SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(MARK ONE)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION A3 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-16560
Vanguard Cellular Systems, Inc.
(Exact name of registrant as specified in its charter)
North Carolina 56-1549590
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2002 Pisgah Church Road, Suite 300
Greensboro, North Carolina 27455
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (910) 282-3690
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___.
The number of shares outstanding of the issuer's common stock as
of August 8, 1994 was 38,579,299 (as adjusted to reflect a 3 for
2 stock split to be effected in the form of a 50% stock dividend
payable on August 23, 1994 to shareholders of record on August 4,
1994).
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets - I-1
June 30, 1994 and December 31, 1993
Condensed Consolidated Statements of Operations - I-2
Three months ended June 30, 1994 and 1993, and
Six months ended June 30, 1994 and 1993
Condensed Consolidated Statements of Cash Flows - I-3
Six months ended June 30, 1994 and 1993
Notes to Condensed Consolidated Financial I-4
Statements
Item 2. Management's Discussion and Analysis of I-7
Results of Operations and Financial Condition
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security II-1
Holders
Item 6. Exhibits and Reports on Form 8-K II-1
SIGNATURES II-2
<PAGE>
Item 1. Financial Statements
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands)
<TABLE>
<Captions>
June 30, December 31,
ASSETS 1994 1993
(Substantially all pledged on long-term debt) (Unaudited) (See note)
<S> <C> <C>
Current Assets:
Cash.................................................. $ 3,120 $ 9,098
Accounts receivable, net of allowances for doubtful
accounts of $2,186 and $1,771....................... 19,223 12,167
Cellular telephone inventories........................ 3,827 4,464
Prepaid expenses...................................... 685 918
Total current assets....................... 26,855 26,647
Investments (Note 2).......................................... 200,093 177,415
Property and Equipment, net of accumulated depreciation of
$73,553 and $65,830......................................... 91,328 71,716
Other Assets, net of accumulated amortization of $1,782 and
$4,459...................................................... 10,290 8,651
Total assets............................... $328,566 $ 284,429
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses.................. $ 33,100 $ 21,470
Customer deposits ..................................... 534 481
Total current liabilities................... 33,634 21,951
Long-Term Debt................................................. 286,655 238,153
Minority Interests ............................................ 2,469 2,427
Commitments and Contingencies
Shareholders' Equity:
Preferred stock - $.01 par value, 1,000,000 shares
authorized, no shares issued.......................... -- --
Common stock, Class A - $.01 par value, 60,000,000
shares authorized, 38,558,675 and 38,398,080 shares
issued and outstanding................................ 386 384
Common stock, Class B - $.01 par value, 30,000,000
shares authorized, no shares issued................... -- --
Additional capital in excess of par value.............. 186,383 185,786
Net unrealized holding losses.......................... (12,391) --
Accumulated deficit.................................... (168,570) (164,272)
Total shareholders' equity.................. 5,808 21,898
Total liabilities and shareholders' equity.. $328,566 $ 284,429
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these balance sheets.
Note: The balance sheet at December 31, 1993 has been derived from
the audited financial statements at that date.
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VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
<TABLE>
<Captions>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1994 1993 1994 1993
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenues:
Service fees.............................. $ 35,473 $ 24,412 $ 63,975 $ 44,648
Cellular telephone equipment revenues.... 4,485 2,039 8,395 3,485
Other.................................. 797 -- 1,476 --
40,755 26,451 73,846 48,133
Costs and Expenses:
Cost of service............................... 5,178 3,457 9,978 6,525
Cost of cellular telephone equipment.......... 6,610 2,742 12,539 4,677
Marketing and selling......................... 8,174 5,072 14,966 9,423
General and administrative.................... 11,027 8,595 20,172 16,348
30,989 19,866 57,655 36,973
Income From Operations Before Depreciation 9,766 6,585 16,191 11,160
and Amortization...................................
Depreciation and Amortization....................... (6,336) (6,582) (11,319) (12,809)
Income (Loss) From Operations.......................... 3,430 3 4,872 (1,649)
Net Gain (Loss) on Dispositions ....................... 320 (383) 7 (390)
Interest Expense....................................... (5,137) (3,795) (9,121) (7,584)
Other, net............................................. 191 97 (14) 139
Loss Before Minority Interests and Extraordinary Item.. (1,196) (4,078) (4,256) (9,484)
Minority Interests..................................... (47) 79 (42) 49
Net Loss Before Extraordinary Item..................... (1,243) (3,999) (4,298) (9,435)
Extraordinary Item..................................... -- (3,715) -- (3,715)
Net Loss............................................... $(1,243) $(7,714) $(4,298) $(13,150)
Net Loss Per Share Before Extraordinary Item........... $ (0.03) $ (0.11) $ (0.11) $ (0.25)
Net Loss Per Share .................................... $ (0.03) $ (0.20) $ (0.11) $ (0.35)
Weighted Average Number of Common
Shares Outstanding ..................................38,446,752 37,849,653 38,424,448 37,838,841
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
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<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(Dollar amounts in thousands)
<TABLE>
<CAPTION>
1994 1993
(Unaudited (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss......................................................... $ (4,298) $ (13,150)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization................................. 11,319 12,809
Amortization of deferred debt issuance costs.................. 643 415
Equity in losses of unconsolidated cellular entities.......... 100 17
Minority interests............................................ 42 (49)
Net gain (loss) on dispositions............................... (7) 390
Extraordinary item............................................ -- 3,715
Non-cash compensation for management consulting services...... (1,071) --
Changes in current items:
Accounts receivable, net.................................... (6,803) (2,867)
Cellular telephone inventories.............................. 637 2
Account payable and accrued expenses........................ 11,584 360
Other, net.................................................. 286 (186)
Net cash used in operating activities........................ 12,432 1,456
Cash flows from investing activities:
Purchase of property and equipment............................... (28,677) (10,710)
Proceeds from dispositions of property and equipment............. 51 --
Payments for acquisition of investments.......................... (36,935) (779)
Proceeds from dispositions of cellular interests................. 419 1,204
Capital contributions to unconsolidated cellular entities........ (3) (222)
Net cash used in investing activities........................ (65,145) (10,507)
Cash flows from financing activities:
Principal payments of long-term debt............................. (2) (209,556)
Net proceeds from issuance of common stock....................... 599 291
Proceeds of long-term debt....................................... 48,500 228,500
Debt issuance costs.............................................. (2,203) (8,298)
Increase in other assets......................................... (159) 73
Net cash provided by financing activities.................... 46,735 11,010
Net increase (decrease) in cash.......................................... (5,978) 1,959
Cash, beginning of period................................................ 9,098 9,473
Cash, end of period...................................................... $ 3,120 $ 11,432
SUPPLEMENTAL DISCLOSURE OF INTEREST PAID................................. $ 7,855 $ 7,508
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these statements.
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<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
(Unaudited)
Note 1: Basis of Presentation
The accompanying condensed consolidated financial statements of
Vanguard Cellular Systems, Inc. and Subsidiaries (the Company)
have been prepared without audit pursuant to Rule 10-01 of
Regulation S-X of the Securities and Exchange Commission ("SEC").
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 six month period ended June 30, 1994 are not
necessarily indicative of the results that may be expected for the
year ending December 31, 1994. For further information, refer to
the consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K.
The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and cellular entities in which
the Company holds a majority ownership interest. Investments in
entities holding cellular interests in which the Company exercises
significant influence but does not exercise control through majority
ownership have been accounted for using the equity method of
accounting. Ownership interests in entities in which the Company does
not exercise significant influence or not control through majority
ownership have been accounted for using the cost method of accounting.
The Company maintains an ownership interest in Geotek Communications,
Inc. ("Geotek"), a publicly held company. Under the provisions of
Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities", which are
effective for 1994, this investment is classified as "available for
sale". As such, the investment is recorded at its market value and
any unrealized gains or losses are recorded as a separate component of
shareholders' equity but do not affect results of operations.
Certain amounts in the statement of operations for the three months
and six months ended June 30, 1993 have been reclassified to conform
to the 1994 presentation. The Company reclassified certain direct
pass through items previously recognized as service revenue in its
Statements of Operations to cost of service expenses to conform with
industry practice. These reclassified items relate to charges
associated with the Company's subscribers roaming into adjacent
cellular markets. The reclassification has had no effect on the
Company's net loss or net loss per share.
Effective January 1, 1994, the Company also changed the depreciable
lives of certain of its property and equipment to more closely
approximate its historical experience and the useful lives of these
assets. These life changes affected assets representing approximately
I-4
<PAGE>
30% of the cost of the Company's depreciable assets. This change
reduced depreciation expense and net loss for the three months and six
months ended June 30, 1994 by approximately $900,000 and 1.8 million
or $0.02 and $0.05 per share, respectively.
Note 2: Investments
Cellular Entities
During 1993, the Company entered into an agreement to acquire in 1994,
two cellular markets contiguous to its Pennsylvania Supersystem. The
acquisition of these two markets, Altoona, PA and Chambersburg, PA,
was in exchange for $4.4 million in cash, the exchange of the
Hagerstown, MD cellular market and ownership interests in one minority
owned cellular market. In April, 1994, the Company completed the
closing of this transaction. As a result, the operations of the
Hagerstown, MD market are no longer included in the operations of the
Company and the operations of the Altoona and Chambersburg markets are
included in the consolidated financial results of the Company.
Subsequent to June 30, 1994 the Company entered into agreements to
acquire four cellular markets contiguous to or near its existing
operating regions in exchange for an aggregate purchase price of
approximately $58.5 million in cash or stock. The Company will
purchase for approximately $48.5 million payable in cash or Class A Common
Stock or a combination thereof at the Company's option, a 97.0% ownership
interest in the Binghamton, New York MSA and a 100% ownership interest in the
Elmira, New York MSA. These markets are contiguous to the Company's
Pennsylvania Supersystem, which due to this New York expansion the
Company has been renamed the "Mid-Atlantic Supersystem". In a
separate transaction, the Company will purchase, for $6.7 million in
cash and $3.3 million in the Company's Class A Common Stock, the 100%
ownership interest in the Washington, Maine (ME-4) RSA and a 100%
ownership interest in three of the four counties of the Mason, West
Virginia (WV-1) RSA. The Maine RSA is approximately 40 miles north of
the Portland, Maine MSA, which is already operated by the Company.
The West Virginia RSA is contiguous to the Company's Charleston, West
Virginia MSA. All four markets to be acquired are operational
cellular systems. As of December 31, 1993 the aggregate population
and number of subscribers for these four markets was approximately
527,000 and 10,400, respectively, and service fees for the year then
ended was approximately $7.1 million. These acquisitions are expected
to close by the end of 1994.
Geotek
In February 1994, the Company purchased for $30.0 million from Geotek
Communications, Inc. (Geotek) 2.5 million shares of Geotek common
stock and received options to invest up to $167.0 million for an
aggregate of 10 million additional shares. Geotek is a
I-5
<PAGE>
telecommunications company that is developing a Specialized Mobile
Radio (SMR) wireless communications network in the United States based
on its Frequency Hopping Multiple Access digital technology (FHMATM).
Geotek's common stock is traded on the NASDAQ National Market System.
The options received by the Company were issued in three series as
follows: (i) Series A for 2 million shares at $15 per share; (ii)
Series B for 2 million shares at $16 per share; and (iii) Series C for
3 million shares at $17 per share and 3 million shares at $18 per
share. All options are exercisable immediately. The Series A options
expire on the later of February 23, 1995 or the commercial validation
(as defined) of Geotek's first SMR system using FHMA (the Series A
Expiration Date). The Series B and Series C options expire a year and
2 years, respectively, after the Series A Expiration Date. However,
the Company may extend the Series B and Series C options by six months
and the Series C options by an additional six months and, if any
portion of any series of options expires, all unexercised options
expire immediately.
The Company has also entered into a 5-year management consulting
agreement to provide operational and marketing support in exchange for
300,000 shares of Geotek common stock per year, however, should any
portion of the Series A, B or C options expire, the management
consulting agreement is immediately terminated. The Company has
earned and recorded as revenue approximately 105,000 shares under the
management agreement with an aggregate value of $1.1 million based
upon the average closing price of Geotek stock during the periods
held.
Note 3: Long-Term Debt
Long term debt consists of the following as of June 30, 1994 and
December 31, 1993 (in thousands):
June 30, December 31,
1994 1993
(Unaudited)
Borrowings under the 1993 loan agreement:
Facility A Loan $ 120,000 $ 120,000
Facility B Loan 116,500 68,000
Facility C Loan 50,000 50,000
Other Long-Term Debt 155 153
$ 286,655 $ 238,153
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<PAGE>
Note 4: Commitments and Contingencies
Litigation
In June 1989, a suit was filed by a group of former partners in the
San Juan Cellular Settlement Partnership which alleges that the
Company and two of its officers breached fiduciary duties and acted
fraudulently in connection with settlement of licensing proceedings
concerning the San Juan, PR market and certain other markets. The
suit requests $49,000 in compensatory damages, $50,000 in punitive
damages and imposition of a constructive trust upon the Company's
Lancaster, Reading and York, PA cellular operations. The Company
believes that the suit is without merit and intends to vigorously
oppose it and has asserted counterclaims against certain of the
plaintiffs. Discovery is essentially completed. Motions for summary
judgement and responsive pleadings have been filed by the parties,
oral argument has been held and the motions are pending. No trial
date has been set and management is unaware of when a trial date will
be set. Additionally, the Company is involved in various other legal
proceedings arising in the normal course of business. In the opinion
of management, the outcome of the above legal proceedings will not
have a material adverse effect on the consolidated financial position
of the Company.
Note 5: Common Stock
In July, 1994, the Board of Directors declared a 3 for 2 stock split
of its Class A Common Stock to be effected in the form of a 50% stock
dividend payable on August 23, 1994 to shareholders of record on
August 4, 1994 with cash to be paid in lieu of the issuance of
fractional shares. The effect of the split has been retroactively
applied to all common stock and per share amounts disclosed in the
accompanying consolidated financial statements and footnotes.
I-7
<PAGE>
VANGUARD CELLULAR SYSTEMS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
The following is a summary of the Company's ownership interests in
cellular markets in which the Company's ownership interests exceeded
20% at June 30, 1994 and 1993:
June 30,
Cellular Markets 1994 1993
Mid-Atlantic Supersystem:
Allentown, PA/NJ 100.0% 100.0%
Wilkes-Barre/Scranton, PA 100.0 65.7
Harrisburg, PA 86.8 86.8
Lancaster, PA 100.0 100.0
York, PA 100.0 100.0
Reading, PA 100.0 100.0
Williamsport, PA 90.9 73.8
State College, PA 97.0 91.0
Hagerstown, MD -- 85.5
Orange County, NY 100.0 100.0
Wayne, PA (PA-5 RSA) 100.0 100.0
Mifflin, PA (PA-11 RSA) 100.0 100.0
Lebanon, PA (PA-12 RSA) 100.0 --
Chambersburg, PA (PA-10 East RSA) 98.8 --
Altoona, PA 85.0 3.0
West Virginia Metro-cluster:
Huntington, WV/KY/OH 100.0 100.0
Charleston, WV 100.0 100.0
Florida Metro-cluster:
Pensacola FL 100.0 100.0
Fort Walton Beach, FL 100.0 100.0
Carolinas Metro-cluster:
Myrtle Beach, SC (SC-5 RSA) 100.0 100.0
Wilmington, NC 47.7 47.7
Jacksonville, NC 47.3 47.3
New England Metro-cluster:
Portland, ME 100.0 100.0
Portsmouth, NH/ME 100.0 100.0
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<PAGE>
RESULTS OF OPERATIONS
Three Months Ended June 30, 1994 and 1993
In 1994, the Company reclassified certain pass-through items
previously recognized as service revenue in its Statements of
Operations to offset the related cost of service expenses to conform
with industry practice. These reclassified items relate to charges
associated with the Company's subscribers roaming into adjacent
cellular markets. Appropriate reclassifications have been made in
each period presented in the accompanying financial statements.
In July, 1994, the Board of Directors declared a 3 for 2 stock split
of its Class A Common Stock to be effected in the form of a 50% stock
dividend payable on August 23, 1994, to shareholders of record on
August 4, 1994, with cash to be in paid in lieu of the issuance of
fractional shares. The effect of the split has been retroactively
applied to all information herein.
Service fee revenues increased by $11.1 million or 45% primarily as a
result of a 57% increase in the number of subscribers in majority
owned markets to approximately 169,000 as of June 30, 1994 as compared
to the end of the second quarter of 1993. Substantially all of the
increase in the number of subscribers was due to subscriber growth in
markets controlled by the Company in both periods. Total net
subscribers in the Company's majority owned markets increased by
19,000 during the second quarter of 1994 as compared to 8,000 in the
second quarter of 1993. This 138% increase in the growth rate of net
subscriber additions is the result of an increase in productivity by
sales personnel which the Company believes has been augmented by
increased sales training and the growing acceptance of cellular
communications. The growth in net subscriber additions also reflects
the number of agents in the Company's indirect distribution channels
combined with moderate economic recovery in the Company's operating
regions. Average monthly service revenue per subscriber decreased 7%
to $74 for the three months ended June 30, 1994 from $79 during the
same period in 1993.
