings:
"1-800-CELL ONE MARK" shall mean the service mark denoted as such on
Exhibit A hereto.
"800 NUMBER SUPPLEMENT" shall have the meaning set forth in Section
IV.J.1.(b) of this License Agreement.
"A" SIDE" shall mean the Block A (nonwireline) cellular
frequencies as designated by the FCC.
"ADDITIONAL FEES" shall mean any fees determined in accordance with
Section V.G. of this License Agreement.
"ADDITIONAL PRODUCTS" shall mean the products described as
"Additional Products" on Exhibit D hereto.
"ADDITIONAL SERVICES" shall mean the services described as
"Additional Services" on Exhibit D hereto.
"ADVISORY COUNCIL" shall have the meaning set forth in Section
III.D. of this License Agreement.
"AFFILIATE" shall have the meaning set forth in Section X.C. of this
License Agreement.
"ALTERNATE WIRELESS SERVICES" shall mean any telecommunications
service offering simultaneous, two-way wireless transmission and receipt of
voice or data, other than Cellular Telephone Services.
"ANNUAL ADMINISTRATIVE FEE" shall mean the fee determined in
accordance with Section V.D. of this License Agreement.
-4-
<PAGE>
"ANNUAL ADVERTISING FEE" shall mean the fee determined in accordance
with Section V.C. of this License Agreement.
"ANNUAL LICENSE FEE" shall mean the fee determined in accordance
with Section V.B. of this License Agreement.
"APPLICATION FEE" shall mean the fee determined in accordance with
Section V.A. of this License Agreement.
"B" SIDE" shall mean the Block B (wireline) cellular frequencies as
designated by the FCC.
"CELLULAR ONE MARK" shall mean the trademark or service mark
"Cellular One" denoted as such on Exhibit A hereto.
"CELLULAR ONE PROMOTIONAL FUND" shall have the meaning set forth in
Sections III.E. and VIII.C. of this License Agreement.
"CELLULAR TELEPHONE SERVICES" shall have the meaning set forth in
the Introductory Statement to this License Agreement.
"CERTIFICATES OF INSURANCE" shall mean certificates designating
insurance coverages required to be delivered to Licensor pursuant to Section
IX.C. of this License Agreement.
"C.F.R." shall mean the Code of Federal Regulations, as may be
amended from time to time.
"CHANGE OF CONTROL" shall have the meaning set forth in Section X.D.
of this License Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning set forth in
Section VII.A. of this License Agreement.
"CONSUMER SERVICE NUMBER" shall have the meaning set forth in
Section IV.J. of this License Agreement.
"CONSUMER SERVICE NUMBER FEE" shall mean the fee determined in
accordance with Section V.F. of this License Agreement.
"CORE PRODUCTS" shall mean those Additional Products and Additional
Services designated as "Core Products" on Exhibit D to this License
Agreement, as amended from time to time.
-5-
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"CTIA" shall mean the Cellular Telecommunications Industry
Association, or any successor thereto recognized by Licensor as such.
"EFFECTIVE DATE" shall mean the date shown adjacent to Licensor's
signature on this License Agreement.
"FCC" shall have the meaning set forth in the Introductory Statement
to this License Agreement.
"FUND" shall have the meaning set forth in Section VIII.C. of this
License Agreement.
"GRAPHIC STANDARDS MANUAL" shall have the meaning set forth in
Section III.A. of this License Agreement.
"GUIDE TO QUALITY OPERATIONS" shall mean the guide and other
materials provided by Licensor to Licensee pursuant to Section III.B. hereto.
"INCIDENTAL USE" shall have the meaning set forth in Section VI.C.
of this License Agreement.
"INITIAL YEAR" shall have the meaning set forth in Section II.A.2.
of this License Agreement.
"LICENSED TERRITORY" shall mean the market(s) described on Exhibit
B, as amended from time to time pursuant to the provisions of this License
Agreement.
"LICENSEE" shall have the meaning set forth in the first paragraph
of this License Agreement.
"LICENSOR" shall mean Cellular One Group, a Delaware general
partnership, and its permitted successors and assigns under this License
Agreement.
"LONG DISTANCE CARRIER" shall have the meaning set forth in Section
IV.J.1.(a) of this License Agreement.
"MSA" shall mean the cellular Metropolitan Statistical Areas as
referred to in 47 C.F.R. Section 22.909.
"MARKS" shall have the meaning set forth in the Preamble to this
License Agreement.
"NATIONAL BRAND GOAL" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
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"OTHER 800 PROGRAMS" shall have the meaning set forth in Section
V.F. of this License Agreement.
"PARTNERSHIP" shall have the meaning set forth in the Preamble to
this License Agreement.
"PARTNERSHIP PARTNERS" shall have the meaning set forth in the
Preamble to this License Agreement.
"PERMITS" shall have the meaning set forth in Section IV.B. of this
License Agreement.
"PERSONAL COMMUNICATION SERVICES" shall have the meaning set forth
in Exhibit D hereto.
"POTENTIAL CUSTOMER CONFUSION" shall have the meaning set forth in
Section VI.D. of this License Agreement.
"PRIMARY SERVICES" shall mean the services specifically described on
Exhibit C hereto.
"QUALITY STANDARDS" shall mean the technical standards and service
standards applicable to Primary Services, Core Products, Additional Services
and Additional Products set forth on Exhibit E to this License Agreement, as
amended from time to time.
"RSA" shall mean the cellular Rural Service Areas as referred to in
47 C.F.R. Section 22.909.
"REVISED LICENSES" shall mean the license agreements between
Licensor and its licensees, which are entered into after July 31, 1996 as
part of Licensor's general licensing program utilizing the Marks for or in
conjunction with the provision of telecommunication services, including,
without limitation, the provision of Cellular Telephone Services and/or other
telecommunication services substantially the same as or reasonably similar to
the Primary Services being licensed to Licensee hereunder.
"STRATEGIC MARKET CHANGE" shall have the meaning set forth in
Section III.H.4. of this License Agreement.
"SUBSEQUENT YEAR" shall have the meaning set forth in Section
II.A.2. of this License Agreement.
"SURVEY COMPANY" shall have the meaning set forth in Section III.C.
of this License Agreement.
"TERM" shall have the meaning set forth in Section II of this
License Agreement.
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"TERMINATED MARKET(S)" shall have the meaning set forth in the
introduction to Section XII of this License Agreement.
The parties therefore agree as follows:
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS
A. GRANT
1. Subject to the remainder of this License Agreement
(including without limitation, Licensor's rights described in Section I.B and
Sections III.E. through III.J. below), Licensor grants to Licensee, upon the
terms and conditions of this License Agreement, the exclusive right, license
and privilege to use the Marks in the Licensed Territory described on Exhibit
B during the Term of this License Agreement to promote the Primary Services,
consisting of Cellular Telephone Services on the "A" side, "B" side and/or
the other services described on Exhibit C hereto.
2. Subject to the remainder of this License Agreement,
Licensor grants to Licensee, upon the terms and conditions of this License
Agreement, the exclusive right, license and privilege to use the Marks during
the Term in connection with the promotion and sale of the Additional Services
and the Additional Products in the Licensed Territory.
3. Subject to the terms of this License Agreement, Licensor
grants to Licensee, upon the terms and conditions of this License Agreement,
the right, license and privilege to make Incidental Use (as defined in
Section VI.C.) of the Marks.
B. LIMITATIONS ON GRANT
1. If the Licensed Territory as described on Exhibit B
consists of multiple markets and the Licensee's rights under this License
Agreement are terminated with respect to one or more of such markets in
accordance with the provisions of this License Agreement, Exhibit B to this
License Agreement and specifically the term "Licensed Territory" shall
thereafter be deemed to apply only to the remaining market(s) as to which
Licensee's rights under this License Agreement continue. In addition, the
Licensed Territory may be modified, in accordance with the provisions of
Section VI.D., in the event that Licensor determines that Potential Customer
Confusion exists.
2. Notwithstanding Licensee's exclusive right to utilize
the Marks to promote the Primary Services, Additional Services and Additional
Products in the Licensed Territory, other persons possessing a license to use
the Marks may promote the Primary Services, Additional Products and
Additional Services provided by such parties outside of the Licensed
Territory in media receiving distribution within or accessible by persons
located in the Licensed
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Territory, such as regional magazines or newspapers, regional television and
radio and World Wide Web pages.
3. Subject to the provisions of Sections III.H. and III.I.
of this License Agreement, Licensor may terminate Licensee's right to use the
Marks to designate or promote certain Core Products, Additional Products and
Additional Services.
C. ACKNOWLEDGMENTS
1. Subject to the specific grants to Licensee set forth in
this Section I, Licensee acknowledges that Licensor has and retains the right
to use and license the Marks anywhere in the world, within or outside of the
Licensed Territory and that Licensee shall have no rights with regard to such
use or any benefits therefrom.
2. Licensor and Licensee agree that effective with the
commencement of the Term of this License Agreement, all prior licenses to
which Licensee is a party relating to the use of the Marks, or any of them,
in the Licensed Territory or any part thereof shall terminate, together with
all of Licensee's rights thereunder.
II. TERM AND RENEWAL
A. TERM
1. Except as otherwise provided in Section II.B. of this
License Agreement, the term (the "Term") of this License Agreement is five
(5) years, beginning on the Effective Date and ending on the day preceding
the fifth anniversary thereof. Licensee recognizes and agrees that Licensor
may modify or terminate the Term as it applies to Additional Products and
Additional Services or Core Products in accordance with Articles III and VI
hereof.
2. The period from the Effective Date of this License
Agreement until December 31 of that calendar year shall be referred to herein
as the "Initial Year." Each subsequent calendar year commencing after the end
of the Initial Year shall be referred to herein as a "Subsequent Year."
B. RENEWAL
Licensee may, at its option, renew the license granted by
this License Agreement for two (2) additional terms (each, in turn, the
"Term") of five (5) years each provided that:
1. Licensee gives Licensor written notice of its election
to renew not less than six (6) months nor more than twelve (12) months before
the end of the expiring Term;
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2. Licensee is neither in default of any of its obligations
under this License Agreement, nor on probation pursuant to Section XI.E.;
3. Licensee has not during the expiring Term received any
notice of default under Section XI.D. which relates to a default which has
not been cured;
4. At the end of the expiring Term, Licensee continues to
hold all of the Permits (as defined in Section IV.B.) necessary to provide
the Primary Services and those of the Core Products, Additional Services and
Additional Products being provided, sold or distributed by it;
5. No later than ninety (90) days before the end of the
expiring Term, Licensee executes Licensor's then-current form of license
renewal agreement, which agreement will supersede this License Agreement in
all respects, provided that such license renewal agreement shall not contain
any terms, provisions or conditions which differ materially from the terms,
provisions or conditions of this License Agreement, except terms, provisions
and conditions (i) which in the good faith judgment of Licensor are not
materially adverse to Licensee, (ii) which are appropriate, in the good faith
judgment of Licensor, to accommodate any material economic, technological,
demographic, or other market changes occurring during the prior five (5) year
Term, (iii) which Licensor determines in good faith are necessary to protect
the Marks, (iv) which Licensor determines in good faith are necessary to
prevent Potential Customer Confusion (as defined in Section VI.D.), (v) which
relate to charges and fees (including increases) which Licensor believes in
good faith are necessary to provide adequate support for the promotion of the
Marks consistent with the National Brand Goal during the renewal Term in
question, (vi) which are reasonably necessary in Licensor's determination to
maintain or achieve the National Brand Goal, (vii) which Licensor adopts
pursuant to Sections III.G., III.H. or III.I. hereof, or (viii) which relate
or are enacted pursuant to Section IV.E.;
6. At the end of the expiring Term, Licensee shall be in
compliance with the provisions of Section IV.A.2. If Licensee has been
assigned probation status at such time as described in Section IV.A.2., then
such probation status shall continue and the required timely improvements
shall be a condition of effective renewal;
7. At the end of the expiring Term, Licensee is offering on
a good faith commercial basis the Primary Services and all of the Core
Products for which Licensee is authorized to utilize the Marks, in
substantially all of the Licensed Territory in accordance with the Quality
Standards and is promoting such Primary Services and Core Products utilizing
the applicable Marks in accordance with the Graphic Standards Manual; and
8. At the end of the expiring Term, Licensee shall have
satisfied all monetary obligations owed by Licensee to Licensor, and shall
have timely met such obligations throughout the term of this License
Agreement.
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III. RIGHTS AND DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee,
and no other parry is entitled to rely on, enforce or obtain relief for
breach of any such obligation, either directly or by subrogation. This
License Agreement is not intended to and shall not create any partnership,
joint venture or other business relationship, other than that of Licensor and
Licensee, between the parties hereto, or to vest any rights in any third
party or group of third parties. This License Agreement shall not create any
rights on behalf of Licensee against any third party, including any other
licensee of the Marks. Subject to the foregoing, and to the remainder of this
License Agreement, Licensor shall undertake the following duties:
A. MARKS USAGE GUIDELINES
1. Licensor will provide Licensee, from time to time, with
a Graphic Standards Manual (the "Graphic Standards Manual") containing
written and graphic guidelines for the correct reproduction, application and
presentation of the Marks. The Graphic Standards Manual may include, among
other things, Mark specimens, samples of advertisements and clip art
indicating color, proportion, and format. The Graphic Standards Manual may
also provide for the use of one or more tag lines to be used to differentiate
or highlight a particular service or offering or group of services or
offerings, such as "Paging By Cellular One" and require its usage in specific
circumstances, including use on signage and promotional materials referenced
in Section III.F. The Graphic Standards Manual may also provide guidelines
for the proper use of tag lines and require such usage in the event that two
or more licensees of the Marks are permitted to make use thereof within the
Licensed Territory, or any part thereof, pursuant to Sections VI.C. or VI.D.
2. From time to time, upon not less than one (1) year's
notice, Licensee shall be entitled to designate one or more icons to be used
with one or more of the Marks and the manner of their usage to signify an
association of such icon or icons with such Marks.
B. TECHNICAL GUIDELINES, QUALITY STANDARDS
1. Licensor will provide Licensee with a Guide to Quality
Operations (the "Guide to Quality Operations") containing suggestions for
providing customers with high quality Primary Services, Core Products,
Additional Services and Additional Products, and other materials, as Licensor
deems appropriate. The Guide to Quality Operations may be modified and
supplemented from time to time as Licensor deems appropriate.
2. Attached to this License Agreement as Exhibit E are the
Quality Standards (the "Quality Standards"), as of the date hereof,
applicable to Primary Services, Core Products, Additional Services and
Additional Products, respectively, to be sold or provided, as the case may
be, utilizing the Marks. The Quality Standards include, as a general matter,
criteria for minimum acceptable service delivery levels and encompass such
matters as geographic coverage requirements, participation in a nationwide
call delivery network, standardized dialing patterns
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and the availability of telephone customer assistance. The Quality Standards
also include required features and technical guidelines for minimum
acceptable system functionality (although specific equipment or system
designs will not be required) and may encompass such matters as required
functionality for telephones and other devices constituting Additional
Products, required compliance by equipment with designated industry
standards, compliance by switching equipment with uniform handoff
requirements, and similar requirements relating to the delivery of Primary
Services and Additional Services or the operation of Additional Products.
3. From time to time, Licensor, by written notice to
Licensee in accordance with Section III.A., shall have the right to amend the
Quality Standards with regard to any Mark to require added features or
functionality for Primary Services, to modify the minimum technical or
operating standards relating thereto or to require coordination and
uniformity in the delivery of Primary Services, Additional Services,
Additional Products and Core Products within the Licensed Territory and
beyond. Licensor shall not be obligated to consider the particular needs of
Licensee or any group of licensees of the Marks in connection with any
amendment to the Quality Standards, except that Licensor shall not propose
amendments to the Quality Standards applicable to Licensee only.
4. From time to time, Licensor, by written notice to
Licensee in accordance with Section IV.A., shall have the right to amend
Exhibit E with regard to any Mark to designate features, technical or
operating standards or functionality appropriate under existing economic,
market, demographic and technological conditions in similarly situated
markets directed to the achievement and maintenance of the National Brand
Goal. Although uniformity and consistency will normally be required by
Licensor throughout the Licensed Territory and among the various territories
or markets in which Licensee and others are licensed to use the Marks, the
Licensor may, from time to time, make certain distinctions, based upon
demographic, topographic, legal or other considerations, and provide for
differing Quality Standards with regard thereto.
5. In addition, Licensor may, upon at least six (6) months
written notice to Licensee, amend Exhibit E to amend the Quality Standards
for Additional Products, Additional Services and Core Products, to designate
Quality Standards for any new Marks added to Exhibit A hereto or to designate
Quality Standards for Additional Products, Additional Services and Core
Products for which separate Quality Standards do not exist. In the event that
an Additional Product or Additional Service becomes a Core Product, Licensor
may further amend Exhibit E to establish Quality Standards for the offering
and delivery of the Core Products, as a whole or as a package of Core
Products or Primary Services and Core Products.
6. Exhibit E to this License Agreement, as amended from
time to time, is incorporated herein by reference. All references to the
Quality Standards shall mean those standards established, as of such time, by
Exhibit E.
7. At Licensee's request, Licensor shall be entitled, but
in no event shall be required, to waive compliance by Licensee with one or
more of the Quality Standards in one or
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more of the markets constituting a part of the Licensed Territory, in the
event that Licensor believes such a waiver to be consistent with the National
Brand Goal. Any waiver by Licensor of a Quality Standard must be in writing
and may, at Licensor's election, be for a limited period or subject to one or
more conditions.
C. CUSTOMER SATISFACTION SURVEYS
Licensor shall have the right, at its own expense,
commission an independent survey company ("Survey Company") to conduct a
customer satisfaction survey of Licensee's customers on a yearly basis for
purposes of assessing the quality of Licensee's Primary Services, Additional
Services, Additional Products or Core Products, or all of them. The
methodology of the survey will be determined by the Survey Company and
Licensor. An outline of current survey methodology for Primary Services,
which may change from time to time, is attached as Exhibit F. The results of
all surveys of Licensee's customers will be shared with Licensee to assist
Licensee in improving its business and complying with Licensee's obligations
under this License Agreement, including its obligations with regard to the
Quality Standards described herein. The results of surveys will be used to
evaluate the general level of customer satisfaction and to assist Licensor in
determining whether or not Licensee is meeting the Quality Standards.
Licensor will instruct the Survey Company to obtain all required survey
information directly from the Licensee and not through or in conjunction with
Licensor. The Survey Company will be required to execute an appropriate
confidentiality agreement for the benefit of Licensee and the other licensees
of the Marks, which shall provide that the Survey Company will not disclose
any Confidential Information of Licensee to Licensor, the Partnership
Partners or affiliates, or their employees or to any other party (except that
the results of the survey for each market and other survey information which
is applicable generally to all licensees of the Marks or any of them may be
disclosed to Licensor and used by Licensor in connection with its business
operations).
D. LICENSEE ADVISORY COUNCIL
Licensor has established an elected council of licensees
("Advisory Council") comprised of licensees other than Partnership Partners
from a broad cross-section of markets throughout the United States, to advise
and consult with Licensor regarding material matters such as advertising,
marketing and Quality Standards relating to the Marks and to act as a liaison
organization between Licensor and the licensees of the Marks. The procedures
and responsibilities adopted for the operation of the Advisory Council are
subject to change, from time to time, as may be appropriate in the judgment
of Licensor to provide the most effective organization for performing the
contemplated functions of the Advisory Council. The representative of any
licensee serving on the Advisory Council shall be an officer of such licensee
or other person reasonably acceptable to Licensor. The charter of
responsibility of the Advisory Council provides that all members of the
Advisory Council will be informed of applicable antitrust laws and shall
abide by any decisions of Licensor's antitrust counsel in such regard.
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E. NATIONAL AND REGIONAL ADVERTISING
Licensor has established and maintains the Cellular One
Promotional Fund, as described in Section VIII.C. of this License Agreement.
Licensor administers the Fund with the goal of enhancing the image of the Marks
and achieving or maintaining the National Brand Goal. Licensor, in connection
with the Cellular One Promotional Fund, or otherwise, shall have the right, from
time to time, to promote the Marks in local, regional or national advertising
receiving distribution within the Licensed Territory and to engage in any other
promotional activities, including sponsoring sporting or other public events
within the Licensed Territory, as Licensor deems appropriate in connection with
the National Brand Goal. No consent of Licensee shall be necessary to any such
promotional activities.
F. NATIONAL/REGIONAL PROGRAMS
Licensor may, in its discretion, make available a national
and/or one or more regional account programs under which, through the voluntary
cooperation of its licensees in various markets, client companies with multiple
market operations may enter into a single contract arrangement for one or more
of the Primary Services or any of the Core Products, Additional Services or
Additional Products for their employees located in such markets. Licensor or its
designee may administer any such national or regional accounts program(s). In
addition, Licensor may, from time to time, utilize the Marks or permit third
party licensees of the Marks to utilize the Marks to promote the sale and
distribution of Additional Products or Additional Services in or by means of
media, such as, but not limited to, direct mail catalogs, World Wide Web pages
and radio and television broadcasts receiving wide distribution, both within and
outside of the Licensed Territory; provided, however, that no such promotional
activity shall have as its primary purpose the targeting of any single market or
territory. In addition, Licensor may also, from time to time, utilize the Marks
or permit third party licensees of the Marks to promote and sell Additional
Products or Additional Services as part of a coordinated regional or national
marketing effort including all or part of the Licensed Territory; provided,
however, that no such promotional activity shall have as its primary purpose the
targeting of any single market or territory.
G. DESIGNATION OF PRIMARY SERVICES
1. Set forth on Exhibit C hereto are descriptions of the
Primary Services applicable to Licensee as of the date of this License
Agreement. From and after the date hereof, Licensor and Licensee, by executing
an amendment to Exhibit C, shall be entitled to amend the description of the
Primary Services and to add or delete services therefrom. Licensor shall be
entitled to group the Primary Services into categories (for use, among other
things, in defining Quality Standards applicable to particular Primary Services)
and, with the consent of Licensee, to add or omit one or more services from the
definition of Primary Services with regard to one or more markets constituting
part of the Licensed Territory.
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2. Consistent with Section VI.D., to the extent necessary to
prevent Potential Customer Confusion, Licensor shall be entitled, with or
without the consent of Licensee, to amend Exhibit C hereto to modify the
description of Primary Services or to separate Primary Services into classes or
categories for the purpose of differentiating between the Primary Services (by
means of tag lines or otherwise) to be rendered in one or more markets
constituting a part of the Licensed Territory; provided, however, that any such
amendment of Exhibit C shall only become effective upon at least six (6) months
written notice to Licensee thereof.
H. DESIGNATION AND DELETION OF ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are
descriptions of products and services which, upon thirty (30) days written
notice to Licensor, Licensee may promote or sell utilizing the Marks which
are applicable to the Additional Product or Additional Service in question,
as may be designated in Licensor's Graphic Standards Manual. Licensor may
review, from time to time, Exhibit D to this License Agreement in light of
current demographic, technological, regulatory and other circumstances
(including, without limitation, Strategic Market Changes) for the purpose of
adding or deleting products and services from the descriptions of Additional
Products and Additional Services, modifying the definitions assigned to one
or more Additional Products or Additional Services or modifying the Term of
this License Agreement or any Licensed Territory with regard thereto. In
undertaking such review, the Licensor shall consider Exhibit D in light of
the National Brand Goal. Licensor shall not be obligated to consider the
needs of any particular licensee or group of licensees in connection with its
review of Exhibit D, nor shall it have an obligation, other than as
specifically provided for herein, to inform Licensee of the progress of such
review. Any such amendment of Exhibit D shall be made pursuant to Sections
III.H.2 through III.H.5 below or pursuant to Section VI.D. hereof.
2. Based upon the review contemplated by Section III.H.1.
above, or otherwise as deemed appropriate by Licensor in its sole discretion,
Licensor may at any time, or from time to time, during the Term, upon not less
than thirty (30) days written notice to Licensee designate one or more new or
additional services or products as Additional Services or Additional Products.
3. Based upon the review contemplated by Section III.H.1.
above, or as otherwise deemed appropriate by Licensor, at any time from and
after January 1, 1999, Licensor may modify or amend Exhibit D hereto, or any
description set forth therein, and may delete products or services constituting
Additional Products or Additional Services, reduce or extend the Term with
respect to one or more Additional Products or Additional Services or modify the
Licensed Territory with regard thereto (i) immediately upon written notice to
Licensee with respect to any Additional Product or Additional Service not then
being offered to the public throughout the Licensed Territory on a good faith,
nondiscrinatory commercial basis by Licensee under the specified Marks at the
time of such written notice, (ii) upon not less than six (6) months written
notice with respect to any Additional Product or Additional Service which is
being offered to the public throughout the Licensed Territory on a good faith,
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nondiscriminatory commercial basis by Licensee under the specified Marks at the
time of such written notice, provided that in the event of modification or
amendment pursuant to either (i) or (ii) preceding, Licensor shall have
determined that a Strategic Market Change has occurred and that such
modification or amendment is required to reasonably permit appropriate response
thereto. A written explanation of the reason for such modification or amendment
shall accompany the written notice referred to in (i) or (ii) preceding. During
such time as Licensee can demonstrate to the satisfaction of Licensor that
Licensee is offering and actively promoting the Primary Services, long distance
service and local calling service (as further described on Exhibit D) under the
specified Marks to the public (including business, residential and mobile
consumers) throughout the Licensed Territory on a good faith, nondiscriminatory
commercial basis, Licensor may agree to refrain from licensing others to use the
Marks for other Additional Products and Additional Services in the Licensed
Territory. Any such agreement shall be subject to those conditions and
limitations as Licensor may establish.
4. For the purposes of this Section III.H., a "Strategic
Market Change" shall mean any change in economic, demographic, technological,
regulatory or competitive conditions which Licensor reasonably believes requires
a material modification in the manner in which the Primary Services, the Core
Products, the Additional Products or the Additional Services, or any of them,
are marketed or delivered, in order to continue the successful promotion of the
Marks to achieve or maintain the National Brand Goal. While it is anticipated
that a Strategic Market Change will be national in scope, and that Licensor's
response thereto will be similarly uniform, Licensor shall be entitled, subject
to Section III.B.4., to respond under this Section III.H. to Strategic Market
Changes affecting a more limited class or classes of markets.
5. Notwithstanding Section III.H.3. above, Licensee shall have
a limited right to have Exhibit D amended to restore Additional Services or
Additional Products deleted under Section III.H.3. For the ninety (90) day
period following delivery of a notice of modification or amendment under Section
III.H.3., Licensee may submit a request to Licensor to reinstate an Additional
Product or Additional Service on Exhibit D or to rescind any other modification
of Exhibit D adopted pursuant to Section III.H.3, stating its reasons therefor.
Licensor shall consider Licensee's request for reinstatement in good faith, but
shall not be obligated to amend Exhibit D. Any reinstatement of an Additional
Product or Additional Service under this Section III.H.5. shall be subject to
such conditions as Licensor shall believe appropriate under the circumstances,
consistent with the achievement or maintenance of the National Brand Goal.
I. DESIGNATION AND DELETION OF CORE PRODUCTS
1. From time to time after the date hereof, to the extent that
Licensor determines that consumers have come to expect that one or more of the
Additional Products and Additional Services described on Exhibit D, as amended
from time to time, are commonly offered as a part of any offering of nationwide,
dependable, high quality telecommunications services or are otherwise
fundamental to the achievement or maintenance of the National Brand Goal,
Licensor may, upon six (6) months written notice to Licensee, amend Exhibit D
hereto to designate those Additional Products and Additional Services as "Core
Products" and may
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further designate an effective date for such designation. However, nationwide
call delivery and nationwide roaming as further described on Exhibit D are
existing required Core Products, and need not be further designated as such
pursuant to this Section III.H.1.
2. From and after the effective date of any designation of an
Additional Product or Additional Service as a Core Product, Licensee shall offer
such Additional Service or Additional Product under the specified Marks on a
good faith commercial basis in substantially all of the Licensed Territory, or
shall have adopted and provided to Licensor in writing a good faith plan
acceptable to Licensor for doing so promptly. Licensee shall promote using the
specified Marks and make all the Core Products available to its customers and to
the public generally in the Licensed Territory, in connection with promoting and
making the Primary Services available and shall not discriminate in terms of
price, availability or promotional efforts in favor of similar products or
services designated by other trademarks or service marks. Upon Licensor's
request, Licensee shall promptly provide a copy of its plans for offering any
Core Products under the specified Marks which it does not then offer.
3. In the event that Licensee shall fail to comply with its
obligations under Section III.I.2 above, or shall fail within six (6) months of
the effectiveness of the designation of any Additional Product or Additional
Service as a Core Product to offer (or plan to offer pursuant to a plan
submitted to and approved by Licensor and promptly thereafter implemented by
Licensee) such Core Product under the specified Marks in good faith, on a
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory, Licensor shall be entitled to immediately amend Exhibit D hereto to
delete therefrom the Core Products not being offered by Licensee under the
specified Marks on a good faith, nondiscriminatory, commercial basis in
substantially all of the Licensed Territory, and shall be entitled to use or
license others to use the Marks in connection with such Core Products in the
Licensed Territory. With respect to the existing Core Products of nationwide
call delivery and nationwide roaming as further described in Exhibit D, Licensor
shall also be entitled to terminate this License Agreement pursuant to Section
XI.D. if, within six (6) months from the Effective Date, such Core Products are
not being offered by Licensee under the specified Marks on a good faith,
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory.
J. OTHER LICENSES, COMPENSATION TO LICENSOR
Licensor has and may continue to license the Marks, or any of them, to
third parties for use in connection with products or services other than Primary
Services, Core Products, Additional Products, or Additional Services. (For
example, Licensor has licensed one of the Marks to a third party marketer of
children's toys). Such licenses, subject to Licensee's rights set forth in
Section I, may permit use of the Marks by such third party licensees to promote
and sell products and services, other than Primary Services, Core Products,
Additional Services and Additional Products, within the Licensed Territory. As
part of such licensing arrangements, Licensor has, and may, from time to time
hereafter, receive fees or other consideration from third parties who provide
goods and services to licensees of the Marks in connection with
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promotional or other programs arranged by Licensor. Licensee shall have no claim
or right with regard to any such fee or consideration or the arrangements giving
rise thereto.
K. RESELLER ARRANGEMENTS
In the event this License Agreement is being executed and delivered by
a licensee who is being licensed to resell Cellular Telephone Services or an
Alternate Wireless Service, it is anticipated that certain terms and conditions
applicable herein to providers of such services will need to be modified and
that certain additional terms and conditions may need to be added hereto to
accommodate the differences between the provision of such services directly by a
provider and by a reseller of such services. Accordingly, as necessary, in any
such event, the parties hereto shall complete and attach hereto an appropriate
Exhibit G to reflect such modified or additional terms and conditions and such
Exhibit G shall thereafter be deemed to be incorporated herein and made a part
hereof for all purposes.
IV. DUTIES OF LICENSEE
All duties of Licensee under this License Agreement are to Licensor,
and no other party is entitled to rely on, enforce or obtain relief for breach
of any such obligation, either directly or by subrogation. Licensee understands
and acknowledges that the high quality operation of its business under the Marks
is important to Licensee, Licensor and other licensees of the Marks in order to
maintain high operating standards and to protect the reputation of, and goodwill
associated with, the Marks. Toward that end, Licensee acknowledges and accepts
the following duties:
A. QUALITY OF SERVICE
1. Licensee agrees to provide high quality Primary Services
and Core Products and, to the extent provided, high quality Additional Services
and Additional Products, to its customers by, among other things, complying with
this License Agreement and the applicable Quality Standards. Upon six (6) months
written notice of the modification of or addition to the Quality Standards,
Licensee shall cause its Primary Services, Core Products, Additional Services or
Additional Products to comply therewith; provided, however, that Licensee shall
be entitled to adopt a plan reasonably acceptable to Licensor to discontinue the
offering of any Additional Services or Additional Products in lieu of complying
with the Quality Standards relating thereto, provided such Additional Products
or Additional Services do not constitute Core Products.
2. Licensee shall attain and maintain an overall minimum
customer satisfaction rating of at least 85% (or such increased level as may be
required pursuant to the provisions of this Section IV.A.) with regard to the
Licensed Territory as a whole (on a population weighted basis) and more than 70%
with respect to any market constituting a part thereof, with regard to
Licensee's Primary Services and Core Products. If Licensee has licenses
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to use the Marks in more than one Licensed Territory pursuant to additional
license agreements with Licensor, Licensee shall be obligated to achieve an
overall minimum customer satisfaction rating of 85% (or any increased level
adopted) for all of such Licensed Territories (on a population weighted basis),
and more than 70% with respect to any market constituting a part thereof.
Licensor reserves the right to increase the overall minimum acceptable customer
satisfaction rating to a percentage greater than 85% if Licensor, in its
reasonable discretion, determines that such higher percentage is appropriate
given the technical state of the industry delivering Primary Services, Core
Products, Additional Products and/or Additional Services at such time; provided,
however, that the Advisory Council must approve any such increase in the minimum
acceptable customer satisfaction rating, and such increase shall not be
effective until the beginning of the next calendar year following the Advisory
Council's approval. In the event that a customer satisfaction survey conducted
by Licensor pursuant to Section III.C. of this License Agreement results in an
overall minimum customer satisfaction rating below 85% (or below any higher
percentage established by Licensor as described above), but more than 70%, in
Licensee's Licensed Territory or Licensed Territories as a whole (on a
population weighted basis), then Licensee will be assigned probation status
under Section XI.E. of this License Agreement and surveys will be commissioned
in the market(s) in the Licensed Territory or Licensed Territories, as the case
may be, which did not achieve a rating of at least 85% (or any higher
percentage established by Licensor), from time to time thereafter as Licensor
deems appropriate until Licensee has achieved an overall minimum customer
satisfaction rating of at least 85% (or any higher percentage established by
Licensor as described above) and the probation status is removed, or until this
License Agreement is terminated, as herein provided, whichever shall first
occur. Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction survey(s).
3. During the Term, Licensee shall provide the Primary
Services and Core Products throughout the Licensed Territory, and shall
maintain, or cause others to maintain on its behalf, a sufficient number of
customer service locations and other facilities, including retail storefronts or
similar facilities, to permit customers and potential customers convenient
access to Primary Services, Core Products, Additional Products and Additional
Services, consistent with existing competitive conditions and in accordance with
the Quality Standards.
B. LEGAL COMPLIANCE
1. Licensee agrees to comply, at its own expense, with all
applicable laws, ordinances and regulations of federal, state, county or
municipal authorities. Licensee will also obtain and maintain, at its own
expense, all permits, approvals, licenses and franchises and shall make all
required filings, applications and reports to all government or administrative
entities or self-regulatory organizations as shall be necessary, from time to
time, to provide those of the Primary Services, the Core Products, the
Additional Services or the Additional Products as Licensee may then be
providing, and to otherwise engage in business, generally, throughout the
Licensed Territory (collectively, the "Permits"). Without limiting the
generality of the foregoing, Licensee's obligation under this Section IV.B.
shall include the maintaining of Licensee's qualification to do business
throughout the Licensed Territory, and the filing of all
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income and franchise tax returns with respect to Licensee's operations. In the
event that any of Licensee's material Permits is scheduled to expire during the
Term, including any renewal of such Term, Licensee agrees to comply with all
requirements for extension of said Permit prior to such expiration. Licensee
shall notify Licensor in writing within five (5) days after receipt of any
notice from the FCC or any other governmental authority regarding an actual or
threatened termination or revocation of any Permit material to the provision of
the Primary Services, Core Products, Additional Products or Additional Services
by Licensee within the Licensed Territory, including any license by the FCC to
conduct business as a provider of telecommunications services or necessary to
construct facilities relating to telecommunications services, and shall within
such time provide a copy of any such notice to Licensor. In addition, Licensee
shall notify Licensor within five (5) days after becoming aware of the
commencement of any action, suit or proceeding, or the issuance of any order,
writ, injunction, award or decree of any court, agency or other governmental
instrumentality which could have a material adverse effect on the operation or
financial condition of Licensee's business as it relates to the Primary
Services, the Core Products, the Additional Services or the Additional Products.
2. To the extent that Licensee's business is dependent upon
one or more agreements with a provider of Primary Services, Core Products,
Additional Services or Additional Products for which Licensee acts as a
reseller, "Permits" shall include such contractual relationship and the license
granted hereunder shall be dependent upon the continuation thereof in good
standing.
3. Licensee represents and warrants that it possesses all
Permits necessary to the conduct of its business and to the business of
providing the Primary Services, Core Products, Additional Services and
Additional Products within the Licensed Territory, including, if applicable, any
Permits necessary to permit it to act as a reseller of services provided by
others.
C. BUSINESS PRACTICES
Licensee shall maintain a competent, conscientious, trained
staff. Neither Licensor nor Licensee shall engage in any trade practice or other
activity which is harmful to the goodwill or reflects unfavorably on the Marks
or on the reputation of Licensee, Licensor, Licensee's business or other
licensees of Licensor, or which constitutes deceptive or unfair competition,
consumer fraud or misrepresentation.
D. INFORMATION TO LICENSOR
1. Upon Licensor's request, subject to the confidentiality
requirements described in Section III.C., Licensee must, in connection with any
customer satisfaction survey Licensor elects to conduct in accordance with
Section III.C., promptly furnish to the Survey Company designated by Licensor a
complete and accurate customer list of all of its subscribers and customers for
its Primary Services, Core Products, Additional Products and Additional
Services, as a whole or separately, in a format reasonably prescribed by
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey
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Company shall require in connection with the performance of its duties. Licensee
hereby gives the Survey Company permission to contact any and all of its
subscribers and customers in conducting a customer survey to ascertain the
quality level of Licensee's services and products and obtain related market
research data in accordance with the methodology set forth in Exhibit F or as
Licensor may reasonably deem appropriate. Licensee shall promptly provide
Licensor with additional information reasonably requested by Licensor regarding
matters such as Licensee's legal status (for example, any Change in Control),
affiliated companies, dealers, agents, retailers, Primary Services, Core
Products, Additional Products and Additional Services being provided or sold
utilizing the Marks, Licensee's use of the Marks, including Incidental Use and
Potential Customer Confusion, and other matters which Licensor may reasonably
determine are relevant to Licensee's performance under this License Agreement.
2. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of each Permit necessary or related to its business of
providing Primary Services, Core Products, Additional Services or Additional
Products using the Marks (with the financial details thereof deleted or redacted
if Licensee so chooses), together with any amendments, termination or other
notices relating thereto.
3. At Licensor's request, Licensee shall promptly provide
Licensor with a copy of Licensee's most recent financial statements for the most
recently completed fiscal year and any subsequent interim periods, including
reports of auditors, if any, and supporting schedules, relating to Licensee's
business of providing Primary Services, Core Products, Additional Services or
Additional Products using the Marks.
E. VOTING BY LICENSEES
Licensor shall be entitled, from time to time, during the
Term, or at any time with regard to a Term to commence in the future, to submit
a proposed amendment to this License Agreement and any Exhibits hereto, to all
of its licensees which have executed Revised Licenses, with a request that such
licensees indicate their approval or disapproval thereof by written ballot.
Unless licensees which have executed Revised Licenses with Licensor and which
are obligated to pay in excess of 50% of the aggregate of all Annual License
Fees payable by all similarly situated licensees shall vote against such
amendment, this License Agreement, and the applicable Exhibits hereto, shall be
amended as proposed by Licensor in the material submitted to the licensees.
Notwithstanding the foregoing, without the express written consent of Licensee,
no amendment to this License Agreement approved under this Section IV.E. shall,
with regard to prior time periods or events taking place prior to the adoption
thereof, increase Licensee's obligations to pay any amounts to Licensor or
otherwise undertake any obligations to Licensor or any other party. In addition,
no amendment to this License Agreement approved solely pursuant to this Section
IV.E. shall (i) modify the Licensed Territory, (ii) prohibit or prevent
Licensee from providing the Primary Services under the Marks in the Licensed
Territory, or (iii) permit Licensor to license others to use the Marks for
providing Alternate Wireless Services or Cellular Telephone Services in the
Licensed Territory. Any notice provided by Licensor hereunder requiring an
approval or disapproval of an amendment to this License Agreement or
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any Exhibits hereto shall be delivered to Licensee in accordance with the
notice provisions of this License Agreement not less than ninety (90) days prior
to the proposed effectiveness thereof. Licensor shall be entitled to set forth
in any notice proposing an amendment to this License Agreement or any Exhibits
hereto an effective date more than ninety (90) days following the delivery of
notice with regard thereto. Licensees which fail to respond to a request by
Licensor to approve or disapprove of an amendment to this License Agreement or
any Exhibits hereto within sixty (60) days after delivery of the proposed
amendment shall be deemed to have consented to such amendment. This Section
IV.E. shall not modify or limit any of Licensor's other rights provided for in
this License Agreement, including but not limited to Licensor's rights to amend
Exhibits to this Agreement under Sections III or IV, to the extent permitted
therein, or to modify or impose the fees or other charges, to the extent such
modification is permitted, required of Licensee under Sections V or VIII hereof.
Only Licensor shall have the right to propose an amendment to this License
Agreement or any Exhibits under this Section IV.E.
F. SIGNAGE, PROMOTION
1. For each market in the Licensed Territory, Licensee shall,
at its own expense, cause the Cellular One Mark to be used or incorporated with
such reasonable prominence in such advertising and other business references to
Licensee as may be appropriate to create a clear impression, among the general
public, that Licensee is affiliated with the Cellular One program. Without
limiting Licensee's obligation to comply with the foregoing, Licensee shall, for
each market in the Licensed Territory, associate Licensee and the Cellular One
name in the telephone "yellow pages" and "white pages" directory listings, and
at least cause the Cellular One Mark to be used or incorporated on or in each of
the following, insofar as they relate to Licensee's business utilizing the
Marks:
(i) Licensee's customer billing statements and
the accompanying envelopes;
(ii) Licensee's advertising media, including without
limitation, print advertising, brochures, marketing materials,
point-of-sale materials, billboards and broadcast media such as radio
and television advertising, on line advertising, home pages on the
World Wide Web and other computer accessible information;
(iii) The greetings, introductions or opening
messages of Licensee's telephone operators, voice mall, telephone
answering machines and other call answering services, in response to
customer and prospective customer inquiries;
(iv) Licensee's stationery, business cards, notices
and other mailouts, and, to the extent practicable, any press or other
media coverage afforded Licensee; and
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(v) Signs or displays on the exterior and interior
of each of Licensee's facilities which interface with customers or
prospective customers in the Licensed Territory.
2. To the extent required by this License Agreement, pursuant
to Sections III.A., VI.B., VI.D. or otherwise, Licensee shall, at its own
expense, modify its usage of the Marks and adopt tag lines, icons or similar
marks or variations, and modify the signage and other items described in Section
IV.F.1. above as may be appropriate, within one (1) year or such shorter period
as Licensor may reasonably require or as may be otherwise provided in this
License Agreement.
3. Licensee shall use the Cellular One Mark (or any mark
substituted therefor by Licensor) as the principal service mark or trademark, as
appropriate, designating Primary Services and Core Products sold or distributed
by it within the Licensed Territory and shall otherwise use the applicable Marks
in connection with Additional Products and Additional Services in the Licensed
Territory to the extent commercially reasonable and as required by this License
Agreement. Use of the Marks will be strictly in accordance with the Graphic
Standards Manual as amended from time to time. Licensee shall only use those
Marks as are specified by Licensor in connection with each of the Additional
Products and Additional Services.
G. DEALERS, AGENTS AND RETAILERS
In the event that, pursuant to this License Agreement,
Licensee permits its authorized dealers, agents or retailers to use the Marks in
the Licensed Territory, such dealers, agents and retailers shall be subject to
the obligations set forth in this License Agreement and those imposed upon such
parties by Licensee; provided, however, that unless required by Licensee, such
dealers, agents and retailers need not necessarily comply with the specific
obligations of Sections IV.F.1.(i), IV.F.1.(iii) and IV.F.1.(iv) hereof in
connection with each dealers', agents' or retailers' use or incorporation of the
Marks on or in the items therein listed.
H. ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings
"Additional Products" and "Additional Services," respectively, are certain
products and services relating to the Primary Services with regard to which,
upon notice to Licensor, Licensee may promote or sell utilizing the Marks as
therein specified.
2. In the event that Licensee shall elect to use the Marks
within all or any part of the Licensed Territory in connection with one or more
of the specified Additional Products or Additional Services, Licensee shall
provide Licensor not less than thirty (30) days written notice of such intended
use, together with a description of Licensee's business and promotional plans
with regard thereto and the portion of the Licensed Territory to which such use
will relate.
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I. USE OF THE CELLULAR ONE TRADEMARK
In order to protect and enhance the Cellular One Mark and the
goodwill pertaining thereto, Licensee shall, consistent with Exhibit D, use the
Cellular One Mark only on or in connection with first class, high quality
telecommunications equipment and related devices further described as an
Additional Product on Exhibit D hereto (collectively, the "Wireless
Communications Equipment"). Any such Wireless Communications Equipment shall be
sold or distributed only in accordance with all applicable federal, state and
local laws, including, without limitation, all applicable FCC directives and
other industry standards issued from time to time by the CTIA, the Electronics
Industries Association and comparable industry groups, and which, if available
for the type of Wireless Communications Equipment in question, has earned a
certification seal issued by the CTIA. Licensee shall, upon execution of this
Agreement, and from time to time thereafter upon request by Licensor, promptly
furnish to Licensor, at no charge, a listing of all of the various types of
Wireless Communications Equipment sold or otherwise distributed by Licensee, and
upon which or in connection with which the Cellular One Mark is used. The nature
and quality of such Wireless Communications Equipment shall be subject to review
by Licensor to insure compliance with this Agreement.
J. CONSUMER SERVICE NUMBER
Licensee shall have the obligation to use and promote and a
nonexclusive right to make use of a toll free national consumer service number
designated by Licensor (the "Consumer Service Number") as a toll free service
to Licensee's customers and prospective customers in the Licensed Territory, to
use the 1-800-CELL ONE Mark and marks associated therewith and to pay an annual
fee to Licensor described in Section V.E. and in accordance with the following
terms and conditions:
1. (a) Licensor will, from time to time, establish and
maintain a national consumer service telephone number, operated twenty-four
hours a day, seven days a week. Currently the number established by Licensor is
1-800-CELL ONE (1-800-235-5663). Licensee shall arrange with a long distance
carrier (the "Long Distance Carrier") for a network-based routing system to
cause such calls to the Consumer Service Number from customers and
prospective customers of Licensee in the Licensed Territory (including
customers of Licensee roaming from the Licensed Territory) to be automatically
(i) routed to Licensee, or to a designated center as further described below or
(ii) provided with a prerecorded intercept announcement or (iii) routed as may
be required pursuant to Section IV.J.3. or any agreement entered into by
Licensee pursuant thereto. All arrangements necessary for the routing of calls
to Licensee or the delivery of prerecorded intercept announcements shall be made
between Licensee and the Long Distance Carrier. In no event will Licensor route
calls made to the Consumer Service Number to Licensee, or cause any such calls
to be so routed. It is anticipated that Licensee will provide customers and
prospective customers calling the Consumer Service Number with assistance,
information and/or promotional literature in response to inquiries concerning
such matters as activation, suspension or disconnection of service, service
plans, promotions, billing, pricing, roaming, dialing instructions, access
numbers, feature codes, the
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locations, hours of operation and telephone numbers of offices, authorized
repair facilities and sources for batteries, parts and accessories, and such
other matters as may be set forth in the 800 Number Supplement (hereinafter
defined).
(b) Licensor will provide Licensee with a supplement to
Exhibit E (the Quality Standards) and the Guide to Quality Operations
(collectively, the "800 Number Supplement"), containing requirements and
suggestions for the operation of the Consumer Service Number program, including
the services which Licensee must have the capability of offering during various
times to callers to the Consumer Service Number which are routed to the Licensee
by the Long Distance Carrier, and other materials as Licensor deems appropriate.
Licensor may from time to time, in its discretion, issue additional supplements,
modifications and additions to the Guide to Quality Operations or the 800 Number
Supplement. Licensor may, in its discretion, expand or introduce new features to
the Consumer Service Number program and may afford Licensee the opportunity to
participate therein by executing an addendum to this Agreement or other suitable
document.
(c) From time to time, at its sole election, Licensor may
select and designate a substitute telephone number to serve as the Consumer
Service Number and Licensee shall take such steps as shall be necessary to
utilize such substituted number in place of the prior telephone number serving
as the Consumer Service Number and shall cease any use of such prior number in
accordance with any schedule reasonably promulgated by Licensor with regard
thereto.
2. Licensee shall establish and maintain adequate staffing and
telephone capacity in relation to the subscriber base and call volume of the
Licensed Territory, in order to promptly and adequately receive and respond to
calls routed to Licensee through the Consumer Service Number; provided however,
that Licensee may establish a centralized location with such capabilities to
serve multiple markets for which Licensee has entered into a License Agreement
with Licensor, if applicable. Licensee agrees that it will not impose any
airtime charges or other charges upon the caller for calls made to the Consumer
Service Number, whether such calls are made by customers, prospective customers,
roamers or otherwise. Licensee shall cause its billing department or, if
applicable, use its best efforts to cause each of its billing companies or
providers of Primary Services, to nonrate calls to the Consumer Service Number
made from the Licensed Territory, and to delete any per diem roaming fees if
calls from the Licensed Territory to the Consumer Service Number are the only
roamer calls made during the twenty-four hour daily billing period. Licensee
shall offer credit card roaming capability for its customers, with respect to
the Licensed Territory, for the purpose of allowing call processing for
customers with validation problems when the serving switch in the home market is
not accessible.
3. Within thirty (30) days of the Effective Date of this
License Agreement, Licensee shall make appropriate arrangements with the Long
Distance Carrier for the routing of calls to the Licensed Territory and, in
conjunction therewith, shall be providing service to customers and prospective
customers in accordance with the Quality Standards and the Guide
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to Quality Operations (including the 800 Number Supplement) twenty four hours a
day, three hundred sixty-five days a year. Licensee may phase in such customer
service operations over a period not to exceed six (6) months following the
Effective Date hereof, but within (30) days after the Effective Date of this
Agreement, Licensee shall, at a minimum, promptly accept and fully respond to
all calls routed to Licensee through the Consumer Service Number from 8:00 a.m.
to 6:00 p.m., local time, Monday through Friday, excluding national holidays.
During such times, the calls routed to the Licensed Territory by the Long
Distance Carrier must be handled by Licensee's own or contracted service
personnel (other than answering services) unless other arrangements satisfactory
to Licensor are made, and the various types of callers (customers, roamers,
prospects, etc.) must be provided with service respecting at least those
categories as set forth in the Guide to Quality Operations (including the 800
Number Supplement). Outside of such times, (i) Licensee has the option of
handling the calls with its own or contracted service personnel (other than
answering services), arranging for other licensees in good standing of the Marks
to handle the calls, arranging for third parties acceptable to Licensor to
handle the calls, or arranging for the calls to be answered by an automated
voice response system, with live operator backup preferred (although a response
system with the capability for the caller to leave a recorded message will be
acceptable); and (ii) not later than six (6) complete calendar months following
the Effective Date of this License Agreement, such callers must be provided with
service respecting at least those categories as set forth in the Guide to
Quality Operations (including the 800 Number Supplement) for such times.
4. Licensee shall at its own expense include the Consumer
Service Number in Licensee's telephone directory listings for the Licensed
Territory, including "White Pages" and "Yellow Pages" listings (under "Cellular
Telephones", "Mobile Telephones," "Radiotelephones" or other category denoting
telecommunications services and equipment, as appropriate), and in Licensee's
promotional and marketing materials. Licensee agrees to actively promote the
Consumer Service Number in the Licensed Territory, but may also utilize its own
toll free numbers or other numbers in the Licensed Territory.
5. Licensor shall in no event be liable by reason of any act
or omission of Licensee or any third party licensee in the conduct of its
business or for any claim or judgment arising therefrom or for any claim or
judgment by third parties (including without limitation, the Long Distance
Carrier, Licensee's customers, prospective customers, dealers, retailers,
agents, resellers, or the like) arising from or relating to the establishment
and the operation of the Consumer Service Number, and Licensee shall indemnify
and hold Licensor, Licensor's employees, the Partnership Partners and their
affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims and judgments, as
well as the costs, including attorneys' fees, of defending against them.
Licensee acknowledges that Licensor shall not be responsible for any direct,
consequential or incidental damages of any kind resulting from or relating to
the Consumer Service Number, the related program or the operation thereof, or
the acts or omissions of the Long Distance Carrier, including without
limitation, damages relating to possible loss of customers or prospective
customers by Licensee or its dealers, retailers, agents, resellers, or the like.
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6. Licensee agrees to promptly provide the Long Distance
Carrier with such complete current and reserve cellular NPA/NXX listings and
other information and data as may be reasonably requested by the Long Distance
Carrier to permit the Long Distance Carrier to provide an efficient and
effective routing of calls and delivery of intercept announcements to Licensee
and to assure that calls which should be routed to other licensees of the
Consumer Service Number are not being affected by Licensee's arrangements with
the Long Distance Carrier. All payments and other similar arrangements which may
be necessary to permit the Long Distance Carrier to route calls or provide
intercept services and prerecorded announcements to callers shall also be the
responsibility of Licensee, shall be determined by and between Licensee and the
Long Distance Carrier, and Licensor shall have no obligation or liability
whatsoever with respect thereto. Licensee agrees to promptly provide directly to
Licensor and/or to cause the Long Distance Carrier to promptly provide to
Licensor such information as Licensor may from time to time reasonably request
in order to permit Licensor to protect the Marks and/or to ascertain Licensee's
compliance with Licensee's obligations under this Agreement.
7. In the event Licensee's agreement with the Long Distance
Carrier expires or is terminated for any reason with respect to any market in
the Licensed Territory, Licensee's rights with respect to the Consumer Service
Number and the 1-800-CELL ONE Mark shall automatically terminate with respect to
such market. In the event Licensor decides to discontinue the Consumer Service
Number or the related program, Licensor may terminate Licensee's rights with
respect to the Consumer Service Number and the 1-800-CELL ONE Mark upon ninety
(90) days prior written notice to Licensee.
8. The parties agree that Licensor is not offering herein to
resell 800 service or other telecommunications services, and no portion of the
annual Consumer Service Number Fee is compensation for any such resale. Licensee
shall have no right to resell 800 service using the Consumer Service Number to
any other person or entity. If Licensee chooses to permit its authorized
dealers, retailers or agents in the Licensed Territory to use the Consumer
Service Number and the 1-800-CELL ONE Mark, Licensee acknowledges, for itself
and on behalf of its dealers, retailers and agents, that the applicable calls by
callers to the Consumer Service Number will be routed by the Long Distance
Carrier to Licensee, and not to any such dealers, retailers and agents of
Licensee, and that the calls will be toll free and free of roaming and airtime
charges upon the callers as set forth above.
9. Licensee acknowledges and agrees that it shall have no
ownership interest in the Consumer Service Number, any telephone number, Mark or
acronym serving as or associated with a current or previous Consumer Service
Number or any agreements relating thereto, notwithstanding any actual or implied
agreements between Licensee and the Long Distance Carrier, any tariffs or
permits applicable or related to the Consumer Service Number or any contract or
course of dealing relating thereto. Without modifying the foregoing, Licensee
hereby grants Licensor an irrevocable power of attorney, which shall be coupled
with an interest, to act in Licensee's place and stead and to execute and
deliver any agreements, instruments, certificates, pleadings or the like
reasonably necessary to disclaim any interest by
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Licensee in the Consumer Service Number, any telephone number, Mark or acronym
serving as or associated with a current or previous Consumer Service Number or
any agreements relating thereto, and to vest in Licensor full title thereto. In
addition, Licensee shall, from time to time, at the request of Licensor or the
Long Distance Carrier, promptly execute and deliver such further agreements,
instruments, certificates, pleadings and the like as Licensor shall reasonably
deem necessary to give effect to this Section IV.J.9.
V. FEES AND REPORTING
A. APPLICATION FEE
Upon execution of this License Agreement by Licensee, Licensee
shall pay to Licensor a nonrefundable application fee (the "Application Fee") of
five hundred dollars ($500.00) per market in the Licensed Territory; provided,
however, that no Application Fee with respect to a particular market shall be
payable in the event that this License Agreement is being executed as a renewal,
extension or modification of an outstanding Cellular One License Agreement
between Licensee and Licensor covering such market in the Licensed Territory or
in the event of a market transfer or Change of Control (the latter events being
subject, however, to the transfer fee described in Section V.H. hereof).
B. ANNUAL LICENSE FEE
Licensee agrees to pay to Licensor an annual license fee (the
"Annual License Fee") based on the total population of each of the markets in
the Licensed Territory (the "Pops") as determined by the most recent population
estimates produced by an independent company selected in good faith by Licensor,
with a minimum Annual License Fee of three thousand dollars ($3,000.00) per
market in the Licensed Territory for each year during the Term. If the Effective
Date of this License Agreement or the commencement of a Subsequent Year is on or
before December 31, 1997, the Annual License Fee for the Initial Year or the
Subsequent Year, as the case may be, shall be equal to two cents ($0.02) per
person in the Licensed Territory, but not less than the foregoing minimum. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is after December 31, 1997, the Annual License Fee for the Initial Year or
the Subsequent Year, as the case may be, shall be calculated in accordance with
Section V.E. below, but shall not be less than the foregoing minimum. The Annual
License Fee shall be due on each January 1 and payable on or before each January
31 of each Subsequent Year during the Term, for the full calendar year; provided
however, that the Annual License Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Annual License
Fee for the Initial Year (including the foregoing minimum fee, if applicable)
shall be prorated to reflect the portion of that calendar year included within
the Initial Year. The Annual License Fee will not be prorated or refunded in
whole or in part under any other circumstances; provided, however, that upon the
normal expiration of this License Agreement at the end of the Term or any
renewal Term (but in no other event, including without
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limitation, upon the voluntary or involuntary termination of this License
Agreement for any reason), Licensor agrees to refund a prorated portion of the
Annual License Fee reflecting that portion of that calendar year remaining after
the date of expiration, less any set off for any other fees owing to Licensor.
C. ANNUAL ADVERTISING FEE
Licensee agrees to pay to Licensor's Cellular One Promotional
Fund an annual advertising fee (the "Annual Advertising Fee") based upon the
population estimates described in Section V. B. above. If the Effective Date of
the License Agreement is on or before December 31, 1996, the Annual Advertising
Fee for the Initial Year shall be equal to five cents ($0.05) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1997 and December 31,
1997, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to six cents ($0.06) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is between January 1, 1998 and December 31,
1998, then the Annual Advertising Fee for the Initial Year or Subsequent Year,
as the case may be, shall be equal to seven cents ($0.07) per person in the
Licensed Territory. If the Effective Date of this License Agreement or the
commencement of a Subsequent Year is after December 31, 1998, then the Annual
Advertising Fee for the Initial Year or the Subsequent Year, as the case may
be, shall be calculated in accordance with Section V.E. below. The Annual
Advertising Fee shall be due on each January 1 and payable on or before each
January 31 of each Subsequent Year during the Term, for the full calendar year;
provided, however, the Annual Advertising Fee for the Initial Year shall be paid
upon execution of this License Agreement by Licensee. Notwithstanding the
foregoing, if the Initial Year commences on a day other than January 1, the
Annual Advertising Fee for the Initial Year shall be prorated to reflect the
portion of that calendar year included within the Initial Year. The Annual
Advertising Fee will not be prorated or refunded in whole or in part under any
other circumstances. For any Initial Year or Subsequent Year beginning on or
before January 1, 1998, if Licensee can demonstrate to the satisfaction of
Licensor that Licensee had less than three hundred thousand (300,000) billable
minutes of air time for each month in the preceding calendar year in a market in
the Licensed Territory, Licensee shall not be obligated to pay the Annual
Advertising Fee with respect to such market for such Initial Year or Subsequent
Year, as the case may be. Licensor agrees to accept, and may require, the bona
fide report of Licensee's independent outside auditing firm as appropriate
confirmation that Licensee has less than the three hundred thousand (300,000)
billable minutes of air time for each month as described above. The foregoing
exemption from payment of the Annual Advertising Fee shall in no event extend
beyond the Annual Advertising Fee due for 1998. To the extent that geographic,
demographic or social factors (such as a location of a market outside of the
continental U.S. or the use in a particular market in the Licensed Territory of
a dominant language other than English) limit the effectiveness of Licensor's
promotional efforts with respect to such market in the Licensed Territory,
Licensor may, but shall not be obligated to, consider an adjustment to the
Annual Advertising Fee payable under this Section V.C. or
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adjusting its promotional activities to improve the effectiveness thereof in
such market in the Licensed Territory.
D. ANNUAL ADMINISTRATIVE FEE
From time to time, upon not less than thirty (30) days written
notice to Licensee, Licensor shall be entitled to levy, and Licensee shall pay,
a nonrefundable annual administrative fee (the "Annual Administrative Fee"), not
to exceed, each calendar year, one-half of one cent ($0.005) per person in the
Licensed Territory as determined in a manner consistent with that applied to the
determination of the Annual License Fee, in the event that Licensor determines
that such a fee is necessary to defray Licensor's administrative costs,
including costs associated with professional fees and expenses, incurred in
connection with performing Licensor's duties under this License Agreement and
otherwise protecting and promoting the Marks and assuring that the Quality
Standards continue to be consistent with changing market conditions and
technological change. In the event that Licensee provides Primary Services as a
reseller for more than one provider of Cellular Telephone Services or any form
of Alternate Wireless Service, Licensor shall be entitled to receive an
additional Annual Administrative Fee (or such part thereof as Licensor shall
deem appropriate) with regard to each such reseller relationship, reflecting the
increased costs of conducting customer surveys and otherwise monitoring
Licensee's performance under this License Agreement.
E. ESCALATION OF LICENSE AND ADVERTISING FEES
In addition to any other increases in the Annual License Fee
and the Annual Advertising Fee which are permitted herein, Licensor may, in its
sole discretion, increase the Annual License Fee payable for any Initial Year or
Subsequent Year commencing on or after January 1, 1998, and/or increase the
Annual Advertising Fee payable for any Initial Year or Subsequent Year
commencing on or after January 1, 1999, by amounts commensurate with the
increases In the Consumer Price Index or media expenses, as the case may be, in
accordance with the following:
1. Annual License Fee for the applicable
Initial Year or Subsequent Year (subject to
the minimum Annual License Fee of $3,000.00
per market in the Licensed Territory)=
$0.02 X CPI-2 X Pops
-----
CPI-1
where:
(a) "CPI" shall mean the monthly National Consumer
Price Index for All Urban Consumers, U.S. City Average (All Items; 1982-84
equals 100) issued by the U.S. Department of Labor, Bureau of Labor Statistics,
or its successor agency, or if such index is no longer in effect, the successor
index thereto;
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(b) "CPI-1" shall mean the monthly CPI for the month
of June, 1996; and
(c) "CPI-2" shall mean the higher of (i) CPI-1 or
(ii) the monthly CPI for the latest calendar month which ends at least six (6)
months before the commencement of the applicable Initial Year or Subsequent Year
for which the adjustment of fee(s) is being computed.
2. Annual Advertising Fee for the applicable Initial Year
or Subsequent Year=
$0.07 X MC-2 X Pops
----
MC-1
where:
(a) "MC-1" shall mean the actual media buy
liabilities incurred by Licensor in connection with Licensor's obligations and
activities under Section VIII of this License Agreement for the immediately
preceding annual period;
(b) "MC-2" shall mean the higher of (i) MC-1
or (ii) the media buy liabilities Licensor would incur in the following annual
period if it engaged in the activities and purchased the goods and services
giving rise to the media buy liabilities constituting MC-1. In making the
determination required by the preceding sentence, Licensor shall utilize the
"netcosts(TM)" reports publication describing Broadcast Network, Cable Network
and Syndication CPM and CPP projections published by Ephron, Papazian & Ephron,
Inc., or any successor or equivalent index generally utilized by the industry to
estimate future costs associated with promotional activities.
F. CONSUMER SERVICE NUMBER FEE
During such time as Licensor makes the Consumer Service Number
program available to licensees, Licensee shall pay to Licensor an annual
Consumer Service Number fee (the "Consumer Service Number Fee") equal to one
thousand dollars ($1,000.00) for each MSA and five hundred dollars ($500.00) for
each RSA constituting a part of the Licensed Territory, subject to a maximum fee
payable under this Section V.F. of thirty thousand dollars ($30,000.00) with
respect to the Licensed Territory or all of Licensee's Licensed Territories
under other License Agreements with Licensor. The Consumer Service Number Fee
shall be due on each January 1 and payable on or before each January 31 of each
Subsequent Year during the Term, for the full calendar year; provided however,
the Consumer Service Number Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Consumer
Service Number Fee for the Initial Year shall be prorated to reflect the portion
of that calendar year included within the Initial Year. The Consumer Service
Number Fee will not be
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prorated or refunded in whole or in part under any other circumstances. The
Consumer Service Number Fee shall be in addition to any other charges or fees
that may be payable by Licensee to any Long Distance Carrier for the Consumer
Service Number program, as contemplated by Section IV.J. hereof. In addition to
the Consumer Service Number program, Licensor may establish similar programs for
other forms of wireless telephony (the "Other 800 Programs"). To the extent that
the Primary Services or Core Products include such forms of wireless telephony,
Licensee shall participate in the Other 800 Programs designed therefor. Licensor
shall be entitled to receive fees from Licensee for the Other 800 Programs
calculated in a similar manner as those for the Consumer Service Number program.
G. ADDITIONAL FEES
From time to time following the date hereof, Licensor may
propose, pursuant to Section IV.E. hereof, changes to or the implementation of
one or more periodic fees to be payable by licensees with regard to the Primary
Services, Core Products, Additional Products or Additional Services, or other
fees deemed appropriate by Licensor. Upon approval thereof in accordance with
Section IV.E., such fees shall become an obligation of Licensee hereunder.
H. SPECIAL LICENSEE RELATED EXPENSES
Licensor shall be entitled to levy, and Licensee shall
promptly pay, a fee of not less than five hundred dollars ($500.00) per market
with regard to any Change of Control of Licensee or assignment by Licensee of
its rights and obligations hereunder (including any transfer or Change of
Control of a market constituting part of the Licensed Territory) or upon any
other assignment, transfer, pledge, Change of Control or other transaction
contemplated or permitted under Article X.
I. PAYMENTS, INTEREST ON LATE PAYMENTS
All fees and charges payable under this License Agreement
shall be payable in good funds at Licensor's address specified herein, or at
such other address as Licensor shall from time to time designate in writing.
Notwithstanding any other provision of this Article V, Licensor shall be
entitled for reasons of administrative convenience or otherwise to defer the
date by which any fee or charge payable by Licensee hereunder may be due. No
such deferral shall be a waiver of any of Licensor's rights hereunder. If
payment of any Application Fee, Annual License Fee, Annual Advertising Fee,
Consumer Service Number Fee, Annual Administrative Fee or other fee or charge
under this License Agreement is overdue, Licensee shall pay Licensor, in
addition to the overdue amount, interest on such overdue amount from the date it
was payable until paid at the rate which is two (2) points above the prime rate
published by the Wall Street Journal on the date payment was due, or the maximum
rate permitted by applicable law, whichever is less. Entitlement to such
interest shall be in addition to any other remedies Licensor may have.
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VI. MARKS
A. OWNERSHIP OF MARKS
Licensor is the owner of all right, title and interest in and
to the Marks (which shall include for the purposes of this Section VI. all of
the permits and contractual or other arrangements (including registrations of
trademarks, service marks and domain names) relating to ownership or control of
the Marks, the Consumer Service Number and the like). No sublicense by Licensee
pursuant to Sections IV.G. or X.C. shall create any ownership interest in the
Marks in Licensee or any sublicensee thereof nor any right by Licensee to
sublicense use of the Marks in the future.
B. GENERAL USE
With respect to Licensee's use of the Marks pursuant to this
License Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor
and shall use them only in the manner authorized and permitted by Licensor
herein, and only in accordance with the Graphic Standards Manual. Without
limiting the generality of the foregoing, Licensee shall comply with Licensor's
guidelines and directives (i) for use of certain Marks with specified Additional
Products and Additional Services, and (ii) concerning the use of the Marks or
derivatives thereof in, or as a part of, the domain name of any World Wide Web
pages or the names of any similar Internet locales or addresses owned by or on
behalf of Licensee.