Cost of service expenses increased as a percentage of service fees to
15% for the three months ended June 30, 1994 as compared to 14% for
the same period in 1993. In many instances in 1994, the Company's
customers who roam into adjacent cellular markets are charged at rates
consistent with those rates the Company charges in its own markets
rather than passing through higher roaming rates customarily charged
by many cellular carriers. This billing practice, while creating a
marketing advantage by providing the customer with a broader virtual
service area, has caused the Company to incur increased net costs
related to the provision of these services. The rapid subscriber
growth which has occurred in the past year has made this larger
virtual service area available to significantly more customers which
has caused greater net costs to be incurred by the Company. The
Company is continuing its efforts to reduce these costs through the
I-9
continued negotiation of more favorable roaming agreements with both
wireline and non-wireline cellular service providers. In addition, the
continued negotiation of more favorable interconnection agreements
with local exchange carriers should contribute to stability in cost of
service as a percentage of service fees.
Marketing and selling expenses increased 61% to $8.2 million during
the three months ended June 30, 1994 as compared to the same period in
1993 and as a percentage of service fees these expenses increased to
23% from 21%. Marketing and selling expenses including the net loss
on subscriber equipment increased to $10.3 million from $5.8 million
during the three months ended June 30, 1994 and 1993, respectively.
The higher rate of growth in net subscriber additions described above
for the 1994 period as compared to the 1993 period and the resulting
increase in salaries and commissions contributed to the increase in
marketing and selling expenses. However, marketing and selling
expenses per net subscriber addition, including the loss on cellular
equipment, declined 25% to $542 in 1994 from $722 during the three
months ended June 30, 1993.
General and administrative expenses increased 28% or $2.4 million
during the three months ended June 30, 1994 but decreased as a
percentage of service fees to 31% from 35% in the same period in 1993.
These expenses declined as a percentage of service fees primarily as a
result of controlled increases of many overhead expenses resulting in
higher utilization of the Company's existing personnel and systems.
General and administrative expenses should continue to decline as a
percentage of service fees as the Company continues to add more
subscribers without commensurate increases in general and
administrative overhead.
Depreciation and amortization decreased $246,000 or 4% during the
three months ended June 30, 1994. The primary reason for this
decrease is that the Company changed the depreciable lives of certain
of its property and equipment to more closely approximate its
historical experience and the estimated useful lives of these assets.
These life changes affected assets representing approximately 30% of
the cost of the Company's depreciable assets. This change reduced
depreciation expense and net loss for the quarter ended June 30, 1994
by approximately $900,000 or $0.03 per share. The remainder of the
decrease is the result of a portion of the Company's property and
equipment becoming fully depreciated during 1993 and, as such, these
assets do not have a continuing effect on depreciation and
amortization or net income.
Interest expense increased $1.3 million or 35% during the three months
ended June 30, 1994, primarily as a result of increased average
borrowings of approximately $65.0 million.
Net loss before extraordinary item decreased from $4.0 million or
$(0.11) per share for the three months ended June 30, 1993 to $1.2
million or $(0.03) per share in the 1994 period. The decrease in net
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loss per share is primarily attributable to an increase in "Operating
Cash Flow" (income (loss)from operations before depreciation and
amortization) of $3.2 million or 48% to $9.8 million.
Six Months Ended June 30, 1994 and 1993
Generally, explanations of changes between specific components of
revenue and costs and expenses contained in the results of operations
for the three month period ended June 30, 1994 apply also to the six
month period ended June 30, 1994.
Service fees for the six months ended June 30, 1994 increased 43% to
$64.0 million primarily as a result of the increase in the number of
subscribers served in the 1994 period. Average monthly revenue per
subscriber was $71 and $74 for the six months ended June 30, 1994 and
1993 respectively.
Cost of service expenses as a percentage of service fees increased to
16% for the six month periods ended June 30, 1994 from 15% in 1993.
As previously explained this increase in the relationship between
service fees and cost of service is largely due to the Company's
subscribers roaming into adjacent cellular markets.
Marketing and selling expenses increased by $5.5 million or 59% and
increased as a percentage of service fees to 23% from 21% during the
six month period ending June 30, 1994 and 1993, respectively. These
increased expenditures are primarily due to increases in advertising
and promotions in 1994. Also contributing were commission expenses
associated with the addition of 36,700 net subscribers during the six
months ended June 30, 1994 as compared to 15,200 during the same
period in 1993.
General and administrative expenses increased $3.8 million or 23% but
declined as a percentage of service fees to 32% during the six months
ended June 30, 1994 from 37% during the same period in 1993.
Depreciation and amortization decreased $1.5 million or 12% during the
six months ended June 30, 1994 as a result of the changes in
depreciable lives of certain of the Company's property and equipment.
The effect of these life changes is to reduce depreciation and
amortization for the six months ended June 30, 194, by $1.8 million or
$0.05 per share.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital to acquire, construct, operate and expand
its cellular systems and to fund operating losses and payments on
indebtedness. In the past, the Company has met these requirements
primarily through private and public sales of its Class A common
stock, seller financing and bank and vendor financing.
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<PAGE>
On April 21, 1993, the Company completed the closing of a $290 million
credit facility, pursuant to a Loan Agreement (the "1993 Loan
Agreement") with various lenders led by the Bank of New York and the
Toronto-Dominion Bank. This agreement was subsequently expanded to
$390 million in February 1994. The 1993 Loan Agreement was used to
repay and terminate the Company's previously existing $275 million
credit facility closed April 1989 (the "1989 Credit Facility"). As
security for borrowings under the 1993 Loan Agreement, the Company has
pledged substantially all of the tangible and intangible assets of the
Company and its subsidiaries. The purpose of this refinancing was to
provide the Company with additional financial and operating
flexibility and enable it to pursue business opportunities that may
arise in the future.
The 1993 Loan Agreement consists of a "Facility A Loan", a "Facility B
Loan", and a "Facility C Loan". The Facility A Loan and the Facility C
Loan, in the amounts of $120 million and $50 million, respectively,
were to refinance the Company's borrowings under the 1989 Credit
Facility. The Facility B Loan is available for capital expenditures,
to acquire cellular franchise interests which are contiguous to or
within 50 miles of any boundary of the Company's Pennsylvania
Supersystem, to make permitted investments, and for general corporate
purposes. In February 1994, the 1993 Loan Agreement was amended to
increase the size of the Facility B Loan to $220 million. As of June
30, 1994, $103.5 million was available for future expenditures under
the amended Facility B Loan.
The Facility A Loan and the Facility B Loan bear interest at a rate
equal to the Company's choice of the Prime Rate, CD Rate or Eurodollar
Rate plus an applicable margin based upon a leverage ratio for the
most recent fiscal quarter. The leverage ratio, which is computed as
the ratio of Total Debt (as defined) to Adjusted Cash Flow (as
defined), currently is at such a level as to cause the applicable
margins on the borrowings to be 1.5%, 2.6% and 2.5% per annum for the
Prime Rate, CD Rate and Eurodollar Rate, respectively. Under the
Facility C Loan, the prescribed rate is the Eurodollar Rate plus a
margin of 3.0% per annum.
The outstanding amount of the Facility A Loan as of March 31, 1996 is
to be repaid in quarterly installments commencing on June 30, 1996 and
terminating at the Facility's maturity date of March 31, 2001. The
Facility B Loan operates as a revolving credit facility with available
borrowings reduced on a quarterly basis commencing on June 30, 1996
and terminating on March 31, 2001. At the time of each quarterly
reduction, the outstanding borrowings must be repaid to the extent
that they exceed the then available commitment. Outstanding
borrowings under the Facility C Loan as of March 31, 2001 shall be
repaid in two equal installments on June 30, 2001 and September 30,
2001, the Facility C Loan Maturity Date.
The 1993 Loan Agreement requires maintenance of certain covenants
including but not limited to maintenance of certain financial ratios
I-12
<PAGE>
and prescribed amounts of interest rate protection. Additionally, the
1993 Loan Agreement restricts, among other things, the creation of
certain additional indebtedness, disposition of certain assets,
payment of cash dividends, capital expenditures and acquisitions and
other uses of proceeds. The requirements of the 1993 Loan Agreement
were established in relation to the Company's projected capital and
projected results of operations. These requirements generally were
designed to require continued improvement in the Company's operating
performance such that its operating cash flow would be sufficient to
begin servicing the debt as repayments are required. The Company is
in compliance with all requirements of the 1993 Loan Agreement and
expects to remain in compliance through December 31, 1994 and beyond.
The Company's operating strategy has been to acquire controlling
ownership interests and build and operate networked cellular telephone
systems in its five regional metro-clusters. On April 26, 1994, the
Company completed the acquisition of two cellular markets contiguous
to its Pennsylvania Supersystem in exchange for $4.4 million in cash,
the exchange of the Hagerstown, MD cellular market and the ownership
interest in one minority owned cellular market. Subsequent to June 30,
1994 the Company entered into agreements to acquire four cellular
markets contiguous to or near its existing operating regions in
exchange for an aggregate purchase price of approximately $58.5
million in cash or stock. The Company will purchase for approximately $48.5
million payable in cash or the Company's Class A Common Stock or a combination
thereof at the Company's option, a 97.0% ownership interest in the Binghamton,
New York MSA and a 100% ownership interest in the Elmira, New York MSA. These
markets are contiguous to the Company's Pennsylvania Supersystem,
which due to this New York expansion the Company has been renamed the
"Mid-Atlantic Supersystem". In a separate transaction, the Company
will purchase, for $6.7 million in cash and $3.3 million in the
Company's Class A Common Stock, the 100% ownership interest in the
Washington, Maine (ME-4) RSA and a 100% ownership interest in three of
the four counties of the Mason, West Virginia (WV-1) RSA. The Maine
RSA is appro-ximately 40 miles north of the Portland, Maine MSA, which
is already operated by the Company. The West Virginia RSA is
contiguous to the Company's Charleston, West Virginia MSA. All four
markets to be acquired are operational cellular systems. As of
December 31, 1993 the aggregate population and number of subscribers
for these four markets was approximately 527,000 and 10,400,
respectively, and service fees for the year then ended was
approximately $7.1 million. These acquisitions are expected to close
by the end of 1994.
As of June 30, 1994 the Company had approximately $165.0 million of
property and equipment placed in service. The Company has
historically incurred capital expenditures primarily based upon
capacity needs in its existing markets resulting from continued
subscriber growth. During the six months ended June 30, 1994, the
Company has accelerated its cellular network buildout through the
purchase of approximately $29.0 million of capital equipment which
included construction of approximately 30 cell sites. During the
remainder of 1994 and during 1995, the Company plans to continue its
I-13
accelerated cellular network buildout by constructing approximately 20
additional cell sites in 1994 and 35 additional cell sites in 1995.
This expansion will increase geographic coverage and provide for
increased portable usage in the Company's cellular markets. The
Company anticipates purchasing approximately $20.0 million and $40.0
million of capital equipment during the remainder of 1994 and during
1995, respectively.
In February 1994, the Company purchased for $30.0 million from Geotek
Communications, Inc. (Geotek) 2.5 million shares of Geotek
common stock and received options to invest up to $167.0 million for
an aggregate of 10 million additional shares. Geotek is a
telecommunications company that is developing a Specialized Mobile
Radio (SMR) wireless communications network in the United States based
on its Frequency Hopping Multiple Access digital technology (FHMATM).
Geotek's common stock is traded on the NASDAQ National Market System.
The options received by the Company were issued in three series as
follows: (i) Series A for 2 million shares at $15 per share; (ii)
Series B for 2 million shares at $16 per share; and (iii) Series C for
3 million shares at $17 per share and 3 million shares at $18 per
share. All options are immediately exercisable. The Series A options
expire on the later of February 23, 1995 or the commercial validation
(as defined) of Geotek's first SMR system using FHMA (the Series A
Expiration Date). The Series B and Series C options expire 1 year and
2 years, respectively, after the Series A Expiration Date. However,
the Company may extend the Series B and Series C options by six months
and the Series C options by an additional six months and, if any
portion of any series of options expires, all unexercised options
expire immediately.
The Company has also entered into a 5 year management consulting
agreement to provide operational and marketing support in exchange for
300,000 shares of Geotek common stock per year. However, should any
portion of the Series A, B or C options expire, the management
consulting agreement is immediately terminated. Approximately 105,000
shares have been earned under this management agreement.
If all options are exercised and all shares are earned and received
under the management consulting agreement, the Company would own an
aggregate of approximately 20% of Geotek's common stock on a fully
diluted basis. Under the provisions of Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", which are effective for 1994, this
investment is classified as "available for sale". As such, the
investment is recorded at its market value and any unrealized gains or
losses are recognized as a separate component of shareholders' equity,
but do not affect results of operations.
The Company funded its initial $30.0 million investment in Geotek
using borrowings under its Facility B Loan, which also permits
borrowings to fund the exercise of the Series A options. In order to
I-14
exercise any of the Series B or C options, the Company will be
required to seek additional lender approval for borrowings under the
Facility B Loan or other financing alternatives.
Operating cash flow improved $5.0 million to $16.2 million during the
six months ended June 30, 1994. The Company's primary goal over the
next several years will be to generate sufficient operating cash flow
to fund its capital expenditures, interest and debt repayment
requirements. In order to continue to improve operating cash flow,
the Company's service fees must continue to increase at a faster rate
than operating expenses. Increases in service fees will be dependent
upon continuing growth in the number of net subscribers and minimizing
declines in revenue per subscriber. The Company believes its business
strategy and sales force will generate continued net subscriber growth
and that its focus on higher revenue customers, principally business
users, will assist in supporting revenue per subscriber. The Company
has substantially completed the development of its managerial,
administrative and marketing functions, as well as the primary
buildout of the cellular networks in its existing markets, and
believes that the rate of service fee growth will exceed the rate of
growth of operating expenses.
Although there can be no assurance that any of the foregoing growth
goals will be achieved, the Company believes that its internally
generated funds and its available bank lines of credit will be
sufficient during the next several years to complete its capital
equipment expansion, fund operating expenses and debt service.
INFLATION
The Company believes that inflation affects its business no more than
it generally affects other similar businesses.
I-15
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Vanguard Cellular Systems, Inc. Annual Meeting of Shareholders
was held May 4, 1994. The proposals voted upon and the results of
voting were as follows:
(1) Election of Class I Directors for a three-year term
Votes Votes
for Withheld
Stuart S. Richardson 19,340,335 136,198
Robert A. Silverberg 19,333,378 143,155
Doris R. Bray 19,331,428 145,105
(2) Proposal to approve 1994 Long-Term Incentive Plan
Votes for: 14,779,136
Votes Against: 1,867,490
Abstained: 208,026
(3) Proposal to approve ratification of Arthur Andersen & Co. as
independent auditors for 1994
Votes for: 19,425,643
Votes against: 13,989
Abstained: 36,901
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits to this Form 10-Q are listed in the accompanying
Index to Exhibits.
(b) There have been no reports filed on Form 8-K during the period.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has fully caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
VANGUARD CELLULAR SYSTEMS, INC.
Date: August 11, 1994 By: /s/ Haynes G. Griffin
Haynes G. Griffin
President
and
Chief Executive Officer
Date: August 11, 1994 By: /s/ Stephen L. Holcombe
Stephen L. Holcombe
Senior Vice President
and
Chief Financial Officer
(principal accounting and
principal financial officer)
<PAGE>
INDEX TO EXHIBITS
Exhibit Sequential
No. Description Page No.
2(a) Stock Purchase Agreement by and among
Registrant, Crowley Cellular Telecom-
munications Limited Partnership and
Crowley Cellular Telecommunications
Binghamton, Inc. dated August 5, 1994.
The following schedules to the Stock
Purchase Agreement have been omitted.
The registrant hereby undertakes to
furnish supplementally a copy of any
such omitted exhibit or schedule to the
Commission upon request.
Exhibit A Capital Budget
Exhibit B Opinion of Buyer's Counsel
Exhibit C Opinion of Seller's Counsel
Schedule 1 Organization of Seller
Schedule 2 Organization of Company
Schedule 3 Organization of the
Licensee
Schedule 6 Absence of Certain Changes
or Events
Schedule 7 Title to Assets, Etc.
Schedule 9 Contracts and Commitments
Schedule 10 Authorizations
Schedule 12 Consents and Approvals
Schedule 13 Financial Statements
Schedule 14 Litigation
Schedule 16 Liabilities
Schedule 20 Proprietary Rights
Schedule 21 Employee Benefit Plans
Schedule 23 Tax Matters
Schedule 25 Insurance
Schedule 28 Customers and Suppliers
*4(a) Charter of the Registrant, filed as
Exhibit 3(a) to the Registrant's
Registration Statement on Form S-1
(File No. 33-18067).