2. Except to the extent permitted as Incidental Use, Licensee
shall use the Marks only in connection with providing Primary Services, Core
Products, Additional Services and Additional Products in the Licensed Territory,
in accordance with the Quality Standards and as otherwise set forth in this
License Agreement.
3. Licensee shall identify the Licensor as the registered
owner of the Marks in such ways as Licensor may direct, including but not
limited to the identification of Licensor as such on Licensee's invoices, order
forms, receipts and contracts.
4. Except as provided in Section IV.G. above and Section X.C.
below, Licensee shall have no right to sublicense the Marks to any other person
or entity, and Licensee shall have no right to allow its resellers, if any, to
make use of the Marks. Any use by a dealer, retailer or agent under Section
IV.G. or by an Affiliate under Section X.C. shall be consistent with Licensee's
rights and responsibilities hereunder with respect to the use of the Marks and,
in no event, shall any such permitted use exceed or extend beyond Licensee's
rights hereunder to use the Marks. Licensee agrees to monitor and be responsible
for the use of the Marks by its agents, retailers and dealers and its Affiliates
and to promptly provide or cause to be provided to Licensor upon request, from
time to time, such reasonable information concerning the use of the Marks by
such dealers, retailers and agents and Affiliates to permit Licensor to
ascertain
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Licensee's compliance hereunder. From time to time upon the reasonable request
of Licensor, Licensee shall promptly supply Licensor with a list of dealers,
retailers, agents and Affiliates authorized to use the Marks and/or promptly
confirm whether any particular dealers, retailers, agents or Affiliates remain
authorized and in good standing with respect to use of the Marks.
5. Licensee's right to use the Marks is limited to the uses
specifically authorized under this License Agreement.
6. Licensee shall not use the Marks or any of their
derivatives, or any marks confusingly similar there;o, as part of Licensee's
corporate or other legal name. Licensee and any dealers, retailers or agents
designated under Section IV.G. or Affiliates designated under Section X.C. may
file and maintain trade name or fictitious name registrations in the
jurisdictions within the Licensed Territory where legally required or otherwise
appropriate to reflect the fact that Licensee is doing business as "Cellular
One." If other licensees desire to file and maintain such a trade name or
fictitious name registration pursuant to a license agreement with Licensor,
Licensee shall consent or otherwise cooperate with Licensor and such licensees
in meeting the state or local requirements to permit such trade or fictitious
name registrations to coexist. Licensee shall execute any documents deemed
necessary or desirable by Licensor or its counsel to assist Licensor in the
protection or registration of the Marks or to maintain or defend Licensor's
title thereto, or their continued validity and enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should Licensee become aware. Licensor agrees, at its sole cost and expense, to
institute or otherwise defend proceedings as may be appropriate to protect the
Marks, including, to the extent necessary, defense of such proceedings following
termination of this License Agreement. In connection with any such proceedings,
Licensee agrees to execute any and all documents and to do whatever reasonable
acts and things as may, in the opinion of counsel for Licensor, be necessary or
advisable to assist Licensor in carrying out the prosecution or defense, and
Licensor agrees to reimburse Licensee for all direct costs incurred by Licensee
in doing these acts and things, except that Licensee shall bear the salary costs
of its employees. Licensor shall have the sole right to institute, defend and
direct proceedings relating to the Marks and Licensee shall not file or
institute any proceedings relating to the Marks without the prior written
consent of Licensor. In the event that Licensee does file or institute any
proceedings relating to the Marks, Licensee shall promptly supply Licensor with
copies of any and all papers and materials relating to such proceedings,
together with such information relating thereto as Licensor may reasonably
request. Notwithstanding anything to the contrary in Section VI.B., and whether
or not Licensor undertakes the prosecution or defense of a legal proceeding
relating to one or more of the Marks, Licensor's liability for damages and
losses to Licensee relating to use of one or more of the Marks (including any
loss resulting from Licensor's loss of title or ownership of the Marks or the
rights thereto) shall be limited to the amount of the Application Fee plus the
Annual License Fee paid by Licensee under this License Agreement for the
market(s) in which such liability is determined, for the year during which such
liability is determined.
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8. The Marks are valid and serve to identify the Primary
Services, the Core Products, the Additional Services and the Additional Products
provided by those who are authorized to operate under the Marks. Licensee shall
not directly or indirectly contest the validity, registration or Licensor's
ownership of the Marks, any of their derivatives, any of the icons or other
marks owned by Licensor, and Licensee shall not directly or indirectly apply for
or otherwise seek to register as a trademark, service mark or design any mark or
other designation which incorporates, which is the same as or confusingly
similar to, or which may dilute Licensor's rights in and to, any of the Marks or
their derivatives, any of the icons or other marks owned by Licensor.
9. Licensee's use of the Marks, and the use thereof by its
agents, retailers, dealers and Affiliates, if any, pursuant to this License
Agreement does not give Licensee or any agent, retailer, dealer or Affiliate,
any ownership interest or other interest in or to the Marks, except the license
granted in this License Agreement. Any and all goodwill arising from use of the
Marks shall inure solely and exclusively to the benefit of Licensor, and upon
expiration or termination of this License Agreement and the license granted by
it, no monetary amount shall be assigned as attributable to any goodwill
associated with use of the Marks by Licensee or its agents, retailers, dealers
or Affiliates.
10. Licensor has and retains the following rights, among
others:
(i) To use the Marks itself, in connection with local,
regional and national advertising and promotion, including
conducting activities designed to enhance the goodwill
associated with the Marks, and, subject to the provisions
of Section I hereof, with directly or indirectly selling
products and services (including telecommunications
products and services) both within and outside the Licensed
Territory;
(ii) To grant licenses for use of the Marks in addition
to those licenses already granted to existing licensees of the
Marks;
(iii) To use the Marks in any manner reserved for
Licensor pursuant to Section I; and
(iv) To create derivatives of the Marks and exploit,
promote and license such derivatives.
11. In the event that any of the Marks or icons, including any
trademarks, service marks and design logos adopted after execution of this
License Agreement which become Marks, can no longer be used, Licensor reserves
the right to provide a substitute mark or design with reasonable notice to
Licensee.
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C. INCIDENTAL USE
1. For the purposes of this License Agreement, the promotion,
sale and delivery of Primary Services, the Core Products, Additional Services
and Additional Products in accordance with this Section VI.C. shall be
considered "Incidental Use" of the Marks.
2. During the Term, and subject to the other provisions of
this License Agreement, Licensee shall be entitled to conduct its business of
providing Primary Services, Core Products, Additional Services and Additional
Products throughout the Licensed Territory, without the necessity of abandoning
or failing to serve any part of the Licensed Territory because such business
might become known to, or because Licensee might from time to time sell products
or services to, persons or businesses resident or located outside of the
Licensed Territory. Licensee shall not be prohibited by the terms of this
License Agreement from promoting Primary Services outside of the Licensed
Territory to the extent necessary to provide Primary Services in accordance with
the Quality Standards throughout the Licensed Territory. In addition, except
that Licensee shall not specifically direct its promotional activities to
potential customers outside of the Licensed Territory, Licensee shall be
entitled to utilize regional or other media in connection with promoting its
Primary Services, Core Products, Additional Services and Additional Products
within the Licensed Territory. Licensee shall not adopt.promotional pricing or
otherwise seek to distribute Primary Services, Core Products, Additional
Services or Additional Products outside of the Licensed Territory, but shall not
be precluded from doing business with persons or entities it knows to be
resident outside of the Licensed Territory.
3. This Section VI.C. does not entitle Licensee to utilize the
Marks for products or services other than Primary Services, Core Products,
Additional Services and Additional Products, nor does it allow use of the Marks
by Licensee outside of the Licensed Territory except strictly in accordance with
Section VI.C.2. above. Licensor shall have the sole right to restrict Licensee's
Incidental Use of the Marks at any time and in such manner as Licensor shall
determine necessary or appropriate to prevent such Incidental Use from
breaching, infringing upon, or otherwise conflicting with, the rights of any
other current or future licensee of the Mark(s). Licensee's Incidental Use of
the Marks may also be restricted under Section VI.D. below, notwithstanding this
Section VI.C., to avoid or mitigate Potential Customer Confusion (as
subsequently defined).
D. POTENTIAL CUSTOMER CONFUSION
1. Notwithstanding any other provision of this Section VI. to
the contrary, in the event that as a result of economic, demographic or
technological changes within or affecting the Licensed Territory from and after
the date of this License Agreement, Licensor reasonably determines that actual
or potential customers of another licensee of the Marks, or any of them, are or
are likely to consider Licensee to be, or to be affiliated with, such other
licensee of the Marks or not readily distinguishable therefrom (such
circumstances being referred to as "Potential Customer Confusion"), Licensor
shall be entitled to modify the provisions of this
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License Agreement and any Exhibit hereto for the purpose of reducing the
circumstances giving rise to the Potential Customer Confusion.
2. In seeking to reduce Potential Customer Confusion, Licensor
shall consider requiring providers (including Licensee) of products or services
which are the source of Potential Customer Confusion to adopt tag lines or
otherwise differentiate such products or services before amending this License
Agreement in a manner that would require a material modification in the conduct
of Licensee's telecommunications business relating to the Marks.
3. Without limiting the generality of the foregoing, and
without limiting any other rights which Licensor may have hereunder with respect
to Additional Products or Additional Services, Licensor shall be entitled, with
or without the consent of Licensee, to reduce the size of the Licensed Territory
with regard to Additional Products or Additional Services or to delete or modify
the description of any Additional Product or Additional Service set forth on
Exhibit D hereto for the purpose of mitigating or eliminating Potential Customer
Confusion. Upon such reasonable written notice to Licensee as Licensor in its
discretion determines, but in no event to exceed sixty (60) days, regarding the
existence of Potential Customer Confusion resulting, in whole or in part, from
Licensee's promotional activities, Licensee shall modify such promotional
activities to the extent reasonably necessary to prevent or mitigate, to the
extent possible, the continuation of events or circumstances previously giving
rise to Potential Customer Confusion.
VII. CONFIDENTIAL INFORMATION
A. DEFINITION
Any and all information, knowledge, know-how, and techniques
which Licensor or Licensee designates as confidential shall be deemed
"Confidential Information" for purposes of this License Agreement, except:
1. Information which either party can demonstrate was known
to it prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by
one patty to the other, had become or later becomes a part of the public domain,
through publication or communication by others through no fault of the party
receiving the information.
B. PROHIBITIONS
Licensor and Licensee each agree that it will use its best
efforts, during the term of this License Agreement and for one year following
expiration or termination of this License Agreement, to prevent the
communication or divulgence, to any other person, partnership, association,
corporation or business enterprise of any Confidential Information which may be
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communicated to it or of which it may be apprised pursuant to this License
Agreement. Licensor shall be deemed to have used its best efforts to prevent
such communication or divulgence if it has distributed guidelines to its
employees in an effort to maintain an information separation between Licensor
and the Partnership Partners and their affiliates, and, specifically, it has
instructed its employees not to divulge any Confidential Information, including
customer information, to the Partnership Partners or their affiliates, and shall
have obtained the executed confidentiality agreements referred to in Section
VII.C. from those persons designated in such Section. In circumstances where
Licensee is in direct competition with one of the Partnership Partners or their
affiliates in any one or more of the market(s) in the Licensed Territory,
Licensor will instruct its employees that no information regarding Licensee's
business of providing Primary Services, Core Products, Additional Products or
Additional Services in that market should be disclosed to that Partnership
Partner or its affiliates. The parties agree that statistical performance
information regarding licensees of the Marks which does not identify individual
markets may be reported to the Partnership Partners and their affiliates and
shall not be considered Confidential Information. Notwithstanding the foregoing,
either party to this License Agreement and the Partnership Partners and their
affiliates may disclose any Confidential Information which any such party may be
legally required to disclose to a government agency or in the context of
litigation or arbitration.
C. LICENSOR CONFIDENTIALITY AGREEMENTS
Licensor will execute, and will cause its employees, agents
and representatives, who are reasonably expected to have access to Confidential
Information of Licensee to execute, an appropriate confidentiality agreement,
which shall provide that any Confidential Information of Licensee made available
to Licensor, Licensor's employees, agents or representatives, pursuant to this
License Agreement, will be kept confidential by all such persons.
D. CONSEQUENCES OF BREACH
Licensor and Licensee each acknowledges that any failure to
comply with this Section VII will cause the other party irreparable injury, and
each party agrees to pay all court costs and reasonable attorneys' fees incurred
by the other party in obtaining specific performance of, or an injunction
against violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Marks, the parties agree as follows:
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A. LICENSEE'S ADVERTISING
All advertising and promotion by Licensee in any manner or
medium must be conducted in a dignified manner and must conform to the written
and graphic guidelines specified by~Licensor from time to time, including the
Graphic Standards Manual. Licensee shall display or otherwise employ the Marks
in the manner prescribed by Licensor on all signs and all other advertising and
promotional materials used in connection with Licensee's business, to the extent
relating to Primary Services, Core Products, Additional Services and Additional
Products. If requested by Licensor, Licensee at its own expense shall promptly
provide to Licensor photocopies or other photographic, mechanical, magnetic or
other representations of all print advertisements and promotional materials,
radio/television advertising sequences, graphical interface presentations and
other media presentations using the Marks which Licensee has used at any time
during the six (6) months preceding Licensor's request.
B. MATERIALS PROVIDED BY LICENSOR
Licensor may provide from time to time, in its sole
discretion, advertising and promotional plans and materials, including without
limitation, newspaper mats, television and radio tapes, graphical interface
files, promotional brochures and sales aids. Licensee may use all or any of
these materials in its sole discretion
C. CELLULAR ONE PROMOTIONAL FUND, OTHER ADVERTISING FUNDS
Licensor has established, and Licensee agrees to participate
in a fund for national, local and regional advertising and promotional and other
public programs and activities (the "Cellular One Promotional Fund" or the
"Fund") for licensees of the Marks. Licensor shall have the right to determine,
in accordance with Section V.C. hereof the amount of contributions to be made by
licensee with respect thereto for any year or years during the Term hereof
including any renewal Term. Licensee agrees to make contributions to the
Cellular One Promotional Fund as required hereunder and under Section V.C.
hereof, and agrees that the Fund is to be maintained and administered by
Licensor or its designee as follows:
1. Licensor or its designee shall direct all advertising
and/or promotional programs with sole discretion over the concepts, materials,
and media used in such programs and the placement and allocation thereof.
Licensee agrees and acknowledges that the Cellular One Promotional Fund is
intended to maximize general public recognition, acceptance, and use of the
Marks for the benefit of all licensees of the Marks, and that Licensor or its
designee are not obligated, in administering the Fund, to undertake expenditures
for Licensee which are equivalent or proportionate to Licensee's contribution,
or to ensure that any particular licensee benefits directly or PRO RATA from
expenditures by the Fund.
2. The Cellular One Promotional Fund, all contributions
thereto, and any interest earnings thereon, shall be used for the purpose of
meeting any and all costs of administering, researching, directing, and
preparing advertising and/or promotional activities
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including the cost of preparing and conducting television, radio, magazine,
World Wide Web, e-mail and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; marketing surveys and other public relations
activities; use of advertising agencies to assist therein; promotional brochures
and other marketing materials for licensees of the Marks; and indirect costs,
including reasonable allocation of Licensor's administrative, personnel and
overhead expenses, associated with the implementation of advertising programs,
such as equipment costs and similar costs relating to special national or
regional programs or other similar programs contemplated by Section III.E. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Licensee shall contribute to the Cellular One Promotional
Fund in accordance with Section V.C. All sums paid by licensees of the Marks to
the Fund shall be maintained in an account separate from the other monies of
Licensor and shall not be used to defray any of Licensor's administrative
expenses, except for such reasonable administrative costs and overhead as
Licensor may incur in activities reasonably related to the administration or
direction of the Fund and advertising programs for licensees of the Marks, and
as further set forth in Section VIII.C.2. Except as set forth in this Section
VIII.C., the Fund and any incidental earnings shall not otherwise inure to the
benefit of Licensor. Licensor or its designee shall maintain separate
bookkeeping accounts for the Fund.
4. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however, excess
amounts retain in the Fund at the end of such taxable year, all expenditures in
the following taxable year(s) shall be made first out of accumulated interest
earnings from previous years, next out of interest earnings in the current year,
and finally from contributions.
5. The Cellular One Promotional Fund is not and shall not be
an asset of Licensor or its designee. A statement of the operations of the Fund
as shown on the books of the Fund shall be prepared annually by an independent
certified public accountant selected by Licensor and shall be made available to
Licensee upon written request.
6. Although the Fund is intended to be of perpetual duration,
Licensor maintains the right to terminate the Fund. The Fund shall not be
terminated, however, until all monies in the Fund have been expended for
advertising and/or promotional purposes or returned to contributors on the basis
of their respective contributions.
In addition, Licensor may establish and Licensee shall contribute to
one or more separate advertising funds for the purpose of promoting types or
groups of primary Services, Core Products, Additional Products or Additional
Services, utilizing all or part of the fees collected pursuant to Section V.C.
hereof. Except as specifically provided by Licensor when establishing such fund,
or as may be permitted under this License Agreement, such additional funds shall
be
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subject to provisions identical to those applicable to the Cellular One
Promotional Fund described herein.
D. PRICE DISCRETION
Licensee shall have the rift to sell its products and offer
services at any price Licensee may determine, and shall in no way be bound by
any price which may be recommended or suggested by Licensor.
IX. INSURANCE
A. REQUIREMENT
Licensee shall promptly procure, and shall maintain in full
force and effect at all times during the Term of this License Agreement, at
Licensee's expense, an insurance policy or policies protecting Licensee,
Licensor, and the Partnership Partners, and their respective affiliates, agents,
officers, directors, shareholders, and employees, against any demand or claim
with respect to personal injury, death, or property damage, or any loss,
liability, or expense whatsoever arising or occurring upon or in connection with
Licensee's business of providing and goods or services utilizing or in
connection with the Marks. Licensor and the Partnership Partners, and their
respective affiliates, agents, officers, directors, shareholders, and employees,
shall be named additional insureds in each such policy.
B. MINIMUM COVERAGE
The policy or policies shall be written by an insurance
company with an Alfred M. Best rating of A or A+, or such other insurance
company as Licensor may reasonably approve, and shall include, at a minimum,
such coverages and policy limits as may reasonably be specified by Licensor from
time to time, which coverages may include, without limitation, comprehensive
general liability insurance, including personal injury, as well as comprehensive
automobile liability coverage for both owned and nonowned vehicles, and property
damage liability coverage, naming Licensor and the Partnership Partners, and
their respective affiliates, agents, officers, directors, shareholders and
employees, as additional insureds in each such policy or policies. Until such
time as Licensor shall in good faith determine that economic or other
circumstances affecting the Cellular One license program require increased
insurance coverage, the following minimum insurance requirements shall be
applicable.
1: General liability: $1,000,000 per occurrence or
$2,000,000 in the aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
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4. Automobile liability: $1,000,000 per occurrence for owned
and operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy
limit;
6. Disease: $500,000; and
7. Accident: $500,000
C. CERTIFICATES OF INSURANCE
Within thirty (30) days after this License Agreement is
executed, and thereafter at least thirty (30) days prior to the expiration of
any such policy, Licensee shall deliver to Licensor Certificates of Insurance
evidencing the proper coverage with limits not less than those required
hereunder. All Certificates shall expressly provide that not less than thirty
(30) days' prior written notice shall be given Licensor in the event of material
alteration to, or cancellation of, the coverages evidenced by such
Certificates.
X. TRANSFER OF INTEREST
A. TRANSFER BY LICENSOR
Licensor shall have the right to transfer or assign all or any
part of its rights or obligations herein to any person or legal entity. If
Licensor's assignee assumes all of the obligations of Licensor under this
License Agreement and sends written notice of the assignment so attesting,
Licensee shall promptly execute a general release of Licensor and the
Partnership Partners, and any affiliates thereof, from any claims against or
liabilities of Licensor, the Partnership Partners or such affiliates arising
under this License Agreement.
B. TRANSFER AND PLEDGE BY LICENSEE
If Licensee desires in the Licensed Territory (i) to sell its
Primary Services business for one or more markets and assign its rights under
this License Agreement with respect to such market(s), (ii) to pledge or assign
its rights under this License Agreement to a financial institution or other
party in connection with a financing transaction involving Licensee, or (iii)
enter into a transaction resulting in a Change of Control of Licensee, Licensee
shall notify Licensor in writing and Licensee shall be entitled to transfer,
assign, or pledge its rights under this License Agreement, or effect the Change
of Control, as the case may be, provided:
1. Licensee shall not be in default under this License
Agreement.
2. The transferee shall enter into a written assignment, in a
form satisfactory to Licensor, assuming and agreeing to comply with, at
Licensor's option, either this License
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Agreement or Licensor's then current form or forms of license agreement relating
to the Marks, except that in the case of a pledge or collateral assignment to a
financial institution referred to in Section X.B.(ii), such pledge or collateral
assignment need only be made subject to all of the terms and conditions of this
License Agreement. In the case of a Change of Control, Licensee and the new
controlling entity shall enter into a written agreement, in a form satisfactory
to Licensor, agreeing that Licensee shall continue to be entitled to the rights
and subject to the obligations of a licensee hereunder.
3. Licensee shall remain liable for all of the obligations to
Licensor under this License Agreement prior to the effective date of transfer
and shall execute any and all instruments reasonably requested by Licensor to
evidence such liability. The transfer or Change of Control shall not affect any
of the terms or provisions of this License Agreement or the status of the
market(s) in the Licensed Territory pursuant hereto (including without
limitation, a market's default or probation status under this License
Agreement), all of which shall be or remain fully applicable to the transferee
or Licensee, as the case may be.
4. Where Licensee provides Primary Services in more than one
market and the transfer or Change of Control involves market(s) comprising less
than all of the markets in the Licensed Territory, the transferee or Licensee,
as the case may be, shall, at Licensor's option, enter into Licensor's then
current form of license agreement for the market(s) being transferred or to
which the Change of Control relates; in such event, this License Agreement shall
remain in full force and effect with respect to Licensee's remaining market(s),
if any, following the transfer or change of Control.
5. The transferee or new controlling entity, or proposed
transferee or new controlling entity, as the case may be, shall provide Licensor
with such financial data, certificates of insurance, copies of Permits, and
other information as are required to be provided by Licensee hereunder in
connection with entering into this License Agreement, or otherwise, and such
materials and information shall be current and complete as of the effective date
of such transfer or Change of Control.
6. The transferee shall promptly pay Licensor any transfer
fees or charges then being charged generally by Licensor to transferees of
licenses to use the Marks. In the case of a Change of Control, Licensee shall
pay Licensor any similar fees then being charged generally by Licensor for such
Changes of Control with respect to licensees of the Marks.
Licensee shall be entitled to transfer, assign or pledge its rights
under this License Agreement, or enter into a transaction resulting in a Change
of Control of Licensee, with respect to a portion of a market in the Licensed
Territory, pursuant to the provisions of this Section X.B.
Licensee shall not be entitled to transfer, assign or pledge any of its
rights or obligations under this License Agreement, except by complying with the
provisions of this Section X.B.
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relating thereto, nor shall Licensee permit a Change of Control to occur without
complying with the provisions of this Section X.B.
C. RIGHT TO ADD AFFILIATE AS PARTY
Subject to Section V.H., with the consent of Licensor,
Licensee shall be entitled to assign any or all of its rights under this License
Agreement to use the Marks in connection with the provision of Primary Services,
Core Products, Additional Services or Additional Products in the Licensed
Territory, or any part thereof, to an "Affiliate," which shall mean any business
entity Controlling, under the Control of or under common Control with Licensee.
No assignment by Licensee of any rights pursuant to this Section X.C. shall
relieve Licensee of its obligations hereunder. In addition, Licensor's consent
to such assignment shall cease to be effective upon the occurrence of a Change
of Control with regard to Licensee or its assignee which results in Licensee or
its assignee no longer being Affiliates. Licensor shall be entitled, from time
to time and upon its reasonable request, to receive from Licensee and any
assignee thereof a certification that assignee continues to be entitled, under
this Section X.C. to utilize the Marks, together with the facts supporting such
entitlement. No assignee of Licensee shall be entitled to any vote pursuant to
Section IV.E. or to any notices from Licensor hereunder. No conduct on the part
of Licensor with regard to any assignee of Licensee shall be deemed to cause
such assignee to become a licensee hereunder or to have any ownership interest
in this License Agreement. Licensee shall give Licensor prior written notice of
any Change of Control, as defined below, of Licensee or any assignee of
Licensee.
D. CHANGE OF CONTROL
For the purposes of this License Agreement, a "Change of
Control" with regard to any entity shall mean the disposition or acquisition,
directly or indirectly, of Control with regard to such entity. "Control" or
"Controlling" with regard to an entity shall mean the record or beneficial
ownership, directly or indirectly, by any person or entity, or group of persons
or entities, of in excess of a majority of the equity securities of the entity
in question, or the power to designate a majority of the members of the Board of
Directors or other governing body thereof or to otherwise determine the
management and policies of the entity in question.
XI. DEFAULT AND TERMINATION
A. TERMINATION BY LICENSEE
Licensee shall have the right to terminate this License
Agreement without cause at any time upon at least one hundred eighty (180) days
advance written notice to Licensor. Licensee shall remain fully responsible for
any fees and other obligations accruing to Licensor during such notice period.
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B. TERMINATION BY LICENSOR - WITHOUT NOTICE
Licensee shall be deemed to be in default under this License
Agreement, and all rights granted herein shall automatically terminate without
notice to Licensee, if Licensee becomes insolvent or makes a general assignment
for the benefit of creditors; or if a petition in bankruptcy is filed by
Licensee or against Licensee and not actively opposed by Licensee; or if
Licensee is adjudicated as bankrupt or insolvent; or if a bill in equity or
other proceeding for the appointment of a receiver of Licensee or other
custodian for Licensee's business or assets is filed and consented to by
Licensee: or if a receiver or other permanent or temporary custodian of
Licensee's assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; or if proceedings for a composition with creditors under
any state or federal law should be instituted by Licensee or against Licensee
and not actively opposed by Licensee; or if a final judgment remains unsatisfied
or of record for thirty (30) days or longer (unless supersedeas bond is filed);
or if Licensee is dissolved except where the Licensee is a limited partnership
and, promptly following dissolution, such limited partnership is reconstituted
with the same general partners: or if a suit to foreclose any lien or mortgage
against real or personal property used in the operation of Licensee's Primary
Services business is instituted against Licensee and not dismissed within thirty
(30) days or, if actively being opposed by Licensee, within one hundred eighty
(180) days; or if execution is levied against Licensee's Primary Services
business, or any of the property related thereto; or if any material real or
personal property of Licensee used in its Primary Services business shall be
sold after levy thereupon by any sheriff, marshal, or constable; or if Licensee
at any time ceases to operate or otherwise abandons its Primary Services
business or otherwise forfeits the right to do or transact business in any
market(s) in the Licensed Territory; or if Licensee loses its FCC license or FCC
construction permit or any other material Permit for one or more market(s) in
the Licensed Territory or otherwise forfeits the right to do or transact
business in one or more market(s), in which event Licensee's rights under this
License Agreement with respect to such market(s) shall automatically terminate
and this License Agreement shall continue with respect to the remaining
market(s) in the Licensed Territory for which Licensee continues to hold all
necessary FCC license(s) and Permits.
C. TERMINATION BY LICENSOR - UPON NOTICE
Upon the occurrence of any of the following events, Licensee
shall be deemed to be in default and Licensor may, at its option, terminate this
License Agreement and all rights granted hereunder without affording Licensee
any opportunity to cure the default. Said termination shall be effective
immediately upon receipt of notice by Licensee (and Licensee shall remain fully
responsible for any fees and other obligations accruing to Licensor until such
termination becomes effective):
1. If Licensee has been advised of its probation status
pursuant to Section XI.E. and Licensee does not make a good faith effort to
formulate and implement a plan during the term of probation, or, at the end of
the term of probation, Licensee fails to meet the 85% overall minimum customer
satisfaction rating (or the higher percentage established by
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Licensor under Section IV.A.) required in the Licensed Territory as a whole by
the Quality Standards for Primary Services and Core Products;
2. If with regard to the Licensed Territory or any market
constituting a part thereof, Licensee fails in any customer satisfaction survey
conducted pursuant to Section III.C. to attain an overall customer satisfaction
rating of more than 70%, regardless of the terms of any probation;
3. If any principal stockholder or officer of Licensee is
convicted of a felony, a fraud, or any other crime or offense that Licensor
believes is reasonably likely to have an adverse effect on the Marks, the
goodwill associated therewith, or Licensor's interest therein;
4. If a threat or danger to public health or safety results
from the operation of the Licensee's Primary Services business or any of its
businesses relating to the delivery of any Primary Services, Core Products,
Additional Products or Additional Services;
5. If Licensee purports to assign or transfer any rights or
obligations under this License Agreement to any third party (including without
limitation, any reseller) or to effect a Change of Control, contrary to the
terms of Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof, Licensee
discloses or divulges Confidential Information provided to Licensee by Licensor;
7. If Licensee knowingly submits any false reports of
information to Licensor or any entity conducting a customer satisfaction survey
either during the application process or subsequent to the execution of this
License Agreement; or
8. If Licensee directly or indirectly contests in any court or
proceeding the validity or registration of or Licensor's ownership of any of the
Marks or other rights licensed hereunder.
D. TERMINATION BY LICENSOR - AFTER NOTICE AND OPPORTUNITY TO CURE
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from Licensor
of a written notice of termination within which to remedy any default hereunder
(or, if the default cannot reasonably be cured within such thirty (30) days, to
initiate within that time substantial and continuing action to cure the
default), and to provide evidence thereof to Licensor. If any such default is
not cured within that time (or, if appropriate, substantial and continuing
action to cure the default is not initiated within that time), or such longer
period as applicable law may require, this License Agreement shall terminate
without further notice to Licensee effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require (and
Licensee shall remain fully responsible for any fees and other obligations
accruing to
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Licensor until such termination occurs). Licensee shall be in default hereunder
for any failure to comply with any of the requirements imposed by this License
Agreement or to carry out the terms of this License Agreement in good faith.
Such defaults shall include, without limitation, the occurrence of any of the
following events:
1. If Licensee fails to offer the Primary Services and the
Core Products of nationwide call delivery and nationwide roaming, or any of
them, under the specified Marks on a continuous basis and in a manner reasonably
appropriate to promote and further the goodwill of the Marks, throughout the
Licensed Territory in accordance with this License Agreement;
2. If Licensee fails, refuses or neglects promptly to pay when
due any monies, fees or charges due to Licensor or the Fund, or under this
License Agreement, or fails, refuses or neglects promptly to submit information
as required under this License Agreement, or makes any false statements in
connection therewith;
3. If Licensee fails to comply, in any material respect, with
the Graphic Standards Manual or the Quality Standards;
4. If Licensee directly or indirectly misuses or makes any
unauthorized use of the Marks or otherwise materially impairs the goodwill
associated therewith or Licensor's rights therein;
5. If Licensee directly or indirectly engages in any business
or markets any service or product under a name or mark which, in Licensor's
opinion, is confusingly similar to, or may have a tendency to dilute, the Marks;
6. If Licensee shall breach or fail to timely perform any of
its covenants or obligations under this License Agreement including, without
limitation, the covenants of Licensee relating to the Consumer Service Number
program and the Other 800 Programs;
7. If Licensee fails, refuses or neglects promptly to pay when
due any fees or charges or otherwise timely perform its obligations to the Long
Distance Carrier with regard to the Consumer Service Number;
8. If Licensee, by act or omission, permits a continued
violation in connection with the operation of its business of any Permit, law,
ordinance, rule or regulation of a governmental agency, in the absence of a good
faith dispute over its application or legality and without promptly resorting to
an appropriate administrative or judicial forum for relief therefrom; or
9. If any dealer, agent, retailer or Affiliate of Licensee
misuses the Marks or otherwise fails to comply with this License Agreement, and
Licensee, upon request by Licensor, does not promptly (i) cause such dealer,
agent, retailer or Affiliate to cease the misuse
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and to otherwise fully comply with this License Agreement, or (ii) terminate its
business relationship with such dealer, agent, retailer or Affiliate.
E. PROBATION
In the event that a customer satisfaction survey, conducted
pursuant to Section III.C., reveals an overall minimum customer satisfaction
rating less than required pursuant to Section IV.A.2., Licensor shall advise
Licensee of an imposition of probation status for a stated period of time,
typically one (1) year for Primary Services and Core Products. Promptly on
receipt of this written notice, Licensee agrees to formulate and implement a
written plan to improve the quality of Licensee's Primary Services and Core
Products, so that a subsequent customer satisfaction survey will indicate
compliance with the provisions of this License Agreement. Licensor shall be
entitled to review Licensee's plan upon reasonable request therefor. The
guidelines contained in the Guide to Quality Operations provided to Licensee by
Licensor and the Quality Standards set forth in Exhibit E are designed to assist
Licensee in improving its customer satisfaction rating. If Licensor determines,
in its sole discretion, that Licensee is not making a good faith effort to
formulate and implement such a plan, or after a reasonable probation period the
goals of the plan are not achieved, then Licensor may elect to extend the term
of the probation or terminate this License Agreement effective upon written
notice to Licensee pursuant to Section XI.C. Any extension of the Term of this
License Agreement by Licensor during any probationary period shall not waive
Licensor's rights under this Section XI.E. or under Section XI.C., and such
probationary period, and any agreements relating thereto, shall continue
unaffected.
F. PARTIAL TERMINATION
In addition to any other rights Licensor may have under
this License Agreement with respect to the termination of Licensee's right to
utilize the Marks in connection with Additional Services or Additional
Products, or to amend Exhibit D to delete Additional Services or Additional
Products therefrom, Licensor shall have the rights set forth in this Section
XI.F. From time to time, Licensor may conduct customer satisfaction surveys
specifically relating to Additional Products or Additional Services. In
addition, surveys conducted by Licensor with regard to the Primary Services
may be designed to determine customer satisfaction levels with regard to
Licensee's Additional Products or Additional Services. In the event that any
such customer satisfaction survey reveals an overall minimum customer
satisfaction rating of less than 85% (or such higher percentage as may be
established by Licensor under Section IV.A.), but more than 70%, with regard
to one or more markets constituting a part of the Licensed Territory,
Licensor shall be entitled to impose a probation status with regard to the
Additional Product or Additional Service and the market or markets in
question. Licensor shall advise Licensee of the period of time, typically one
(1) year, of such probation. Promptly upon receipt of this written notice,
Licensee agrees to formulate and implement a written plan to improve the
quality of Licensee's Additional Product or Additional Service in question in
the market or markets in question, so that a subsequent customer satisfaction
survey will indicate compliance with the provisions of this License
Agreement. Licensor shall be entitled to review Licensee's
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plan upon reasonable request therefor. The Guide to Quality Operations provided
to Licensee by Licensor and the Quality Standards set forth in Exhibit E hereto
are designed to assist Licensee in improving its customer satisfaction rating.