*4(b) Articles of Amendment to Charter of
the Registrant dated May 12, 1989,
filed as Exhibit 3(b) to the
Registrant's Registration Statement on
Form S-4 (File No. 33-35054).
<PAGE>
*4(c)(1) Amended and Restated Bylaws of the
Registrant, filed as Exhibit 4(b) to
the Registrant's Form 10-Q for the
quarter ended September 30, 1990.
*4(c)(2) Amendment to the Bylaws adopted
September 11, 1991, filed as Exhibit
4(c)(2) to the Registrant's Form 8
Amendment to the Registrant's Form 10-
Q for the quarter ended June 30, 1991.
*4(d) Specimen Common Stock Certificate,
filed as Exhibit 4(a) to the
Registrant's Registration Statement on
Form S-1 (File No. 33-18067).
*4(e)(1) Loan Agreement between the Registrant
and various lenders led by The Bank of
New York and The Toronto-Dominion
Bank, as managing agents, dated as of
April 21, 1993, filed as Exhibit 2(a)
to the Registrant's Current Report on
Form 8-K dated as of April 21, 1993.
*4(e)(2) Security Agreement between the
Registrant and various lenders led by
The Bank of New York and The Toronto-
Dominion Bank, as Secured Party, dated
as of April 21, 1993, filed as Exhibit
2(b) to the Registrant's Current
Report on Form 8-K dated as of April
21, 1993.
*4(e)(3) Master Subsidiary Security Agreement
between the Registrant, certain of its
subsidiaries and various lenders led
by The Bank of New York and the
Toronto-Dominion Bank, as Secured
Party, dated as of April 21, 1993
filed as Exhibit 2(c) to the
Registrant's Current Report on Form 8-
K dated as of April 21, 1993.
*4(e)(4) Amendment No. 1 dated as of January
31, 1994 to the Loan Agreement among
Registrant and various lenders led by
The Bank of New York and The Toronto-
Dominion Bank, as managing agents,
filed as Exhibit 8 to Amendment 1 of
Schedule 13D dated February 23, 1994
with respect to the common stock of
Geotek Communications, Inc.
<PAGE>
4(e)(5) Amendment No. 2 dated as of June 30,
1994 among Registrant and various
lenders led by The Bank of New York
and The Toronto-Dominion Bank, as
managing agents, filed as Exhibit 8 to
Amendment 1 of Schedule 13D dated
February 23, 1994 with respect to the
common stock of Geotek Communications,
Inc.
____________
*Incorporated by reference to the statement or report indicated.
_____________________________________________
STOCK PURCHASE AGREEMENT
by and among
CROWLEY CELLULAR TELECOMMUNICATIONS
LIMITED PARTNERSHIP, as "Seller",
CROWLEY CELLULAR TELECOMMUNICATIONS
BINGHAMTON, INC., as the "Company"
and
VANGUARD CELLULAR SYSTEMS, INC., as Buyer
Dated as of August 5, 1994
_____________________________________________
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Defined Terms . . . . . . . . . . . . . . . . . . . . 4
ARTICLE II PURCHASE AND SALE OF STOCK . . . . . . . . . . . . . . . . . 6
2.1 Transfer of Stock . . . . . . . . . . . . . . . . . . . . . 6
2.2 Consideration for Stock . . . . . . . . . . . . . . . . . . 6
ARTICLE III CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Documents to be Delivered . . . . . . . . . . . . . . . . .12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . .13
ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . .13
ARTICLE VI ACTIONS BY SELLER AND BUYER PRIOR TO THE CLOSING . . . . . . .13
6.1 Covenants of Seller . . . . . . . . . . . . . . . . . . . .13
6.2 Covenants of Seller and Buyer . . . . . . . . . . . . . . .16
ARTICLE VII CONDITIONS TO SELLER'S OBLIGATIONS . . . . . . . . . . . . . .19
7.1 Representations, Warranties and Covenants . . . . . . . . .19
7.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . .20
7.3 No Governmental Proceeding or Litigation . . . . . . . . .20
7.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . .20
7.5 Certificates . . . . . . . . . . . . . . . . . . . . . . .20
7.6 Corporate Documents . . . . . . . . . . . . . . . . . . . .20
7.7 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . .20
7.8 Bankruptcy . . . . . . . . . . . . . . . . . . . . . . . .20
7.9 Billing Support Agreement . . . . . . . . . . . . . . . . .21
ARTICLE VIII CONDITIONS TO BUYER'S OBLIGATIONS . . . . . . . . . . . . . .21
8.1 Representations, Warranties and Covenants . . . . . . . . .21
8.2 Consents . . . . . . . . . . . . . . . . . . . . . . . . .21
8.3 No Governmental Proceeding or Litigation . . . . . . . . .22
8.4 Opinion of Counsel . . . . . . . . . . . . . . . . . . . .22
8.5 Billing Support Agreement . . . . . . . . . . . . . . . . .22
8.6 Certificates . . . . . . . . . . . . . . . . . . . . . . .22
8.7 Corporate Documents . . . . . . . . . . . . . . . . . . . .22
8.8 HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . .22
8.9 Clearance Certificate. . . . . . . . . . . . . . . . . . .22
8.10 Nonforeign Affidavit. . . . . . . . . . . . . . . . . . . .22
8.11 Noncompetition Agreement. . . . . . . . . . . . . . . . . .23
i
<PAGE>
Page
ARTICLE IX ACTIONS BY SELLER, THE COMPANY AND BUYER AFTER THE CLOSING . 23
9.1 Cooperation and Records Retention. . . . . . . . . . . . .23
9.2 Further Assurances . . . . . . . . . . . . . . . . . . . .23
9.3 Noncompetition Agreement . . . . . . . . . . . . . . . . .24
9.4 Stock Certificates . . . . . . . . . . . . . . . . . . . .24
9.5 Sale of Vanguard Stock by Seller . . . . . . . . . . . . .24
9.6 Sale of Elmira Assets by Buyer . . . . . . . . . . . . . .24
9.7 Name Change . . . . . . . . . . . . . . . . . . . . . . . .24
9.8 Billing and Conversion Matters . . . . . . . . . . . . . . .25
ARTICLE X INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . .25
10.1 Survival of Representations, Etc . . . . . . . . . . . . .25
10.2 Indemnification . . . . . . . . . . . . . . . . . . . . . .25
10.3 Indemnification Procedures . . . . . . . . . . . . . . . .26
10.4 No Right of Contribution . . . . . . . . . . . . . . . . .27
10.5 Remedies . . . . . . . . . . . . . . . . . . . . . . . . .27
10.6 Tax Indemnification and Procedures. . . . . . . . . . . . .27
ARTICLE XI SECURITIES LAWS . . . . . . . . . . . . . . . . . . . . . . .29
11.1 Acquisition for Investment . . . . . . . . . . . . . . . .29
11.2 Legend . . . . . . . . . . . . . . . . . . . . . . . . . .30
ARTICLE XII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .30
12.1 Termination . . . . . . . . . . . . . . . . . . . . . . . .30
12.2 Assignment . . . . . . . . . . . . . . . . . . . . . . . .30
12.3 Notices; Transfer of Funds . . . . . . . . . . . . . . . .31
12.4 Choice of Law . . . . . . . . . . . . . . . . . . . . . . .32
12.5 Entire Agreement; Amendments and Waivers . . . . . . . . . .32
12.6 Counterparts . . . . . . . . . . . . . . . . . . . . . . .32
12.7 Invalidity . . . . . . . . . . . . . . . . . . . . . . . .32
12.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . .32
12.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . .32
12.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . .32
12.11 Confidential Information . . . . . . . . . . . . . . . . .33
ANNEX I REPRESENTATIONS AND WARRANTIES OF SELLER . . . . . . . . . . . 1
1. Organization of Seller . . . . . . . . . . . . . . . . . . 1
2. Organization of the Company . . . . . . . . . . . . . . . . 1
3. Organization of Licensee . . . . . . . . . . . . . . . . . 1
4. Authorization . . . . . . . . . . . . . . . . . . . . . . . 2
5. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . 2
6. Absence of Certain Changes or Events . . . . . . . . . . . 2
7. Title to Assets, Etc . . . . . . . . . . . . . . . . . . . 4
ii
<PAGE>
Page
8. Condition of Tangible Assets . . . . . . . . . . . . . . . 5
9. Contracts and Commitments . . . . . . . . . . . . . . . . . 5
10. Authorizations . . . . . . . . . . . . . . . . . . . . . . 6
11. No Conflict or Violation . . . . . . . . . . . . . . . . . 6
12. Consents and Approvals . . . . . . . . . . . . . . . . . . 7
13. Financial Statements . . . . . . . . . . . . . . . . . . . 7
14. Litigation . . . . . . . . . . . . . . . . . . . . . . . . 7
15. Labor Matters . . . . . . . . . . . . . . . . . . . . . . . 7
16. Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 8
17. Compliance with Law . . . . . . . . . . . . . . . . . . . . 8
18. No Brokers . . . . . . . . . . . . . . . . . . . . . . . . 8
19. No Other Agreements to Sell the Assets or the Company . . . 9
20. Proprietary Rights . . . . . . . . . . . . . . . . . . . . 9
21. Employee Benefit Plans . . . . . . . . . . . . . . . . . . 9
22. Transactions with Certain Persons . . . . . . . . . . . . .16
23. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . .17
24. Severance Arrangements . . . . . . . . . . . . . . . . . .19
25. Insurance . . . . . . . . . . . . . . . . . . . . . . . . 19
26. Accounts Receivable . . . . . . . . . . . . . . . . . . . 19
27. Payments . . . . . . . . . . . . . . . . . . . . . . . . 20
28. Customers and Suppliers . . . . . . . . . . . . . . . . . 20
29. Compliance With Environmental Laws . . . . . . . . . . . 20
30. Material Misstatements Or Omissions . . . . . . . . . . . 21
ANNEX II REPRESENTATIONS AND WARRANTIES OF BUYER . . . . . . . . . . 1
1. Organization of Buyer . . . . . . . . . . . . . . . . . . 1
2. Authorization . . . . . . . . . . . . . . . . . . . . . . 1
3. Consents and Approvals . . . . . . . . . . . . . . . . . 1
4. No Brokers . . . . . . . . . . . . . . . . . . . . . . . 1
5. No Conflict or Violation . . . . . . . . . . . . . . . . 1
6. Vanguard Stock . . . . . . . . . . . . . . . . . . . . . 2
7. Material Misstatements Or Omissions . . . . . . . . . . . 2
8. Reports . . . . . . . . . . . . . . . . . . . . . . . . . 2
*********************************************
Exhibit A Capital Budget
Exhibit B Opinion(s) of Buyer's Counsel
Exhibit C Opinion(s) of Seller's Counsel
iii
<PAGE>
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated
as of August 5, 1994 is by and among VANGUARD CELLULAR
SYSTEMS, INC., a North Carolina corporation ("Buyer"),
CROWLEY CELLULAR TELECOMMUNICATIONS LIMITED
PARTNERSHIP, a Delaware limited partnership ("Seller"),
and CROWLEY CELLULAR TELECOMMUNICATIONS BINGHAMTON,
INC., a Delaware corporation (the "Company").
RECITALS
A. Seller owns 100 shares of
common stock of the Company, constituting all of the
issued and outstanding capital stock (the "Stock") of
the Company. The Company is a general partner of
Binghamton CellTelCo ("Licensee"), which currently
engages in the non-wireline cellular telephone
business, operating the Cellular Block A telephone
system in the Binghamton, New York metropolitan
statistical area (the "Binghamton System"). The
Company is the licensee of the Cellular Block A
telephone system in the Elmira, New York metropolitan
statistical area (the "Elmira System") (collectively,
the Binghamton System and the Elmira System are herein
referred to as the "Systems").
B. Buyer desires to purchase from
Seller, and Seller desires to sell to Buyer, all of the
Stock subject to the terms and conditions of this
Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of
the mutual covenants and promises contained herein and
for other good and valuable consideration the receipt
and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used
herein, the terms below shall have the following
meanings:
"Authorizations" shall mean all
authorizations, permits and licenses issued by any
governmental authority to the Company and Licensee in
respect of the construction, ownership or operation of
the Systems and all applications for modification,
extension or renewal thereof, including without
limitation, such authorizations, permits and licenses
set forth on Schedule 1.1(a) hereof.
"Balance Sheet" shall mean the
Consolidating Balance Sheets of the Company as of May
31, 1994 and the Consolidating Balance Sheets of the
Company as
<PAGE>
of December 31, 1993, together with the
notes thereon and the related unqualified report of
Arthur Andersen & Co., the Company's certified public
accountants, previously delivered to Buyer and
described in the Disclosure Schedules.
"Balance Sheet Date" shall mean May
31, 1994.
"Closing Date Balance Sheet" shall
mean the Balance Sheet of the Company as of the Closing
Date.
"Code" shall mean the Internal Revenue
Code of 1986, as may be amended from time to time, and
the regulations promulgated thereunder.
"Communications Act" shall mean the
Communications Act of 1934, as amended, and the written
rules, regulations, orders and policies of the FCC
promulgated thereunder.
"Contracts" shall mean any of the
agreements, contracts, commitments or other documents
described in the Disclosure Schedules.
"Disclosure Schedules" means the
schedules delivered by Seller to Buyer on or prior to
the date hereof which sets forth exceptions to the
representations and warranties contained in Annex I
hereof and certain other information called for by
Annex I hereof and other provisions of this Agreement.
"Encumbrances" shall mean any claim,
lien, pledge, option, charge, easement, security
interest, right-of-way, encumbrance or other rights of
third parties.
"Facilities" shall mean the real
property and related facilities which are owned or
leased by the Company or Licensee, including without
limitation the real property and related facilities as
set forth on Schedule 1.1(b) hereof.
"FCC" shall mean the Federal
Communications Commission or any successor agency.
"FCC Consent" shall mean the actions
of the FCC granting its consent to the Transfer
Applications.
"Final Order" means an order, action
or decision of the FCC (or subsequent court order or
judgment) that has not been reversed, stayed, enjoined,
modified or amended and as to which the time to appeal,
petition for certiorari or seek reargument or rehearing
or administrative reconsideration or review has expired
and as to which no appeal, reargument, petition for
certiorari or rehearing or petition for
2
<PAGE>
reconsideration or application for review is pending or
as to which any right to appeal, reargue, petition for
certiorari or rehearing or reconsideration or review has
been waived in writing by each party having such a right
or, if any appeal, reargument, petition for certiorari or
rehearing or reconsideration or review thereof has been
sought, the order or judgment of the court or FCC has
been affirmed by the highest court (or the
administrative entity or body) to which the order was
appealed or from which the argument or rehearing or
reconsideration or review was sought, or certiorari has
been denied, and the time to take any further appeal or
to seek certiorari or further reargument or rehearing,
or reconsideration or review, has expired.
"Financial Statements" shall mean the
Consolidating Statements of Income and Expense for the
five month period ended as of the Balance Sheet Date
and the Consolidating Statements of Income and Expense
for the year ended as of December 31, 1993, together
with the notes thereon and the related unqualified
report of Arthur Andersen & Co., the Company's
certified public accountants, previously delivered to
Buyer and described in the Disclosure Schedules.
"Fixtures and Equipment" shall mean
all of the furniture, fixtures, furnishings, machinery
and equipment owned by the Company or Licensee, and
located in, at or upon the Facilities as of the Balance
Sheet Date plus all additions, replacements or
deletions since the Balance Sheet Date in the ordinary
course of the Company's or Licensee's business,
including without limitation the furniture, fixtures,
furnishings, machinery and equipment set forth on
Schedule 1.1(c) hereof.
"FTC" shall mean the Federal Trade
Commission or any successor agency.
"HSR Act" shall mean the Hart-Scott-
Rodino Antitrust Improvements Act of 1976.
"NYPSC" means the New York Public
Service Commission or any successor agency.
"NYPSC Approval" means the order
issued by the NYPSC approving the sale of the Stock as
contemplated by this Agreement.
"Representative" shall mean any
officer, director, principal, attorney, agent, employee
or other representative.
"Returns" means all returns (including
without limitation information returns), declarations,
reports, statements, and other documents required to be
filed in respect of Taxes, and the term "Return" means
any one of the foregoing Returns.
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"Subsidiaries" shall mean all
corporations, partnerships, joint ventures or other
entities in which the Company either owns capital stock
or is a partner or is in some other manner affiliated
through an investment or participation in the equity of
such entity.
"Target Closing Date" shall mean (a)
the fifth business day after the later to occur of (i)
the date on which all FCC and state regulatory
approvals necessary in order to lawfully consummate the
transactions have been received and shall have become a
Final Order (unless Buyer waives the condition that
such approvals have become Final Orders), or (ii) the
date upon which all applicable waiting periods under
the HSR Act, if any, shall have expired or been
terminated without objection by the FTC or the date
upon which the approval of the United States Department
of Justice with respect to the Closing shall have been
obtained, or (b) such other date as may be mutually
agreed upon in writing by Seller and Buyer.