Additional customer satisfaction surveys will be commissioned in the market or
markets in question from time to time thereafter as Licensor deems appropriate,
and Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction surveys. If Licensor determines, in its sole
discretion, that Licensee is not making a good faith effort to formulate and
implement such a plan, or after a reasonable probation period the goals of the
plan are not achieved, then Licensor may elect to extend the term of the
probation or terminate Licensee's right to utilIze the Marks in connection with
the Additional Products or Additional Services in question in the market or
markets in question or in the Licensed Territory as a whole. In the event of
such a termination, Exhibit D hereto shall be amended appropriately. In
addition, if a customer satisfaction survey shall reveal an overall customer
satisfaction rating of 70% or less with regard to any Additional Product or
Additional Service in any market or markets in the Licensed Territory, Licensor,
upon thirty (30) days prior written notice to Licensee, shall be entitled to
terminate Licensee's right to utilize the Marks in connection with such
Additional Services or Additional Products, or any of them, in the market or
markets in question or in the Licensed Territory as a whole, and Exhibit D
hereto shall be amended to delete such Additional Products or Additional
Services therefrom. Any extension of the Term of this License Agreement by
Licensor during any such probationary period shall not waive Licensor's rights
under this Section XI.F., and such probationary period, and any agreements
relating thereto, shall continue unaffected.
G. FORCE MAJEURE
Neither Licensor nor Licensee shall be liable or deemed to be
in default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God or the public enemy. Any delay resulting from any such cause shall
extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable; provided however, that (i) said causes shall not excuse
payment of any amount due or owed at the time of such occurrence or payment of
Annual License Fees, Annual Advertising Fees, Consumer Service Number Fees or
other amounts due thereafter, (ii) the party asserting any such cause shall
promptly commence and diligently pursue action to remedy its inability or
failure to perform hereunder, and (iii) in no event shall said causes extend or
excuse performance for more than one hundred twenty (120) days from the time of
performance set forth in this License Agreement. The party asserting the
existence of a force majeure condition under this Section XI.G. shall promptly
notify the other party in writing of the occurrence and nature of any such cause
and shall thereafter regularly inform the other party in writing of the progress
of actions to remedy the inability or failure to perform hereunder.
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XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect
to one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s)"), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. DEIDENTIFICATION
1. Licensee shall immediately cease to hold itself out as a
present or former licensee of Licensor with respect to the Terminated Market(s).
2. Licensee shall immediately cease to participate in the
Consumer Service Number program, any Other 800 Programs or any similar national
call or customer routing program utilizing the Marks.
3. Licensee shall immediately and permanently cease to use, in
any manner whatsoever, in the Terminated Market(s) any of the Marks and
derivatives thereof, and all other marks and distinctive forms, slogans, signs,
icons, symbols, monograms and devices associated with the Marks. Without
limiting the foregoing, Licensee shall cease to use all signs, advertising
materials, World Wide Web sites, displays, stationery, forms, and any other
articles or clothing which display or incorporate any of the Marks or any
derivatives thereof.
4. Licensee shall take such action as may be necessary to
cancel in the Terminated Market(s) any trade name, fictitious name or equivalent
registration which contains any of the Marks or any other service mark or
trademark of Licensor, and Licensee shall furnish Licensor with proof of
compliance with this obligation within thirty (30) days after termination or
expiration of this License Agreement with respect to the Terminated Market(s).
5. Licensee agrees, in the event it continues to operate a
business in the Terminated Market(s), not to use any reproduction, counterfeit,
copy, or colorable imitation of the Marks or derivatives thereof, either in
connection with such other business or the promotion thereof, which is likely to
cause confusion, mistake, or deception, or which is likely to dilute Licensor's
rights in and to the Marks or derivatives thereof. Further, Licensee agrees not
to utilize any designation of origin or description or representation which
falsely suggests or represents an association or connection with Licensor or any
of the Marks or derivatives thereof in the Terminated Market(s).
6. Licensee shall immediately notify and cause its dealers,
agents, retailers and Affiliates that are using the Marks in the Terminated
Market(s) to immediately cease all use of the Marks and participation in the
Consumer Service Number program and any Other 800 Programs, and further cause
its dealers, agents, retailers and Affiliates to fully comply with all the
obligations applicable to Licensee under this Section XII. with respect to the
Terminated Market(s).
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B. PAYMENT OF MONIES DUE
1. Licensee shall promptly pay all sums owing to Licensor, the
Cellular One Promotional Fund and any other advertising fund established
hereunder. If and when this License Agreement is terminated as a result of any
default of Licensee, such sums shall include all damages, costs and expenses,
including reasonable attorney's fees, incurred by Licensor as a result of the
default.
2. Licensee shall pay to Licensor all damages, costs and
expenses, including reasonable attorney's fees, incurred by Licensor subsequent
to the termination or expiration of this License Agreement in obtaining
injunctive or other relief for the enforcement of any provisions of this Section
XII.
C. RETURN OF CERTAIN CONFIDENTIAL DOCUMENTS
If this License Agreement has expired or been terminated with
respect to all of the market(s) in the Licensed Territory, then Licensor and
Licensee shall immediately deliver to the other party all documents which
contain Confidential Information of the other party as defined in Section VII.
hereof, including without limitation, the Guide to Quality Operations (including
the 800 Number Supplement) and the Graphic Standards Manual.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this License
Agreement does not create a fiduciary relationship between them; that Licensee
shall remain an independent business; and that nothing in this License Agreement
is intended to constitute either party as an agent, legal representative
subsidiary, joint venturer, partner, employee or servant of the other for any
purpose whatsoever.
B. During the term of this License Agreement and any renewal hereof,
Licensee shall hold itself out to the public as an independent business using
the Marks pursuant to a license from Licensor. Licensee agrees to take such
action as may be necessary to so notify the public.
C. It is understood and agreed that nothing in this License Agreement
authorizes Licensee to make any contract, agreement, warranty or representation
on Licensor's behalf, or to incur any debt or other obligation in Licensor's
name. Licensor shall in no event assume liability for, or be deemed liable
hereunder as a result of any such action; nor shall Licensor be liable by reason
of any act or omission of Licensee, its dealers, agents, retailers or Affiliates
in the conduct of their businesses or for any claim or judgment arising
therefrom against Licensee or Licensor. Licensee shall indemnify and hold
Licensor, Licensor's employees, the Partnership Partners and their affiliates,
and their respective officers, directors, employees and stockholders, harmless
from and against any and all claims arising directly or indirectly from, as a
result of, or in connection with, the operation of the businesses of Licensee,
its dealers,
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agents, retailers and Affiliates, as well as the costs, including attorney's
fees, of defending against them.
D. It is understood and agreed that Licensor does not establish or
certify manufacturing, technical or performance standards for telecommunications
equipment or customer premises equipment and Licensee will not represent
otherwise to third parties.
XIV. APPROVAL AND WAIVERS
A. Whenever this License Agreement requires the prior approval or
consent of Licensor, Licensee shall make a timely written request to Licensor
therefor, and such approval or consent shall be obtained in writing. Licensor
will process all such requests for approvals and consents in a reasonable and
timely manner.
B. Licensor makes no warranties or guarantees upon which Licensee may
rely, and assumes no liability or obligation to Licensee, by providing any
waiver, approval, consent or suggestion to Licensee in connection with this
License Agreement, or by reason of any neglect, delay or denial of any request
therefor.
C. No failure of Licensor or Licensee to exercise any power reserved to
it in this License Agreement, or to insist upon compliance by the other party
with any obligation or condition in this Agreement, and no custom or practice of
the parties at variance with the terms hereof, shall constitute a waiver of
either party's rights to demand exact compliance with any of the terms of this
License Agreement. Waiver by Licensor or Licensee of any particular default on
the part of the other party shall not affect or impair the non-defaulting
party's right with respect to any subsequent default of the same or of a
different nature; nor shall any delay, forbearance or omission by Licensor or
Licensee to exercise any power or right arising out of any breach or default by
the other party of any of the terms, provisions or covenants of this License
Agreement affect or impair such party's rights, nor shall such constitute a
waiver by Licensor or Licensee, as the case may be, of any rights hereunder or
rights to declare any subsequent breach or default.
D. Subsequent acceptance by Licensor of any payments due to it shall
not be deemed to be a waiver by Licensor of any preceding breach by Licensee of
any terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under this License Agreement
shall be in writing and shall be personally delivered, delivered by reputable
overnight courier, proof of delivery requested, or by certified mail, postage
prepaid and return receipt requested, to the
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<PAGE>
respective parties at the following addresses unless and until a different
address has been designated by written notice to the other party:
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: President
Copy (which shall not
constitute notice) to: Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the signature page
hereof.
Any notice by overnight courier or certified mail shall be deemed to
have been given at the date and time such notice is accepted by the overnight
courier or deposited with the U.S. Postal Service, respectively. No failure to
address any notice hereunder to a particular individual shall render such notice
invalid.
XVI. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this License
Agreement shall be deemed to amend and restate in its entirety and to supersede,
for all purposes, any prior license agreement between the parties hereto which
contemplates or has as its primary purpose the grant of a license to use any of
the Marks. Except for those permitted to be made unilaterally by Licensor
hereunder, no amendment, change or variance from this License Agreement shall be
binding on either party unless mutually agreed to by the parties and executed by
their authorized officers or agents in writing.
XVI. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and/or provision of this License Agreement shall be
considered severable; and if, for any reason, a portion, section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any
other effect upon,
-53-
<PAGE>
such other portions, sections, parts, terms and/or provisions of this License
Agreement as may remain otherwise intelligible; and the latter shall continue to
be given full force and effect and bind the parties hereof; and said invalid
portions, sections, parts, terms and/or provisions shall be deemed not to be a
part of this License Agreement.
B. Nothing in this License Agreement is intended, nor shall be deemed,
to confer any rights or remedies upon any person or legal entity other than
Licensor or Licensee, and their respective successors and assigns as permitted
by this License Agreement.
C. In the event a court in a final decision rules that any provision of
this License Agreement or portion thereof is unenforceable, Licensee agrees to
be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
F. This License Agreement may be executed in several counterparts, and
each copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND
EXECUTION BY LICENSOR IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND
INTERPRETED AND CONSTRUED UNDER, THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN
THE EVENT OF ANY CONFLICT OF LAW; PROVIDED, HOWEVER, THAT IF ANY OF THE
PROVISIONS OF THIS LICENSE AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS OF
THE STATE OF TEXAS, THEN SUCH PROVISIONS SHALL BE GOVERNED BY, AND INTERPRETED
AND CONSTRUED UNDER, THE LAWS OF THE STATE IN WHICH THE LICENSED TERRITORY IS
LOCATED (IF THE LICENSED TERRITORY CONTAINS PORTIONS OF MORE THAN ONE STATE OR
THE DISTRICT OF COLUMBIA, THEN THE APPLICABLE LAW SHALL BE THAT OF THE STATE IN
WHICH THE LARGEST PORTION OF THE LICENSED TERRITORY IS LOCATED).
B. No right or remedy conferred upon or reserved to Licensor or
Licensee by this License Agreement is intended to be, nor shall be deemed,
exclusive of any other right or remedy herein or by law or equity provided or
permitted, but each shall be cumulative of every other right or remedy.
-54-
<PAGE>
C. Nothing herein contained shall bar Licensor's right to apply for
injunctive relief against threatened conduct that will cause it loss or damages,
under applicable equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in the
telecommunications business and that such business involves substantial
investment and risks and that its success is largely dependent upon the ability
of Licensee's management and technical personnel. Licensor expressly disclaims
the making of, and Licensee acknowledges that it has not received, any warranty
or guarantee, express or implied, as to the potential volume, profits, or
success resulting from the utilization of the Marks by Licensee in its
telecommunications business.
B. Licensee acknowledges that it received a copy of the complete
Cellular One License Agreement and the Exhibits thereto at least five (5)
business days prior to the date on which this License Agreement is signed by
Licensee. Licensee further acknowledges that it received the disclosure document
required by the Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures" at least ten (10) business days prior to the date on which
this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood this License
Agreement and the attachments hereto, and that Licensor has accorded Licensee
ample time and opportunity to consult with advisors of Licensee's own choosing
about the potential benefits and risks of entering into this License Agreement
on the effective date set forth below.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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<PAGE>
WITNESS WHEREOF, the parties hereto have duly executed this License Agreement
to be effective on the date shown below.
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
-------------------------------------
Title: President
Effective Date: 1/30/97
-------------------------
Primary Contact in Ordinary Course of
Business:
Richard J. Lyons, President
Cellular One Group
5001 LBJ Freeway, Suite 700
Dallas, TX 752244
972/387-5225
972/387-5275 (Fax)
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
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<PAGE>
LICENSEE: SYGNET Communications, Inc.
By: /s/ William Zlotnick
-------------------------------------
Title: Vice President
----------------------------------
Date of Signature: 1/6/97
----------------------
William Zlotnick
Vice President & Chief Operating Officer
SYGNET Communication, Inc.
6550-B Seville Dr.
Canfield, Ohio 44406
Phone: 330/565-9508 Fax: 330/782-5379
CONTACT FOR BILLING PURPOSES:
John Anderson Controller
SYGNET Communications
6550-B Seville Dr.
Canfield, Ohio 44406
Phone: 330/565-9505 Fax: 330/565-9519
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<PAGE>
EXHIBIT A
CELLULAR ONE LICENSE AGREEMENT
The Marks currently designated by Licensor for use hereunder are as
follows:
<TABLE>
<CAPTION>
REGISTRATION OR
MARKS APPLICATION NUMBER
----- ------------------
<S> <C>
CELLULAR ONE (service mark) 1,839,076
1-800-CELL ONE(1) 75/105,170
CELLULAR ONE NETWORK(2) 74/495,960
LONG DISTANCE BY CELLULAR ONE(2) 75/017,997
PCS BY CELLULAR ONE(2) 75/010,430
PAGING BY CELLULAR ONE(2) 75/010,429
TELCOM BY CELLULAR ONE(2) 75/010,427
DISPATCH BY CELLULAR ONE(2) 75/010,428
DATA BY CELLULAR ONE(2) 75/079,447
VIDEO BY CELLULAR ONE(2) 75/079,445
INTERNET BY CELLULAR ONE(2) 75/088,362
LOCAL CALLING BY CELLULAR ONE(2) --
CELLULAR ONE (trademark)(2) 1,947,105
</TABLE>
(1) Licensor may delete this Mark and/or Licensee's rights with respect to
this Mark may terminate under certain circumstances, as further
described in Section IV.J. of this License Agreement.
(2) Licensor may delete or modify any of these Marks or vary the Additional
Services or Additional Products in connection with which these Marks
may be used by Licensee, in accordance with the provisions of this
License Agreement or in furtherance of Licensor's rights hereunder.
OPTIONAL MARKS*
<TABLE>
<S> <C>
CLEAR ACROSS AMERICA 1,907,932
</TABLE>
- -------------
* Licensee may utilize the optional Marks in accordance with the terms
and provisions of this License Agreement and the Graphic Standards
Manual, but Licensor shall have the right in its sole discretion to
terminate Licensee's use of any of the optional Marks upon thirty (30)
days written notice to Licensee.
<PAGE>
EXHIBIT B
CELLULAR ONE LICENSE AGREEMENT
LICENSED TERRITORY
<TABLE>
<CAPTION>
OTHER
FCC MARKET
MARKET NAME MSA/RSA MARKET NO. DESCRIPTION
- ----------- ------- ---------- -----------
<S> <C> <C> <C>
Pennsylvania 03 RSA 561A1
</TABLE>
Total Population: 486603
<PAGE>
EXHIBIT C
CELLULAR ONE LICENSE AGREEMENT
PRIMARY SERVICES
<TABLE>
<CAPTION>
ASSOCIATED
MARK (IF ANY) PRIMARY SERVICES DESCRIPTION
- ------------- ---------------- -----------
<S> <C> <C>
Cellular One Cellular Telephone Services "A" Side Cellular Telephone Services
</TABLE>
<PAGE>
EXHIBIT D
CELLULAR ONE LICENSE AGREEMENT
ADDITIONAL SERVICES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
X Cellular One Nationwide Call The ability of customers to be
Delivery reached on their wireless phone
anywhere in the United States and
its territories (including Alaska,
Hawaii, Puerto Rico and U.S. Virgin
Islands) by having the caller dial
their wireless phone number.
- -------------------------------------------------------------------------------------------------------------
X Cellular One Nationwide Roaming The ability of customers to
make calls in other than
"home markets" anywhere in the
United States and its territories
(including Alaska, Hawaii, Puerto Rico
and U.S. Virgin Islands) by dialing the
appropriate phone number.
- -------------------------------------------------------------------------------------------------------------
Cellular One Nationwide Cellular NCCDN shall be a backbone
Network Call Delivery Network network which consists of
("NCCDN") permitting hardware/software, transmission
participating cellular links and routing switches or
customers to protocols, and possessing the
automatically receive physical and intangible properties
calls dialed to such and functionality necessary to
customer's home permit Licensee to offer Cellular
cellular telephone Telephone Services customers the
number when roaming. (i) service codes, (ii) dialing
patterns, (iii) feature codes, and
(iv) recorded messages (the foregoing
clauses (i) through (iv) being hereafter
collectively referred to as "Dialing
Standards" described in the Guide to
Quality Operations, within the United
States and its territories (including
Alaska, Hawaii, Puerto Rico and U.S.
Virgin Islands).
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 1
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cellular One Primary Services The Cellular One Mark may be
provided in used for one or more Additional
combination with Services if they are provided in
one or more of the conjunction with the Primary
Additional Services Services; otherwise, the other Marks in
this Exhibit are to be used for the
specified Additional Services in
accordance with Licensor's graphic
standards. If the Primary Services are
provided in conjunction with one or more
Additional Services under the
Cellular One Mark, Licensee must,
in accordance with Licensor's
graphic standards (i) use the Marks
in this Exhibit for the Additional
Services in question or (ii) use
Licensor's designated form of the
descriptive term for the Primary
Services and Additional Services in
question (e.g., Cellular, Long
Distance, PCS, Paging, Telcom,
Dispatch, Data, Video, Internet or
Local Calling) rather than the full
Marks shown in this Exhibit (e.g.,
Long Distance by Cellular One,
Paging by Cellular One, etc.).
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 2
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Long Distance Long Distance An intra-LATA or inter-LATA toll
by Cellular Service telecommunications service that is
One primarily viewed as part of a public
switched telephone network providing
users in fixed (such as residences and
businesses) or mobile locations with two
way voice, data, text, and image
communications. Minimum requirements for
Long Distance Service include:
- provisioning of telecommunications
service
- offering two-way voice, data and
text communications
- being used as part of a public
switched telephone network
- providing intra-LATA, inter-LATA and
international service
- providing users with the ability to
terminate calls nationally and
internationally
- allowing customers utilizing any or
all of the full spectrum of
telecommunications services such as
Cellular, PCS, Paging, Dispatch,
Alternate Wireless Services and
Telcom, to subscribe to this
service.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 3
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PCS by Cellular Personal A wireless telecommunications
One communication service that is interconnected to a
services public switched telephone network
providing users with at least intra-
LATA and inter-LATA two-way voice and
data communications. Service is provided
through a mobile phone (car,
transportable, or portable) or through
wireless modems incorporated into
devices such as lap top computers and
electronic notebooks. Minimum
requirements of PCS are:
- provisioning of wireless
telecommunications service
- offering two-way voice and data
communications.
- interconnecting to a public
telephone network
- providing intra-LATA and inter-LATA
service
- supplying service through:
- mobile phones that are mobile
(car), transportable or
portable, or
- wireless modems incorporated
into devices such as lap top
computers and electronic
notebooks.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 4
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Paging by Paging A wireless telecommunications
Cellular One messaging service providing users
with at least one-way voice and/or data
communications such as voice or data
messaging or data transfer to a pager or
a device such as a lap top computer, or
mobile phone with a built in pager.
Minimum requirements of Paging are:
- provisioning of a wireless
telecommunications service
- offering at least one way voice
and/or data communications
- providing service through analog or
digital technology for paging
devices that either are stand-alone
or part of a device such as a lap
top computer or a mobile phone.
- -------------------------------------------------------------------------------------------------------------
Telcom by A combination of Telecommunications products and
Cellular One telecommunications services that are part of or
products or services, interconnected primarily to a public
including products switched telephone network
such as handsets, providing users in fixed locations
modems and PBX-like such as a residence and businesses
devices and services with local, intra-LATA and inter-
such as Cellular LATA two-way voice, data, text,
Telephone Services, and image communications.
Alternate Wireless Minimum requirements for Telcom
Services, private include:
network services, or
local calling - providing service to users in
(exchange) services fixed locations such as
residences and businesses
- offering two-way voice, data and
text communications
- interconnecting to a public switched
telephone network
- providing local, intra-LATA or
inter-LATA service.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 5
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dispatch by Dispatch Services A wireless telecommunications
Cellular One messaging service providing users
with "push to talk" two-way voice
dispatch and data broadcast that is
generally used in the public safety,
construction, and transportation
industries, and that can be
interconnected to a public telephone
network. Minimum requirements for
Dispatch include:
- provisioning of wireless analog
telecommunications service
- offering two-way voice and data
communications
- providing "push to talk" technology
for organizations and multiple
vehicles or locations
- interconnecting with a public
telephone network.
- -------------------------------------------------------------------------------------------------------------
Data by Data Transmission Transmission of information in a numerical
Cellular One form that is in either a digital or analog
format which can be transmitted via
local, intra-LATA and inter-LATA
facilities through a wireless
telecommunications network that is
interconnected to a public switched
telephone network and subsequently
processed.
- -------------------------------------------------------------------------------------------------------------
Video by Video Delivery Providing full motion images and
Cellular One Services conversational audio transmission which
can be sent or received in synchronization
via wired and wireless facilities.
- -------------------------------------------------------------------------------------------------------------
Internet by Internet Services A wired or wireless telecommunications
Cellular One access to a data base of articles,
information and entertainment through the
Internet/World Wide Web.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 6
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Local Calling by Local Calling An intra-LATA telecommunications service
Cellular One (exchange) Services that is primarily viewed as part of a public
switched telephone network providing users
in fixed (such as residences and businesses)
locations with two-way voice, data, text, and
image communications. Minimum requirements for
local calling services include:
- provisioning of
telecommunications service
- offering two-way voice, data and
text communications
- being used as part of a public
switched telephone network
- providing intra-LATA service
- providing users with the ability to
terminate calls nationally and
internationally
- allowing customers utilizing any
or all of the full spectrum of
telecommunications services, such
as Cellular, PCS, Paging Dispatch,
Alternate Wireless Services and
Telcom, to subscribe to this service.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL PRODUCTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cellular One Wireless Cellular telephones, handsets, transceivers,
Communications pagers (remote data receptors), personal
Equipment digital assistants (wireless data devices
which can receive and send data
messages), modems and facsimile
machines, and parts and accessories
therefor.
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit D - Page 7
<PAGE>
EXHIBIT E
CELLULAR ONE LICENSE AGREEMENT
QUALITY STANDARDS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
QUALITY STANDARDS MEASUREMENT
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
- - Overall Minimum Customer - 85% of surveyed respondents answered Licensor's
Satisfaction Rating commissioned satisfaction survey as "very satisfied" or
"somewhat satisfied" with their Cellular One service overall
- - Reliability of placing and - Majority of surveyed respondents answered Licensor's
completing a call commissioned satisfaction survey "As Expected" or "Better
than Expected" for the reliability of placing and receiving a call
in home calling area ("Home Market")
- - Voice quality - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the quality of voice or sound during Cellular One
calls in Home Market
- - System Busy Signals - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the ability to place or receive calls without a
system busy signal in Home Market
- - Dropped Calls - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the ability to continue phone calls without being
dropped because of weak signal
- - Quickness of answering - Majority of surveyed respondents answered Licensor's
customer call commissioned satisfaction survey "As Expected" or "Better than
Expected" for the quickness of answering the phone
- - Ability to adequately - Majority of surveyed respondents answered Licensor's
answer customer's reason commissioned satisfaction survey "As Expected" or "Better than
for calling Expected" for ability to adequately answer reason for calling
- - Accuracy of Bill - Majority of surveyed respondents answered Licensor's
commissioned satisfaction survey "As Expected" or "Better than
Expected" for the accuracy of the bill
- - Clarity or - Majority of surveyed respondents answered Licensor's
Understandability of Bill commissioned satisfaction survey "As Expected" or "Better than
Expected" for the clarity or understandability of the bill
- - Data Quality - Accurately transmit or receive data at a rate of at least 9,600
bps
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit E - Page 1
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
- - Seamless Network - Customers must be able to travel with their wireless phones
outside their Home Market and mike and receive calls without
interruption when they travel beyond their Home Market
- - Automatic Roaming - Customers must have the ability to make calls in markets
outside of their Home Market in the same manner as is done in
their Home Markets without any special dialing sequences or
instructions
- - 24 Hour Customer Service - Customer service must be able to be accessed inside or outside
of their Home Market 24 hours a day, 7 days a week
- - *611 Dialing From a - Customers with problems must be able to access customer
Wireless Phone service from their wireless phone within and outside their Home
Market by dialing *611
- - 1-800-CELL ONE - A 24 hour service which can be accessed by prospects and
customers for assistance with telecommunications products and
services by any type of telephone technology from local and
remote sites
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit E - Page 2
<PAGE>
EXHIBIT F
CELLULAR ONE LICENSE AGREEMENT
SURVEY METHODOLOGY
The methodology currently being employed by Licensor and its designated
Survey Company will be a telephone survey conducted from random probability
samples selected by the Survey Company from listings supplied by Licensee of
all of Licensee's customers in each market in the Licensed Territory.
Customer listings shall be provided to the Survey Company in magnetic
tape or disk medium in such common format as may be reasonably specified by
Licensor. (If Licensee is unable to comply, a half-size, high income
probability sample will be ordered at Licensee's expense).
A random probability sample will be utilized, sufficient in number for
economic completion of the satisfaction survey. The size of the samples will
be at the discretion of Licensor and the Survey Company, but will typically
be between approximately 50 and 200 depending on the size of the market being
surveyed.
<PAGE>
EXHIBIT G
CELLULAR ONE LICENSE AGREEMENT
SPECIAL RESELLER PROVISIONS
[To be agreed to between Licensor and Licensee when applicable]
<PAGE>
Exhibit 10.35
CELLULAR ONE LICENSE AGREEMENT
between
Cellular One Group
and
SYGNET Communications, Inc.
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
<TABLE>
<CAPTION>
SECTION TITLE PAGE NO.
- ------- ----- -------
<S> <C> <C>
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS............................... 8
II. TERM AND RENEWAL..................................................... 9
III. RIGHTS AND DUTIES OF LICENSOR........................................ 11
IV. DUTIES OF LICENSEE................................................... 18
V. FEES AND REPORTING................................................... 28
VI. MARKS................................................................ 33
VII. CONFIDENTIAL INFORMATION............................................. 37
VIII. ADVERTISING.......................................................... 38
IX. INSURANCE............................................................ 41
X. TRANSFER OF INTEREST................................................. 42
XI. DEFAULT AND TERMINATION.............................................. 44
XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION........................... 50
XIII. INDEPENDENT STATUS AND INDEMNIFICATION............................... 51
XIV. APPROVAL AND WAIVERS................................................. 52
XV. NOTICES.............................................................. 52
XVI. ENTIRE AGREEMENT..................................................... 53
XVII. SEVERABILITY AND CONSTRUCTION........................................ 53
XVIII. APPLICABLE LAW....................................................... 54
XIX. ACKNOWLEDGMENTS...................................................... 55
</TABLE>
<PAGE>
CELLULAR ONE LICENSE AGREEMENT
THIS AGREEMENT is entered by and between Cellular One Group, a Delaware
general partnership ("Licensor") and SYGNET Communications, Inc., a
corporation/partnership organized under the laws of OHIO ("Licensee").
PREAMBLE
Licensor is a Delaware general partnership (the "Partnership") with its
principal place of business in Dallas, Texas. The current general partners of
the Partnership are Cellular One Marketing, Inc., a Delaware corporation,
Cellular One Development, Inc., a Delaware corporation, and Vanguard Cellular
Corp., a North Carolina corporation. Additional partners may be admitted to the
Partnership from time to time. (The Partnership partners, as they may exist from
time to time, are referred to herein as the "Partnership Partners").
The Partnership is engaged in the business of licensing and promoting the
service mark "Cellular One" and certain related trademarks, service marks and
designs.
Licensee desires to receive a license from Licensor to use the Cellular
One-Registered Trademark- mark, together with the marks designated on Exhibit
A hereto and such other marks as Licensor may hereinafter designate in
writing (collectively referred to as the "Marks") within the market(s)
described on Exhibit B (the "Licensed Territory") in accordance with the
provisions of this License Agreement.
INTRODUCTORY STATEMENT
Licensor's goal has been and continues to be the promotion of the Marks as
being synonymous, in the minds of consumers of telecommunications services, with
nationwide, dependable, high quality telecommunications services and related
services, goods and equipment (the "National Brand Goal"). Historically,
Licensor's strategy to achieve the National Brand Goal has been to license the
Marks, and predecessors of the Marks, for use by providers of Cellular
Radiotelephone Services (as defined in 47 C.F.R ss.22.99) ("Cellular Telephone
Services") on the so-called "A" side in certain Federal Communications
Commission ("FCC") designated markets. The competition to licensees of the Marks
has historically come primarily from "B" side providers of Cellular Telephone
Services (who constitute the other providers of Cellular Telephone Services
under the duopoly created by the FCC for such service). Given this duopoly,
Licensor believes that its strategy for achieving the National Brand Goal has
been effective to date. However, the telecommunications landscape has changed
dramatically in
1
<PAGE>
recent periods and Licensor believes that its strategy may need to be modified
or entirely new strategies adopted to achieve and maintain the National Brand
Goal.
Licensor believes that these modified or new strategies will be essential
if its licensees are to enjoy the competitive benefits afforded by a widely
recognized national brand as other powerful national brand competitors, which
have not historically competed with licensees of the Marks, enter their markets
directly. Licensor believes that the emergence of these major new competitors,
with powerful national brands, will be accompanied by technological changes that
will render the distinction between Cellular Telephone Services and other
telecommunications services increasingly less important to consumers. Licensor
expects that consumers will begin to focus on applications, utilities, brand
names and distribution channels and will demand that a provider of
telecommunications services, either directly or through alliances, offer a full
menu of communications, such as long distance, cellular (or other wireless)
service, internet access, satellite television and local service, all under one
name and perhaps billed by a single source. Licensor believes that its current
and future strategies must be sufficiently flexible to permit it to respond to
these expected changes in the industry and to provide its licensees with a
national brand that can be used in a manner that will allow those licensees to
meet consumer expectations.
Licensor plans to continue, as its primary strategy, granting licenses to
"A" side Cellular Telephone Services providers (both in newly licensed markets
or in connection with the renewal of currently outstanding Cellular One "A" side
licenses), and to begin attempting to grant licenses to "B" side providers of
Cellular Telephone Services or to resellers of Cellular Telephone Services in
FCC licensed markets not served by an "A" side Cellular One licensee. Licensor
may also consider, however, licensing a provider of Alternate Wireless Services
(as defined below), such as a personal communications service provider, the
right to utilize the Marks in a market or markets where no Cellular Telephone
Services provider utilizes the Marks to promote such services.
Licensor has, from time to time, granted licensees of the Marks the right
to use one or more of such Marks in connection with products or services other
than those constituting Cellular Telephone Services. Among other things,
Licensor has permitted licensees of the Marks to incorporate one or more of the
Marks onto cellular telephone equipment or to utilize one or more of the Marks
in connection with the nationwide delivery of calls to cellular telephones.
Licensor has also granted licensees the right to continue to use or to begin
using one or more of the Marks in connection with some of the products and
services (the "Additional Products" and "Additional Services") described on
Exhibit D hereto. Licensor anticipates that consumers of wireless
telecommunications services may come to expect that high quality offerings of
services such as Cellular Telephone Services or other Primary Services (as
defined below) will include uniform functionality and service features and
bundles of Additional Products, Additional Services and Cellular Telephone
Services or other Primary Services. As such demand develops, Licensor expects to
designate standards for the offering and delivery of the Cellular Telephone
Services or Other Primary Services and related Additional Products and
Additional Services, and to identify one or more Additional Products or
Additional Services as
2
<PAGE>
"Core Products," the offering of which will be subject to the provisions of this
License Agreement, as described in Section III.I. hereof.
As part of its plan to achieve and maintain the National Brand Goal,
Licensor will from time to time establish standards pursuant to Section III.B.
hereof, defining minimum acceptable operating and other criteria for offerings
by Licensee of the Cellular Telephone Services or other Primary Services and
related Additional Services and Additional Products. In light of market
conditions, as they change from time to time, Licensor may designate separate
standards for products offered under a particular Mark. Licensor has provided,
on Exhibit E to this License Agreement, a description of the technical standards
and service standards (collectively, the "Quality Standards") which will
initially be applicable to the Cellular Telephone Services or Other Primary
Services, Core Products, Additional Services and Additional Products displaying
or sold under the various Marks.
Licensor may, in the future, designate certain of the Additional Products
or Additional Services as Core Products where and when it determines that
consumers have come to expect that such products or services will be offered in
conjunction with any high quality offering of Cellular Telephone Services or
other Primary Services, and in order to achieve and maintain the National Brand
Goal. The existing required Core Products are nationwide call delivery and
roaming capability. Additional Core Products may include, by way of example
only, such products or services as long distance, voice messaging, local
exchange service, dispatch service and paging service, which offer consumers
nationwide consistency of operation or other benefits. Unless it elects not to
do so, Licensee will be obligated to offer the Core Products under the specified
Marks throughout the Licensed Territory in connection with its delivery of
Cellular Telephone Services or other Primary Services. If Licensee is unable or
elects not to so offer one or more Core Products in connection with Cellular
Telephone Services or other Primary Services, Licensor, subject to Section
III.I. of this License Agreement, may amend the License Agreement to terminate
Licensee's rights to utilize the Marks to promote the Core Products not then
being offered or, with respect to the existing Core Products of nationwide call
delivery and roaming capability, may terminate this License Agreement.
The development of the wireless telecommunications industry and the
regulatory patterns relating to that industry have resulted in overlaps or
conflicts between licensees of the Marks with regard to certain promotional
activities. In order to permit licensees of the Marks to make full use of such
Marks in their promotional and other activities and in order to reduce conflicts
between or the expense of resolving conflicts between such licensees, this
License Agreement permits licensees of the Marks to make certain incidental use
of the Marks outside of their respective licensed territories while permitting
Licensor to impose reasonably necessary restrictions, including requiring the
use of tag lines or other identifying mechanisms, where necessary to maintain
the integrity of the licensed territories and to avoid customer confusion
regarding the providers of Cellular Telephone Services or other Primary Services
therein. In addition, because the markets for wireless telecommunications
services vary from geographic area to geographic area for economic, demographic,
topographic, legal and other reasons, and because Licensor expects that certain
markets may develop at different rates from others, this
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License Agreement permits Licensor to vary definitions of Cellular Telephone
Services or other Primary Services, Core Products, Additional Services and
Additional Products and to vary the Quality Standards and certain of the fees
payable hereunder in order to achieve or maintain progress toward the National
Brand Goal.
The foregoing is intended as an explanation of Licensor's goals and
planning, and shall not be deemed to affect the meaning or construction of any
of the following provisions. In the event of any conflict between the foregoing
and the following provisions, the following provisions shall prevail.
DEFINED TERMS
As used in this License Agreement, the capitalized terms set forth below
shall have the following meanings:
"1-800-CELL ONE Mark" shall mean the service mark denoted as such on
Exhibit A hereto.
"800 Number Supplement" shall have the meaning set forth in Section
IV.J.1.(b) of this License Agreement.
"A" Side" shall mean the Block A (nonwireline) cellular frequencies as
designated by the FCC.
"Additional Fees" shall mean any fees determined in accordance with Section
V.G. of this License Agreement.
"Additional Products" shall mean the products described as "Additional
Products" on Exhibit D hereto.
"Additional Services" shall mean the services described as "Additional
Services" on Exhibit D hereto.
"Advisory Council" shall have the meaning set forth in Section III.D. of
this License Agreement.
"Affiliate" shall have the meaning set forth in Section X.C. of this
License Agreement.
"Alternate Wireless Services" shall mean any telecommunications service
offering simultaneous, two-way wireless transmission and receipt of voice or
data, other than Cellular Telephone Services.
"Annual Administrative Fee" shall mean the fee determined in accordance
with Section V.D. of this License Agreement.
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"Annual Advertising Fee" shall mean the fee determined in accordance with
Section V.C. of this License Agreement.
"Annual License Fee" shall mean the fee determined in accordance with
Section V.B. of this License Agreement.
"Application Fee" shall mean the fee determined in accordance with Section
V.A. of this License Agreement.
"B" Side" shall mean the Block B (wireline) cellular frequencies as
designated by the FCC.
"Cellular One Mark" shall mean the trademark or service mark "Cellular One"
denoted as such on Exhibit A hereto.
"Cellular One Promotional Fund" shall have the meaning set forth in
Sections III.E. and VIII.C. of this License Agreement.
"Cellular Telephone Services" shall have the meaning set forth in the
Introductory Statement to this License Agreement.
"Certificates of Insurance" shall mean certificates designating insurance
coverages required to be delivered to Licensor pursuant to Section IX.C. of this
License Agreement.
"C.F.R." shall mean the Code of Federal Regulations, as may be amended from
time to time.
"Change of Control" shall have the meaning set forth in Section X.D. of
this License Agreement.
"Confidential Information" shall have the meaning set forth in Section
VII.A. of this License Agreement.
"Consumer Service Number" shall have the meaning set forth in Section IV.J.
of this License Agreement.
"Consumer Service Number Fee" shall mean the fee determined in accordance
with Section V.F. of this License Agreement.
"Core Products" shall mean those Additional Products and Additional
Services designated as "Core Products" on Exhibit D to this License Agreement,
as amended from time to time.
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"CTIA" shall mean the Cellular Telecommunications Industry Association, or
any successor thereto recognized by Licensor as such.
"Effective Date" shall mean the date shown adjacent to Licensor's signature
on this License Agreement.
"FCC" shall have the meaning set forth in the Introductory Statement to
this License Agreement.
"Fund" shall have the meaning set forth in Section VIII.C. of this License
Agreement.
"Graphic Standards Manual" shall have the meaning set forth in Section
III.A. of this License Agreement.
"Guide to Quality Operations" shall mean the guide and other materials
provided by Licensor to Licensee pursuant to Section III.B. hereto.
"Incidental Use" shall have the meaning set forth in Section VI.C. of this
License Agreement.
"Initial Year" shall have the meaning set forth in Section II.A.2. of this
License Agreement.
"Licensed Territory" shall mean the market(s) described on Exhibit B, as
amended from time to time pursuant to the provisions of this License Agreement.
"Licensee" shall have the meaning set forth in the first paragraph of this
License Agreement.
"Licensor" shall mean Cellular One Group, a Delaware general partnership,
and its permitted successors and assigns under this License Agreement.
"Long Distance Carrier" shall have the meaning set forth in Section
IV.J.1.(a) of this License Agreement.
"MSA" shall mean the cellular Metropolitan Statistical Areas as referred to
in 47 C.F.R. ss.22.909.
"Marks" shall have the meaning set forth in the Preamble to this License
Agreement.
"National Brand Goal" shall have the meaning set forth in the Introductory
Statement to this License Agreement.
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"Other 800 Programs" shall have the meaning set forth in Section V.F. of
this License Agreement.
"Partnership" shall have the meaning set forth in the Preamble to this
License Agreement.
"Partnership Partners" shall have the meaning set forth in the Preamble to
this License Agreement.
"Permits" shall have the meaning set forth in Section IV.B. of this License
Agreement.
"Personal Communication Services" shall have the meaning set forth in
Exhibit D hereto.
"Potential Customer Confusion" shall have the meaning set forth in Section
VI.D. of this License Agreement.
"Primary Services" shall mean the services specifically described on
Exhibit C hereto.
"Quality Standards" shall mean the technical standards and service
standards applicable to Primary Services, Core Products, Additional Services and
Additional Products set forth on Exhibit E to this License Agreement, as amended
from time to time.
"RSA" shall mean the cellular Rural Service Areas as referred to in 47
C.F.R. ss.22.909.
"Revised Licenses" shall mean the license agreements between Licensor and
its licensees, which are entered into after July 31, 1996 as part of Licensor's
general licensing program utilizing the Marks for or in conjunction with the
provision of telecommunication services, including, without limitation, the
provision of Cellular Telephone Services and/or other telecommunication services
substantially the same as or reasonably similar to the Primary Services being
licensed to Licensee hereunder.
"Strategic Market Change" shall have the meaning set forth in Section
III.H.4. of this License Agreement.
"Subsequent Year" shall have the meaning set forth in Section II.A.2. of
this License Agreement.
"Survey Company" shall have the meaning set forth in Section III.C. of this
License Agreement.
"Term" shall have the meaning set forth in Section II of this License
Agreement.
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"Terminated Market(s)" shall have the meaning set forth in the introduction
to Section XII of this License Agreement.
The parties therefore agree as follows:
I. GRANT, LIMITATIONS AND ACKNOWLEDGMENTS
A. Grant
1. Subject to the remainder of this License Agreement (including
without limitation, Licensor's rights described in Section I.B and Sections
III.E. through III.J. below), Licensor grants to Licensee, upon the terms and
conditions of this License Agreement, the exclusive right, license and privilege
to use the Marks in the Licensed Territory described on Exhibit B during the
Term of this License Agreement to promote the Primary Services, consisting of
Cellular Telephone Services on the "A" side, "B" side and/or the other services
described on Exhibit C hereto.
2. Subject to the remainder of this License Agreement, Licensor grants
to Licensee, upon the terms and conditions of this License Agreement, the
exclusive right, license and privilege to use the Marks during the Term in
connection with the promotion and sale of the Additional Services and the
Additional Products in the Licensed Territory.
3. Subject to the terms of this License Agreement, Licensor grants to
Licensee, upon the terms and conditions of this License Agreement, the right,
license and privilege to make Incidental Use (as defined in Section VI.C.) of
the Marks.
B. Limitations on Grant
1. If the Licensed Territory as described on Exhibit B consists of
multiple markets and the Licensee's rights under this License Agreement are
terminated with respect to one or more of such markets in accordance with the
provisions of this License Agreement, Exhibit B to this License Agreement and
specifically the term "Licensed Territory" shall thereafter be deemed to apply
only to the remaining market(s) as to which Licensee's rights under this License
Agreement continue. In addition, the Licensed Territory may be modified, in
accordance with the provisions of Section VI.D., in the event that Licensor
determines that Potential Customer Confusion exists.
2. Notwithstanding Licensee's exclusive right to utilize the Marks to
promote the Primary Services, Additional Services and Additional Products in the
Licensed Territory, other persons possessing a license to use the Marks may
promote the Primary Services, Additional Products and Additional Services
provided by such parties outside of the Licensed Territory in media receiving
distribution within or accessible by persons located in the Licensed
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Territory, such as regional magazines or newspapers, regional television and
radio and World Wide Web pages.
3. Subject to the provisions of Sections III.H. and III.I. of this
License Agreement, Licensor may terminate Licensee's right to use the Marks to
designate or promote certain Core Products, Additional Products and Additional
Services.
C. Acknowledgments
1. Subject to the specific grants to Licensee set forth in this
Section I, Licensee acknowledges that Licensor has and retains the right to use
and license the Marks anywhere in the world, within or outside of the Licensed
Territory and that Licensee shall have no rights with regard to such use or any
benefits therefrom.
2. Licensor and Licensee agree that effective with the commencement of
the Term of this License Agreement, all prior licenses to which Licensee is a
party relating to the use of the Marks, or any of them, in the Licensed
Territory or any part thereof shall terminate, together with all of Licensee's
rights thereunder.
II. TERM AND RENEWAL
A. Term
1. Except as otherwise provided in Section II.B. of this License
Agreement, the term (the "Term") of this License Agreement is five (5) years,
beginning on the Effective Date and ending on the day preceding the fifth
anniversary thereof. Licensee recognizes and agrees that Licensor may modify or
terminate the Term as it applies to Additional Products and Additional Services
or Core Products in accordance with Articles III and VI hereof.
2. The period from the Effective Date of this License Agreement until
December 31 of that calendar year shall be referred to herein as the "Initial
Year." Each subsequent calendar year commencing after the end of the Initial
Year shall be referred to herein as a "Subsequent Year."
B. Renewal
Licensee may, at its option, renew the license granted by this License
Agreement for two (2) additional terms (each, in turn, the "Term") of five (5)
years each provided that:
1. Licensee gives Licensor written notice of its election to renew not
less than six (6) months nor more than twelve (12) months before the end of the
expiring Term;
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2. Licensee is neither in default of any of its obligations under this
License Agreement, nor on probation pursuant to Section XI.E.;
3. Licensee has not during the expiring Term received any notice of
default under Section XI.D. which relates to a default which has not been cured;
4. At the end of the expiring Term, Licensee continues to hold all of
the Permits (as defined in Section IV.B.) necessary to provide the Primary
Services and those of the Core Products, Additional Services and Additional
Products being provided, sold or distributed by it;
5. No later than ninety (90) days before the end of the expiring Term,
Licensee executes Licensor's then-current form of license renewal agreement,
which agreement will supersede this License Agreement in all respects, provided
that such license renewal agreement shall not contain any terms, provisions or
conditions which differ materially from the terms, provisions or conditions of
this License Agreement, except terms, provisions and conditions (i) which in the
good faith judgment of Licensor are not materially adverse to Licensee, (ii)
which are appropriate, in the good faith judgment of Licensor, to accommodate
any material economic, technological, demographic, or other market changes
occurring during the prior five (5) year Term, (iii) which Licensor determines
in good faith are necessary to protect the Marks, (iv) which Licensor determines
in good faith are necessary to prevent Potential Customer Confusion (as defined
in Section VI.D.), (v) which relate to charges and fees (including increases)
which Licensor believes in good faith are necessary to provide adequate support
for the promotion of the Marks consistent with the National Brand Goal during
the renewal Term in question, (vi) which are reasonably necessary in Licensor's
determination to maintain or achieve the National Brand Goal, (vii) which
Licensor adopts pursuant to Sections III.G., III.H. or III.I. hereof, or (viii)
which relate or are enacted pursuant to Section III.E.;
6. At the end of the expiring Term, Licensee shall be in compliance
with the provisions of Section IV.A.2. If Licensee has been assigned probation
status at such time as described in Section IV.A.2., then such probation status
shall continue and the required timely improvements shall be a condition of
effective renewal;
7. At the end of the expiring Term, Licensee is offering on a good
faith commercial basis the Primary Services and all of the Core Products for
which Licensee is authorized to utilize the Marks, in substantially all of the
Licensed Territory in accordance with the Quality Standards and is promoting
such Primary Services and Core Products utilizing the applicable Marks in.
accordance with the Graphic Standards Manual; and
8. At the end of the expiring Term, Licensee shall have satisfied all
monetary obligations owed by Licensee to Licensor, and shall have timely met
such obligations throughout the term of this License Agreement.
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III. RIGHTS AND DUTIES OF LICENSOR
All duties of Licensor under this License Agreement are to Licensee, and no
other parry is entitled to rely on, enforce or obtain relief for breach of any
such obligation, either directly or by subrogation. This License Agreement is
not intended to and shall not create any partnership, joint venture or other
business relationship, other than that of Licensor and Licensee, between the
parties hereto, or to vest any rights in any third party or group of third
parties. This License Agreement shall not create any rights on behalf of
Licensee against any third party, including any other licensee of the Marks.
Subject to the foregoing, and to the remainder of this License Agreement,
Licensor shall undertake the following duties:
A. MARKS USAGE GUIDELINES
1. Licensor will provide Licensee, from time to time, with a Graphic
Standards Manual (the "Graphic Standards Manual") containing written and graphic
guidelines for the correct reproduction, application and presentation of the
Marks. The Graphic Standards Manual may include, among other things, Mark
specimens, samples of advertisements and clip art indicating color, proportion,
and format. The Graphic Standards Manual may also provide for the use of one or
more tag lines to be used to differentiate or highlight a particular service or
offering or group of services or offerings, such as "Paging By Cellular One" and
require its usage in specific circumstances, including use on signage and
promotional materials referenced in Section IV.F. The Graphic Standards Manual
may also provide guidelines for the proper use of tag lines and require such
usage in the event that two or more licensees of the Marks are permitted to make
use thereof within the Licensed Territory, or any part thereof, pursuant to
Sections VI.C. or VI.D.
2. From time to time, upon not less than one (1) year's notice,
Licensee shall be entitled to designate one or more icons to be used with one or
more of the Marks and the manner of their usage to signify an association of
such icon or icons with such Marks.
B. TECHNICAL GUIDELINES, QUALITY STANDARDS
1. Licensor will provide Licensee with a Guide to Quality Operations
(the "Guide to Quality Operations") containing suggestions for providing
customers with high quality Primary Services, Core Products, Additional Services
and Additional Products, and other materials, as Licensor deems appropriate. The
Guide to Quality Operations may be modified and supplemented from time to time
as Licensor deems appropriate.
2. Attached to this License Agreement as Exhibit E are the Quality
Standards (the "Quality Standards"), as of the date hereof, applicable to
Primary Services, Core Products, Additional Services and Additional Products,
respectively, to be sold or provided, as the case may be, utilizing the Marks.
The Quality Standards include, as a general matter, criteria for minimum
acceptable service delivery levels and encompass such matters as geographic
coverage requirements, participation in a nationwide call delivery network,
standardized dialing patterns
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and the availability of telephone customer assistance. The Quality Standards
also include required features and technical guidelines for minimum acceptable
system functionality (although specific equipment or system designs will not be
required) and may encompass such matters as required functionality for
telephones and other devices constituting Additional Products, required
compliance by equipment with designated industry standards, compliance by
switching equipment with uniform handoff requirements, and similar requirements
relating to the delivery of Primary Services and Additional Services or the
operation of Additional Products.
3. From time to time, Licensor, by written notice to Licensee in
accordance with Section IV.A., shall have the right to amend the Quality
Standards with regard to any Mark to require added features or functionality for
Primary Services, to modify the minimum technical or operating standards
relating thereto or to require coordination and uniformity in the delivery of
Primary Services, Additional Services, Additional Products and Core Products
within the Licensed Territory and beyond. Licensor shall not be obligated to
consider the particular needs of Licensee or any group of licensees of the Marks
in connection with any amendment to the Quality Standards, except that Licensor
shall not propose amendments to the Quality Standards applicable to Licensee
only.
4. From time to time, Licensor, by written notice to Licensee in
accordance with Section IV.A., shall have the right to amend Exhibit E with
regard to any Mark to designate features, technical or operating standards or
functionality appropriate under existing economic, market, demographic and
technological conditions in similarly situated markets directed to the
achievement and maintenance of the National Brand Goal. Although uniformity and
consistency will normally be required by Licensor throughout the Licensed
Territory and among the various territories or markets in which Licensee and
others are licensed to use the Marks, the Licensor may, from time to time, make
certain distinctions, based upon demographic, topographic, legal or other
considerations, and provide for differing Quality Standards with regard thereto.
5. In addition, Licensor may, upon at least six (6) months written
notice to Licensee, amend Exhibit E to amend the Quality Standards for
Additional Products, Additional Services and Core Products, to designate Quality
Standards for any new Marks added to Exhibit A hereto or to designate Quality
Standards for Additional Products, Additional Services and Core Products for
which separate Quality Standards do not exist. In the event that an Additional
Product or Additional Service becomes a Core Product, Licensor may further amend
Exhibit E to establish Quality Standards for the offering and delivery of the
Core Products, as a whole or as a package of Core Products or Primary Services
and Core Products.
6. Exhibit E to this License Agreement, as amended from time to time,
is incorporated herein by reference. All references to the Quality Standards
shall mean those standards established, as of such time, by Exhibit E.
7. At Licensee's request, Licensor shall be entitled, but in no event
shall be required, to waive compliance by Licensee with one or more of the
Quality Standards in one or
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more of the markets constituting a part of the Licensed Territory, in the
event that Licensor believes such a waiver to be consistent with the National
Brand Goal. Any waiver by Licensor of a Quality Standard must be in writing
and may, at Licensor's election, be for a limited period or subject to one or
more conditions.
C. CUSTOMER SATISFACTION SURVEYS
Licensor shall have the right, at its own expense, commission an
independent survey company ("Survey Company") to conduct a customer satisfaction
survey of Licensee's customers on a yearly basis for purposes of assessing the
quality of Licensee's Primary Services, Additional Services, Additional Products
or Core Products, or all of them. The methodology of the survey will be
determined by the Survey Company and Licensor. An outline of current survey
methodology for Primary Services, which may change from time to time, is
attached as Exhibit F. The results of all surveys of Licensee's customers will
be shared with Licensee to assist Licensee in improving its business and
complying with Licensee's obligations under this License Agreement, including
its obligations with regard to the Quality Standards described herein. The
results of surveys will be used to evaluate the general level of customer
satisfaction and to assist Licensor in determining whether or not Licensee is
meeting the Quality Standards. Licensor will instruct the Survey Company to
obtain all required survey information directly from the Licensee and not
through or in conjunction with Licensor. The Survey Company will be required to
execute an appropriate confidentiality agreement for the benefit of Licensee and
the other licensees of the Marks, which shall provide that the Survey Company
will not disclose any Confidential Information of Licensee to Licensor, the
Partnership Partners or affiliates, or their employees or to any other party
(except that the results of the survey for each market and other survey
information which is applicable generally to all licensees of the Marks or any
of them may be disclosed to Licensor and used by Licensor in connection with its
business operations).
D. LICENSEE ADVISORY COUNCIL
Licensor has established an elected council of licensees ("Advisory
Council") comprised of licensees other than Partnership Partners from a broad
cross-section of markets throughout the United States, to advise and consult
with Licensor regarding material matters such as advertising, marketing and
Quality Standards relating to the Marks and to act as a liaison organization
between Licensor and the licensees of the Marks. The procedures and
responsibilities adopted for the operation of the Advisory Council are subject
to change, from time to time, as may be appropriate in the judgment of Licensor
to provide the most effective organization for performing the contemplated
functions of the Advisory Council. The representative of any licensee serving on
the Advisory Council shall be an officer of such licensee or other person
reasonably acceptable to Licensor. The charter of responsibility of the Advisory
Council provides that all members of the Advisory Council will be informed of
applicable antitrust laws and shall abide by any decisions of Licensor's
antitrust counsel in such regard.
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E. NATIONAL AND REGIONAL ADVERTISING
Licensor has established and maintains the Cellular One Promotional
Fund, as described in Section VIII.C. of this License Agreement. Licensor
administers the Fund with the goal of enhancing the image of the Marks and
achieving or maintaining the National Brand Goal. Licensor, in connection with
the Cellular One Promotional Fund, or otherwise, shall have the right, from time
to time, to promote the Marks in local, regional or national advertising
receiving distribution within the Licensed Territory and to engage in any other
promotional activities, including sponsoring sporting or other public events
within the Licensed Territory, as Licensor deems appropriate in connection with
the National Brand Goal. No consent of Licensee shall be necessary to any such
promotional activities.
F. NATIONAL/REGIONAL PROGRAMS
Licensor may, in its discretion, make available a national and/or one
or more regional account programs under which, through the voluntary cooperation
of its licensees in various markets, client companies with multiple market
operations may enter into a single contract arrangement for one or more of the
Primary Services or any of the Core Products, Additional Services or Additional
Products for their employees located in such markets. Licensor or its designee
may administer any such national or regional accounts program(s). In addition,
Licensor may, from time to time, utilize the Marks or permit third party
licensees of the Marks to utilize the Marks to promote the sale and distribution
of Additional Products or Additional Services in or by means of media, such as,
but not limited to, direct mail catalogs, World Wide Web pages and radio and
television broadcasts receiving wide distribution, both within and outside of
the Licensed Territory; provided, however, that no such promotional activity
shall have as its primary purpose the targeting of any single market or
territory. In addition, Licensor may also, from time to time, utilize the Marks
or permit third party licensees of the Marks to promote and sell Additional
Products or Additional Services as part of a coordinated regional or national
marketing effort including all or part.of the Licensed Territory; provided,
however, that no such promotional activity shall have as its primary purpose the
targeting of any single market or territory.
G. DESIGNATION OF PRIMARY SERVICES
1. Set forth on Exhibit C hereto are descriptions of the Primary
Services applicable to Licensee as of the date of this License Agreement. From
and after the date hereof, Licensor and Licensee, by executing an amendment to
Exhibit C, shall be entitled to amend the description of the Primary Services
and to add or delete services therefrom. Licensor shall be entitled to group the
Primary Services into categories (for use, among other things, in defining
Quality Standards applicable to particular Primary Services) and, with the
consent of Licensee, to add or omit one or more services from the definition of
Primary Services with regard to one or more markets constituting part of the
Licensed Territory.
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2. Consistent with Section VI.D., to the extent necessary to prevent
Potential Customer Confusion, Licensor shall be entitled, with or without the
consent of Licensee, to amend Exhibit C hereto to modify the description of
Primary Services or to separate Primary Services into classes or categories for
the purpose of differentiating between the Primary Services (by means of tag
lines or otherwise) to be rendered in one or more markets constituting a part of
the Licensed Territory; provided, however, that any such amendment of Exhibit C
shall only become effective upon at least six (6) months written notice to
Licensee thereof.
H. DESIGNATION AND DELETION OF ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings "Additional
Products" and "Additional Services," respectively, are descriptions of
products and services which, upon thirty (30) days written notice to
Licensor, Licensee may promote or sell utilizing the Marks which are
applicable to the Additional Product or Additional Service in question, as
may be designated in Licensor's Graphic Standards Manual. Licensor may
review, from time to time, Exhibit D to this License Agreement in light of
current demographic, technological, regulatory and other circumstances
(including, without limitation, Strategic Market Changes) for the purpose of
adding or deleting products and services from the descriptions of Additional
Products and Additional Services, modifying the definitions assigned to one
or more Additional Products or Additional Services or modifying the Term of
this License Agreement or any Licensed Territory with regard thereto. In
undertaking such review, the Licensor shall consider Exhibit D in light of
the National Brand Goal. Licensor shall not be obligated to consider the
needs of any particular licensee or group of licensees in connection with its
review of Exhibit D, nor shall it have an obligation, other than as
specifically provided for herein, to inform Licensee of the progress of
such review. Any such amendment of Exhibit D shall be made pursuant to
Sections III.H.2 through III.H.5 below or pursuant to Section VI.D. hereof.
2. Based upon the review contemplated by Section III.H.1. above, or
otherwise as deemed appropriate by Licensor in its sole discretion, Licensor may
at any time, or from time to time, during the Term, upon not less than thirty
(30) days written notice to Licensee designate one or more new or additional
services or products as Additional Services or Additional Products.
3. Based upon the review contemplated by Section III.H.1. above, or
as otherwise deemed appropriate by Licensor, at any time from and after
January 1, 1999, Licensor may modify or amend Exhibit D hereto, or any
description set forth therein, and may delete products or services
constituting Additional Products or Additional Services, reduce or extend the
Term with resect to one or more Additional Products or Additional Services or
modify the Licensed Territory with regard thereto (i) immediately upon
written notice to Licensee with respect to any Additional Product or
Additional Service not then being offered to the public throughout the
Licensed Territory on a good faith, nondiscrinatory commercial basis by
Licensee under the specified Marks at the time of such written notice, (ii)
upon not less than six (6) months written notice with respect to any
Additional Product or Additional Service which is being offered to the public
throughout the Licensed Territory on a good faith,
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nondiscriminatory commercial basis by Licensee under the specified Marks at the
time of such written notice, provided that in the event of modification or
amendment pursuant to either (i) or (ii) preceding, Licensor shall have
determined that a Strategic Market Change has occurred and that such
modification or amendment is required to reasonably permit appropriate response
thereto. A written explanation of the reason for such modification or amendment
shall accompany the written notice referred to in (i) or (ii) preceding. During
such time as Licensee can demonstrate to the satisfaction of Licensor that
Licensee is offering and actively promoting the Primary Services, long distance
service and local calling service (as further described on Exhibit D) under the
specified Marks to the public (including business, residential and mobile
consumers) throughout the Licensed Territory on a good faith, nondiscriminatory
commercial basis, Licensor may agree to refrain from licensing others to use the
Marks for other Additional Products and Additional Services in the Licensed
Territory. Any such agreement shall be subject to those conditions and
limitations as Licensor may establish.
4. For the purposes of this Section III.H., a "Strategic Market
Change" shall mean any change in economic, demographic, technological,
regulatory or competitive conditions which Licensor reasonably believes requires
a material modification in the manner in which the Primary Services, the Core
Products, the Additional Products or the Additional Services, or any of them,
are marketed or delivered, in order to continue the successful promotion of the
Marks to achieve or maintain the National Brand Goal. While it is anticipated
that a Strategic Market Change will be national in scope, and that Licensor's
response thereto will be similarly uniform, Licensor shall be entitled, subject
to Section III.B.4., to respond under this Section III.H. to Strategic Market
Changes affecting a more limited class or classes of markets.
5. Notwithstanding Section III.H.3. above, Licensee shall have a
limited right to have Exhibit D amended to restore Additional Services or
Additional Products deleted under Section III.H.3. For the ninety (90) day
period following delivery of a notice of modification or amendment under Section
III.H.3., Licensee may submit a request to Licensor to reinstate an Additional
Product or Additional Service on Exhibit D or to rescind any other modification
of Exhibit D adopted pursuant to Section III.H.3, stating its reasons therefor.
Licensor shall consider Licensee's request for reinstatement in good faith, but
shall not be obligated to amend Exhibit D. Any reinstatement of an Additional
Product or Additional Service under this Section III.H.5. shall be subject to
such conditions as Licensor shall believe appropriate under the circumstances,
consistent with the achievement or maintenance of the National Brand Goal.
I. DESIGNATION AND DELETION OF CORE PRODUCTS
1. From time to time after the date hereof, to the extent that
Licensor determines that consumers have come to expect that one or more of the
Additional Products and Additional Services described on Exhibit D, as amended
from time to time, are commonly offered as a part of any offering of nationwide,
dependable, high quality telecommunications services or are otherwise
fundamental to the achievement or maintenance of the National Brand Goal,
Licensor may, upon six (6) months written notice to Licensee, amend Exhibit D
hereto to designate those Additional Products and Additional Services as "Core
Products" and may
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further designate an effective date for such designation. However, nationwide
call delivery and nationwide roaming as further described on Exhibit D are
existing required Core Products, and need not be further designated as such
pursuant to this Section III.H.1.
2. From and after the effective date of any designation of an
Additional Product or Additional Service as a Core Product, Licensee shall offer
such Additional Service or Additional Product under the specified Marks on a
good faith commercial basis in substantially all of the Licensed Territory, or
shall have adopted and provided to Licensor in writing a good faith plan
acceptable to Licensor for doing so promptly. Licensee shall promote using the
specified Marks and make all the Core Products available to its customers and to
the public generally in the Licensed Territory, in connection with promoting and
making the Primary Services available and shall not discriminate in terms of
price, availability or promotional efforts in favor of similar products or
services designated by other trademarks or service marks. Upon Licensor's
request. Licensee shall promptly provide a copy of its plans for offering any
Core Products under the specified Marks which it does not then offer.
3. In the event that Licensee shall fail to comply with its
obligations under Section III.1.2 above, or shall fail within six (6) months of
the effectiveness of the designation of any Additional Product or Additional
Service as a Core Product to offer (or plan to offer pursuant to a plan
submitted to and approved by Licensor and promptly thereafter implemented by
Licensee) such Core Product under the specified Marks in good faith, on a
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory, Licensor shall be entitled to immediately amend Exhibit D hereto to
delete therefrom the Core Products not being offered by Licensee under the
specified Marks on a good faith, nondiscriminatory, commercial basis in
substantially all of the Licensed Territory, and shall be entitled to use or
license others to use the Marks in connection with such Core Products in the
Licensed Territory. With respect to the existing Core Products of nationwide
call delivery and nationwide roaming as further described in Exhibit D, Licensor
shall also be entitled to terminate this License Agreement pursuant to Section
XI.D. if, within six (6) months from the Effective Date, such Core Products are
not being offered by Licensee under the specified Marks on a good faith,
nondiscriminatory, commercial basis in substantially all of the Licensed
Territory.
J. OTHER LICENSES, COMPENSATION TO LICENSOR
Licensor has and may continue to license the Marks, or any of them, to
third parties for use in connection with products or services other than Primary
Services, Core Products, Additional Products, or Additional Services. (For
example, Licensor has licensed one of the Marks to a third party marketer of
children's toys). Such licenses, subject to Licensee's rights set forth in
Section I, may permit use of the Marks by such third party licensees to promote
and sell products and services, other than Primary Services, Core Products,
Additional Services and Additional Products, within the Licensed Territory. As
part of such licensing arrangements, Licensor has, and may, from time to time
hereafter, receive fees or other consideration from third parties who provide
goods and services to licensees of the Marks in connection with
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promotional or other programs arranged by Licensor. Licensee shall have no claim
or right with regard to any such fee or consideration or the arrangements giving
rise thereto.
K. RESELLER ARRANGEMENTS
In the event this License Agreement is being executed and delivered by a
licensee who is being licensed to resell Cellular Telephone Services or an
Alternate Wireless Service, it is anticipated that certain terms and conditions
applicable herein to providers of such services will need to be modified and
that certain additional terms and conditions may need to be added hereto to
accommodate the differences between the provision of such services directly by a
provider and by a reseller of such services. Accordingly, as necessary, in any
such event, the parties hereto shall complete and attach hereto an appropriate
Exhibit G to reflect such modified or additional terms and conditions and such
Exhibit G shall thereafter be deemed to be incorporated
herein and made a part hereof for all purposes.
IV. DUTIES OF LICENSEE
All duties of Licensee under this License Agreement are to Licensor, and no
other party is entitled to rely on, enforce or obtain relief for breach of any
such obligation, either directly or by subrogation. Licensee understands and
acknowledges that the high quality operation of its business under the Marks is
important to Licensee, Licensor and other licensees of the Marks in order to
maintain high operating standards and to protect the reputation of, and goodwill
associated with, the Marks. Toward that end, Licensee acknowledges and accepts
the following duties:
A. QUALITY OF SERVICE
1. Licensee agrees to provide high quality Primary Services and Core
Products and, to the extent provided, high quality Additional Services and
Additional Products, to its customers by, among other things, complying with
this License Agreement and the applicable Quality Standards Upon, six (6) months
written notice of the modification of or addition to the Quality Standards,
Licensee shall cause its Primary Services, Core Products, Additional Services or
Additional Products to comply therewith; provided, however,that Licensee shall
be entitled to adopt a plan reasonably acceptable to Licensor to discontinue the
offering of any Additional Services or Additional Products in lieu of complying
with the Quality Standards relating thereto, provided such Additional Products
or Additional Services do not constitute Core Products.
2. Licensee shall attain and maintain an overall minimum customer
satisfaction rating of at least 85% (or such increased level as may be required
pursuant to the provisions of this Section IV.A.) with regard to the Licensed
Territory as a whole (on a population weighted basis) and more than 70% with
respect to any market constituting a part thereof, with regard to Licensee's
Primary Services and Core Products. If Licensee has licenses
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to use the Marks in more than one Licensed Territory pursuant to additional
license agreements with Licensor, Licensee shall be obligated to achieve an
overall minimum customer satisfaction rating of 85% (or any increased level
adopted) for all of such Licensed Territories (on a population weighted basis),
and more than 70% with respect to any market constituting a part thereof.