"Taxes" means all federal, state,
local, foreign, and other net income, gross income,
gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service
use, withholding, payroll, employment, excise,
severance, stamp, occupation, premium, property,
windfall profits, customs, duties, or other taxes,
fees, assessments, or charges in the nature of, or
commonly thought of, as Taxes, together with any
interest and penalties, additions to tax, or additional
amounts with respect thereto, and the term "Tax" means
any one of the foregoing Taxes.
"Transfer Applications" shall mean the
applications filed with the FCC requesting its written
consent to the transfer of control of the
Authorizations from the Company to Buyer.
1.2 Other Defined Terms. The
following terms shall have the meanings defined for
such terms in the Sections set forth below:
Term Section
Actions Annex I - 14
Assets Annex I - 7
Authorizations Annex I - 10
Base Shares 2.2(c)
Base Stock Price 2.2(a)
Benefit Arrangement Annex I - 21
Billing Support Agreement 6.2(e)
Billing Support Services 6.2(e)
Binghamton System Recitals
Buyer Recitals
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CIMS 6.2(e)
Closing 3.1
Closing Date 3.1
Closing Date Price 2.2(c)
Closing Date Value 2.2(c)
Code Annex I - 21
Common Control Entity Annex I -21
Company Recitals
Competitive Business 9.3
Damages 10.2
Designated Partners 2.2(b)(v)
Elmira Assets 9.6
Elmira System Recitals
Employee Plans Annex I - 21
ERISA Annex I - 21
ERISA Affiliate Annex I - 21
Escrow Deposit 2.2(d)
Excess Stock 2.2(a)
Exchange Act 2.2(b)
Floor Value 2.2(c)
Increase 3.1
Insurance Statement 6.2(f)
Insurer 6.2(f)
Interest Period 2.2(d)
Maximum Value 2.2(c)
Multiemployer Plan Annex I - 21
NASDAQ 2.2(b)
Net Current Assets 2.2(d)
PBGC Annex I - 21
Pension Plan Annex I - 21
Personnel 6.1(a)
Plans Annex I - 21
Post-Closing Partial Period 10.6(b)
Pre-Closing Partial Period 10.6(a)
Proprietary Rights Annex I - 20
Prospectus 2.2(b)
Purchase Price 2.2(a)
Purchase Price Notice 2.2(a)
Registration Statement 2.2(b)
Reimbursable Capital 2.2(d)
Resale Period 2.2(b)
Securities Act 2.2(b)
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SEC 2.2(b)
SEC Reports Annex II-8
Seller Recitals
Stock Recitals
Subsidiary Annex I - 21
Systems Recitals
Telesk Claim 10.2(a)
Vanguard Stock 2.2(a)
Welfare Plan Annex I - 21
ARTICLE II
PURCHASE AND SALE OF STOCK
2.1 Transfer of Stock. Upon the
terms and subject to the conditions contained herein,
Seller will sell, convey, transfer, assign and deliver
to Buyer, and Buyer will purchase from Seller, on the
Closing Date, all of the issued and outstanding shares
of the Stock.
2.2 Consideration for Stock.
(a) Base Stock Price. Upon the
terms and subject to the conditions contained herein,
as consideration for the purchase of all of the issued
and outstanding shares of the Stock, Buyer shall pay a
purchase price of Forty Eight Million Five Hundred
Thirty Nine Thousand Two Hundred Fifty Dollars
($48,539,250) (the "Base Stock Price"), as adjusted
pursuant to subsections (c) and (d) of this Section 2.2
and as adjusted pursuant to Section 3.1 below (the
"Purchase Price"). The Base Stock Price will be
payable, at Buyer's option: (i) in full in cash, (ii)
in shares of Class A common stock of Buyer (such stock
being referred to as "Vanguard Stock") or (iii) in any
combination of both cash and Vanguard Stock in Buyer's
sole discretion. Buyer shall notify Seller in writing
(the "Purchase Price Notice") on the trading day
immediately preceding the Closing Date of Buyer's
intended method of payment of the Purchase Price and,
if all or part of such payment shall be in Vanguard
Stock, the Purchase Price Notice shall include the
determination of the number of shares of Vanguard
Stock, including the calculations under subsection (c),
if applicable, to be paid by Buyer to Seller pursuant
to this Section 2.2. If Buyer does not so notify
Seller, then the Purchase Price shall be paid in full
in cash. Notwithstanding the foregoing, in no event
shall Buyer pay the Purchase Price in Vanguard Stock to
the extent that the amount of Vanguard Stock to be
delivered by Buyer shall equal or exceed 5% of the
issued and outstanding
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Class A common stock of Buyer,
after giving effect to the issuance thereof (such
Vanguard Stock in excess of 5% of the issued and
outstanding Class A common stock of Vanguard being
referred to as the "Excess Stock"). Buyer shall pay
that portion of the Base Stock Price attributable to
the Excess Stock in cash.
(b) Vanguard Stock. (i) If Buyer
elects to pay the Base Stock Price in accordance with
subsection (a) above in whole or in part with shares of
Vanguard Stock, then, as a condition to Buyer's right
to deliver such shares in lieu of cash, Buyer shall
ensure that at the time of delivery of such shares to
Seller (1) such shares are subject to a then-currently
effective registration statement under the Securities
Act of 1933 (as amended and together with the rules and
regulations promulgated thereunder, the "Securities
Act") and are specifically registered for resale by
Seller to the public pursuant to such registration
statement (the "Registration Statement") free and clear
of any restrictions under the Securities Act except for
prospectus delivery requirements, (2) such shares are
listed on the National Association of Securities
Dealers Automated Quotations National Market System
("NASDAQ") or on a national securities exchange, and
(3) the delivery of such shares to Seller and the
resale of such shares by Seller is qualified under
applicable state securities laws and the resale of such
shares shall have been qualified under such state
securities laws as Seller shall reasonably request;
provided, however, that Buyer shall not be obligated to
qualify as a foreign corporation to do business under
the laws of or become subject to taxation in, any
jurisdiction in which it shall not be then qualified,
or to file any general consent to service of process.
(ii) From time to time
during the period commencing on the Closing Date and
ending upon the earlier of (x) 75 days after the
Closing Date, or (y) such time as Seller shall have
advised Buyer in writing that it has completed its
resale of the Vanguard Stock delivered hereunder (the
"Resale Period"), Buyer shall do the following:
(A) Prepare and deliver
to Seller as many copies of the Prospectus (as
hereafter defined) as Seller may reasonably request;
(B) Use its best efforts
to comply with all requirements imposed upon it by the
Securities Act, by the Securities Exchange Act of 1934
(as amended and together with the rules and regulations
promulgated thereunder, the "Exchange Act"), and by the
undertakings in the Registration Statement (including
but not limited to the undertakings required by Item
512(g) of Regulation S-K) so far as is necessary to
permit the continuance of sales of Vanguard Stock by
Seller to the public free and clear of any restrictions
under the Securities Act except for prospectus delivery
requirements. If, at any time during the Resale
Period, an event shall occur which makes it necessary
to amend or supplement the Prospectus to comply with
law or with the rules and regulations of the Securities
and Exchange Commission (the "SEC"), Buyer shall forthwith
notify Seller of the proposed amendment or supplement
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and prepare and furnish to Seller such
number of copies of an amended or supplemented
Prospectus that complies with law and with such rules
and regulations as Seller may reasonably request.
Seller shall suspend its sales of Vanguard Stock
pending preparation and delivery of such amendment or
supplement. Buyer authorizes Seller, and any brokers
or dealers effecting sales of the Vanguard Stock for
the account of Seller, to use the Prospectus, as from
time to time amended or supplemented, in connection
with the sale of the Vanguard Stock in accordance with
applicable provisions of the Securities Act. For
purposes of this Agreement, the term "Prospectus" means
the final prospectus relating to the Vanguard Stock
most recently included in the Registration Statement or
filed by Buyer pursuant to Rule 424 of the Securities
Act and any amendments or supplements thereto filed by
Buyer pursuant to Rule 424 of the Securities Act and
shall include all documents or information incorporated
in any such prospectus by reference.
(C) Promptly advise
Seller (I) when any post-effective amendment of the
Registration Statement is filed with the SEC and when
any post-effective amendment becomes effective; (II) of
any request made by the SEC for any amendment of or
supplement to the Registration Statement or the
Prospectus or for additional information relating
thereto; (III) of any suspension or threatened
suspension of the use of any Prospectus in any state;
and (IV) of any proceedings commenced or threatened to
be commenced by the SEC or any state securities
commission which would result in the issuance of any
stop order or other order or suspension of use. Buyer
agrees to use its best efforts to prevent or promptly
remove any stop order or other order preventing or
suspending the use of the Prospectus during the Resale
Period and to comply with any such request by the SEC
to amend or supplement the Prospectus.
(D) Take such action as
shall be necessary to qualify the shares of Vanguard
Stock covered by such registration under such state
securities laws for offers and sales to the public as
Seller shall reasonably request; provided, however,
that Buyer shall not be obligated to qualify as a
foreign corporation to do business under the laws of or
become subject to taxation in, any jurisdiction in
which it shall not be then qualified, or to file any
general consent to service of process.
(E) Cause the Vanguard
Stock to be registered pursuant to Section 12(b) or
12(g) of the Exchange Act and continually listed,
subject to notice of issuance, on the NASDAQ or a
national securities exchange and not subject to any
restriction or suspension from trading on the NASDAQ or
such national securities exchange; provided, however,
that Buyer may deregister the Vanguard Stock registered
pursuant to Section 12(b) or 12(g) of the Exchange Act
if such deregistration is in connection with a merger,
dissolution or other transaction in which the
shareholders of Buyer receive prior to such
deregistration either cash or securities that are
listed on the
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NASDAQ or a national securities exchange
or some combination of cash and such securities;
provided, further, that Buyer may delist the Vanguard
Stock from trading on the NASDAQ or national securities
exchange if Buyer is concurrently listing such stock on
a national securities exchange.
(iii) If Buyer elects to
pay the Base Stock Price in accordance with subsection
(a) above in whole or in part with shares of Vanguard
Stock, then Buyer shall make generally available to its
security holders (and deliver to Seller), in the manner
contemplated by Rule 158(b) under the Securities Act or
otherwise, as soon as practicable but in any event not
later than 120 days after the end of its fiscal quarter
in which the first anniversary date of the Closing Date
occurs if the end of such fiscal quarter is the end of
Buyer's fiscal year (and if the end of such fiscal
quarter is not the end of Buyer's fiscal year, then
such period shall be reduced to 50 days), an earnings
statement satisfying the requirements of Section 11(a)
of the Securities Act and covering a period of at least
twelve (12) consecutive months beginning after the
Closing Date.
(iv) (A) Buyer shall indemnify and
hold harmless Seller and the officers and directors and
any controlling persons of Seller against and in
respect of any losses, claims, damages or liabilities,
joint or several (including legal or other fees and
expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage
or liability) to which Seller may become subject under
the Securities Act or otherwise insofar as such losses,
claims, damages or liabilities (or actions with respect
thereto) arise out of or are based upon any untrue
statement or alleged untrue statement of any material
fact contained in the Registration Statement, or arise
out of or are based upon the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, except to the extent that any
such untrue statement or omission is based upon written
information supplied by Seller or by any of its
representatives for use in such Registration Statement;
provided, however, this indemnity agreement shall not
inure to the benefit of Seller, its officers and
directors nor any controlling person of Seller on
account of any loss, claim, damage, liability or action
arising from the sale of Vanguard Stock to any person
if Seller failed to send or give a copy of the
Prospectus (as amended or supplemented) to such person.
(B) Seller shall
indemnify and hold harmless Buyer, its officers and its
directors and any controlling persons of Buyer against
and in respect of any losses, claims, damages or
liabilities, joint or several (including legal or other
fees and expenses reasonably incurred by any of them in
connection with investigating or defending any such
loss, claim, damage or liability) to which Buyer or any
such persons may become subject under the Securities
Act or otherwise insofar as such losses, claims,
damages or liabilities (or actions with respect
thereto) arise out of or are
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based upon any untrue
statement or alleged untrue statement of any material
fact contained in the Registration Statement, or arise
out of or are based upon the omission or alleged
omission to state therein a material fact required to
be stated therein or necessary to make the statements
therein not misleading, but only to the extent that any
such untrue statement or omission is based upon written
information supplied by Seller or its representatives
for use in such Registration Statement.
(C) The indemnification
obligations of the parties hereunder shall be subject
to Section 10.3 hereof and, notwithstanding any other
provision of this Agreement, shall survive indefinitely
and shall not be subject to the indemnification
thresholds set forth in Section 10.2(a) or Section
10.2(b) hereof.
(D) If for any reason the
indemnification provided for in the preceding clauses
is unavailable to an indemnified party as contemplated
by the preceding clauses, then the indemnifying party
shall contribute to the amount paid or payable by the
indemnified party as a result of such loss, claim,
damage or liability in such proportion as is
appropriate to reflect not only the relative benefits
received by the indemnified party and the indemnifying
party, but also the relative fault of the indemnified
party and the indemnifying party, as well as any other
relevant equitable considerations.
(v) Notwithstanding anything in
this Agreement to the contrary, if Seller or its
Designated Partners (as defined below) shall have
failed to provide all information to Buyer required to
be included in the Registration Statement as to Seller
and its Designated Partners within five (5) business
days of request by Buyer or such later date, not later
than sixty (60) days prior to the Closing Date, as is
sufficient to enable the condition in subsection (b)(i)
to be satisfied prior to the Closing, then (A)
subsection (b)(i) shall not be a condition precedent to
Buyer's right to deliver Vanguard Stock in whole or
partial payment of the Base Stock Price and (B) Buyer's
obligations under subsection b(ii) shall be suspended
until the period beginning sixty (60) days from the
date all such information is delivered to Buyer until
the end of the Resale Period. If Seller desires that
any Vanguard Stock that may be delivered at Closing be
registered for resale under the Securities Act by its
partners rather than Seller, then Seller shall so
notify Buyer in writing and provide in such
notification the names and addresses of such partners
(the "Designated Partners"). If Seller so notifies
Buyer, then the Designated Partners shall be entitled
to the rights and subject to the obligations of Seller
under this subsection (b) and otherwise treated as
Seller for all purposes of this subsection (b).
(c) Determination of Number of
Shares of Vanguard Stock. If Buyer elects to pay the
Base Stock Price in accordance with subsection (a)
above in whole or in part with Vanguard Stock, the
number of shares of Vanguard Stock deliverable by
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Buyer to Seller on the Closing Date (the "Base Shares")
shall be determined by dividing that portion of the Base
Stock Price which Buyer elects to pay in stock by the
arithmetical average of the closing prices of Vanguard
Stock (as reported in The Wall Street Journal) on the
five trading days ending on the trading day immediately
preceding the Closing Date. If the product of the Base
Shares multiplied by the closing price for Vanguard
Stock (as reported in The Wall Street Journal) for the
trading day immediately preceding the Closing Date
(such closing price being referred to as the "Closing
Date Price" and such product being referred to as the
"Closing Date Value") plus the amount of cash to be
paid to Seller is less than $47,083,072.50 (i.e. 97% of
the Base Stock Price) (the "Floor Value"), then Buyer
shall deliver to Seller on the Closing Date an amount
equal to the difference between the Floor Value and the
Closing Date Value, at Buyer's option (but subject to
the 5% limitation described in subsection (a) above),
either in immediately available funds or by delivering
an additional number of shares of Vanguard Stock
determined by dividing the amount of the difference
between the Floor Value and the Closing Date Value by
the Closing Date Price. If the Closing Date Value plus
the amount of cash to be paid to Seller is greater than
$49,995,427.50 (i.e. 103% of the Base Stock Price) (the
"Maximum Value"), then Buyer may reduce the number of
shares of Vanguard Stock deliverable to Seller by Buyer
on the Closing Date by the number of shares equal to
(i) the difference between the Closing Date Value and
the Maximum Value (ii) divided by the Closing Date
Price.
(d) Working Capital Adjustment.
The Base Stock Price shall be increased or decreased,
as the case may be, by the Net Current Assets (as
defined below) of the Company as of the Closing Date
(such amount being referred to as the "Reimbursable
Capital"). "Net Current Assets" shall mean current
assets as set forth on the Closing Date Balance Sheet,
minus current liabilities (other than current
maturities of long term debt), as such terms are used
in accordance with generally accepted accounting
principles. At least two (2) business days prior to
the Closing Date, Seller will provide Buyer with an
estimated Closing Date Balance Sheet and a calculation
of the Reimbursable Capital, which estimate, unless
otherwise agreed, shall in no event exceed the sum of
the net current assets of the Company as of the then
most recent month end for which a balance sheet,
prepared by the Company in good faith on a basis
consistent with prior periods. On the Closing Date,
Buyer shall pay to Seller an amount in cash equal to
Seller's calculation of the Reimbursable Capital based
on the estimated Closing Date Balance Sheet as provided
above, of which $2,426,962 (the "Escrow Deposit") shall
be deposited into an escrow account. Within ninety
(90) days following the Closing Date, the parties shall
determine the actual amount of the Reimbursable Capital
as of the close of business on the Closing Date (not
taking into account any cash infusions pursuant to
subsection (e) hereof). Upon the determination of such
amount, the Escrow Deposit shall be delivered to Seller
or Buyer, as the case may be, such that, after giving
effect to the payment thereof, Seller shall have
received the correct amount of Reimbursable Capital.
Such payment shall include an amount of
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simple interest thereon calculated from the Closing Date
to the date such payment is made (the "Interest Period")
at the prime rate of interest announced from time to time
during the Interest Period by the Bank of New York.
(e) To the extent the Purchase Price
is paid in full in cash, Buyer shall infuse an amount
thereof into the Company on the Closing Date sufficient
to enable the Company to pay off any of its
indebtedness for borrowed money as of the Closing Date
(with the Purchase Price payable to Seller for the
Stock being reduced accordingly); provided, however,
that in no event shall Buyer's obligation to make such
a cash infusion change the parties' obligations with
respect to the Reimbursable Capital as contemplated by
subsection (d) hereof.
ARTICLE III
CLOSING
3.1 Closing. The closing of the
transactions contemplated herein (the "Closing") shall
be held at 10:00 a.m. local time on the Target Closing
Date at the offices of Latham & Watkins in Washington,
D.C. unless the parties hereto otherwise agree. If the
Target Closing Date occurs prior to January 5, 1995,
Buyer shall have the right in its sole discretion, by
written notice to Seller at least 21 days prior to the
Target Closing Date, to extend the Closing from the
Target Closing Date until a date no later than January
5, 1995; provided, however, if Buyer exercises such
right: (i) the Purchase Price shall be increased by
Fourteen Thousand Two Hundred Seventy Three and 93/100
Dollars ($14,273.93) (the "Increase") for each day
beginning on the Target Closing Date and ending on the
day before the date the Closing actually occurs (the
"Closing Date"), which Increase may be paid in cash or
in Vanguard Stock (but not in Excess Stock), or in some
combination of cash and Vanguard Stock, at the sole
discretion of Buyer, and (ii) if the Closing occurs on
or after January 1, 1995, Buyer shall be obligated to
pay the Purchase Price in full in cash (and shall not
have the right to pay the Base Stock Price by
delivering Vanguard Stock to Seller); provided,
further, that Buyer shall not be required to pay the
Purchase Price in full in cash if the Target Closing
Date has not occurred prior to January 1, 1995,
provided that the Closing occurs on the Target Closing
Date. Buyer may waive the requirement that all
consents of the FCC and state regulatory agencies shall
have become Final Orders prior to the Closing.
Notwithstanding the foregoing, Buyer shall not be
required to pay the Increase hereunder if the Closing
is delayed other than by reason of Buyer's exercise of
its extension right described above.
3.2 Documents to be Delivered. To
effect the transfer referred to in Section 2.1 and the
delivery of the consideration described in Section 2.2
hereof, Seller and Buyer shall, on the Closing Date,
deliver the following:
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(a) Seller shall deliver to Buyer
certificate(s) evidencing 100 shares of the Stock, free
and clear of any Encumbrances of any nature whatsoever,
duly endorsed, with signature guaranteed, in blank for
transfer or accompanied by stock powers duly executed
in blank.
(b) Seller and Buyer shall each
deliver all documents required to be delivered pursuant
to Articles VII and VIII.
(c) Buyer shall deliver to Seller
the Purchase Price as provided in Section 2.2.
(d) All instruments and documents
executed and delivered to Buyer pursuant hereto shall
be in form and substance, and shall be executed in a
manner, reasonably satisfactory to Buyer. All
instruments and documents executed and delivered to
Seller pursuant hereto shall be in form and substance,
and shall be executed in a manner, reasonably
satisfactory to Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
Except as otherwise set forth in the
Disclosure Schedules, Seller represents and warrants to
Buyer as set forth in Annex I, incorporated by
reference hereto.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to
Seller as set forth in Annex II, incorporated by
reference hereto.
ARTICLE VI
ACTIONS BY SELLER AND BUYER PRIOR TO THE CLOSING
6.1 Covenants of Seller. Seller
covenants that, other than in the ordinary course of
business, for the period from the date hereof through
the Closing:
(a) Maintenance of Business.
Seller shall cause the Company and Licensee to
diligently carry on its respective business in the
ordinary course consistent with past practice.
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(b) Certain Prohibited
Transactions. Seller shall not permit the Company or
Licensee to do any of the following without the prior
written approval of Buyer:
(i) increase the compensation
payable or to become payable to any of its officers,
employees or agents (collectively, "Personnel") other
than consistent with past practice (ii) grant a bonus,
incentive compensation, service award or other like
benefit, awarded or accrued, contingently or otherwise,
for or to the credit of any of the Personnel except for
arrangements described in the Disclosure Schedules,
(iii) make or agree to make any employee welfare,
pension, retirement, profit-sharing or similar payment
or arrangement for any Personnel except pursuant to the
existing plans and arrangements described in the
Disclosure Schedules or (iv) enter into any new employ-
ment agreements;
(ii) add to or modify any of the
employee benefit plans, arrangements or practices
described in the Disclosure Schedules affecting
Personnel other than (i) contributions made in
accordance with the normal practices of the Company or
(ii) the extension of coverage to other Personnel who
became eligible after the Balance Sheet Date;
(iii) sell, assign or transfer any
of its assets, other than in the ordinary course of
business consistent with past practice (not exceeding
$50,000 in aggregate value);
(iv) cancel any indebtedness or
waive any rights of substantial value whether or not in
the ordinary course of business;
(v) amend, cancel or terminate any
material Contract, license or other instrument;
(vi) make a capital expenditure or
execute any lease or incur any liability therefor,
other than expenditures pursuant to the capital budget
set forth on Exhibit A attached hereto or replacements
made necessary due to a casualty loss;
(vii) fail to repay any material
obligation;
(viii) change accounting methods or
practices, which change affects its assets, liabilities
or business;
(ix) revalue any of its assets,
including without limitation, writing off notes or
accounts receivable;
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(x) mortgage, pledge or otherwise
Encumber any of its assets except purchase money
mortgages or capital leases arising in the ordinary
course of business;
(xi) declare, set aside or pay any
dividends or distribute any capital stock of the
Company or redeem, purchase or otherwise acquire any of
the Company's equity securities;
(xii) make any distributions to the
partners of Licensee unless Seller determines that
compliance with this covenant would cause Seller to
breach its fiduciary duty to the partners of Licensee;
provided, however, that if Seller makes any
distributions to the partners of Licensee between the
date hereof and the Closing Date, the Purchase Price
paid by Buyer to Seller shall be reduced by the amount
of such distributions paid to partners other than the
Company;
(xiii) issue, or commit to issue, any
shares of stock or other equity securities or
obligations or securities convertible into or
exchangeable for shares of stock or other equity
securities;
(xiv) other than in the ordinary
course of business, incur any indebtedness for borrowed
money or commit to borrow money, or enter into any
loans, guaranties, or capital lease obligations;
(xv) incur any liabilities, other
than in the ordinary course and consistent with past
practice, involving $20,000 or more in the aggregate,
or increase or change any assumptions underlying or
methods of calculating any bad debt, contingency or
other reserves;
(xvi) agree to do any of the forego-
ing; or
(xvii) do any other act which would
cause any representation or warranty of Seller
hereunder to be or become untrue in any material
respect.
(c) Investigation by Buyer. Seller
and the Company shall allow Buyer during regular
business hours through Buyer's employees, agents and
representatives, to make such investigation of the
business, properties, books and records of the Company
and Licensee, and to conduct such examination of the
condition of the Company and Licensee, as Buyer deems
necessary or advisable to familiarize itself with such
business, properties, books, records, condition and
other matters, and to verify the representations and
warranties of Seller hereunder; provided, however, that
any information obtained from Seller is subject to the
confidentiality provisions contained in Section 12.12
below; and provided, further, that any investigation by
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Buyer hereunder shall not affect the representations
and warranties of Seller and the Company contained in
this Agreement.
(d) No Mergers, Consolidations,
Sale of Stock, Etc. Neither the Company nor Seller
will, directly or indirectly, solicit any inquiries or
proposals or enter into or continue any discussions,
negotiations or agreements relating to the sale or
exchange of the Stock, the merger of the Company or
Licensee with, or the direct or indirect disposition of
a significant amount of the Company's or Licensee's
assets or business to any person other than Buyer or
its affiliates or provide any assistance or any
information to or otherwise cooperate with any person
in connection with any such inquiry, proposal or
transaction. In the event that either the Company or
Seller receives an unsolicited offer for such a
transaction or obtains information that such an offer
is likely to be made, the Company or Seller, as the
case may be, will provide Buyer with notice thereof as
soon as practical after receipt, including the identity
of the prospective purchaser or soliciting party.
(e) Tax Elections. No new
elections with respect to Taxes or any changes in
current elections with respect to Taxes affecting the
Company shall be made after the date of this Agreement
without the prior written consent of Buyer.
(f) Control. Notwithstanding any
provision of this Agreement that may be construed to
the contrary, pending the Closing, Seller shall
maintain actual (de facto) and legal (de jure) control
over the Company and Licensee. Specifically, and
without limitation, the responsibility for the
operation of the Company and Licensee shall, pending
the Closing, reside with the Board of Directors of the
Company and the partners of Licensee, including, but
not limited to, responsibility for the following
matters: (i) access to and the use of the Facilities
and Equipment of the Company and Licensee; (ii) control
of the daily operation of the Company and Licensee;
(iii) creation and implementation of policy decisions;
(iv) employment and supervision of Personnel; (v)
payment of financing obligations and expenses incurred
in the operation of the Company and Licensee; (vi)
receipt and distribution of monies and profits derived
from the operation of the Company and Licensee; and
(vii) execution and approval of all contracts and
applications prepared and filed before regulatory agencies.
6.2 Covenants of Seller and Buyer.
Seller and Buyer covenant as follows for the period
from the date hereof through the Closing:
(a) Consents and Best Efforts.
(i) Within fifteen (15) business
days after execution and delivery of this Agreement,
Buyer and Seller shall make all filings, if any,
required under the HSR Act. Seller shall and shall
cause the Company to, as soon as possible, commence to
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take all action reasonably required to obtain all
consents, approvals and agreements of, and to give all
notices and make all other filings with, any third
parties, including governmental authorities, necessary
to authorize, approve or permit the full and complete
sale, conveyance, assignment or transfer of all of the
Stock, and Buyer shall cooperate with Seller with
respect thereto; provided, however, that neither Buyer
nor Seller shall be required to pay any consideration
or agree to any material unfavorable modification of
any existing contract or agreement in order to obtain
such consent. In addition, subject to the terms and
conditions herein provided, each of the parties hereto
covenants and agrees to use its reasonable efforts to
take, or cause to be taken, all action or do, or cause
to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and
make effective the transactions contemplated hereby and
to cause the fulfillment of the parties' obligations
hereunder.
(ii) Seller and Buyer shall each
diligently and expeditiously take all steps reasonably
necessary to prosecute the Transfer Applications, and
to obtain the FCC's determination that grant of the
Transfer Applications will serve the public interest,
convenience or necessity. The failure by either party
to diligently prosecute its portions of the Transfer
Applications as required by this Section shall be a
material breach of this Agreement. All fees charged by
the FCC in connection with filing the Transfer
Applications shall be paid one-half by Buyer and one-
half by Seller.
(iii) Seller and Buyer shall each
diligently and expeditiously take all steps reasonably
necessary to prosecute the application for the NYPSC
Approval, and to obtain the NYPSC's determination that
grant of a NYPSC Approval will serve the public
interest, convenience or necessity. The failure by
either party to diligently prosecute its portions of
the application for the NYPSC Approval as required by
this Section shall be a material breach of this
Agreement. All fees charged by the NYPSC in connection
with filing the application for the NYPSC Approval
shall be paid one-half by Buyer and one-half by Seller.
(b) Notification of Certain
Matters. Seller shall give prompt notice to Buyer, and
Buyer shall give prompt notice to Seller, of (i) the
occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any
representation or warranty contained in this Agreement
to be untrue or inaccurate in any material respect any
time from the date hereof to the Closing and (ii) any
material failure of Seller, the Company or Buyer, as
the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or
satisfied by it hereunder, and each party shall use all
reasonable efforts to remedy same.
(c) Offer to Purchase Other
Interests. Buyer covenants that for the period from
the date hereof through the Closing, Buyer shall offer
to purchase any and all of the ownership interests in
Licensee from any holders thereof (other than the
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Company and Buyer) on the Closing Date for a purchase
price of not less than $43,439.51 for each one tenth of
one percent of ownership interest in Licensee, such
purchase price to be paid in cash. Seller shall
provide, or cause the Company to provide, all
information reasonably required by Buyer in making such
offers.
(d) Actions Affecting Vanguard
Stock. Buyer and Seller each covenant that it shall
not take any actions outside of the scope of its
ordinary course of business to affect or influence the
trading price of Vanguard Stock during the five (5)
trading day period ending the trading day immediately
preceding the Closing Date as described in Section
2.2(c).
(e) Billing Support Agreement.
Buyer and Seller shall enter into an agreement
reasonably acceptable to Buyer and Seller (the "Billing
Support Agreement") pursuant to which Seller shall
cause to be provided to Buyer for up to one year
following the Closing Date both (1) support services
for the cellular information management system
presently used in the operation of the Systems (the
"CIMS") of the type the Company and Licensee now
receive from Seller's affiliate, MLC Industries, Inc.,
and which will assist Buyer in operating the Systems
after the Closing Date consistent with the manner in
which the Systems are operated prior to the Closing
Date and (2) assistance in converting the CIMS to
Buyer's system as soon as reasonably practicable
following the Closing Date (such services being
referred to as "Billing Support Services"). Without
limitation of the foregoing, the Billing Support
Services shall include the following:
(i) Maintenance. Ongoing
maintenance of the CIMS including, without
limitation, (A) routine maintenance as required
by the billing process, (B) programming support
necessary to maintain and change customer
features, billing rates and programs, (C)
generation of information reports not presently
generated by the CIMS and (D) responding to
CIMS failures and outages in a timely fashion
to the end that the Company and Licensee are
able (x) to have generated and mailed to the
Systems' subscribers bills for the usage of the
Systems in the ordinary course of business and
(y) to have access to customer records so as to
be able to respond to customer billing
inquiries in the ordinary course of business;
(ii) Roaming. Service as
the billing vendor with respect to incollect
and outcollect roamer tape processing for the
roamer clearinghouse selected by Buyer
(initially, the GTE TSI clearinghouse),
including, without limitation, (A) processing
roamer outcollects and submitting to Buyer's
clearinghouse in "Ciber" format on a bi-weekly
basis to the end that outcollects are released
in a timely manner to be received and processed
by Buyer's clearinghouse prior to the 15th day
of each month and (B) processing all
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incollects once per billing cycle and not later
than three (3) days prior to the "cut off" date;
and
(iii) Conversion.
Assistance in converting the CIMS to Buyer's
system on an automated basis (i.e., tape-to-
tape and not in a manner requiring manual data
entry onto Buyer's system).
The Billing Support Agreement shall provide that
Billing Support Services shall be performed in a manner
consistent with that generally available to cellular
carriers by billing vendors in the cellular industry
and by Seller or its affiliates to persons who have
previously acquired from Seller corporations holding
cellular telephone systems. Buyer shall pay a monthly
fee for the Billing Support Services during the term of
the Billing Support Agreement equal to $2.00 per
subscriber to the Systems during such period.
(f) Statement from Insurance
Carrier. Prior to the Closing, Seller shall obtain
from its insurance carrier (the "Insurer") a statement
to the following effect (the "Insurance Statement"):
upon review of the pleadings filed in a lawsuit against
the Company and/or Licensee by John and Joan A. Telesk,
the Insurer has found that the allegations raised in
such pleadings are within the scope of coverage
afforded under the insurance policies of the Company
and/or Licensee. If Seller is unable to obtain the
Insurance Statement from the Insurer prior to Closing,
Seller agrees that Six Hundred Thousand Dollars
($600,000) of the Escrow Deposit shall remain in escrow
until the earlier of (i) receipt by Buyer of the
Insurance Statement and (ii) resolution of any and all
claims raised by John and Joan A. Telesk, whether by
settlement, dismissal or adjudication.
ARTICLE VII
CONDITIONS TO SELLER'S OBLIGATIONS
The obligations of Seller to transfer
the Stock to Buyer on the Closing Date are subject, in
the discretion of Seller, to the satisfaction, on or
prior to the Closing Date, of each of the following
conditions:
7.1 Representations, Warranties
and Covenants. All representations and warranties of
Buyer contained in this Agreement shall be true and
correct in all material respects at and as of the
Closing Date as if such representations and warranties
were made at and as of the Closing Date, other than
representations and warranties that speak of a certain
date and other than by reason of changes not prohibited
by the provisions of this Agreement. Buyer shall have
performed in all material respects all agreements and
covenants required hereby to be performed by it prior
to or at the
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Closing Date. There shall be delivered to
Seller a certificate (signed by the President or a Vice
President of Buyer) to the foregoing effect.