Licensor reserves the right to increase the overall minimum acceptable customer
satisfaction rating to a percentage greater than 85% if Licensor, in its
reasonable discretion, determines that such higher percentage is appropriate
given the technical state of the industry delivering Primary Services, Core
Products, Additional Products and/or Additional Services at such time; provided,
however, that the Advisory Council must approve any such increase in the minimum
acceptable customer satisfaction rating, and such increase shall not be
effective until the beginning of the next calendar year following the Advisory
Council's approval. In the event that a customer satisfaction survey conducted
by Licensor pursuant to Section III.C. of this License Agreement results in an
overall minimum customer satisfaction rating below 85% (or below any higher
percentage established by Licensor as described above), but more than 70%, in
Licensee's Licensed Territory or Licensed Territories as a whole (on a
population weighted basis), then Licensee will be assigned probation status
under Section XI.E. of this License Agreement and surveys will be commissioned
in the market(s) in the Licensed Territory or Licensed Territories, as the case
may be, which did not achieve a rating of at least, 85% (or any higher
percentage established by Licensor), from time to time thereafter as Licensor
deems appropriate until Licensee has achieved an overall minimum customer
satisfaction rating of at least 85% (or any higher percentage established by
Licensor as described above) and the probation status is removed, or until this
License Agreement is terminated, as herein provided, whichever shall first
occur. Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction survey(s).
3. During the Term, Licensee shall provide the Primary Services and
Core Products throughout the Licensed Territory, and shall maintain, or cause
others to maintain on its behalf, a sufficient number of customer service
locations and other facilities, including retail storefronts or similar
facilities, to permit customers and potential customers convenient access to
Primary Services, Core Products, Additional Products and Additional Services,
consistent with existing competitive conditions and in accordance with the
Quality Standards.
B. LEGAL COMPLIANCE
1. Licensee agrees to comply, at its own expense, with all applicable
laws, ordinances and regulations of federal, state, county or municipal
authorities. Licensee will also obtain and maintain, at its own expense, all
permits, approvals, licenses and franchises and shall make all required filings,
applications and reports to all government or administrative entities or self
regulatory organizations as shall be necessary, from time to time, to provide
those of the Primary Services, the Core Products, the Additional Services or the
Additional Products as Licensee may then be providing, and to otherwise engage
in business, generally, throughout the Licensed Territory (collectively, the
"Permits"). Without limiting the generality of the foregoing, Licensee's
obligation under this Section IV.B. shall include the maintaining of Licensee's
qualification to do business throughout the Licensed Territory, and the filing
of all
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income and franchise tax returns with respect to Licensee's operations. In the
event that any of Licensee's material Permits is scheduled to expire during the
Term, including any renewal of such Term, Licensee agrees TO comply with all
requirements for extension of said Permit prior to such expiration. Licensee
shall notify Licensor in writing within five (5) days after receipt of any
notice from the FCC or any other governmental authority regarding an actual or
threatened termination or revocation of any Permit material to the provision of
the Primary Services, Core Products, Additional Products or Additional Services
by Licensee within the Licensed Territory, including any license by the FCC to
conduct business as a provider of telecommunications services or necessary to
construct facilities relating to telecommunications services, and shall within
such time provide a copy of any such notice to Licensor. In addition, Licensee
shall notify Licensor within five (5) days after becoming aware of the
commencement of any action, suit or proceeding, or the issuance of any order,
writ, injunction, award or decree of any court, agency or other governmental
instrumentality which could have a material adverse effect on the operation or
financial condition of Licensee's business as it relates to the Primary
Services, the Core Products, the Additional Services or the Additional Products.
2. To the extent that Licensee's business is dependent upon one or
more agreements with a provider of Primary Services, Core Products, Additional
Services or Additional Products for which Licensee acts as a reseller, "Permits"
shall include such contractual relationship and the license granted hereunder
shall be dependent upon the continuation thereof in good standing.
3. Licensee represents and warrants that it possesses all Permits
necessary to the conduct of its business and to the business of providing the
Primary Services, Core Products, Additional Services and Additional Products
within the Licensed Territory, including, if applicable, any Permits necessary
to permit it to act as a reseller of services provided by others.
C. BUSINESS PRACTICES
Licensee shall maintain a competent, conscientious, trained staff.
Neither Licensor nor Licensee shall engage in any trade practice or other
activity which is harmful to the goodwill or reflects unfavorably on the Marks
or on the reputation of Licensee, Licensor, Licensee's business or other
licensees of Licensor, or which constitutes deceptive or unfair competition,
consumer fraud or misrepresentation.
D. INFORMATION TO LICENSOR
1. Upon Licensor's request, subject to the confidentiality
requirements described in Section III.C., Licensee must, in connection with any
customer satisfaction survey Licensor elects to conduct in accordance with
Section III.C., promptly furnish to the Survey Company designated by Licensor a
complete and accurate customer list of all of its subscribers and customers for
its Primary Services, Core Products, Additional Products and Additional
Services, as a whole or separately, in a format reasonably prescribed by
Licensor, including computerized magnetic media, together with such reasonable
information which the Survey
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Company shall require in connection with the performance of its duties. Licensee
hereby gives the Survey Company permission to contact any and all of its
subscribers and customers in conducting a customer survey to ascertain the
quality level of Licensee's services and products and obtain related market
research data in accordance with the methodology set forth in Exhibit F or as
Licensor may reasonably deem appropriate. Licensee shall promptly provide
Licensor with additional information reasonably requested by Licensor regarding
matters such as Licensee's legal status (for example, any Change in Control),
affiliated companies, dealers, agents, retailers, Primary Services, Core
Products, Additional Products and Additional Services being provided or sold
utilizing the Marks, Licensee's use of the Marks, including Incidental Use and
Potential Customer Confusion, and other matters which Licensor may reasonably
determine are relevant to Licensee's performance under this License Agreement.
2. At Licensor's request, Licensee shall promptly provide Licensor
with a copy of each Permit necessary or related to its business of providing
Primary Services, Core Products, Additional Services or Additional Products
using the Marks (with the financial details thereof deleted or redacted if
Licensee so chooses), together with any amendments, termination or other notices
relating thereto.
3. At Licensor's request, Licensee shall promptly provide Licensor
with a copy of Licensee's most recent financial statements for the most recently
completed fiscal year and any subsequent interim periods, including reports of
auditors, if any, and supporting schedules, relating to Licensee's business of
providing Primary Services, Core Products, Additional Services or Additional
Products using the Marks.
E. VOTING BY LICENSEES
Licensor shall be entitled, from time to time, during the Term, or at
any time with regard to a Term to commence in the future, to submit a proposed
amendment to this License Agreement and any Exhibits hereto, to all of its
licensees which have executed Revised Licenses, with a request that such
licensees indicate their approval or disapproval thereof by written ballot.
Unless licensees which have executed Revised Licenses with Licensor and which
are obligated to pay in excess of 50% of the aggregate of all Annual License
Fees payable by all similarly situated licensees shall vote against such
amendment, this License Agreement, and the applicable Exhibits hereto, shall be
amended as proposed by Licensor in the material submitted to the licensees.
Notwithstanding the foregoing, without the express written consent of Licensee,
no amendment to this License Agreement approved under this Section IV.E. shall,
with regard to prior time periods or events taking place prior to the adoption
thereof, increase Licensee's obligations to pay any amounts to Licensor or
otherwise undertake any obligations to Licensor or any other party. In addition,
no amendment to this License Agreement approved solely pursuant to this Section
IV.E. shall (i) modify the Licensed Territory, (ii) prohibit or prevent
Licensee from providing the Primary Services under the Marks in the Licensed
Territory, or (iii) permit Licensor to license others to use the Marks for
providing Alternate Wireless Services or Cellular Telephone Services in the
Licensed Territory. Any notice provided by Licensor hereunder requiring an
approval or disapproval of an amendment to this License Agreement or
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any Exhibits hereto shall be. delivered to Licensee in accordance with the
notice provisions of this License Agreement not less than ninety (90) days
prior to the proposed effectiveness thereof. Licensor shall be entitled to
set forth in any notice proposing an amendment to this License Agreement or
any Exhibits hereto an effective date more than ninety (90) days following
the delivery of notice with regard thereto. Licensees which fall to respond
to a request by Licensor to approve or disapprove of an amendment to this
License Agreement or any Exhibits hereto within sixty (60) days after
delivery of the proposed amendment shall be deemed to have consented to such
amendment. This Section IV.E. shall not modify or limit any of Licensor's
other rights provided for in this License Agreement, including but not
limited to Licensor's rights to amend Exhibits to this Agreement under
Sections III or IV, to the extent permitted therein, or to modify or impose
the fees or other charges, to the extent such modification is permitted,
required of Licensee under Sections V or VIII hereof. Only Licensor shall
have the right to propose an amendment to this License Agreement or any
Exhibits under this Section IV.E.
F. SIGNAGE, PROMOTION
1. For each market in the Licensed Territory, Licensee shall, at its
own expense, cause the Cellular One Mark to be used or incorporated with such
reasonable prominence in such advertising and other business references to
Licensee as may be appropriate to create a clear impression, among the general
public, that Licensee is affiliated with the Cellular One program. Without
limiting Licensee's obligation to comply with the foregoing, Licensee shall, for
each market in the Licensed Territory, associate Licensee and the Cellular One
name in the telephone "yellow pages" and "white pages" directory listings, and
at least cause the Cellular One Mark to be used or incorporated on or in each of
the following, insofar as they relate to Licensee's business utilizing the
Marks:
(i) Licensee's customer billing statements and the accompanying
envelopes;
(ii) Licensee's advertising media, including without limitation,
print advertising, brochures, marketing materials, point-of-sale materials,
billboards and broadcast media such as radio and television advertising, on
line advertising, home pages on the World Wide Web and other computer
accessible information;
(iii) The greetings, introductions or opening messages of
Licensee's telephone operators, voice mall, telephone answering machines
and other call answering services, in response to customer and prospective
customer inquiries;
(iv) Licensee's stationery, business cards, notices and other
mailouts, and, to the extent practicable, any press or other media coverage
afforded Licensee; and
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(v) Signs or displays on the exterior and interior of each of
Licensee's facilities which interface with customers or prospective
customers In the Licensed Territory.
2. To the extent required by this License Agreement, pursuant to
Sections III.A., VI.B.. VI.D. or otherwise, Licensee shall, at its own expense,
modify its usage of the Marks and adopt tag lines, icons or similar marks or
variations, and modify the signage and other items described in Section IV.F.1.
above as may be appropriate, within one (1) year or such shorter period as
Licensor may reasonably require or as may be otherwise provided in this License
Agreement.
3. Licensee shall use the Cellular One Mark (or any mark substituted
therefor by Licensor) as the principal service mark or trademark, as
appropriate, designating Primary Services and Core Products sold or distributed
by it within the Licensed Territory and shall otherwise use the applicable Marks
in connection with Additional Products and Additional Services in the Licensed
Territory to the extent commercially reasonable and as required by this License
Agreement. Use of the Marks will be strictly in accordance with the Graphic
Standards Manual as amended from time to time. Licensee shall only use those
Marks as are specified by Licensor in connection with each of the Additional
Products and Additional Services.
G. DEALERS, AGENTS AND RETAILERS
In the event that, pursuant to this License Agreement, Licensee
permits its authorized dealers, agents or retailers to use the Marks in the
Licensed Territory, such dealers, agents and retailers shall be subject to the
obligations set forth in this License Agreement and those imposed upon such
parties by Licensee; provided, however, that unless required by Licensee, such
dealers, agents and retailers need not necessarily comply with the specific
obligations of Sections IV.F.1.(i), IV.F.1.(iii) and IV.F.1.(iv) hereof in
connection with each dealers', agents' or retailers' use or incorporation of the
Marks on or in the items therein listed.
H. ADDITIONAL PRODUCTS AND SERVICES
1. Set forth on Exhibit D hereto under the headings "Additional
Products" and "Additional Services," respectively, are certain products and
services relating to the Primary Services with regard to which, upon notice to
Licensor, Licensee may promote or sell utilizing the Marks as therein specified.
2. In the event that Licensee shall elect to use the Marks within all
or any part of the Licensed Territory in connection with one or more of the
specified Additional Products or Additional Services, Licensee shall provide
Licensor not less than thirty (30) days written notice of such intended use,
together with a description of Licensee's business and promotional plans with
regard thereto and the portion of the Licensed Territory to which such use will
relate.
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I. USE OF THE CELLULAR ONE TRADEMARK
In order to protect and enhance the Cellular One Mark and the goodwill
pertaining thereto, Licensee shall, consistent with Exhibit D, use the Cellular
One Mark only on or in connection with first class, high quality
telecommunications equipment and related devices further described as an
Additional Product on Exhibit D hereto (collectively, the "Wireless
Communications Equipment"). Any such Wireless Communications Equipment shall be
sold or distributed only in accordance with all applicable federal, state and
local laws, including, without limitation, all applicable FCC directives and
other industry standards issued from time to time by the CTIA, the Electronics
Industries Association and comparable industry groups, and which, if available
for the type of Wireless Communications Equipment in question, has earned a
certification seal issued by the CTIA. Licensee shall, upon execution of this
Agreement, and from time to time thereafter upon request by Licensor, promptly
furnish to Licensor, at no charge, a listing of all of the various types of
Wireless Communications Equipment sold or otherwise distributed by Licensee, and
upon which or in connection with which the Cellular One Mark is used. The nature
and quality of such Wireless Communications Equipment shall be subject to review
by Licensor to insure compliance with this Agreement.
J. CONSUMER SERVICE NUMBER
Licensee shall have the obligation to use and promote and a
nonexclusive right to make use of a toll free national consumer service number
designated by Licensor (the "Consumer Service Number"). as a toll free service
to Licensee's customers and prospective customers in the Licensed Territory, to
use the 1-800-CELL ONE Mark and marks associated therewith and to pay an annual
fee to Licensor described in Section V.E. and in accordance with the following
terms and conditions:
1. (a) Licensor will, from time to time, establish and maintain a
national consumer service telephone number, operated twenty-four hours a day,
seven days a week. Currently the number established by Licensor is 1-800-CELL
ONE (1-800-235-5663). Licensee shall arrange with a long distance carrier (the
"Long Distance Carrier") for a network-based routing system to cause such calls
to the Consumer Service Number from customers and prospective.customers of
Licensee in; the Licensed Territory (including customers of Licensee roaming
from the Licensed Territory) to be automatically (i) routed to Licensee, or to a
designated center as further described below or (ii) provided with a prerecorded
intercept announcement or (iii) routed as may be required pursuant to Section
IV.J.3. or any agreement entered into by Licensee pursuant thereto. All
arrangements necessary for the routing of calls to Licensee or the delivery of
prerecorded intercept announcements shall be made between Licensee and the Long
Distance Carrier. In no event will Licensor route calls made to the Consumer
Service Number to Licensee, or cause any such calls to be so routed. It is
anticipated that Licensee will provide customers and prospective customers
calling the Consumer Service Number with assistance, information and/or
promotional literature in response to inquiries concerning such matters as
activation, suspension or disconnection of service, service plans, promotions,
billing, pricing, roaming, dialing instructions, access numbers, feature codes,
the
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locations, hours of operation and telephone numbers of offices, authorized
repair facilities and sources for batteries, parts and accessories, and such
other matters as may be set forth in the 800 Number Supplement (hereinafter
defined).
(b) Licensor will provide Licensee with a supplement to Exhibit E
(the Quality Standards) and the Guide to Quality Operations (collectively, the
"800 Number Supplement"), containing requirements and suggestions for the
operation of the Consumer Service Number program, including the services which
Licensee must have the capability of offering during various times to callers to
the Consumer Service Number which are routed to the Licensee by the Long
Distance Carrier, and other materials as Licensor deems appropriate. Licensor
may from time to time, in its discretion, issue additional supplements,
modifications and additions to the Guide to Quality Operations or the 800 Number
Supplement. Licensor may, in its discretion, expand or introduce new features to
the Consumer Service Number program and may afford Licensee the opportunity to
participate therein by executing an addendum to this Agreement or other suitable
document.
(c) From time to time, at its sole election, Licensor may select
and designate a substitute telephone number to serve as the Consumer Service
Number and Licensee shall take such steps as shall be necessary to utilize such
substituted number in place of the prior telephone number serving as the
Consumer Service Number and shall cease any use of such prior number in
accordance with any schedule reasonably promulgated by Licensor with regard
thereto.
2. Licensee shall establish and maintain adequate staffing and
telephone capacity in relation to the subscriber base and call volume of the
Licensed Territory, in order to promptly and adequately receive and respond to
calls routed to Licensee through the Consumer Service Number; provided however,
that Licensee may establish a centralized location with such capabilities to
serve multiple markets for which Licensee has entered into a License Agreement
with Licensor, if applicable. Licensee agrees that it will not impose any
airtime charges or other charges upon the caller for calls made to the Consumer
Service Number, whether such calls are made by customers, prospective customers,
roamers or otherwise. Licensee shall cause its billing department or, if
applicable, use its best efforts to cause each of its billing companies or
providers of Primary Services, to nonrate calls to the Consumer Service Number
made from the Licensed Territory, and to delete any per diem roaming fees if
calls from the Licensed Territory to the Consumer Service Number are the only
roamer calls made during the twenty-four hour daily billing period. Licensee
shall offer credit card roaming capability for its customers, with respect to
the Licensed Territory, for the purpose of allowing call processing for
customers with validation problems when the serving switch in the home market is
not accessible.
3. Within thirty (30) days of the Effective Date of this License
Agreement, Licensee shall make appropriate arrangements with the Long Distance
Carrier for the routing of calls to the Licensed Territory and, in conjunction
therewith, shall be providing service to customers and prospective customers in
accordance with the Quality Standards and the Guide
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to Quality Operations (including the 800 Number Supplement) twenty four hours a
day, three hundred sixty-five days a year. Licensee may phase in such customer
service operations over a period not to exceed six (6) months following the
Effective Date hereof, but within (30) days after the Effective Date of this
Agreement, Licensee shall, at a minimum, promptly accept and fully respond to
all calls routed to Licensee through the Consumer Service Number from 8:00 a.m.
to 6:00 p.m., local time, Monday through Friday, excluding national holidays.
During such times, the calls routed to the Licensed Territory by the Long
Distance Carrier must be handled by Licensee's own or contracted service
personnel (other than answering services) unless other arrangements satisfactory
to Licensor are made, and the various types of callers (customers, roamers,
prospects, etc.) must be provided with service respecting at least those
categories as set forth in the Guide to Quality Operations (including the 800
Number Supplement). Outside of such times, (i) Licensee has the option of
handling the calls with its own or contracted service personnel (other than
answering services), arranging for other licensees in good standing of the Marks
to handle the calls, arranging for third parties acceptable to Licensor to
handle the calls, or arranging for the calls to be answered by an automated
voice response system, with live operator backup preferred (although a response
system with the capability for the caller to leave a recorded message will be
acceptable); and (ii) not later than six (6) complete calendar months following
the Effective Date of this License Agreement; such callers must be provided with
service respecting at least those categories as set forth in the Guide to
Quality Operations (including the 800 Number Supplement) for such times.
4. Licensee shall at its own expense include the Consumer Service
Number in Licensee's telephone directory listings for the Licensed Territory,
including "White Pages" and "Yellow Pages" listings (under "Cellular
Telephones", "Mobile Telephones," "Radiotelephones" or other category denoting
telecommunications services and equipment, as appropriate), and in Licensee's
promotional and marketing materials. Licensee agrees to actively promote the
Consumer Service Number in the Licensed Territory, but may also utilize its own
toll free numbers or other numbers in the Licensed Territory.
5. Licensor shall in no event be liable by reason of any act or
omission of Licensee or any third party licensee in the conduct of its business
or for any claim or judgment arising therefrom or for any claim or judgment by
third parties (including without limitation, the Long Distance Carrier,
Licensee's customers, prospective customers, dealers, retailers, agents,
resellers, or the like) arising from or relating to the establishment and the
operation of the Consumer Service Number, and Licensee shall indemnify and hold
Licensor, Licensor's employees, the Partnership Partners and their affiliates,
and their respective officers, directors, employees and stockholders, harmless
from and against any and all claims and judgments, as well as the costs,
including attorneys' fees, of defending against them. Licensee acknowledges that
Licensor shall not be responsible for any direct, consequential or incidental
damages of any kind resulting from or relating to the Consumer Service Number,
the related program or the operation thereof, or the acts or omissions of the
Long Distance Carrier, including without limitation, damages relating to
possible loss of customers or prospective customers by Licensee or its dealers,
retailers, agents, resellers, or the like.
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6. Licensee agrees to promptly provide the Long Distance Carrier with
such complete current and reserve cellular NPA/NXX listings and other
information and data as may be reasonably requested by the Long Distance Carrier
to permit the Long Distance Carrier to provide an efficient and effective
routing of calls and delivery of intercept announcements to Licensee and to
assure that calls which should be routed to other licensees of the Consumer
Service Number are not being affected by Licensee's arrangements with the Long
Distance Carrier. All payments and other similar arrangements which may be
necessary to permit the Long Distance Carrier to route calls or provide
intercept services and prerecorded announcements to callers shall also be the
responsibility of Licensee, shall be determined by and between Licensee and the
Long Distance Carrier, and Licensor shall have no obligation or liability
whatsoever with respect thereto. Licensee agrees to promptly provide directly to
Licensor and/or to cause the Long Distance Carrier to promptly provide to
Licensor such information as Licensor may from time to time reasonably request
in order to permit Licensor to protect the Marks and/or to ascertain Licensee's
compliance with Licensee's obligations under this Agreement.
7. In the event Licensee's agreement with the Long Distance Carrier
expires or is terminated for any reason with respect to any market in the
Licensed Territory, Licensee's rights with respect to the Consumer Service
Number and the 1-800-CELL ONE Mark shall automatically terminate with respect to
such market. In the event Licensor decides to discontinue the Consumer Service
Number or the related program, Licensor may terminate Licensee's rights with
respect to the Consumer Service Number and the 1-800-CELL ONE Mark upon ninety
(90) days prior written notice to Licensee.
8. The parties agree that Licensor is not offering herein to resell
800 service or other telecommunications services, and no portion of the annual
Consumer Service Number Fee is compensation for any such resale. Licensee shall
have no right to resell 800 service using the Consumer Service Number to any
other person or entity. If Licensee chooses to permit its authorized dealers,
retailers or agents in the Licensed Territory to use the Consumer Service Number
and the 1-800-CELL ONE Mark, Licensee acknowledges, for itself and on behalf of
its dealers, retailers and agents, that the applicable calls by callers to the
Consumer Service Number will be routed by the Long Distance Carrier to Licensee,
and not to any such dealers, retailers and agents of Lice=e, and that the calls
will be toll free and free of roaming and airtime charges upon the callers as
set forth above.
9. Licensee acknowledges and agrees that it shall have no ownership
interest in the Consumer Service Number, any telephone number, Mark or acronym
serving as or associated with a current or previous Consumer Service Number or
any agreements relating thereto, notwithstanding any actual or implied
agreements between Licensee and the Long Distance Carrier, any tariffs or
permits applicable or related to the Consumer Service Number or any contract or
course of dealing relating thereto. Without modifying the foregoing, Licensee
hereby grants Licensor an irrevocable power of attorney, which shall be coupled
with an interest, to act in Licensee's place and stead and to execute and
deliver any agreements, instruments, certificates, pleadings or the like
reasonably necessary to disclaim any interest by
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Licensee in the Consumer Service Number, any telephone number, Mark or acronym
serving as or associated with a current or previous Consumer Service Number or
any agreements relating thereto, and to vest in Licensor full title thereto. In
addition, Licensee shall, from time to time, at the request of Licensor or the
Long Distance Carrier, promptly execute and deliver such further agreements,
instruments, certificates, pleadings and the like as Licensor shall reasonably
deem necessary to give effect to this Section IV.J.9.
V. FEES AND REPORTING
A. APPLICATION FEE
Upon execution of this License Agreement by Licensee, Licensee shall
pay to Licensor a nonrefundable application fee (the "Application Fee") of five
hundred dollars ($500.00) per market in the Licensed Territory; provided,
however, that no Application Fee with respect to a particular market shall be
payable in the event that this License Agreement is being executed as a renewal,
extension or modification of an outstanding Cellular One License Agreement
between Licensee and Licensor covering such market in the Licensed Territory or
in the event of a market transfer or Change of Control (the latter events being
subject, however, to the transfer fee described in Section V.H. hereof).
B. ANNUAL LICENSE FEE
Licensee agrees to pay to Licensor an annual license fee (the "Annual
License Fee") based on the total population of each of the markets in the
Licensed Territory (the "Pops") as determined by the most recent population
estimates produced by an independent company selected in good faith by Licensor,
with a minimum Annual License Fee of three thousand dollars ($3,000.00) per
market in the Licensed Territory for each year during the Term. If the Effective
Date of this License Agreement or the commencement of a Subsequent Year is on or
before December 31, 1997, the Annual License Fee for the Initial Year or the
Subsequent Year, as the case may be, shall be equal to two cents ($0.02) per
person in the Licensed Territory, but not less than the foregoing minimum. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is after December 31, 1997, the Annual License Fee for the Initial Year or
the Subsequent Year, as the case may be, shall be calculated in accordance with
Section V.E. below, but shall not be less than the foregoing minimum. The Annual
License Fee shall be due on each January 1 and payable on or before each January
31 of each Subsequent Year during the Term, for the full calendar year; provided
however, that the Annual License Fee for the Initial Year shall be paid upon
execution of this License Agreement by Licensee. Notwithstanding the foregoing,
if the Initial Year commences on a day other than January 1, the Annual License
Fee for the Initial Year (including the foregoing minimum fee, if applicable)
shall be prorated to reflect the portion of that calendar year included within
the Initial Year. The Annual License Fee will not be prorated or refunded in
whole or in part under any other circumstances; provided, however, that upon the
normal expiration of this License Agreement at the end of the Term or any
renewal Term (but in no other event, including without
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limitation, upon the voluntary or involuntary termination of this License
Agreement for any reason), Licensor agrees to refund a prorated portion of the
Annual License Fee reflecting that portion of that calendar year remaining after
the date of expiration, less any set off for any other fees owing to Licensor.
C. ANNUAL ADVERTISING FEE
Licensee agrees to pay to Licensor's Cellular One Promotional Fund an
annual advertising fee (the "Annual Advertising Fee") based upon the population
estimates described in Section V. B. above. If the Effective Date of the License
Agreement is on or before December 31, 1996, the Annual Advertising Fee for the
Initial Year shall be equal to five cents ($0.05) per person in the Licensed
Territory. If the Effective Date of this License Agreement or the commencement
of a Subsequent Year is between January 1, 1997 and December 31, 1997, then the
Annual Advertising Fee for the Initial Year or Subsequent Year, as the case may
be, shall be equal to six cents ($0.06) per person in the Licensed Territory. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is between January 1, 1998 and December 31, 1998, then the Annual
Advertising Fee for the Initial Year or Subsequent Year, as the case may be,
shall be equal to seven cents ($0.07) per person in the Licensed Territory. If
the Effective Date of this License Agreement or the commencement of a Subsequent
Year is after December 31, 1998, then the Annual Advertising Fee for the
Initial. Year or the Subsequent Year, as the case may be, shall be calculated in
accordance with Section V.E. below. The Annual Advertising Fee shall be due on
each January 1 and payable on or before each January 31 of each Subsequent Year
during the Term, for the full calendar year; provided, however, the Annual
Advertising Fee for the Initial Year shall be paid upon execution of this
License Agreement by Licensee. Notwithstanding the foregoing, if the Initial
Year commences on a day other than January 1, the Annual Advertising Fee for the
Initial Year shall be prorated to reflect the portion of that calendar year
included within the Initial Year. The Annual Advertising Fee will not be
prorated or refunded in whole or in part under any other circumstances. For any
Initial Year or Subsequent Year beginning on or before January 1, 1998, if
Licensee can demonstrate to the satisfaction of Licensor that Licensee had less
than three hundred thousand (300,000) billable minutes of air time for each
month in the preceding calendar year in a market in the Licensed Territory,
Licensee shall not be obligated to pay the Annual Advertising Fee with respect
to such market for such Initial Year or Subsequent Year, as the case may be.
Licensor agrees to accept, and may require, the bona fide report of Licensee's
independent outside auditing firm as appropriate confirmation that Licensee has
less than the three hundred thousand (300,000) billable minutes of air time for
each month as described above. The foregoing exemption from payment of the
Annual Advertising Fee shall in no event extend beyond the Annual Advertising
Fee due for 1998. To the extent that geographic, demographic or social factors
(such as a location of a market outside of the continental U.S. or the use in a
particular market in the Licensed Territory of a dominant language other than
English) limit the effectiveness of Licensor's promotional efforts with respect
to such market in the Licensed Territory, Licensor may, but shall not be
obligated to, consider an adjustment to the Annual Advertising Fee payable under
this Section V.C. or
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adjusting its promotional activities to improve the effectiveness thereof in
such market in the Licensed Territory.
D. ANNUAL ADMINISTRATIVE FEE
From time to time, upon not less than thirty (30) days written notice
to Licensee, Licensor shall be entitled to levy, and Licensee shall pay, a
nonrefundable annual administrative fee (the "Annual Administrative Fee"), not
to exceed, each calendar year, one-half of one cent ($0.005) per person in the
Licensed Territory as determined in a manner consistent with that applied to the
determination of the Annual License Fee, in the event that Licensor determines
that such a fee is necessary to defray Licensor's administrative costs,
including costs associated with professional fees and expenses, incurred in
connection with performing Licensor's duties under this License Agreement and
otherwise protecting and promoting the Marks and assuring that the Quality
Standards continue to be consistent with changing market conditions and
technological change. In the event that Licensee provides Primary Services as a
reseller for more than one provider of Cellular Telephone Services or any form
of Alternate Wireless Service, Licensor shall be entitled to receive an
additional Annual Administrative Fee (or such part thereof as Licensor shall
deem appropriate) with regard to each such reseller relationship, reflecting the
increased costs of conducting customer surveys and otherwise monitoring
Licensee's performance under this License Agreement.
E. ESCALATION OF LICENSE AND ADVERTISING FEES
In addition to any other increases in the Annual License Fee and the
Annual Advertising Fee which are permitted herein, Licensor may, in its sole
discretion, increase the Annual License Fee payable for any Initial Year or
Subsequent Year commencing on or after January 1, 1998, and/or increase the
Annual Advertising Fee payable for any Initial Year or Subsequent Year
commencing on or after January 1, 1999, by amounts commensurate with the
increases In the Consumer Price Index or media expenses, as the case may be, in
accordance with the following:
1. Annual License Fee for the applicable Initial Year or Subsequent
Year (subject to the minimum Annual License Fee of $3,000.00 per
market in the Licensed Territory)=
$0.02 X CPI-2 X Pops
CPI-1
where:
(a) "CPI" shall mean the monthly National Consumer Price Index
for All Urban Consumers, U.S. City Average (All Items; 1982-84 equals 100)
issued by the U.S. Department of Labor, Bureau of Labor Statistics, or its
successor agency, or if such index is no longer in effect, the successor index
thereto;
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(b) "CPI-1" shall mean the monthly CPI for the month of June,
1996;
and
(c) "CPI-2" shall mean the higher of (i) CPI-1 or (ii) the
monthly CPI for the latest calendar month which ends at least six (6) months
before the commencement of the applicable Initial Year or Subsequent Year for
which the adjustment of fee(s) is being computed.
2. Annual Advertising Fee for the applicable Initial Year or
Subsequent Year=
$0.07 X MC-2 X Pops
MC-1
where:
(a) "MC-1" shall mean the actual media buy liabilities incurred
by Licensor in connection with Licensor's obligations and activities under
Section VIII of this License Agreement for the immediately preceding annual
period;
(b) "MC-2" shall mean the higher of (i) MC-1 or (ii) the media
buy liabilities Licensor would incur in the following annual period if it
engaged in the activities and purchased the goods and services giving rise to
the media buy liabilities constituting MC-1. In making the determination
required by the preceding sentence, Licensor shall utilize the "netcosts(TM)"
reports publication describing Broadcast Network, Cable Network and Syndication
CPM and CPP projections published by Ephron, Papazian & Ephron, Inc., or any
successor or equivalent index generally utilized by the industry to estimate
future costs associated with promotional activities.
F. CONSUMER SERVICE NUMBER FEE
During such time as Licensor makes the Consumer Service Number program
available to licensees, Licensee shall pay to Licensor an annual Consumer
Service Number fee (the "Consumer Service Number Fee") equal to one thousand
dollars ($1,000.00) for each MSA and five hundred dollars ($500.00) for each RSA
constituting a part of the Licensed Territory, subject to a maximum fee payable
under this Section V.F. of thirty thousand dollars ($30,000.00) with respect to
the Licensed Territory or all of Licensee's Licensed Territories under other
License Agreements with Licensor. The Consumer Service Number Fee shall be due
on each January 1 and payable on or before each January 31 of each Subsequent
Year during the Term, for the full calendar year; provided however, the Consumer
Service Number Fee for the Initial Year shall be paid upon execution of this
License Agreement by Licensee. Notwithstanding the foregoing, if the Initial
Year commences on a day other than January 1, the Consumer Service Number Fee
for the Initial Year shall be prorated to reflect the portion of that calendar
year included within the Initial Year. The Consumer Service Number Fee will not
be
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prorated or refunded in whole or in part under any other circumstances. The
Consumer Service Number Fee shall be in addition to any other charges or fees
that may be payable by Licensee to any Long Distance Carrier for the Consumer
Service Number program, as contemplated by Section IV.J. hereof. In addition to
the Consumer Service Number program, Licensor may establish similar programs for
other forms of wireless telephony (the "Other 800 Programs"). To the extent that
the Primary Services or Core Products include such forms of wireless telephony,
Licensee shall participate in the Other 800 Programs designed therefor. Licensor
shall be entitled to receive fees from Licensee for the Other 800 Programs
calculated in a similar manner as those for the Consumer Service Number program.
G. ADDITIONAL FEES
From time to time following the date hereof, Licensor may propose,
pursuant to Section IV.E. hereof, changes to or the implementation of one or
more periodic fees to be payable by licensees with regard to the Primary
Services, Core Products, Additional Products or Additional Services, or other
fees deemed appropriate by Licensor. Upon approval thereof in accordance with
Section IV.E., such fees shall become an obligation of Licensee hereunder.
H. SPECIAL LICENSEE RELATED EXPENSES
Licensor shall be entitled to levy, and Licensee shall promptly pay, a
fee of not less thin five hundred dollars ($500.00) per market with regard to
any Change of Control of Licensee or assignment by Licensee of its rights and
obligations hereunder (including any transfer or Change of Control of a market
constituting part of the Licensed Territory) or upon any other assignment,
transfer, pledge, Change of Control or other transaction contemplated or
permitted under Article X.
I. PAYMENTS, INTEREST ON LATE PAYMENTS
All fees and charges payable under this License Agreement shall be
payable in good funds at Licensor's address specified herein, or at such other
address as Licensor shall from time to time designate in writing.
Notwithstanding any other provision of this Article V, Licensor shall be
entitled for reasons of administrative convenience or otherwise to defer the
date by which any fee or charge payable by Licensee hereunder may be due. No
such deferral shall be a waiver of any of Licensor's rights hereunder. If
payment of any Application Fee, Annual License Fee, Annual Advertising Fee,
Consumer Service Number Fee, Annual Administrative Fee or other fee or charge
under this License Agreement is overdue, Licensee shall pay Licensor, in
addition to the overdue amount, interest on such overdue amount from the date it
was payable until paid at the rate which is two (2) points above the prime rate
published by the Wall Street Journal on the date payment was due, or the maximum
rate permitted by applicable law, whichever is less. Entitlement to such
interest shall be in addition to any other remedies Licensor may have.
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VI. MARKS
A. OWNERSHIP OF MARKS
Licensor is the owner of all right, title and interest in and to the
Marks (which shall include for the purposes of this Section VI. all of the
permits and contractual or other arrangements (including registrations of
trademarks, service marks and domain names) relating to ownership or control of
the Marks, the Consumer Service Number and the like). No sublicense by Licensee
pursuant to Sections III.G. or X.C. shall create any ownership interest in the
Marks in Licensee or any sublicensee thereof nor any right by Licensee to
sublicense use of the Marks in the future.
B. GENERAL USE
With respect to Licensee's use of the Marks pursuant to this License
Agreement, Licensee acknowledges and agrees to the following:
1. Licensee shall use only the Marks designated by Licensor and shall
use them only in the manner authorized and permitted by Licensor herein, and
only in accordance with the Graphic Standards Manual. Without limiting the
generality of the foregoing, Licensee shall comply with Licensor's guidelines
and directives (i) for use of certain Marks with specified Additional Products
and Additional Services, and (ii) concerning the use of the Marks or derivatives
thereof in, or as a part of, the domain name of any World Wide Web pages or the
names of any similar Internet locales or addresses owned by or on behalf of
Licensee.
2. Except to the extent permitted as Incidental Use, Licensee shall
use the Marks only in connection with providing Primary Services, Core Products,
Additional Services and Additional Products in the Licensed Territory, in
accordance with the Quality Standards and as otherwise set forth in this License
Agreement.
3. Licensee shall identify the Licensor as the registered owner of the
Marks in such ways as Licensor may direct, including but not limited to the
identification of Licensor as such on Licensee's invoices, order forms, receipts
and contracts.
4. Except as provided in Section IV.G. above and Section X.C. below,
Licensee shall have no right to sublicense the Marks to any other person or
entity, and Licensee shall have no right to allow its resellers, if any, to make
use of the Marks. Any use by a dealer, retailer or agent under Section IV.G. or
by an Affiliate under Section X.C. shall be consistent with Licensee's rights
and responsibilities hereunder with respect to the use of the Marks and in no
event, shall any such permitted use exceed or extend beyond Licensee's rights
hereunder to use the Marks. Licensee agrees to monitor and be responsible for
the use of the Marks by its agents, retailers and dealers and its Affiliates and
to promptly provide or cause to be provided to Licensor upon request, from time
to time, such reasonable information concerning the use of the Marks by such
dealers, retailers and agents and Affiliates to permit Licensor to ascertain
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Licensee's compliance hereunder. From time to time upon the reasonable request
of Licensor, Licensee shall promptly supply Licensor with a list of dealers,
retailers, agents and Affiliates authorized to use the Marks and/or promptly
confirm whether any particular dealers, retailers, agents or Affiliates remain
authorized and in good standing with respect to use of the Marks.
5. Licensee's right to use the Marks is limited to the uses
specifically authorized under this License Agreement.
6. Licensee shall not use the Marks or any of their derivatives, or
any marks confusingly similar thereto, as part of Licensee's corporate or other
legal name. Licensee and any dealers, retailers or agents designated under
Section IV.G. or Affiliates designated under Section X.C. may file and maintain
trade name or fictitious name registrations in the jurisdictions within the
Licensed Territory where legally required or otherwise appropriate to reflect
the fact that Licensee is doing business as "Cellular One." If other licensees
desire to file and maintain such a trade name or fictitious name registration
pursuant to a license agreement with Licensor, Licensee shall consent or
otherwise cooperate with Licensor and such licensees in meeting the state or
local requirements to permit such trade or fictitious name registrations to
coexist. Licensee shall execute any documents deemed necessary or desirable by
Licensor or its counsel to assist Licensor in the protection or registration of
the Marks or to maintain or defend Licensor's title thereto, or their continued
validity and enforceability.
7. Licensee shall promptly notify Licensor of any suspected
infringement of, or challenge to the validity, registration, or Licensor's
ownership of the Marks, which occurs in the Licensed Territory, or elsewhere,
should Licensee become aware. Licensor agrees, at its sole cost and expense, to
institute or otherwise defend proceedings as may be appropriate to protect the
Marks, including, to the extent necessary, defense of such proceedings following
termination of this License Agreement. In connection with any such proceedings,
Licensee agrees to execute any and all documents and to do whatever reasonable
acts and things as may, in the opinion of counsel for Licensor, be necessary or
advisable to assist Licensor in carrying out the prosecution or defense, and
Licensor agrees to reimburse Licensee for all direct costs incurred by Licensee
in doing these acts and things, except that Licensee shall bear the salary costs
of its employees. Licensor shall have the sole right to institute, defend and
direct proceedings relating to the Marks and Licensee shall not file or
institute any proceedings relating to the Marks without the prior written
consent of Licensor. In the event that Licensee does file or institute any
proceedings relating to the Marks, Licensee shall promptly supply Licensor with
copies of any and all papers and materials relating to such proceedings,
together with such information relating thereto as Licensor may reasonably
request. Notwithstanding anything to the contrary in Section VI.B., and whether
or not Licensor undertakes the prosecution or defense of a legal proceeding
relating to one or more of the Marks, Licensor's liability for damages and
losses to Licensee relating to use of one or more of the Marks (including any
loss resulting from Licensor's loss of title or ownership of the Marks or the
rights thereto) shall be limited to the amount of the Application Fee plus the
Annual License Fee paid by Licensee under this License Agreement for the
market(s) in which such liability is determined, for the year during which such
liability is determined.
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8. The Marks are valid and serve to identify the Primary Services, the
Core Products, the Additional Services and the Additional Products provided by
those who are authorized to operate under the Marks. Licensee shall not directly
or indirectly contest the validity, registration or Licensor's ownership of the
Marks, any of Their derivatives, any of the icons or other marks owned by
Licensor, and Licensee shall not directly or indirectly apply for or otherwise
seek to register as a trademark, service mark or design any mark or other
designation which incorporates, which is the same as or confusingly similar to,
or which may dilute Licensor's rights in and to, any of the Marks or their
derivatives, any of the icons or other marks owned by Licensor.
9. Licensee's use of the Marks, and the use thereof by its agents,
retailers, dealers and Affiliates, if any, pursuant to this License Agreement
does not give Licensee or any agent, retailer, dealer or Affiliate, any
ownership interest or other interest in or to the Marks, except the license
granted in this License Agreement. Any and all goodwill arising from use of the
Marks shall inure solely and exclusively to the benefit of Licensor, and upon
expiration or termination of this License Agreement and the license granted by
it, no monetary amount shall be assigned as attributable to any goodwill
associated with use of the Marks by Licensee or its agents, retailers, dealers
or Affiliates.
10. Licensor has and retains the following rights, among others:
(i) To use the Marks itself, in connection with local, regional
and national advertising and promotion, including conducting
activities designed to enhance the goodwill associated with the Marks,
and, subject to the provisions of Section I hereof, with directly or
indirectly selling products and services (including telecommunications
products and services) both within and outside the Licensed Territory;
(ii) To grant licenses for use of the Marks in addition to those
licenses already granted to existing licensees of the Marks;
(iii) To use the Marks in any manner reserved for Licensor
pursuant to Section I; and
(iv) To create derivatives of the Marks and exploit, promote and
license such derivatives.
11. In the event that any of the Marks or icons, including any
trademarks, service marks and design logos adopted after execution of this
License Agreement which become Marks, can no longer be used, Licensor reserves
the right to provide a substitute mark or design with reasonable notice to
Licensee.
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C. INCIDENTAL USE
1. For the purposes of this License Agreement, the promotion, sale and
delivery of Primary Services, the Core Products, Additional Services and
Additional Products in accordance with this Section VI.C. shall be considered
"Incidental Use" of the Marks.
2. During the Term, and subject to the other provisions of this
License Agreement, Licensee shall be entitled to conduct its business of
providing Primary Services, Core Products, Additional Services and Additional
Products throughout the Licensed Territory, without the necessity of abandoning
or failing to serve any part of the Licensed Territory because such business
might become known to, or because Licensee might from time to time sell products
or services to, persons or businesses resident or located outside of the
Licensed Territory. Licensee shall not be prohibited by the terms of this
License Agreement from promoting Primary Services outside of the Licensed
Territory to the extent necessary to provide Primary Services in accordance with
the Quality Standards throughout the Licensed Territory. In addition, except
that Licensee shall not specifically direct its promotional activities to
potential customers outside of the Licensed Territory, Licensee shall be
entitled to utilize regional or other media in connection with promoting its
Primary Services, Core Products, Additional Services and Additional Products
within the Licensed Territory. Licensee shall not adopt.promotional pricing or
otherwise seek to distribute Primary Services, Core Products, Additional
Services or Additional Products outside of the Licensed Territory, but shall not
be precluded from doing business with persons or entities it knows to be
resident outside of the Licensed Territory.
3. This Section VI.C. does not entitle Licensee to utilize the Marks
for products or services other than Primary Services, Core Products, Additional
Services and Additional Products, nor does it allow use of the Marks by Licensee
outside of the Licensed Territory except strictly in accordance with Section
VI.C.2. above. Licensor shall have the sole right to restrict Licensee's
Incidental Use of the Marks at any time and in such manner as Licensor shall
determine necessary or appropriate to prevent such Incidental Use from
breaching, infringing upon, or otherwise conflicting with, the rights of any
other current or future licensee of the Mark(s). Licensee's Incidental Use of
the Marks may also be restricted under Section VI.D. below, notwithstanding this
Section VI.C., to avoid or mitigate Potential Customer Confusion (as
subsequently defined).
D. POTENTIAL CUSTOMER CONFUSION
1. Notwithstanding any other provision of this Section VI. to the
contrary, in the event that as a result of economic, demographic or
technological changes within or affecting the Licensed Territory from and after
the date of this License Agreement, Licensor reasonably determines that actual
or potential customers of another licensee of the Marks, or any of them, are or
are likely to consider Licensee to be, or to be affiliated with, such other
licensee of the Marks or not readily distinguishable therefrom (such
circumstances being referred to as "Potential Customer Confusion"), Licensor
shall be entitled to modify the provisions of this
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License Agreement and any Exhibit hereto for the purpose of reducing the
circumstances giving rise to the Potential Customer Confusion.
2. In seeking to reduce Potential Customer Confusion, Licensor shall
consider requiring providers (including Licensee) of products or services which
are the source of Potential Customer Confusion to adopt tag lines or otherwise
differentiate such products or services before amending this License Agreement
in a manner that would require a material modification in the conduct of
Licensee's telecommunications business relating to the Marks.
3. Without limiting the generality of the foregoing, and without
limiting any other rights which Licensor may have hereunder with respect to
Additional Products or Additional Services, Licensor shall be entitled, with or
without the consent of Licensee, to reduce the size of the Licensed Territory
with regard to Additional Products or Additional Services or to delete or modify
the description of any Additional Product or Additional Service set forth on
Exhibit D hereto for the purpose of mitigating or eliminating Potential Customer
Confusion. Upon such reasonable written notice to Licensee as Licensor in its
discretion determines, but in no event to exceed sixty (60) days, regarding the
existence of Potential Customer Confusion resulting, in whole or in part, from
Licensee's promotional activities, Licensee shall modify such promotional
activities to the extent reasonably necessary to prevent or mitigate, to the
extent possible, the continuation of events or circumstances previously giving
rise to Potential Customer Confusion.
VII. CONFIDENTIAL INFORMATION
A. DEFINITION
Any and all information, knowledge, know-how, and techniques which
Licensor or Licensee designates as confidential shall be deemed "Confidential
Information" for purposes of this License Agreement, except:
1. Information which either party can demonstrate was known to it
prior to disclosure thereof by the other party; or
2. Information which, at or after the time of disclosure by one party
to the other, had become or later becomes a part of the public domain, through
publication or communication by others through no fault of the party receiving
the information.
B. PROHIBITIONS
Licensor and Licensee each agree that it will use its best efforts,
during the term of this License Agreement and for one year following expiration
or termination of this License Agreement, to prevent the communication or
divulgence, to any other person, partnership, association, corporation or
business enterprise of any Confidential Information which may be
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communicated to it or of which it may be apprised pursuant to this License
Agreement. Licensor shall be deemed to have used its best efforts to prevent
such communication or divulgence if it has distributed guidelines to its
employees in an effort to maintain an information separation between Licensor
and the Partnership Partners and their affiliates, and, specifically, it has
instructed its employees not to divulge any Confidential Information, including
customer information, to the Partnership Partners or their affiliates, and shall
have obtained the executed confidentiality agreements referred to in Section
VII.C. from those persons designated in such Section. In circumstances where
Licensee is in direct competition with one of the Partnership Partners or their
affiliates in any one or more of the market(s) in the Licensed Territory,
Licensor will instruct its employees that no information regarding Licensee's
business of providing Primary Services, Core Products, Additional Products or
Additional Services in that market should be disclosed to that Partnership
Partner or its affiliates. The parties agree that statistical performance
information regarding licensees of the Marks which does not identify individual
markets may be reported to the Partnership Partners and their affiliates and
shall not be considered Confidential Information. Notwithstanding the foregoing,
either party to this License Agreement and the Partnership Partners and their
affiliates may disclose any Confidential Information which any such party may be
legally required to disclose to a government agency or in the context of
litigation or arbitration.
C. LICENSOR CONFIDENTIALITY AGREEMENTS
Licensor will execute, and will cause its employees, agents and
representatives, who are reasonably expected to have access to Confidential
Information of Licensee to execute, an appropriate confidentiality agreement,
which shall provide that any Confidential Information of Licensee made available
to Licensor, Licensor's employees, agents or representatives, pursuant to this
License Agreement, will be kept confidential by all such persons.
D. CONSEQUENCES OF BREACH
Licensor and Licensee each acknowledges that any failure to comply
with this Section VII will cause the other party irreparable injury, and each
party agrees to pay all court costs and reasonable attorneys' fees incurred by
the other party in obtaining specific performance of, or an injunction against
violation of, this Section VII.
VIII. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising programs to the furtherance of the goodwill and
public image of the Marks, the parties agree as follows:
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A. LICENSEE'S ADVERTISING
All advertising and promotion by Licensee in any manner or medium must
be conducted in a dignified manner and must conform to the written and graphic
guidelines specified by~Licensor from time to time, including the Graphic
Standards Manual. Licensee shall display or otherwise employ the Marks in the
manner prescribed by Licensor on all signs and all other advertising and
promotional materials used in connection with Licensee's business, to the extent
relating to Primary Services, Core Products, Additional Services and Additional
Products. If requested by Licensor, Licensee at its own expense shall promptly
provide to Licensor photocopies or other photographic, mechanical, magnetic or
other representations of all print advertisements and promotional materials,
radio/television advertising sequences, graphical interface presentations and
other media presentations using the Marks which Licensee has used at any time
during the six (6) months preceding Licensor's request.
B. MATERIALS PROVIDED BY LICENSOR
Licensor may provide from time to time, in its sole discretion,
advertising and promotional plans and materials, including without limitation,
newspaper mats, television and radio tapes, graphical interface files,
promotional brochures and sales aids. Licensee may use all or any of these
materials in its sole discretion
C. CELLULAR ONE PROMOTIONAL FUND, OTHER ADVERTISING FUNDS
Licensor has established, and Licensee agrees to participate in a fund
for national, local and regional advertising and promotional and other public
programs and activities (the "Cellular One Promotional Fund" or the "Fund") for
licensees of the Marks. Licensor shall have the right to determine, in
accordance with Section V.C. hereof the amount of contributions to be made by
licensee with respect thereto for any year or years during the Term hereof
including any renewal Term. Licensee agrees to make contributions to the
Cellular One Promotional Fund as required hereunder and under Section V.C.
hereof, and agrees that the Fund is to be maintained and administered by
Licensor or its designee as follows:
1. Licensor or its designee shall direct all advertising and/or
promotional programs with sole discretion over the concepts, materials, and
media used in such programs and the placement and allocation thereof. Licensee
agrees and acknowledges that the Cellular One Promotional Fund is intended to
maximize general public recognition, acceptance, and use of the Marks for the
benefit of all licensees of the Marks, and that Licensor or its designee are not
obligated, in administering the Fund, to undertake expenditures for Licensee
which are equivalent or proportionate to Licensee's contribution, or to ensure
that any particular licensee benefits directly or PRO RATA from expenditures by
the Fund.
2. The Cellular One Promotional Fund, all contributions thereto, and
any interest earnings thereon, shall be used for the purpose of meeting any and
all costs of administering, researching, directing, and preparing advertising
and/or promotional activities
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including the cost of preparing and conducting television, radio, magazine,
World Wide Web, e-mail and newspaper advertising campaigns; direct mail and
outdoor billboard advertising; marketing surveys and other public relations
activities; use of advertising agencies to assist therein; promotional brochures
and other marketing materials for licensees of the Marks; and indirect costs,
including reasonable allocation of Licensor's administrative, personnel and
overhead expenses, associated with the implementation of advertising programs,
such as equipment costs and similar costs relating to special national or
regional programs or other similar programs contemplated by Section III.E. All
reasonable costs incurred by Licensor or charged to Licensor by third parties
for the production and dissemination of such advertising and promotional
materials may be charged to the Fund.
3. Licensee shall contribute to the Cellular One Promotional Fund in
accordance with Section V.C. All sums paid by licensees of the Marks to the Fund
shall be maintained in an account separate from the other monies of Licensor and
shall not be used to defray any of Licensor's administrative expenses, except
for such reasonable administrative costs and overhead as Licensor may incur in
activities reasonably related to the administration or direction of the Fund and
advertising programs for licensees of the Marks, and as further set forth in
Section VIII.C.2. Except as set forth in this Section VIII.C., the Fund and any
incidental earnings shall not otherwise inure to the benefit of Licensor.
Licensor or its designee shall maintain separate bookkeeping accounts for the
Fund.
4. It is anticipated that all Licensee contributions to, and
incidental interest earned by, the Cellular One Promotional Fund shall be
expended for advertising and/or promotional purposes during the taxable year
within which the contributions and earnings are received. If, however, excess
amounts retain in the Fund at the end of such taxable year, all expenditures in
the following taxable year(s) shall be made first out of accumulated interest
earnings from previous years, next out of interest earnings in the current year,
and finally from contributions.
5. The Cellular One Promotional Fund is not and shall not be an asset
of Licensor or its designee. A statement of the operations of the Fund as shown
on the books of the Fund shall be prepared annually by an independent certified
public accountant selected by Licensor and shall be made available to Licensee
upon written request.
6. Although the Fund is intended to be of perpetual duration, Licensor
maintains the right to terminate the Fund. The Fund shall not be terminated,
however, until all monies in the Fund have been expended for advertising and/or
promotional purposes or returned to contributors on the basis of their
respective contributions.
In addition, Licensor may establish and Licensee shall contribute to
one or more separate advertising funds for the purpose of promoting types or
groups of Primary Services, Core Products, Additional Products or Additional
Services, utilizing all or part of the fees collected pursuant to Section V.C.
hereof. Except as specifically provided by Licensor when establishing such fund,
or as may be permitted under this License Agreement, such additional funds shall
be
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subject to provisions identical to those applicable to the Cellular One
Promotional Fund described herein.
D. PRICE DISCRETION
Licensee shall have the right to sell its products and offer services
at any price Licensee may determine, and shall in no way be bound by any price
which may be recommended or suggested by Licensor.
IX. INSURANCE
A. REQUIREMENT
Licensee shall promptly procure, and shall maintain in full force and
effect at all times during the Term of this License Agreement, at Licensee's
expense, an insurance policy or policies protecting Licensee, Licensor, and the
Partnership Partners, and their respective affiliates, agents, officers,
directors, shareholders, and employees, against any demand or claim with respect
to personal injury, death, or property damage, or any loss, liability, or
expense whatsoever arising or occurring upon or in connection with Licensee's
business of providing and goods or services utilizing or in connection with the
Marks. Licensor and the Partnership Partners, and their respective affiliates,
agents, officers, directors, shareholders, and employees, shall be named
additional insureds in each such policy.
B. MINIMUM COVERAGE
The policy or policies shall be written by an insurance company with
an Alfred M. Best rating of A or A+, or such other insurance company as Licensor
may reasonably approve, and shall include, at a minimum, such coverages and
policy limits as may reasonably be specified by Licensor from time to time,
which coverages may include, without limitation, comprehensive general liability
insurance, including personal injury, as well as comprehensive automobile
liability coverage for both owned and nonowned vehicles, and property damage
liability coverage, naming Licensor and the Partnership Partners, and their
respective affiliates, agents, officers, directors, shareholders and employees,
as additional insureds in each such policy or policies. Until such time as
Licensor shall in good faith determine that economic or other circumstances
affecting the Cellular One license program require increased insurance coverage,
the following minimum insurance requirements shall be applicable.
1: General liability: $1,000,000 per occurrence or $2,000,000 in the
aggregate;
2. Personal liability: $1,000,000;
3. Property damage: $1,000,000;
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4. Automobile liability: $1,000,000 per occurrence for owned and
operated vehicles;
5. Workers' compensation/Employers' liability: $500,000 policy limit;
6. Disease: $500,000; and
7. Accident: $500,000
C. CERTIFICATES OF INSURANCE
Within thirty (30) days after this License Agreement is executed, and
thereafter at least thirty (30) days prior to the expiration of any such policy,
Licensee shall deliver to Licensor Certificates of Insurance evidencing the
proper coverage with limits not less than those required hereunder. All
Certificates shall expressly provide that not less than thirty (30) days prior
written notice shall be given Licensor in the event of material alteration to,
or cancellation of, the coverages. evidenced by such Certificates.
X. TRANSFER OF INTEREST
A. TRANSFER BY LICENSOR
Licensor shall have the right to transfer or assign all or any part of
its rights or obligations herein to any person or legal entity. If Licensor's
assignee assumes all of the obligations of Licensor under this License Agreement
and sends written notice of the assignment so attesting, Licensee shall promptly
execute a general release of Licensor and the Partnership Partners, and any
affiliates thereof, from any claims against or liabilities of Licensor, the
Partnership Partners or such affiliates arising under this License Agreement.
B. TRANSFER AND PLEDGE BY LICENSEE
If Licensee desires in the Licensed Territory (i) to sell its Primary
Services business for one or more markets and assign its rights under this
License Agreement with respect to such market(s), (ii) to pledge or assign its
rights under this License Agreement to a financial institution or other party in
connection with a financing transaction involving Licensee, or (iii) enter into
a transaction resulting in a Change of Control of Licensee, Licensee shall
notify Licensor in writing and Licensee shall be entitled to transfer, assign,
or pledge its rights under this License Agreement, or effect the Change of
Control, as the case may be, provided:
1. Licensee shall not be in default under this License Agreement.
2. The transferee shall enter into a written assignment, in a form
satisfactory to Licensor, assuming and agreeing to comply with, at Licensor's
option, either this License
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Agreement or Licensor's then current form or forms of license agreement relating
to the Marks, except that in the case of a pledge or collateral assignment to a
financial institution referred to in Section X.B.(ii), such pledge or collateral
assignment need only be made subject to all of the terms and conditions of this
License Agreement. In the case of a Change of Control; Licensee and the new
controlling entity shall enter into a written agreement, in a form satisfactory
to Licensor, agreeing that Licensee shall continue to be entitled to the rights
and subject to the obligations of a licensee hereunder.
3. Licensee shall remain liable for all of the obligations to Licensor
under this License Agreement prior to the effective date of transfer and shall
execute any and all instruments reasonably requested by Licensor to evidence
such liability. The transfer or Change of Control shall not affect any of the
terms or provisions of this License Agreement or the status of the market(s) in
the Licensed Territory pursuant hereto (including without limitation, a market's
default or probation status under this License Agreement), all of which shall be
or remain fully applicable to the transferee or Licensee, as the case may be.
4. Where Licensee provides Primary Services in more than one market
and the transfer or Change of Control involves market(s) comprising less than
all of the markets in the Licensed Territory, the transferee or Licensee, as the
case may be, shall, at Licensor's option, enter into Licensor's then current
form of license agreement for the market(s) being transferred or to which the
Change of Control relates; in such event, this License Agreement shall remain in
full force and effect with respect to Licensee's remaining market(s), if any,
following the transfer or Change of Control.
5. The transferee or new controlling entity, or Proposed transferee or
new controlling entity, as the case may be, shall provide Licensor with such
financial data, certificates of insurance, copies of Permits, and other
information as are required to be provided by Licensee hereunder in connection
with entering into this License Agreement, or otherwise, and such materials and
information shall be current and complete as of the effective date of such
transfer or Change of Control.
6. The transferee shall promptly pay Licensor any transfer fees or
charges then being charged generally by Licensor to transferees of licenses to
use the Marks. In the case of a Change of Control, Licensee shall pay Licensor
any similar fees then being charged generally by Licensor for such Changes of
Control with respect to licensees of the Marks.
Licensee shall be entitled to transfer, assign or pledge its rights under
this License Agreement, or enter into a transaction resulting in a Change of
Control of Licensee, with respect to a portion of a market in the Licensed
Territory, pursuant to the provisions of this Section X.B.
Licensee shall not be entitled to transfer, assign or pledge any of its
rights or obligations under this License Agreement, except by complying with the
provisions of this Section X.B.
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relating thereto, nor shall Licensee permit a Change of Control to occur without
complying with the provisions of this Section X.B.
C. RIGHT TO ADD AFFILIATE AS PARTY
Subject to Section V.H., with the consent of Licensor, Licensee shall
be entitled to assign any or all of its rights under this License Agreement to
use the Marks in connection with the provision of Primary Services, Core
Products, Additional Services or Additional Products in the Licensed Territory,
or any part thereof, to an "Affiliate," which shall mean any business entity
Controlling, under the Control of, or under common Control with Licensee. No
assignment by Licensee of any rights pursuant to this Section X.C. shall relieve
Licensee of its obligations hereunder. In addition, Licensor's consent to such
assignment shall cease to be effective upon the occurrence of a Change of
Control with regard to Licensee or its assignee which results in Licensee or its
assignee no longer being Affiliates. Licensor shall be entitled, from time to
time and upon its reasonable request, to receive from Licensee and any assignee
thereof a certification that assignee continues to be entitled, under this
Section X.C. to utilize the Marks, together with the facts supporting such
entitlement. No, assignee of Licensee shall be entitled to any vote pursuant to
Section IV.E. or to any notices from Licensor hereunder. No conduct on the part
of Licensor with regard to any assignee of Licensee shall be deemed to cause
such assignee to become a licensee hereunder or to have any ownership interest
in this License Agreement. Licensee shall give Licensor prior written notice of
any Change of Control, as defined below, of Licensee or any assignee of
Licensee.
D. CHANGE OF CONTROL
For the purposes of this License Agreement, a "Change of Control" with
regard to any entity shall mean the disposition or acquisition, directly or
indirectly, of Control with regard to such entity. "Control" or "Controlling"
with regard to an entity shall mean the record or beneficial ownership, directly
or indirectly, by any person or entity, or group of persons or entities, of in
excess of a majority of the equity securities of the entity in question, or the
power to designate a majority of the members of the Board of Directors or other
governing body thereof or to otherwise determine the management and policies of
the entity in question.
XI. DEFAULT AND TERMINATION
A. TERMINATION BY LICENSEE
Licensee shall have the right to terminate this License Agreement
without cause at any time upon at least one hundred eighty (180) days advance
written notice to Licensor. Licensee shall remain fully responsible for any fees
and other obligations accruing to Licensor during such notice period.
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B. TERMINATION BY LICENSOR - WITHOUT NOTICE
Licensee shall be deemed to be in default under this License
Agreement, and all rights granted herein shall automatically terminate without
notice to Licensee, if Licensee becomes insolvent or makes a general assignment
for the benefit of creditors; or if a petition in bankruptcy is filed by
Licensee or against Licensee and not actively opposed by Licensee; or if
Licensee is adjudicated as bankrupt or insolvent; or if a bill in equity or
other proceeding for the appointment of a receiver of Licensee or other
custodian for Licensee's business or assets is filed and consented to by
Licensee: or if a receiver or other permanent or temporary custodian of
Licensee's assets or property, or any part thereof, is appointed by any court of
competent jurisdiction; or if proceedings for a composition with creditors under
any state or federal law should be instituted by Licensee or against Licensee
and not actively opposed by Licensee; or if a final judgment remains unsatisfied
or of record for thirty (30) days or longer (unless supersedeas bond is filed);
or if Licensee is dissolved except where the Licensee is a limited partnership
and, promptly following dissolution, such limited partnership is reconstituted
with the same general partners: or if a suit to foreclose any lien or mortgage
against real or personal property used in the operation of Licensee's Primary
Services business is instituted against Licensee and not dismissed within thirty
(30) days or, if actively being opposed by Licensee, within one hundred eighty
(180) days; or if execution is levied against Licensee's Primary Services
business, or any of the property related thereto; or if any material real or
personal property of Licensee used in its Primary Services business shall be
sold after levy thereupon by any sheriff, marshal, or constable; or if Licensee
at any time ceases to operate or otherwise abandons its Primary Services
business or otherwise forfeits the right to do or transact business in any
market(s) in the Licensed Territory; or if Licensee loses its FCC license or FCC
construction permit or any other material Permit for one or more market(s) in
the Licensed Territory or otherwise forfeits the right to do or transact
business in one or more market(s), in which event Licensee's rights under this
License Agreement with respect to such market(s) shall automatically terminate
and this License Agreement shall continue with respect to the remaining
market(s) in the Licensed Territory for which Licensee continues to hold all
necessary FCC license(s) and Permits.
C. TERMINATION BY LICENSOR - UPON NOTICE
Upon the occurrence of any of the following events, Licensee shall be
deemed to be in default and Licensor may, at its option, terminate this License
Agreement and all rights granted hereunder without affording Licensee any
opportunity to cure the default. Said termination shall be effective immediately
upon receipt of notice by Licensee (and Licensee shall remain fully responsible
for any fees and other obligations accruing to Licensor until such termination
becomes effective):
1. If Licensee has been advised of its probation status pursuant to
Section XI.E. and Licensee does not make a good faith effort to formulate and
implement a plan during the term of probation, or, at the end of the term of
probation, Licensee fails to meet the 85% overall minimum customer satisfaction
rating (or the higher percentage established by
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Licensor under Section IV.A.) required in the Licensed Territory as a whole by
the Quality Standards for Primary Services and Core Products;
2. If with regard to the Licensed Territory or any market constituting
a part thereof, Licensee fails in any customer satisfaction survey conducted
pursuant to Section III.C. to attain an overall customer satisfaction rating of
more than 70%, regardless of the terms of any probation;
3. If any principal stockholder or officer of Licensee is convicted of
a felony, a fraud, or any other crime or offense that Licensor believes is
reasonably likely to have an adverse effect on the Marks, the goodwill
associated therewith, or Licensor's interest therein;
4. If a threat or danger to public health or safety results from the
operation of the Licensee's Primary Services business or any of its businesses
relating to the delivery of any Primary Services, Core Products, Additional
Products or Additional Services;
5. If Licensee purports to assign or transfer any rights or
obligations under this License Agreement to any third party (including without
limitation, any reseller) or to effect a Change of Control, contrary to the
terms of Sections VI.B.4 or X.B. of this License Agreement;
6. If, contrary to the terms of Section VII. hereof, Licensee
discloses or divulges Confidential Information provided to Licensee by Licensor;
7. If Licensee knowingly submits any false reports of information to
Licensor or any entity conducting a customer satisfaction survey either during
the application process or subsequent to the execution of this License
Agreement; or
8. If Licensee directly or indirectly contests in any court or
proceeding the validity or registration of, or Licensor's ownership of, any
of the Marks or other rights licensed hereunder.