7.2 Consents. All consents,
approvals and waivers from governmental authorities and
other parties necessary to permit Seller to transfer
the Stock to Buyer as contemplated hereby shall have
been obtained, unless the failure to obtain any such
consent, approval or waiver would not have a material
adverse effect upon Seller.
7.3 No Governmental Proceeding or
Litigation. No suit, action, investigation, inquiry or
other proceeding by any governmental authority or other
person shall have been instituted which questions the
validity or legality of the transactions contemplated
hereby and which would reasonably be expected
materially to damage Seller if the transactions
contemplated hereunder are consummated, unless such
proceeding was initiated or instigated by Seller or its
subsidiaries.
7.4 Opinion of Counsel. Buyer
shall have delivered to Seller an opinion of counsel to
Buyer reasonably acceptable to Seller, in the form of
Exhibit B hereto. If any Vanguard Stock is to be
delivered at Closing, Buyer shall also have delivered
to Seller an opinion of Buyer's SEC counsel reasonably
acceptable in form and substance to Seller, with
respect to the due authorization and issuance of such
Vanguard Stock and the registration of such Vanguard
Stock under the Securities Act.
7.5 Certificates. Buyer will
furnish Seller with such certificates of its officers,
directors and others to evidence compliance with the
conditions set forth in this Article VII as may be
reasonably requested by Seller.
7.6 Corporate Documents. Seller
shall have received from Buyer resolutions adopted by
the board of directors of Buyer approving this
Agreement and the transactions contemplated hereby,
certified by Buyer's corporate secretary.
7.7 HSR Act. The applicable
waiting period, including any extension thereof, under
the HSR Act shall have expired or shall have been
terminated and neither the U.S. Department of Justice
nor the FTC shall have made a request for additional
information which has not previously been supplied or
have taken any action to prevent the transactions
contemplated by this Agreement.
7.8 Bankruptcy. In the event it
delivers shares of Vanguard Stock to Seller pursuant to
Section 2.2 hereof, Buyer will not have (I) commenced a
voluntary case under the federal bankruptcy laws (as
now or hereafter in effect), (II) filed a petition
seeking to take advantage of any other laws relating to
bankruptcy, insolvency, reorganization, winding up or
composition or adjustment of debts generally, (III)
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consented to or failed to contest in a timely and
appropriate manner any petition filed against it in an
involuntary case under such bankruptcy laws or other
laws, (IV) applied for, or consented to, or failed to
contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or
of a substantial part of its assets, (V) admitted in
writing its inability to pay, or generally not be
paying, its debts generally (other than those that are
the subject of bona fide disputes) as they become due,
(VI) made a general assignment for the benefit of
creditors, or (VII) taken any corporate action for the
purpose of effecting any of the foregoing; and no case
or other proceeding shall have been commenced against
Buyer in any court of competent jurisdiction seeking
(x) relief under the federal bankruptcy laws (as now or
hereafter in effect) or under any laws relating to
bankruptcy, insolvency, reorganization, winding up or
adjustment of debts generally, or (y) the appointment
of a trustee, receiver, custodian, liquidator or the
like of Buyer or of all or any substantial part of the
assets of Buyer.
7.9 Billing Support Agreement.
Buyer and Seller shall have entered into the Billing
Support Agreement contemplated by Section 6.2(e).
ARTICLE VIII
CONDITIONS TO BUYER'S OBLIGATIONS
The obligations of Buyer to purchase
the Stock as provided hereby are subject, in the
discretion of Buyer, to the satisfaction, on or prior
to the Closing Date, of each of the following
conditions:
8.1 Representations, Warranties
and Covenants. All representations and warranties of
Seller contained in this Agreement shall be true and
correct in all material respects at and as of the
Closing Date as if such representations and warranties
were made at and as of the Closing Date, other than
representations and warranties that speak of a certain
date and other than by reason of the changes not
prohibited by the provisions of this Agreement.
Seller, Licensee and the Company shall have performed
in all material respects all agreements and covenants
required hereby to be performed by any of them prior to
or at the Closing Date. There shall be delivered to
Buyer a certificate (signed by the General Partner of
Seller and the President or a Vice President of the
Company) to the foregoing effect.
8.2 Consents. All consents,
approvals and waivers from governmental authorities and
other parties necessary to permit Seller to transfer
the Stock to Buyer as contemplated hereby shall have
been obtained and shall have become Final Orders,
unless the failure to obtain any such consent, approval
or waiver would not have a material adverse effect upon
Buyer.
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8.3 No Governmental Proceeding or
Litigation. No suit, action, investigation, inquiry or
other proceeding by any governmental authority or other
person shall have been instituted or, to the best
knowledge of Seller, threatened which questions the
validity or legality of the transactions contemplated
hereby and which would reasonably be expected
materially and adversely to affect the value of the
Stock or business of the Company or Licensee, unless
such proceeding was initiated or instigated by Buyer or
its subsidiaries.
8.4 Opinion of Counsel. Seller
shall have delivered to Buyer an opinion of counsel for
Seller and the Company in the form of Exhibit C hereto.
8.5 Billing Support Agreement.
Buyer and Seller shall have entered into the Billing
Support Agreement contemplated by Section 6.2(e).
8.6 Certificates. Seller and the
Company shall furnish Buyer with such certificates of
the general partner of Seller and officers of the
Company and others to evidence compliance with the
conditions set forth in this Article VIII as may be
reasonably requested by Buyer.
8.7 Corporate Documents. Buyer
shall have received from Seller evidence of partnership
approval and from the Company resolutions adopted by
its board of directors approving this Agreement and the
transactions contemplated hereby, certified by the
general partner of Seller and the corporate secretary
of the Company, respectively. Buyer shall have also
received the corporate minute books, Certificates of
Incorporation, bylaws, stock transfer books and other
books and records of the Company and the partnership
records and other books and records of Licensee.
8.8 HSR Act. The applicable
waiting period, including any extension thereof, under
the HSR Act shall have expired or shall have been
terminated and neither the U.S. Department of Justice
nor the FTC shall have made a request for additional
information which has not previously been supplied or
have taken any action to prevent the transactions
contemplated by this Agreement..
8.9 Clearance Certificate. Seller
shall provide Buyer with any clearance certificate or
similar document(s) that may be required by any state
taxing authority in order to relieve Buyer of any
obligation to withhold any portion of the Purchase
Price. Buyer shall waive this condition precedent if,
at Closing, Seller agrees to provide such clearance
certificate to Buyer as soon as practicable after
Closing.
8.10 Nonforeign Affidavit. Seller
shall furnish Buyer an affidavit, stating under penalty
of perjury that the indicated number is the
transferor's United
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States taxpayer identification
number and that the transferor is not a foreign person,
pursuant to Section 1445(b)(2) of the Code.
8.11 Noncompetition Agreement.
George Crowley, Brian McTernan and John Fujii shall
have entered into a noncompetition agreement containing
the terms and conditions set forth in Section 9.3.
ARTICLE IX
ACTIONS BY SELLER, THE COMPANY
AND BUYER AFTER THE CLOSING
9.1 Cooperation and Records
Retention. Seller and Buyer agree that so long as any
books, records and files relating to the business,
properties, assets or operations of the Company, to the
extent that they pertain to the operations of the
Company prior to the Closing Date, remain in existence
and available, each party (at its expense) shall have
the right to inspect and to make copies of the same at
any time during business hours for any proper purpose.
Seller and Buyer shall (i) each provide the other, and
Buyer shall cause the Company to provide to Seller,
with such assistance as may reasonably be requested by
any of them in connection with the preparation of any
Return, audit, or other examination by any taxing
authority or judicial or administrative proceedings
relating to liability for Taxes, (ii) each retain and
provide the other, and Buyer shall cause the Company to
retain and provide Seller with, any records or other
information that may be relevant to such Return, audit
or examination, proceeding, or determination, and (iii)
each provide the other with any final determination of
any such audit or examination, proceeding, or
determination that affects any amount required to be
shown on any Return of the other for any period.
Without limiting the generality of the foregoing, Buyer
shall retain, and shall cause the Company to retain,
and Seller shall retain, until the applicable statutes
of limitations (including any extensions) have expired,
copies of all Returns, supporting work schedules, and
other records or information that may be relevant to
such Returns for all tax periods or portions thereof
ending before or including the Closing Date and shall
not destroy or otherwise dispose of any such records
without first providing the other party with a
reasonable opportunity to review and copy the same.
9.2 Further Assurances. On and
after the Closing Date, Seller, the Company and Buyer
will take all appropriate action and execute all
documents, instruments or conveyances of any kind which
may be reasonably necessary or advisable to carry out
any of the provisions hereof, including without
limitation, putting Buyer in possession and operating
control of the business of the Company and Licensee.
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9.3 Noncompetition Agreement.
Seller and Buyer agree that for a period of three (3)
years after the Closing Date, Seller and its general
partners shall not, directly or indirectly, (i) own,
manage, operate, control, join, assist, lend money to,
guarantee the obligation of, or participate in the
ownership, management, operation or control of, or be
connected as consultant, stockholder, director,
officer, employee, or partner with, or participate in
any manner with the start-up or set-up of, any
Competitive Business (as defined below), or
(ii) solicit or induce any employee of Buyer to
terminate such employment or become employed by any
person or entity other than Buyer. "Competitive
Business" means the operation of broadband personal
communications systems, enhanced specialized mobile
radio, cellular telephone or other competitive wireless
telecommunications businesses, but not including
narrowband personal communications systems and other
narrowband applications that can be used for paging,
the authorized service area for which Competitive
Business is located in whole or in part within the
Binghamton, New York metropolitan statistical area or
the Elmira, New York metropolitan statistical area.
Notwithstanding anything herein to the contrary, the
restrictions hereunder shall not apply to (A) the
activities of any publicly-held company less than five
percent (5%) of the equity of which is owned directly
or indirectly by Seller, its partners or its
affiliates, or (B) a noncontrolling interest in a
national or regional system or license so long as
Seller or its general partners is not providing
services within the Binghamton, New York metropolitan
statistical area or the Elmira, New York metropolitan
statistical area.
9.4 Stock Certificates. If Buyer
has elected to pay all or any portion of the Purchase
Price with Vanguard Stock, Buyer shall deliver or cause
to be delivered to Seller stock certificate(s)
representing such Vanguard Stock, free and clear of any
Encumbrances of any nature whatsoever, no later than
three (3) business days after the Closing.
9.5 Sale of Vanguard Stock by
Seller. Seller hereby agrees to promptly inform Buyer
in writing upon the sale of the last share of Vanguard
Stock by Seller.
9.6 Sale of Elmira Assets by
Buyer. Buyer hereby agrees that for a period of
eighteen (18) months from the date of this Agreement,
Buyer will not sell or enter into any agreement to sell
the Cellular Block A telephone system serving the
Elmira, New York metropolitan statistical area (the
"Elmira Assets") to Horizon Cellular Telephone Company,
L.P. or any of its subsidiaries. If Buyer breaches
this Section 9.6, Buyer shall deliver all consideration
in excess of $7,250,000 received by Buyer for the
Elmira Assets to Seller.
9.7 Name Change. As soon as
practicable following the Closing, Buyer shall cause
the name of the Company to be changed to a name which
does not
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contain the word "Crowley" and shall cause the
Company to cease using the word "Crowley" in the
conduct of its business.
9.8 Billing and Conversion
Matters. On and after the Closing, Seller and Buyer
shall perform their respective obligations under the
Billing Support Agreement contemplated by Section
6.2(e), which obligations will survive the Closing for
the term of the Billing Support Agreement and are by
this reference incorporated into this Agreement.
ARTICLE X
INDEMNIFICATION
10.1 Survival of Representations,
Etc. All statements contained in the Disclosure
Schedules or in any certificate or instrument of
conveyance delivered by or on behalf of the parties
pursuant to this Agreement or in connection with the
transactions contemplated hereby shall be deemed to be
representations and warranties by the parties
hereunder. The representations and warranties of
Seller and Buyer contained herein shall survive the
Closing Date until the date that is the second
anniversary of the Closing Date, without regard to any
investigation made by any of the parties hereto. The
representations and warranties of Seller relating to
Taxes, environmental matters, title and due
authorization shall survive until all applicable
statutes of limitations (including extensions and
waivers thereof but only if and to the extent approved
by Seller in writing, such approval not to be
unreasonably withheld) have expired.
10.2 Indemnification. (a) Seller
shall indemnify Buyer and the Company against, and hold
Buyer and the Company harmless from, any damage, claim,
liability or expense, including without limitation,
interest, penalties and reasonable attorneys' fees
(collectively "Damages") Buyer or the Company incur,
arising out of (i) the breach or inaccuracy of any
representation or warranty of Seller contained in this
Agreement or any document delivered in connection with
the Closing, or (ii) third party claims not reflected
on the Closing Date Balance Sheet arising from or out
of the operations of the Company or Licensee prior to
the Closing; provided, however, that Seller shall not
be required to indemnify and hold harmless Buyer or the
Company under this Section 10.2(a) with respect to any
Damages (and no claim shall be made against Seller
therefor) unless, until, and then only insofar as the
Damages for which such indemnification is sought under
this Section 10.2(a) shall exceed in the aggregate
$50,000, and provided, further, the aggregate amount
for which Seller shall be required to indemnify and
hold harmless Buyer and the Company under this Section
10.2(a) with respect to Damages shall not exceed the
amount of the Purchase Price. Notwithstanding the
foregoing, Seller shall indemnify and hold Buyer and
the Company
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harmless from all Damages Buyer or the
Company incur arising out of that certain personal
injury claim of John and Joan A. Telesk (the "Telesk
Claim") against the Company and/or Licensee. Buyer
agrees to seek recovery for the Telesk Claim first from
Seller's insurance carrier and then from Seller.
(b) Buyer shall indemnify and hold
Seller harmless from any Damages arising out of (i) the
breach of any warranty, representation, covenant or
agreement of Buyer contained in this Agreement, or (ii)
third party claims reflected on the Closing Date
Balance Sheet arising from or out of the operations of
the Company or the Licensee following the Closing;
provided, however, that notwithstanding the foregoing,
Buyer shall not be required to indemnify and hold
harmless Seller under this Section 10.2(b) with respect
to any Damages incurred by Seller hereunder (except
with respect to Damages incurred in connection with the
breach by Buyer of its obligations under Section 2.2
hereof) and no claim shall be made against Buyer until
the Damages for which such indemnification is sought
under this Section 10.2(b) shall exceed in the
aggregate $50,000 and, provided, further, that (except
with respect to Damages incurred in connection with the
breach by Buyer of its obligations under Section 2.2
hereof) the aggregate amount which Buyer shall be
required to indemnify and hold harmless Seller under
this Section 10.2(b) with respect to Damages incurred
by Seller shall not exceed $4,853,925.
(c) The term "Damages" as used in
this Section 10.2 is not limited to matters asserted by
third parties against Seller, the Company, Licensee or
Buyer, but includes Damages incurred or sustained by
Seller, the Company, Licensee or Buyer in the absence
of third party claims.
(d) This Section 10.2 shall not
apply with respect to indemnification for Taxes.
10.3 Indemnification Procedures.
(a) Upon Buyer becoming aware of a fact, condition or
event which constitutes a breach of any of the
representations, warranties, covenants or agreements of
Seller contained herein, if a claim for Damages in
respect thereof is to be made against Seller under this
Article X, Buyer will with reasonable promptness notify
Seller in writing of such fact, condition or event. If
such fact, condition or event is the assertion of a
claim by a third party, Seller will be entitled to
participate in or take charge of the defense against
such claim, provided that Seller and its counsel shall
proceed with diligence and in good faith with respect
thereto.
(b) Upon Seller becoming aware of a
fact, condition or event which constitutes a breach of
any of the representations, warranties, covenants or
agreements of Buyer contained herein, if a claim for
Damages in respect thereof is to be made
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against Buyer under this Article X, Seller will with
reasonable promptness notify Buyer in writing of such fact,
condition or event. If such fact, condition or event
is the assertion of a claim by a third party, Buyer
will be entitled to participate in or take charge of
the defense against such claim, provided that Buyer and
its counsel shall proceed with diligence and in good
faith with respect thereto.
(c) No indemnifying party hereunder
shall be liable for any settlement effected without its
written consent.
10.4 No Right of Contribution.
After the Closing, each of the Company and Licensee
shall have no liability to indemnify either Buyer or
Seller on account of the breach of any representation
or warranty or the nonfulfillment of any covenant or
agreement of Seller, the Company or Licensee; and
Seller shall have no right of contribution against the
Company or Licensee.
10.5 Remedies. Prior to the
Closing, in addition to any other remedy which may be
available at law or in equity, Buyer shall be entitled
to specific performance and injunctive relief, without
posting bond or other security. After the Closing,
indemnification shall be the sole remedy hereunder and
under tort, contract or otherwise.
10.6 Tax Indemnification and
Procedures.
(a) Seller shall indemnify and
hold harmless Buyer and the Company and each of their
respective affiliates, successors and assigns, from and
against all liability for Taxes (i) with respect to all
periods ending on or prior to the Closing Date, (ii)
with respect to any period beginning before the Closing
Date and ending after the Closing Date, but only with
respect to the portion of such period up to and
including the Closing Date (such portion, a "Pre-
Closing Partial Period"), or (iii) payable as a result
of a breach of any representation or warranty with
respect to Taxes. Notwithstanding the foregoing,
Seller shall not be required to indemnify Buyer, or the
Company for Taxes to the extent of the reserves set
forth on the Closing Date Balance Sheet. Seller shall
be entitled to any net refunds of Taxes with respect to
the periods described in clauses (i) and (ii) above,
except to the extent such refund arises as the result
of a carryback of a loss or other tax benefit from a
period beginning after the Closing Date or a
distribution made to a shareholder after the Closing
Date.
(b) Buyer shall indemnify and hold
harmless Seller and its respective affiliates,
successors and assigns, from and against all Taxes (i)
with respect to all periods beginning after the Closing
Date or (ii) with respect to any period beginning
before the Closing Date and ending after the Closing
Date, but only with respect to the portion of such
period beginning the day after the Closing Date (such
portion, a "Post-
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Closing Partial Period"). Buyer shall
be entitled to all refunds of Taxes with respect to the
period described in clauses (i) and (ii) above.
(c) For purposes of this Section
10.6, Tax or Taxes shall include the amount of Taxes
which would have been paid but for the application of
any credit or net operating or capital loss deduction
attributable to (i) periods beginning after the Closing
Date or (ii) to any period beginning before the Closing
Date and ending after the Closing Date, but only with
respect to the portion of such period after the Closing
Date, but shall not include amounts which would have
been paid but for the application of any credit or net
operating or capital loss deduction attributable to
periods ending on or prior to the Closing Date or to
any Pre-Closing Partial Period.
(d) Any Taxes for a period
including a Pre-Closing Partial Period and a Post-
Closing Partial Period shall be apportioned between
such Pre-Closing Partial Period and such Post-Closing
Partial Period, based, in the case of real and personal
property Taxes, on a per diem basis and, in the case of
other Taxes, on the actual activities, taxable income
or taxable loss of the Company during such Pre-Closing
Partial Period and such Post-Closing Partial Period.
(e) Seller shall prepare and file
all Tax returns for periods ending prior to or on the
Closing Date. Buyer shall prepare and file all other
Tax returns. Seller shall prepare and deliver to Buyer
books and working papers (including a closing of the
books) which will clearly demonstrate the income and
activities of the Company for any period ending on the
Closing Date and any Pre-Closing Partial Period.
(f) Seller and Buyer agree to give
prompt notice to each other of any proposed adjustment
to Taxes for periods ending on or prior to the Closing
Date or any Pre-Closing Partial Period. Seller and
Buyer shall cooperate with each other in the conduct of
any audit or other proceedings involving the Company
for such periods and each may participate at its own
expense, provided that Seller shall have the right to
control the conduct of any audit or proceeding for
which Seller (i) agrees that any resulting Tax is
covered by the indemnity provided in this Section 10.6,
and (ii) demonstrates to the reasonable satisfaction of
Buyer its ability to make such indemnity payment.
Notwithstanding the foregoing, neither party may settle
or otherwise resolve any such claim, suit or proceeding
without the consent of the other party, such consent
not to be unreasonably withheld.
(g) Seller and Buyer agree to
furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information
and assistance (including access to books and records)
relating to the Company as is reasonably necessary for
the preparation of any Tax return, claim for refund or
audit, and the
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prosecution or defense of any claim,
suit or proceeding relating to any proposed adjustment.
(h) Notwithstanding the foregoing,
Seller shall have no obligation to indemnify Buyer with
respect to any liability for Taxes arising from (i) any
election made under Section 338 of the Code or any
similar provision under state law pertaining to the
Company and (ii) a transaction occurring after the
first day of the year in which the Closing shall occur
and on or before the Closing Date to the extent Buyer
takes or causes the Company to take a tax reporting
position with respect to the transaction giving rise to
such tax obligation which is inconsistent with the
method by which the Company accounted for such
transaction on or prior to the Closing Date or the
reporting position taken by the Company with respect to
similar transactions in prior periods, provided that
the Company had substantial authority for the
accounting method or reporting position previously
taken. Subsection (h)(ii) shall not apply, however, to
any tax reporting position taken by the Company to the
extent that (i) the Company provided to Seller a copy
of the relevant workpapers or schedules reflecting the
tax reporting positions taken with respect to the
Company and (ii) Seller did not notify the Company in
writing within twelve (12) business days of delivery of
such notice of (a) Seller's objection to the Company's
tax reporting position and (b) the basis for such
objection including but not limited to identification
of similar prior transactions of the Company and the
tax reporting positions taken by the Company with
respect to such transactions in prior periods.
(i) If any liability for Taxes
with respect to which Buyer or the Company is entitled
to indemnification hereunder results from the
disallowance of any claimed deduction or credit, or
from the shifting of any item of income from one
taxable period to another taxable period, the amount of
indemnification to which Buyer or the Company is
entitled shall be computed after taking into account
any resulting benefit accruing to Buyer or the Company
by reason of such disallowed claim or shift of any item
of income.
ARTICLE XI
SECURITIES LAWS
11.1 Acquisition for Investment.
Buyer hereby acknowledges that the shares of Stock to
be purchased pursuant to the terms of this Agreement
shall be acquired in good faith for investment for its
own account and not with a view to a distribution or
resale of any of such Stock.
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<PAGE>
11.2 Legend. Each certificate
representing shares of Stock sold pursuant to the
provisions hereof, if deemed advisable by the Company,
shall bear the following legends:
"THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE
SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF
EXEMPTION THEREFROM UNDER SAID ACT OR
THE RULES AND REGULATIONS PROMULGATED
THEREUNDER."
ARTICLE XII
MISCELLANEOUS
12.1 Termination. (a) If any
condition precedent to Seller's obligations hereunder
is not satisfied and such condition is not waived by
Seller at or prior to the Closing Date, or if any
condition precedent to Buyer's obligations hereunder is
not satisfied and such condition is not waived by Buyer
at or prior to the Closing Date, the party in whose
favor the condition does not run may, by written notice
to the other party, extend the Closing Date to a day
which is on or prior to one year from the date hereof.
If the Closing Date has not occurred on or prior to one
year from the date hereof, either party may terminate
this Agreement so long as such party is not in default
under this Agreement. In the event that a condition
precedent to its obligations is not satisfied, nothing
contained herein shall be deemed to require any party
to terminate this Agreement, rather than to waive such
condition precedent and proceed with the transactions
contemplated hereby.
(b) This Agreement may be terminated
and the transactions contemplated hereby abandoned by
either party if the conditions set forth in Articles
VII and VIII have not been satisfied on or before one
year from the date hereof (unless waived by the party
entitled to the benefit thereof), without liability of
either party hereto; provided, however, that no party
shall be released from liability hereunder if this
Agreement is terminated and the transactions abandoned
by reason of (i) willful failure of any party to have
performed its obligations hereunder, or (ii) any
knowing misrepresentation made by any party of any
matter set forth herein.
12.2 Assignment. Neither this
Agreement nor any of the rights or obligations
hereunder may be assigned by Seller without the prior
written consent of Buyer, or by Buyer without the prior
written consent of Seller, except that Buyer may,
without such consent, assign the right to acquire the
Stock to a wholly-owned subsidiary or subsidiaries of
Buyer; provided, however, that Buyer shall continue to be
30
<PAGE>
a party to this Agreement and to be bound by the
provisions hereof. Subject to the foregoing, this
Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns, and no other person shall have
any right, benefit or obligation hereunder.
12.3 Notices; Transfer of Funds.
Unless otherwise provided herein, any notice, request,
instruction or other document to be given hereunder by
any party to the others shall be in writing and
delivered in person or by courier, overnight delivery
service, telegraphed, telexed or by facsimile
transmission or mailed by certified mail, postage
prepaid, return receipt requested (such mailed notice
to be effective on the date of such receipt is
acknowledged), as follows:
If to Seller, Crowley Cellular Telecommunications
the Company Limited Partnership
or Licensee: Crowley Cellular Telecommunications
Binghamton, Inc.
Binghamton CellTelCo
Two Wisconsin Circle, Suite 850
Chevy Chase, Maryland 20815
Attention: George D. Crowley, Jr.
With a copy to: Edwards & Angell
101 Federal Street
Boston, MA 02110
Attention: Leonard Q. Slap, Esq.
If to Buyer: Vanguard Cellular Systems, Inc.
2002 Pisgah Church Road, Suite 300
Greensboro, NC 27455
Attention: Richard C. Rowlenson,
Senior Vice President
With a copy to: Latham & Watkins
1001 Pennsylvania Avenue, N.W.,
Suite 1300
Washington, D.C. 200024
Attention: Eric A. Stern, Esq.
or to such other place and with such other copies as
either party may designate as to itself by written
notice to the others.
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<PAGE>
12.4 Choice of Law. This Agreement
shall be construed, interpreted and the rights of the
parties determined in accordance with the laws of the
State of New York except with respect to matters of law
concerning the internal corporate affairs of any
corporate entity which is a party to or the subject of
this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives
its powers shall govern.
12.5 Entire Agreement; Amendments
and Waivers. This Agreement, together with all
exhibits, annexes and schedules hereto, constitutes the
entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agree-
ments, understandings, negotiations and discussions,
whether oral or written, of the parties. No supple-
ment, modification or waiver of this Agreement shall be
binding unless executed in writing by the party to be
bound thereby. No waiver of any of the provisions of
this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not
similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided.
12.6 Counterparts. This Agreement
may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.7 Invalidity. In the event that
any one or more of the provisions contained in this
Agreement or in any other instrument referred to
herein, shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not
affect any other provision of this Agreement or any
other such instrument.
12.8 Headings. The headings of the
Articles and Sections herein are inserted for
convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation
of this Agreement.
12.9 Expenses. Seller and Buyer
will each be liable for its own, and Seller shall be
liable for the Company's and Licensee's, costs and
expenses incurred in connection with the negotiation,
preparation, execution or performance of this
Agreement.
12.10 Publicity. No party shall
issue any press release or make any public statement
regarding the transactions contemplated hereby, until
such time, if any, as Buyer is required to disclose
such terms pursuant to it obligations under the
securities laws. No party shall make any public
announcement of the transaction or its terms without
first giving not less than 48 hours' notice to each
other party of the text of such public announcement and
giving each other party an opportunity to comment
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<PAGE>
thereon. The parties shall cooperate reasonably with
each other in making any public announcement, provided,
however, in no event shall any party in making any
public announcement of the transaction characterize or
attempt to characterize any other party's position,
thoughts, expectations or conclusions concerning the
transaction without such party's prior written consent.
This Section 12.11 shall not survive the Closing.
12.11 Confidential Information. The
parties acknowledge that the transaction described
herein is of a confidential nature and shall not be
disclosed except to consultants, advisors and
affiliates, or as required by law, until such time as
the parties make a public announcement regarding the
transaction as provided in Section 12.11. Neither
Seller nor Buyer shall make any public disclosure of
the specific terms of this Agreement, except as
required by law. In connection with the negotiation of
this Agreement and the preparation for the consummation
of the transactions contemplated hereby, each party
acknowledges that it will have access to confidential
information relating to the other party. Each party
shall treat such information as confidential, preserve
the confidentiality thereof and not duplicate or use
such information, except to advisors, consultants and
affiliates in connection with the transactions
contemplated hereby. Seller, at a time and in a manner
which it reasonably determines and after prior notice
to and consultation with Buyer, may notify employees,
unions and bargaining agents of the fact of the subject
transaction. In the event of the termination of this
Agreement for any reason whatsoever, each party shall
return to the other all documents, work papers and
other material (including all copies thereof) obtained
in connection with the transactions contemplated hereby
and will use all reasonable efforts, including
instructing its employees and others who have had
access to such information, to keep confidential and
not to use any such information, unless such
information is now, or is hereafter disclosed, through
no act or omission of such party, in any manner making
it available to the general public.
[signatures on following page]
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto
have executed this Agreement, or have caused this
Agreement to be duly executed on their respective
behalf by their respective officers thereunto duly
authorized, as of the day and year first above written.
SELLER:
CROWLEY CELLULAR TELECOMMUNICATIONS
LIMITED PARTNERSHIP
By: Crowley Cellular Telecommunications, Inc.,
its general partner
By:________George D. Crowley, Jr.__________
George D. Crowley, Jr., Chairman
THE COMPANY:
CROWLEY CELLULAR TELECOMMUNICATIONS
BINGHAMTON, INC.
By:________George D. Crowley, Jr.___________
George D. Crowley, Jr., Chairman
BUYER:
VANGUARD CELLULAR SYSTEMS, INC.
By:________Stephen R. Leeolou___________
Its: Executive Vice President<PAGE>
<PAGE>
ANNEX I
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to exceptions set forth in the
Disclosure Schedules, Seller represents and warrants to
Buyer as follows:
1. Organization of Seller.
Seller is duly organized, validly existing and in good
standing under the laws of the State of Delaware, has
full partnership power and authority to conduct its
business as it is presently being conducted and to own
and lease its properties and assets. Seller is duly
qualified to do business as a foreign limited
partnership and is in good standing in each
jurisdiction in which such qualification is necessary
under applicable law as a result of the conduct of its
business or the ownership of its properties and where
the failure to be so qualified would have a material
adverse effect on the business or financial condition
of Seller. Each jurisdiction in which Seller is
qualified to do business as a foreign limited
partnership is listed on the Disclosure Schedules.
Seller owns of record and beneficially all of the
outstanding capital stock of the Company free and clear
of all Encumbrances.
2. Organization of the Company.
The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware,
has full corporate power and authority to conduct its
business as it is presently being conducted and to own
and lease its properties and assets. The Company is
duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction in which
such qualification is necessary under applicable law as
a result of the conduct of its business or the
ownership of its properties and where the failure to be
so qualified would have a material adverse effect on
the business or financial condition of the Company.
Each jurisdiction in which the Company is qualified to
do business as a foreign corporation is listed on the
Disclosure Schedules. The Company has authorized 3,000
shares of common stock, $.02 par value per share, 100
shares of which are issued and outstanding. All of the
Company's outstanding shares of common stock have been
duly authorized and validly issued and are fully paid
and non-assessable. The Company is a general partner
of Licensee with a 96.9651% general partner interest
therein. The Company holds the license for and owns
all of the assets relating to the Elmira System.
3. Organization of Licensee.
Licensee is a general partnership formed under the laws
of the District of Columbia, has full partnership power
and authority to conduct its business as it is
presently being conducted and to own and lease its
properties and assets. The partners of Licensee and
their respective interests in Licensee are listed on
the Disclosure Schedules.
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<PAGE>
4. Authorization. Seller has all
necessary partnership power and authority to enter into
this Agreement and has taken all partnership action
necessary to consummate the transactions contemplated
hereby and to perform its obligations hereunder. The
Company has all necessary corporate power and authority
to enter into this Agreement and has taken all
corporate action necessary to consummate the
transactions contemplated hereby and to perform its
obligations hereunder. This Agreement has been duly
executed and delivered by Seller and the Company and is
a legal, valid and binding obligation of each of Seller
and the Company enforceable against each of them in
accordance with its terms.
5. Subsidiaries. Except for
Licensee, the Company has no subsidiaries.