D. TERMINATION BY LICENSOR - AFTER NOTICE AND OPPORTUNITY TO CURE
Except as provided in Sections XI.B. and XI.C. of this License
Agreement, Licensee shall have thirty (30) days after its receipt from Licensor
of a written notice of termination within which to remedy any default hereunder
(or, if the default cannot reasonably be cured within such thirty (30) days, to
initiate within that time substantial and continuing action to cure the
default), and to provide evidence thereof to Licensor. If after such default is
not cured within that time (or, if appropriate, substantial and continuing
action to cure the default is not initiated within that time), or such longer
period as applicable law may require, this License Agreement shall terminate
without further notice to Licensee effective immediately upon expiration of the
thirty (30) day period or such longer period as applicable law may require (and
Licensee shall remain fully responsible for any fees and other obligations
accruing to
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Licensor until such termination occurs). Licensee shall be in
default hereunder for any failure to comply with any of the requirements imposed
by this License Agreement or to carry out the terms of this License Agreement in
good faith. Such defaults shall include, without limitation, the occurrence of
any of the following events:
1. If Licensee fails to offer the Primary Services and the Core
Products of nationwide call delivery and nationwide roaming, or any of them,
under the specified Marks on a continuous basis and in a manner reasonably
appropriate to promote and further the goodwill of the Marks, throughout the
Licensed Territory in accordance with this License Agreement;
2. If Licensee fails, refuses or neglects promptly to pay when due any
monies, fees or charges due to Licensor or the Fund, or under this License
Agreement, or fails, refuses or neglects promptly to submit information as
required under this License Agreement, or makes any false statements in
connection therewith;
3. If Licensee fails to comply, in any material respect, with the
Graphic Standards Manual or the Quality Standards;
4. If Licensee directly or indirectly misuses or makes any
unauthorized use of the Marks or otherwise materially impairs the goodwill
associated therewith or Licensor's rights therein;
5. If Licensee directly or indirectly engages in any business or
markets any service or product under a name or mark which, in Licensor's
opinion, is confusingly similar to, or may have a tendency to dilute, the Marks;
6. If Licensee shall breach or fail to timely perform any of its
covenants or obligations under this License Agreement including, without
limitation, the covenants of Licensee relating to the Consumer Service Number
program and the Other 800 Programs;
7. If Licensee fails, refuses or neglects promptly to pay when due any
fees or charges or otherwise timely perform its obligations to the Long Distance
Carrier with regard to the Consumer Service Number;
8. If Licensee, by act or omission, permits a continued violation in
connection with the operation of its business of any Permit, law, ordinance,
rule or regulation of a governmental agency, in the absence of a good faith
dispute over its application or legality and without promptly resorting to an
appropriate administrative or judicial forum for relief therefrom; or
9. If any dealer, agent, retailer or Affiliate of Licensee misuses the
Marks or otherwise fails to comply with this License Agreement, and Licensee,
upon request by Licensor, does not promptly (i) cause such dealer, agent,
retailer or Affiliate to cease the misuse
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and to otherwise fully comply with this License Agreement, or (ii) terminate its
business relationship with such dealer, agent, retailer or Affiliate.
E. PROBATION
In the event that a customer satisfaction survey, conducted pursuant
to Section III.C., reveals an overall minimum customer satisfaction rating less
than required pursuant to Section IV.A.2., Licensor shall advise Licensee of an
imposition of probation status for a stated period of time, typically one (1)
year for primary Services and Core Products. Promptly on receipt of this written
notice, Licensee agrees to formulate and implement a written plan to improve the
quality of Licensee's Primary Services and Core Products, so that a subsequent
customer satisfaction survey will indicate compliance with the provisions of
this License Agreement. Licensor shall be entitled to review Licensee's plan
upon reasonable request therefor. The guidelines contained in the Guide to
Quality Operations provided to Licensee by Licensor and the Quality Standards
set forth in Exhibit E are designed to assist Licensee in improving its customer
satisfaction rating. If Licensor determines, in its sole discretion, that
Licensee is not making a good faith effort to formulate and implement such a
plan, or after a reasonable probation period the goals of the plan are not
achieved, then Licensor may elect to extend the term of the probation or
terminate this License Agreement effective upon written notice to Licensee
pursuant to Section XI.C. Any extension of the Term of this License Agreement by
Licensor during any probationary period shall not waive Licensor's rights under
this Section XI.E. or under Section XI.C., and such probationary period, and any
agreements relating thereto, shall continue unaffected.
F. PARTIAL TERMINATION
In addition to any other rights Licensor may have under this
License Agreement with respect to the termination of Licensee's right to
utilize the Marks in connection with Additional Services or Additional
Products, or to amend Exhibit D to delete Additional Services or Additional
Products therefrom, Licensor shall have the rights set forth in this Section
XI.F. From time to time, Licensor may conduct customer satisfaction surveys
specifically relating to Additional Products or Additional Services. In
addition, surveys conducted by Licensor with regard to the Primary Services
may be designed to determine customer satisfaction levels with regard to
Licensee's Additional Products or Additional Services. In the event that any
such customer satisfaction survey reveals an overall minimum customer
satisfaction rating of less than 85% (or such higher percentage as may be
established by Licensor under Section IV.A.), but more than 70%, with regard
to one or more markets constituting a part of the Licensed Territory,
Licensor shall be entitled to impose a probation status with regard to the
Additional Product or Additional Service and the market or markets in
question. Licensor shall advise Licensee of the period of time, typically one
(1) year, of such probation. Promptly upon receipt of this written notice,
Licensee agrees to formulate and implement a written plan to improve the
quality of Licensee's Additional Product or Additional Service in question in
the market or markets in question, so that a subsequent customer satisfaction
survey will indicate compliance with the provisions of this License
Agreement. Licensor shall be entitled to review Licensee's
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plan upon reasonable request therefor. The Guide to Quality Operations provided
to Licensee by Licensor and the Quality Standards set forth in Exhibit E hereto
are designed to assist Licensee in improving its customer satisfaction rating.
Additional customer satisfaction surveys will be commissioned in the market or
markets in question from time to time thereafter as Licensor deems appropriate,
and Licensee agrees to pay the reasonable direct costs of conducting such
additional customer satisfaction surveys. If Licensor determines, in its sole
discretion, that Licensee is not making a good faith effort to formulate and
implement such a plan, or after a reasonable probation period the goals of the
plan are not achieved, then Licensor may elect to extend the term of the
probation or terminate Licensee's right to utilIze the Marks in connection with
the Additional Products or Additional Services in question in the market or
markets in question or in the Licensed Territory as a whole. In the event of
such a termination, Exhibit D hereto shall be amended appropriately. In
addition, if a customer satisfaction survey shall reveal an overall customer
satisfaction rating of 70% or less with regard to any Additional Product or
Additional Service in any market or markets in the Licensed Territory, Licensor,
upon thirty (30) days prior written notice to Licensee, shall be entitled to
terminate Licensee's right to utilize the Marks in connection with such
Additional Services or Additional Products, or any of them, in the market or
markets in question or in the Licensed Territory as a whole, and Exhibit D
hereto shall be amended to delete such Additional Products or Additional
Services therefrom. Any extension of the Term of this License Agreement by
Licensor during any such probationary period shall not waive Licensor's rights
under this Section XI.F., and such probationary period, and any agreements
relating thereto, shall continue unaffected.
G. FORCE MAJEURE
Neither Licensor nor Licensee shall be liable or deemed to be in
default for a delay in or failure of performance that results from any of the
following causes beyond the reasonable control of such party: strikes, work
stoppages, shortages of equipment, supplies or energy, war, insurrection, or
acts of God or the public enemy. Any delay resulting from any such cause shall
extend performance accordingly or excuse performance, in whole or in part, as
may be reasonable; provided however, that (i) said causes shall not excuse
payment of any amount due or owed at the time of such occurrence or payment of
Annual License Fees, Annual Advertising Fees, Consumer Service Number Fees or
other amounts due thereafter, (ii) the party asserting any such cause shall
promptly commence and diligently pursue action to remedy its inability or
failure to perform hereunder, and (iii) in no event shall said causes extend or
excuse performance for more than one hundred twenty (120) days from the time of
performance set forth in this License Agreement. The party asserting the
existence of a force majeure condition under this Section XI.G. shall promptly
notify the other party in writing of the occurrence and nature of any such cause
and shall thereafter regularly inform the other party in writing of the progress
of actions to remedy the inability or failure to perform hereunder.
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XII. OBLIGATIONS UPON TERMINATION OR EXPIRATION
Upon termination or expiration of this License Agreement with respect
to one or more of the market(s) in the Licensed Territory (the "Terminated
Market(s)"), all rights granted hereunder to Licensee with respect to each
Terminated Market shall forthwith terminate, and:
A. DEIDENTIFICATION
1. Licensee shall immediately cease to hold itself out as a present or
former licensee of Licensor with respect to the Terminated Market(s).
2. Licensee shall immediately cease to participate in the Consumer
Service Number program, any Other 800 Programs or any similar national call or
customer routing program utilizing the Marks.
3. Licensee shall immediately and permanently cease to use, in any
manner whatsoever, in the Terminated Market(s) any of the Marks and derivatives
thereof, and all other marks and distinctive forms, slogans, signs, icons,
symbols, monograms and devices associated with the Marks. Without limiting the
foregoing, Licensee shall cease to use all signs, advertising materials, World
Wide Web sites, displays, stationery, forms, and any other articles or clothing
which display or incorporate any of the Marks or any derivatives thereof.
4. Licensee shall take such action as may be necessary to cancel in
the Terminated Market(s) any trade name, fictitious name or equivalent
registration which contains any of the Marks or any other service mark or
trademark of Licensor, and Licensee shall furnish Licensor with proof of
compliance with this obligation within thirty (30) days after termination or
expiration of this License Agreement with respect to the Terminated Market(s).
5. Licensee agrees, in the event it continues to operate a business in
the Terminated Market(s), not to use any reproduction, counterfeit, copy, or
colorable imitation of the Marks or derivatives thereof, either in connection
with such other business or the promotion thereof, which is likely to cause
confusion, mistake, or deception, or which is likely to dilute Licensor's rights
in and to the Marks or derivatives thereof. Further, Licensee agrees not to
utilize any designation of origin or description or representation which falsely
suggests or represents an association or connection with Licensor or any of the
Marks or derivatives thereof in the Terminated Market(s).
6. Licensee shall immediately notify and cause its dealers, agents,
retailers and Affiliates that are using the Marks in the Terminated Market(s) to
immediately cease all use of the Marks and participation in the Consumer Service
Number program and any Other 800 Programs, and further cause its dealers,
agents, retailers and Affiliates to fully comply with all the obligations
applicable to Licensee under this Section XII. with respect to the Terminated
Market(s).
50
<PAGE>
B. Payment of Monies Due
1. Licensee shall promptly pay all sums owing to Licensor, the
Cellular One Promotional Fund and any other advertising fund established
hereunder. If and when this License Agreement is terminated as a result of any
default of Licensee, such sums shall include all damages, costs and expenses,
including reasonable attorney's fees, incurred by Licensor as a result of the
default.
2. Licensee shall pay to Licensor all damages, costs and expenses,
including reasonable attorney s fees, incurred by Licensor subsequent to the
termination or expiration of this License Agreement in obtaining injunctive or
other relief for the enforcement of any provisions of this Section XII.
C. Return of Certain Confidential Documents
If this License Agreement has expired or been terminated with respect
to all of the market(s) in the Licensed Territory, then Licensor and Licensee
shall immediately deliver to the other party all documents which contain
Confidential Information of the other party as defined in Section VII. hereof,
including without limitation, the Guide to Quality Operations (including the 800
Number Supplement) and the Graphic Standards Manual.
XIII. INDEPENDENT STATUS AND INDEMNIFICATION
A. It is understood and agreed by the parties hereto that this License
Agreement does not create a fiduciary relationship between them; that Licensee
shall remain an independent business: and,that nothing in this License Agreement
is intended to constitute either party as an agent, legal representative
subsidiary, joint venturer, partner, employee or servant of the other for any
purpose whatsoever.
B. During the term of this License Agreement and any renewal hereof,
Licensee shall hold itself out to the public as an independent business using
the Marks. pursuant to a license from Licensor. Licensee agrees to take such
action as may be necessary to so notify the public.
C. It is understood and agreed that nothing in this License Agreement
authorizes Licensee to make any contract, agreement, warranty or
representation on Licensor's behalf, or to incur any debt or other obligation
in Licensor's name. Licensor shall in no event assume liability for, or be
deemed liable hereunder as a result of, any such action; nor shall Licensor
be liable by reason of any act or omission of Licensee, its dealers, agents,
retailers or Affiliates in the conduct of their businesses or for any claim
or judgment arising therefrom against Licensee or Licensor. Licensee shall
indemnify and hold Licensor, Licensor's employees, the Partnership Partners
and their affiliates, and their respective officers, directors, employees and
stockholders, harmless from and against any and all claims arising directly
or indirectly from, as a result of, or in connection with, the operation of
the businesses of Licensee, its dealers,
51
<PAGE>
agents, retailers and Affiliates, as well as the costs, including attorney's
fees, of defending against them.
D. It is understood and agreed that Licensor does not establish or certify
manufacturing, technical or performance standards for telecommunications
equipment or customer premises equipment and Licensee will not represent
otherwise to third parties.
XIV. APPROVAL AND WAIVERS
A. Whenever this License Agreement requires the prior approval or consent
of Licensor, Licensee shall make a timely written request to Licensor therefor,
and such approval or consent shall be obtained in writing. Licensor will process
all such requests for approvals and consents in a reasonable and timely manner.
B. Licensor makes no warranties or guarantees upon which Licensee may rely,
and assumes no liability or obligation to Licensee, by providing any waiver,
approval, consent or suggestion to Licensee in connection with this License
Agreement, or by reason of any neglect, delay or denial of any request therefor.
C. No failure of Licensor or Licensee to exercise any power reserved to it
in this License Agreement, or to insist upon compliance by the other party with
any obligation or condition in this Agreement, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver of either
party's rights to demand exact compliance with any of the terms of this License
Agreement. Waiver by Licensor or Licensee of any particular default on the part
of the other party shall not affect or impair the non-defaulting party's right
with respect to any subsequent default of the same or of a different nature; nor
shall any delay, forbearance or omission by Licensor or Licensee to exercise any
power or right arising out of any breach or default by the other party of any of
the terms, provisions or covenants of this License Agreement affect or impair
such party's rights, nor shall such constitute a waiver by Licensor or Licensee,
as the case may be, of any rights hereunder or rights to declare any subsequent
breach or default.
D. Subsequent acceptance by Licensor of any payments due to it shall not be
deemed to be a waiver by Licensor of any preceding breach by Licensee of any
terms, covenants or conditions of this License Agreement.
XV. NOTICES
Any and all notices required or permitted under this License Agreement
shall be in writing and shall be personally delivered, delivered by reputable
overnight courier, proof of delivery requested, or by certified mail, postage
prepaid and return receipt requested, to the
<PAGE>
respective parties at the following addresses unless and until a different
address has been designated by written notice to the other party:
Notices to Licensor: CELLULAR ONE GROUP
5001 LBJ Freeway
Suite 700
Dallas, Texas 75244
Attn: President
Copy (which shall not
constitute notice) to: Arter & Hadden
1717 Main Street, Suite 4100
Dallas, Texas 75201
Attn: Cellular One Group
Notices to Licensee: At the address shown on the signature page hereof.
Any notice by overnight courier or certified mail shall be deemed to have
been given at the date and time such notice is accepted by the overnight courier
or deposited with the U.S. Postal Service, respectively. No failure to address
any notice hereunder to a particular individual shall render such notice
invalid.
XVII. ENTIRE AGREEMENT
This License Agreement, the documents referred to herein, and the
attachments hereto, if any, constitute the entire, full and complete License
Agreement between Licensor and Licensee concerning the subject matter hereof,
and supersede all prior agreements. Without limiting the foregoing, this License
Agreement shall be deemed to amend and restate in its entirety and to supersede,
for all purposes, any prior license agreement between the parties hereto which
contemplates or has as its primary purpose the grant of a license to use any of
the Marks. Except for those permitted to be made unilaterally by Licensor
hereunder, no amendment, change or variance from this License Agreement shall be
binding on either party unless mutually agreed to by the parties and executed by
their authorized officers or agents in writing.
XVI. SEVERABILITY AND CONSTRUCTION
A. Except as expressly provided to the contrary herein, each portion,
section, part, term and/or provision of this License Agreement shall be
considered severable; and if, for any reason, a portion, section, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with, any existing or future law or regulation by a court or agency
having valid jurisdiction, such shall not impair the operation of, or have any
other effect upon,
53
<PAGE>
such other portions, sections, parts, terms and/or provisions of this License
Agreement as may remain otherwise intelligible; and the latter shall continue to
be given full force and effect and bind the parties hereof; and said invalid
portions, sections, parts, terms and/or provisions shall be deemed not to be a
part of this License Agreement.
B. Nothing in this License Agreement is intended, nor shall be deemed, to
confer any rights or remedies upon any person or legal entity other than
Licensor or Licensee, and their respective successors and assigns as permitted
by this License Agreement.
C. In the event a court in a final decision rules that any provision of
this License Agreement or portion thereof is unenforceable, Licensee agrees to
be bound by the maximum duty ruled enforceable by the court.
D. All captions in this License Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
E. All references herein to the masculine, neuter or singular shall be
construed to include the masculine, feminine, neuter or plural, where
applicable.
F. This License Agreement may be executed in several counterparts, and each
copy so executed shall be deemed an original.
XVIII. APPLICABLE LAW
A. THIS LICENSE AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY
LICENSOR IN THE STATE OF TEXAS AND SHALL BE GOVERNED BY, AND INTERPRETED AND
CONSTRUED UNDER, THE LAWS THEREOF, WHICH LAWS SHALL PREVAIL IN THE EVENT OF ANY
CONFLICT OF LAW; PROVIDED, HOWEVER, THAT IF ANY OF THE PROVISIONS OF THIS
LICENSE AGREEMENT WOULD NOT BE ENFORCEABLE UNDER THE LAWS OF THE STATE OF TEXAS,
THEN SUCH PROVISIONS SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED UNDER,
THE LAWS OF THE STATE IN WHICH THE LICENSED TERRITORY IS LOCATED (IF THE
LICENSED TERRITORY CONTAINS PORTIONS OF MORE THAN ONE STATE OR THE DISTRICT OF
COLUMBIA, THEN THE APPLICABLE LAW SHALL BE THAT OF THE STATE IN WHICH THE
LARGEST PORTION OF THE LICENSED TERRITORY IS LOCATED).
B. No right or remedy conferred upon or reserved to Licensor or Licensee by
this License Agreement is intended to be, nor shall be deemed, exclusive of any
other right or remedy herein or by law or equity provided or permitted, but each
shall be cumulative of every other right or remedy.
54
<PAGE>
C. Nothing herein contained shall bar Licensor's right to apply for
injunctive relief against threatened conduct that will cause it loss or damages,
under applicable equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
XIX. ACKNOWLEDGMENTS
A. Licensee acknowledges that it is currently engaged in the
telecommunications business and that such business involves substantial
investment and risks and that its success is largely dependent upon the ability
of Licensee's management and technical personnel. Licensor expressly disclaims
the making of, and Licensee acknowledges that it has not received, any warranty
or guarantee, express or implied, as to the potential volume, profits, or
success resulting from the utilization of the Marks by Licensee in its
telecommunications business.
B. Licensee acknowledges that it received a copy of the complete Cellular
One License Agreement and the Exhibits thereto at least five (5) business days
prior to the date on which this License Agreement is signed by Licensee.
Licensee further acknowledges that it received the disclosure document required
by the Trade Regulation Rule of the Federal Trade Commission entitled
"Disclosure Requirements and Prohibitions Concerning Franchising and Business
Opportunity Ventures" at least ten (10) business days prior to the date on which
this License Agreement is signed by Licensee.
C. Licensee acknowledges that it has read and understood this License
Agreement and the attachments hereto, and that Licensor has accorded Licensee
ample time and opportunity to consult with advisors of Licensee's own choosing
about the potential benefits and risks of entering into this License Agreement
on the effective date set forth below.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
55
<PAGE>
WITNESS WHERE OF, the parties hereto have duly executed this License Agreement
to be effective on the date shown below.
CELLULAR ONE GROUP
By: /s/ Richard J. Lyons
--------------------------------
Title: President
Effective Date: 1/1/97
Primary Contact in Ordinary Course of
Business:
Richard J. Lyons, President
Cellular One Group
5001 LBJ Freeway, Suite 700
Dallas, TX 752244
972/387-5225
972/387-5275 (Fax)
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
<PAGE>
LICENSEE: SYGNET Communications, Inc.
By: /s/ William Zlotnick
-------------------------------------------------
Title: Vice President
----------------------------------------------
Date of Signature: 1/22/97
----------------------------------
PRIMARY CONTACT IN ORDINARY COURSE OF BUSINESS:
Lou Ebert General Manager
Cellular One/Dicomm Cellular Telephone Co.
1800 Rand Bldg.
Buffalo, NY 14203
Phone: 716/854-8900 Fax: 716/854-8904
ADDRESS FOR NOTICE AND VOTING PURPOSES:
William Zlotnick VP & Chief Operating Officer
SYGNET Communications, Inc.
6550-B Seville Drive
Canfield, OH 44406
Phone: 330/565-9508 Fax: 330/782-5379
CONTACT FOR BILLING PURPOSES:
John Anderson Controller
SYGNET Communications
6550-B Seville Dr.
Canfield, Ohio 44406
Phone: 330/565-9505 Fax: 330/565-9519
57
<PAGE>
EXHIBIT A
Cellular One License Agreement
The Marks currently designated by Licensor for use hereunder are as
follows:
<TABLE>
<CAPTION>
Registration or
MARKS APPLICATION NUMBER
<S> <C>
CELLULAR ONE (service mark) 1,839,076
1-800-CELL ONE(1) 75/105,170
CELLULAR ONE NETWORK(2) 74/495,960
LONG DISTANCE BY CELLULAR ONE(2) 75/017,997
PCS BY CELLULAR ONE(2) 75/010,430
PAGING BY CELLULAR ONE(2) 75/010,429
TELCOM BY CELLULAR ONE(2) 75/010,427
DISPATCH BY CELLULAR ONE(2) 75/010,428
DATA BY CELLULAR ONE(2) 75/079,447
VIDEO BY CELLULAR ONE(2) 75/079,445
INTERNET BY CELLULAR ONE(2) 75/088,362
LOCAL CALLING BY CELLULAR ONE(2) -
CELLULAR ONE (trademark)(2) 1,947,105
</TABLE>
(1) Licensor may delete this Mark and/or Licensee's rights with respect to this
Mark may terminate under certain circumstances, as further described in
Section IV.J. of this License Agreement.
(2) Licensor may delete or modify any of these Marks or vary the Additional
Services or Additional Products in connection with which these Marks may be
used by Licensee, in accordance with the provisions of this License
Agreement or in furtherance of Licensor's rights hereunder.
OPTIONAL MARKS*
<TABLE>
<CAPTION>
<S> <C>
CLEAR ACROSS AMERICA 1,907,932
</TABLE>
* Licensee may utilize the optional Marks in accordance with the terms and
provisions of this License Agreement and the Graphic Standards Manual, but
Licensor shall have the right in its sole discretion to terminate
Licensee's use of any of the optional Marks upon thirty (30) dads written
notice to Licensee.
<PAGE>
EXHIBIT B
Cellular One License Agreement
Licensed Territory
<TABLE>
<CAPTION>
Other
FCC Market
Market Name MSA/RSA Market No. Description
<S> <C> <C> <C>
New York 03 RSA 561A1
</TABLE>
Total Population: 486603
<PAGE>
EXHIBIT C
Cellular One License Agreement
Primary Services
<TABLE>
<CAPTION>
Associated
Mark (if any) Primary Services Description
<S> <C> <C>
Cellular One Cellular Telephone Services "A" Side Cellular Telephone Services
</TABLE>
<PAGE>
EXHIBIT D
CELLULAR ONE LICENSE AGREEMENT
ADDITIONAL SERVICES
<TABLE>
<CAPTION>
Core Product Mark Product or Service Description
- ------------------- ------------ ------------------ -----------------------------------------
<S> <C> <C> <C>
X Cellular One Nationwide Call The ability of customers to be reached on
Delivery their wireless phone anywhere in the
United States and its territories (including
Alaska, Hawaii, Puerto Rico and U.S.
Virgin Islands) by having the caller dial
their wireless phone number.
X Cellular One Nationwide The ability of customers to make calls in
Roaming other than "home markets" anywhere in
the United States and its territories
(including Alaska, Hawaii, Puerto Rico and
U.S. Virgin Islands) by dialing the
appropriate phone number.
Cellular One Nationwide Cellular NCCDN shall be a backbone network
Network Call Delivery which consists of hardware/software,
Network transmission links and routing switches or
("NCCDN") protocols, and possessing the physical and
permitting intangible properties and functionality
participating cellular necessary to permit Licensee to offer
customers to Cellular Telephone Services customers the
automatically (i) service codes, (ii) dialing patterns,
receive calls dialed (iii) feature codes, and (iv) recorded
to such customer's messages (the foregoing clauses (i) through
home cellular (iv) being hereafter collectively referred
telephone number to as "Dialing Standards") described in
when roaming the Guide to Quality Operations, within
the United States and its territories
(including Alaska, Hawaii, Puerto Rico and
U.S. Virgin Islands).
</TABLE>
Exhibit D - Page 1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Cellular One Primary Services The Cellular One Mark may be used for
provided in one or more Additional Services if they
combination with are provided in conjunction with the
one or more of the Primary Services; otherwise, the other
Additional Services Marks in this Exhibit are to be used for
the specified Additional Services in
accordance with Licensor's graphic standards.
If the Primary Services are provided
in conjunction with one or more Additional
Services under the Cellular One Mark, Licensee
must, in accordance with Licensor's
graphic standards (i) use the Marks in this
Exhibit for the Additional Services in
question or (ii) use Licensor's designated
form of the descriptive term for the Primary
Services and Additional Services in question
(e.g., Cellular, Long Distance, PCS, Paging,
Telcom, Dispatch, Data, Video, Internet or
Local Calling) rather than the full Marks
shown in this Exhibit (e.g., Long Distance by
Cellular One, Paging by Cellular One, etc.).
</TABLE>
Exhibit D - Page 2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Long Distance by Long Distance An intra-LATA or inter-LATA toll
Cellular One Service telecommunications service
that is primarily viewed as part of a
public switched telephone network
providing users in fixed (such as
residences and businesses) or mobile
locations with two way voice, data, text,
and image communications. Minimum
requirements for Long Distance Service
include:
- provisioning of telecommunications
service
- offering two-way voice, data and text
communications
- being used as part of a public switched
telephone network
- providing intra-LATA, inter-LATA and
international service
- providing users with the ability to
terminate calls nationally and
internationally
- allowing customers utilizing any or all
of the full spectrum of telecommunications
services such as Cellular, PCS, Paging,
Dispatch, Alternate Wireless Services and
Telcom, to subscribe to this service.
</TABLE>
Exhibit D - Page 3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
PCS by Personal A wireless telecommunications service that is
Cellular One communication interconnected to a public switched
services telephone network providing users with at
least intra-LATA and inter-LATA two-way
voice and data communications. Service is
provided through a mobile phone (car,
transportable, or portable) or through
wireless modems incorporated into devices
such as lap top computers and electronic
notebooks. Minimum requirements of PCS are:
- provisioning of wireless
telecommunications service
- offering two-way voice and data
communications
- interconnecting to a public telephone
network
- providing intra-LATA and inter-LATA
service
- supplying service through:
- mobile phones that are mobile (car),
transportable or portable, or
- wireless modems incorporated into
devices such as lap top computers and
electronic notebooks.
</TABLE>
Exhibit D - Page 4
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Paging by Paging A wireless telecommunications
Cellular One messaging service providing users
with at least one-way voice and/or data
communications such as voice or data
messaging or data transfer to a pager or a
device such as a lap top computer, or
mobile phone with a built in pager.
Minimum requirements of Paging are:
- provisioning of a wireless
telecommunications service
- offering at least one way voice and/or
data communications
- providing service through analog or
digital technology for paging devices that
either are stand-alone or part of a device
such as a lap top computer or a mobile
phone.
Telcom by Cellular A combination of Telecommunications products and services
One telecommunications that are part of or interconnected
products or primarily to a public switched telephone
services, including network providing users in fixed locations such
products such as as a residence and businesses with local,
handsets, modems intra-LATA and inter-LATA two-way voice,
and PBX- like data, text, and image communications. Minimum
devices and services requirements for Telcom include:
such as Cellular
Telephone Services, - providing service to users in fixed
Alternate Wireless locations such as residences and
Services, private businesses
network services,
or local calling - offering two-way voice, data and text
(exchange) communications
services
- interconnecting to a public switched
telephone network
- providing local, intra-LATA or
inter-LATA service.
</TABLE>
Exhibit D- Page 5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Dispatch by Dispatch Services A wireless telecommunications
Cellular One messaging service providing users with
"push to talk" two-way voice dispatch and
data broadcast that is generally used in
the public safety, construction, and
transportation industries, and that can be
interconnected to a public telephone
network. Minimum requirements for Dispatch
include:
- provisioning of wireless analog
telecommunications service
- offering two-way voice and data
communications
- providing "push to talk" technology for
organizations and multiple vehicles or
locations
- interconnecting with a public telephone
network.
Data by Data Transmission Transmission of information in a numerical
Cellular One form that is in either a digital or analog
format which can be transmitted via local,
intra-LATA and inter-LATA facilities
through a wireless telecommunications
network that is interconnected to a public
switched telephone network and
subsequently processed.
Video by Cellular Video Delivery Providing full motion images and
One Services conversational audio transmission which
can be sent or received in synchronization
via wired and wireless facilities.
Internet by Internet Services A wired or wireless telecommunications
Cellular One access to a data base of articles,
information and entertainment through the
Internet/World Wide Web.
Exhibit D- Page 6
<PAGE>
Local Local Calling An intra-LATA telecommunications service
Calling by (exchange) that is primarily viewed as part of a
Cellular One Services public switched telephone network
providing users in fixed (such as
residences and businesses) locations with
two-way voice, data, text, and image
communications. Minimum requirements for
local calling services include:
- provisioning of telecommunications
service
- offering two-way voice, data and text
communications
- being used as part of a public switched
telephone network
- providing intra-LATA service
- providing users with the ability to
terminate calls nationally and
internationally
- allowing customers utilizing any or all
of the full spectrum of telecommunications
services, such as Cellular, PCS, Paging
Dispatch, Alternate Wireless Services and
Telcom, to subscribe to this service.
</TABLE>
ADDITIONAL PRODUCTS
<TABLE>
<CAPTION>
CORE PRODUCT MARK PRODUCT OR SERVICE DESCRIPTION
- ----------------- ---------------- ------------------------- -----------------------------------------------
<S> <C> <C> <C>
Cellular One Wireless Cellular telephones, handsets, transceivers,
Communications pagers (remote data receptors), personal
Equipment digital assistants (wireless data devices
which can receive and send data messages),
modems and facsimile machines, and parts
and accessories therefor.
</TABLE>
Exhibit D - Page 7
<PAGE>
EXHIBIT E
Cellular One License Agreement
Quality Standards
<TABLE>
<CAPTION>
QUALITY STANDARDS MEASUREMENT
----------------- ----------------
<S> <C>
- - Overall Minimum - 85% of surveyed respondents answered
Customer Licensor's commissioned satisfaction
Satisfaction survey as "very satisfied" or somewhat
Rating satisfied" with their Cellular One service
overall
- - Reliability of - Majority of surveyed respondents answered
placing and Licensor's commissioned satisfaction
completing a call survey "As Expected" or "Better than
Expected" for the reliability of placing
and receiving a call in home calling area
("Home Market")
- - Voice quality - Majority of surveyed respondents answered
Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the quality of voice or
sound during Cellular One calls in Home
Market
- - System Busy - Majority of surveyed respondents answered
Signals Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the ability to place or
receive calls without a system busy signal
in Home Market
- - Dropped Calls - Majority of surveyed respondents answered
Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the ability to continue
phone calls without being dropped because
of weak signal
- - Quickness of - Majority of surveyed respondents answered
answering Licensor's commissioned satisfaction
customer call survey "As Expected" or "Better than
Expected" for the quickness of answering
the phone
- - Ability to - Majority of surveyed respondents answered
adequately answer Licensor's commissioned satisfaction
customer's reason survey "As Expected" or "Better than
for calling Expected" for abilIty to adequately answer
reason for calling
- - Accuracy of Bill - Majority of surveyed respondents answered
Licensor's commissioned satisfaction
survey "As Expected" or "Better than
Expected" for the accuracy of the bill
- - Clarity or - Majority of surveyed respondents answered
Understandability Licensor's commissioned satisfaction
of Bill survey "As Expected" or "Better than
Expected" for the clarity or
understandability of the bill
- - Data Quality - Accurately transmit or receive data at a
rate of at least 9,600 bps
</TABLE>
Exhibit E - Page 1
<PAGE>
<TABLE>
<S> <C>
- - Seamless Network - Customers must be able to travel with
their wireless phones outside their Home
Market and make and receive calls without
interruption when they travel beyond their
Home Market
- - Automatic Roaming - Customers must have the ability to make
calls in markets outside of their Home
Market in the same manner as is done in
their Home Markets without any special
dialing sequences or instructions
- - 24 Hour Customer - Customer service must be able to be
Service accessed inside or outside of their Home
Market 24 hours a day, 7 days a week
- - *611 Dialing From - Customers with problems must be able to
a Wireless Phone access customer service from their
wireless phone within and outside their
Home Market by dialing *611
- - 1-800-CELL ONE - A 24 hour service which can be accessed by
prospects and customers for assistance
with telecommunications products and
services by any type of telephone
technology from local and remote sites
</TABLE>
Exhibit E - Page 2
<PAGE>
EXHIBIT F
CELLULAR ONE LICENSE AGREEMENT
SURVEY METHODOLOGY
The methodology currently being employed by Licensor and its designated
Survey Company will be a telephone survey conducted from random probability
samples selected by the Survey Company from listings supplied by Licensee of all
of Licensee's customers in each market in the Licensed Territory.
Customer listings shall be provided to the Survey Company in magnetic
tape or disk medium in such common format as may be reasonably specified by
Licensor. (If Licensee is unable to comply, a half-size, high income probability
sample will be ordered at Licensee's expense).
A random probability sample will be utilized, sufficient in number for
economic completion of the satisfaction survey. The size of the samples will be
at the discretion of Licensor and the Survey Company, but will typically be
between approximately 50 and 200 depending on the size of the market being
surveyed.
<PAGE>
EXHIBIT G
CELLULAR ONE LICENSE AGREEMENT
SPECIAL RESELLER PROVISIONS
[To be agreed to between Licensor and Licensee when applicable]
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports as they relate to Dobson/Sygnet Communications Company and
Dobson/Sygnet Operating Company (and to all references to our Firm) included
in or made a part of this registration statement.
ARTHUR ANDERSEN LLP
Oklahoma City, Oklahoma
February 11, 1999
<PAGE>
[Letterhead]
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated on February 6, 1998, with respect to the consolidated
financial statements of Sygnet Wireless, Inc. included in Amendment No. 1 to
the Registration Statement (Form S-4 No. 333-71051) and related Prospectus of
Dobson/Sygnet Communications Company for the registration of $200,000,000 of
its senior notes due 2008.
/s/ Ernst & Young LLP
Ernst & Young LLP
Cleveland, Ohio
February 10, 1999