6. Absence of Certain Changes or
Events. Except as set forth in the Disclosure
Schedules, from the Balance Sheet Date through the date
hereof, there has not been any:
(a) (i) increase in the
compensation payable or to become payable by the
Company or Licensee to any of its Personnel whose total
compensation for services rendered to the Company or
Licensee is currently at an annual rate of more than
$15,000 other than consistent with past practice, (ii)
bonus, incentive compensation, service award or other
like benefit granted, made or accrued, contingently or
otherwise, for or to the credit of any of the Personnel
other than consistent with past practice, (iii)
employee welfare, pension, retirement, profit-sharing
or similar payment or arrangement made or agreed to by
the Company for any Personnel except pursuant to the
existing plans and arrangements described in the
Disclosure Schedules or (iv) new employment agreement
to which the Company or Licensee is a party;
(b) addition to or modification of
the employee benefit plans, arrangements or practices
described in the Disclosure Schedules affecting
Personnel other than (i) contributions made in
accordance with the normal practices of the Company or
(ii) the extension of coverage to other Personnel who
became eligible after the Balance Sheet Date;
(c) sale, assignment or transfer
of any of the assets of the Company or Licensee, other
than in the ordinary course of business consistent with
past practice (not exceeding $50,000 in aggregate
value);
(d) cancellation of any
indebtedness other than settlement of customer accounts
in the ordinary course of business to or waiver of any
rights of substantial value to, the Company or
Licensee, whether or not in the ordinary course of
business;
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<PAGE>
(e) amendment, cancellation or
termination of any Contract, license or other
instrument material to the Company or Licensee;
(f) capital expenditure or the
execution of any lease or any incurring of liability
therefor by the Company or Licensee, other than
expenditures pursuant to the capital budget set forth
on Exhibit A attached hereto;
(g) failure to pay when due any
material obligation of the Company or Licensee;
(h) failure to operate the
business of the Company or Licensee since the Balance
Sheet Date in the ordinary course of business;
(i) change in accounting methods
or practices by the Company or Licensee affecting its
assets, liabilities or business;
(j) revaluation by the Company or
Licensee of any of its assets, including without
limitation, writing off notes or accounts receivable
other than in the ordinary course of business and
consistent with industry practice;
(k) damage, destruction or loss
(not covered by insurance) adversely affecting the
properties, business or prospects of the Company or
Licensee;
(l) mortgage, pledge or other
Encumbrance of any assets of the Company or Licensee
except purchase money mortgages arising in the ordinary
course of business;
(m) declaration, setting aside or
payment of dividends or distributions in respect of any
capital stock of the Company or any redemption,
purchase or other acquisition of any of the Company's
equity securities;
(n) distribution to any partner of
Licensee;
(o) issuance by the Company of, or
commitment of the Company to issue, any shares of stock
or other equity securities or obligations or securities
convertible into or exchangeable for shares of stock or
other equity securities;
(p) indebtedness incurred by the
Company or Licensee for borrowed money or any
commitment to borrow money entered into by the Company
or Licensee, or any loans, guaranties, or capital lease
obligations made or agreed to be made by the Company or
Licensee;
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<PAGE>
(q) liabilities involving $20,000
or more in the aggregate, or any increase or change in
any assumptions underlying or methods of calculating
any bad debt, contingency or other reserves;
(r) agreement by the Company or
Licensee to do any of the foregoing; or
(s) other event or condition of
any character (financial or otherwise) which in any one
case or in the aggregate has materially adversely
affected, or any event or condition known to the
Company (other than matters of general public knowledge
relating to general economic conditions or the
Company's industry as a whole) which it is reasonable
to expect will, in any one case or in the aggregate,
materially adversely affect in the future, the
condition (financial or otherwise), assets, liab-
ilities, working capital, reserves, earnings, business
or prospects of the Company or Licensee.
7. Title to Assets, Etc. The
Company and/or Licensee, as the case may be, have good
and marketable fee simple title to, or a good leasehold
interest in, the assets used in the operation of the
Systems, including but not limited to those assets
listed on the Disclosure Schedules and as reflected on
the Balance Sheet or acquired in the ordinary course of
business since the Balance Sheet Date (collectively,
the "Assets"). None of the Assets is subject to any
Encumbrances except as set forth on the Disclosure
Schedules or which will be released at Closing. The
Company and/or Licensee, as the case may be, have in
all material respects performed all the obligations
required to be performed by it or them with respect to
all Assets leased by it or them through the date
hereof, except where the failure to perform would not
have a material adverse effect on the business or
financial condition of the Company or Licensee. The
Company and/or Licensee, as the case may be, enjoy
peaceful and undisturbed possession of all Facilities
owned or leased by it or them, and such Facilities are
not subject to any Encumbrances, encroachments,
building or use restrictions, exceptions, reservations
or limitations which in any material respect interfere
with or impair the present and continued use thereof in
the usual and normal conduct of the business of the
Company or Licensee. There are no pending or threat-
ened condemnation proceedings relating to any of the
Facilities. The real property improvements (including
leasehold improvements), equipment and other tangible
assets owned or used by the Company or Licensee at the
Facilities are adequately insured and are structurally
sound with no known material defects. None of said
improvements, equipment and other assets is subject to
any commitment or other arrangement for their sale or
use by any affiliate of the Company, Licensee, or third
parties. The Assets are valued for financial
accounting purposes at or below actual cost less an
adequate and proper depreciation charge.
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8. Condition of Tangible Assets.
The Facilities and Fixtures and Equipment are in good
operating condition and repair (except for ordinary
wear and tear and any defect the cost of repairing
which would not be material), are sufficient for the
operation of the Company's or Licensee's business as
presently conducted and are in conformity in all
material respects with all applicable laws, ordinances,
orders, regulations and other requirements (including
applicable zoning, environmental, motor vehicle safety
or standards, occupational safety and health laws and
regulations) relating thereto currently in effect,
except where the failure to conform would not have a
material adverse effect on the business or financial
condition of the Company or Licensee.
9. Contracts and Commitments.
Neither the Company nor Licensee is a party to and the
Company, Licensee and its respective properties are not
subject to any written or oral:
(a) commitment, contract, note,
loan, evidence of indebtedness, purchase order or
letter of credit involving any obligation or liability
on the part of the Company of more than $20,000 and not
cancelable (without liability) within sixty (60) days;
(b) lease of real property (the
Disclosure Schedules indicates with respect to each
lease listed on the Disclosure Schedules the term,
annual rent and renewal options);
(c) lease of personal property
involving any annual expense in excess of $5,000 and
not cancelable (without liability) within 60 days;
(d) contracts and commitments not
otherwise described above or listed in the Disclosure
Schedules (including purchase orders, franchise
agreements and undertakings or commitments to any
governmental or regulatory authority) relating to the
business of the Company or Licensee and otherwise
materially affecting the Company's or Licensee's
business;
(e) material governmental or
regulatory licenses or permits required to conduct the
business of the Company and Licensee as presently
conducted, other than the Authorizations;
(f) contracts or agreements
containing covenants limiting the freedom of the
Company or Licensee to engage in any line of business
or compete with any person; or
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<PAGE>
(g) employment contracts,
including without limitation, contracts to employ
executive officers and other contracts with officers or
directors of the Company or Licensee.
Neither the Company nor Licensee is
(and, to the best knowledge of the Company, no other
party is) in material breach or violation of, or
default under any of the Contracts or other instru-
ments, obligations, evidences of indebtedness or
commitments described in (a)-(g) above, the breach or
violation of which would have a material adverse effect
on the business or financial condition of the Company
or Licensee.
10. Authorizations. Set forth on
the Disclosure Schedules are all of the Authorizations.
There are no pending or, to the knowledge of each of
Seller, the Company or Licensee, threatened proceedings
by or before the FCC which would result in the
revocation, cancellation, suspension or adverse
modification of any FCC Authorization, nor are there
any facts that would give rise to, or form the basis
for such a proceeding. On the Closing Date, subject to
the receipt of the approvals contemplated herein,
Licensee and the Company will have the absolute and
unrestricted right, power and authority under the
Communications Act to transfer control of the
Authorizations to Buyer upon consummation of the
transaction contemplated hereby. Neither the Company
nor Licensee (a) has engaged in any course of conduct
which would impair the Company's or Licensee's ability
to remain the holder of the Authorizations, and (b) is
aware of any reason why (i) those of the Authorizations
subject to expiration might not be renewed in the
ordinary course or (ii) any of the Authorizations might
be revoked.
11. No Conflict or Violation.
Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated
hereby will result in (a) a violation of or a conflict
with any provision of (i) the Certificate of Limited
Partnership or the partnership agreement of Seller,
(ii) the Articles of Incorporation or Bylaws of the
Company, or so long as Buyer complies with its
obligations under Section 6.2(c) hereof the partnership
agreement of Licensee (b) a breach of, or a default
under, any term or provision of any contract,
agreement, indebtedness, lease, Encumbrance, com-
mitment, license, franchise, permit, authorization or
concession to which Seller, the Company or Licensee is
a party or by which the Assets are bound, which breach
or default would have a material adverse effect on the
business or financial condition of Seller, the Company
or Licensee or their respective ability to consummate
the transactions contemplated hereby, (c) a violation
by Seller, the Company or Licensee of any statute,
rule, regulation, ordinance, code, order, judgment,
writ, injunction, decree or award, which violation
would have a material adverse effect on the business or
financial condition of Seller, the Company or Licensee
or their respective ability to consummate the
transactions
6
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contemplated hereby, or (d) an imposition
of any material Encumbrance, restriction or charge on
the business of Seller, the Company or Licensee or on
any of the Assets.
12. Consents and Approvals. No
consent, approval or authorization of, or declaration,
filing or registration with, any governmental or
regulatory authority, or any other person or entity, is
required to be made or obtained by Seller or the
Company in connection with the execution, delivery and
performance of this Agreement and the consummation of
the transactions contemplated hereby other than the
filings required under the HSR Act, the FCC Consents
and the NYPSC Approval.
13. Financial Statements. Seller
has heretofore delivered to Buyer the Financial
Statements. Except as otherwise set forth therein, the
Financial Statements are complete, are in accordance
with the books and records of the Company, fairly and
accurately reflect the assets, liabilities and
financial condition and results of operations indicated
thereby in accordance with generally accepted
principles of tax basis accounting consistently
applied, and contain and reflect all necessary
adjustments for a fair representation of the Financial
Statements as of the date and for the period covered
thereby.
14. Litigation. There is no
action, order, writ, injunction, judgment or decree
outstanding or claim, suit, litigation, proceeding
(other than routine collection matters against
customers), labor dispute (other than routine grievance
procedures or routine, uncontested claims for benefits
under any benefit plans for Personnel), arbitration
action or investigation (collectively, "Actions")
pending or, to the knowledge of Seller or the Company,
threatened or anticipated against, relating to or
affecting (i) the Company, (ii) Licensee, (iii) the
Systems, (iv) any benefit plan for Personnel or any
fiduciary or administrator thereof or (v) the
transactions contemplated by this Agreement. None of
Seller, the Company or Licensee is in default with
respect to any judgment, order, writ, injunction or
decree of any court or governmental agency, and there
are no unsatisfied judgments against Seller, the
Company, Licensee or the business or activities of the
Company or Licensee. There is not a reasonable likeli-
hood of an adverse determination of any pending Actions
which would, individually or in the aggregate, have a
material adverse effect on the business or financial
condition of the Company or Licensee.
15. Labor Matters. Neither the
Company nor Licensee is a party to any collective
bargaining agreement with respect to its employees with
any labor organization, group or association. In the
last three (3) years, neither the Company nor Licensee
has experienced any attempt by organized labor or its
representatives to make the Company or Licensee conform
to demands of organized labor relating to its employees
or to enter into a binding agreement with organized
labor that would cover the employees of the Company or
licensee. Each of the Company and Licensee is in
7
<PAGE>
material compliance with all applicable laws respecting
employment practices, terms and conditions of
employment and wages and hours and is not engaged in
any unfair labor practice. There is no unfair labor
practice charge or complaint against the Company or
Licensee pending before the National Labor Relations
Board or any other governmental agency arising out of
the Company's or Licensee's activities, and the Company
has no knowledge of any facts or information which
would give rise thereto; there is no labor strike or
labor disturbance pending or threatened against the
Company or Licensee nor is any grievance currently
being asserted; and neither the Company nor Licensee
has experienced a work stoppage or other labor dif-
ficulty.
16. Liabilities. The Company has
no liabilities or obligations (absolute, accrued,
contingent or otherwise) except (i) liabilities which
are reflected and reserved against on the Balance
Sheet, (ii) liabilities incurred in the ordinary course
of business and consistent with past practice since the
Balance Sheet Date, and (iii) liabilities arising under
Contracts, letters of credit, purchase orders, licen-
ses, permits, purchase agreements and other agreements,
business arrangements and commitments described in the
Disclosure Schedules or which are of the type described
in paragraph 9 of this Annex I but which because of the
dollar amount or other qualifications are not required
to be listed in the Disclosure Schedules.
17. Compliance with Law. Each of
Seller, the Company and Licensee and the conduct of its
and their respective business are in compliance with
all applicable laws, statutes, ordinances and
regulations, whether federal (including the
Communications Act), state or local, except where the
failure to comply would not have a material adverse
effect on the business or financial condition of
Seller, the Company or Licensee, as the case may be.
None of Seller, the Company nor Licensee has received
any written notice to the effect that, or otherwise
been advised that, it is not in compliance with any of
such statutes, regulations, orders, ordinances or other
laws where the failure to comply would have a material
adverse effect on the business or financial condition
of Seller, the Company or Licensee, as the case may be,
and neither Seller, the Company nor Licensee has any
reason to anticipate that any presently existing
circumstances are likely to result in violations of any
such regulations which would, in any one case or in the
aggregate, have a material adverse effect on the
business or financial condition of Seller, the Company
or Licensee, as the case may be.
18. No Brokers. None of Seller,
the Company nor any affiliate of Seller or the Company
has entered into or will enter into any Contract,
agreement, arrangement or understanding with any person
or firm which will result in the obligation of Buyer to
pay any finder's fee, brokerage commission or similar
payment in connection with the transactions
contemplated hereby. Notwithstanding the foregoing,
Seller shall be responsible for all payments due to
Donaldson, Lufkin & Jenrette Securities Corporation and
Toronto Dominion Bank as a finder's fee or
8
<PAGE>
brokerage commission and shall indemnify Buyer for any
costs, expenses (including without limitation attorneys'
fees), claims, liabilities or losses related thereto.
19. No Other Agreements to Sell
the Assets or the Company. None of Seller, the Company
nor Licensee have any legal obligation, absolute or
contingent, to any other person or firm to sell the
Assets, to sell any capital stock of the Company or to
effect any merger, consolidation or other reorganiza-
tion of the Company or Licensee or to enter into any
agreement with respect thereto.
20. Proprietary Rights. All of
the Company's and Licensee's registrations of
trademarks and of other marks, trade names or other
trade rights, and all pending applications for any such
registrations and all of the Company's and Licensee's
patents and copyrights and all pending applications
therefor; all other trademarks and other marks, trade
names and other trade rights and all other trade
secrets, designs, plans, specifications and other
proprietary rights, whether or not registered (col-
lectively, "Proprietary Rights") are listed in the
Disclosure Schedules. The Proprietary Rights listed in
the Disclosure Schedules are in all material respects
all those used in the business of the Company or
Licensee. No person has a right to receive a royalty
or similar payment in respect of any Proprietary Rights
pursuant to any contractual arrangements entered into
by the Company or Licensee, and no person otherwise has
a right to receive a royalty or similar payment in
respect of any such Proprietary Rights. Neither the
Company nor Licensee has any licenses granted by or to
it or no other agreements to which it is a party,
relating in whole or in part to any of the Proprietary
Rights. Each of the Company's and Licensee's use of
the Proprietary Rights is not infringing upon or
otherwise violating the rights of any third party in or
to such Proprietary Rights, and no proceedings have
been instituted against or notices received by the
Company or Licensee that are presently outstanding
alleging that the Company's or Licensee's use of its
Proprietary Rights infringes upon or otherwise violates
any rights of a third party in or to such Proprietary
Rights.
21. Employee Benefit Plans
(a) Definitions. The following
terms, when used in this paragraph 21, shall have the
following meanings. Any of these terms may, unless the
context otherwise requires, be used in the singular or
the plural depending on the reference.
(1) Benefit Arrangement.
"Benefit Arrangement" shall mean any
employment, consulting, severance or other
similar contract, arrangement or policy and
each plan, arrangement (written or oral),
program, agreement or commitment providing for
insurance coverage (including any self-insured
arrangements), workers' compensation, dis-
ability benefits, supplemental unemployment
benefits, vacation benefits, retirement benefi-
ts, life, health,
9
<PAGE>
disability or accident benefits or for deferred
compensation, profit-sharing bonuses, stock
options, stock appreciation rights, stock
purchases or other forms of incentive compensation
or post-retirement insurance, compensation or
benefits which (A) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (B) is entered into,
maintained, contributed to or required to be
contributed to, as the case may be, by the
Company or under which the Company may incur
any liability, and (C) covers any employee or
former employee of the Company (with respect to
their relationship with the Company).
(2) Code. "Code" shall
mean the Internal Revenue Code of 1986, as
amended.
(3) Employee Plans.
"Employee Plans" shall mean all Benefit
Arrangements, Multiemployer Plans, Pension
Plans and Welfare Plans.
(4) ERISA. "ERISA" shall
mean the Employee Retirement Income Security
Act of 1974, as amended.
(5) ERISA Affiliate.
"ERISA Affiliate" shall mean any entity which
is (or at any relevant time was) a member of a
"controlled group of corporations" with or
under "common control" with the Company as
defined in Section 414(b) or (c) of the Code.
(6) Multiemployer Plan.
"Multiemployer Plan" shall mean any
"multiemployer plan," as defined in Sec-
tion 4001(a)(3) of ERISA, (A) which the Company
or any ERISA Affiliate maintains, administers,
contributes to or is required to contribute to,
or, after September 25, 1980, maintained,
administered, contributed to or was required to
contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and
(B) which covers any employee or former
employee of the Company or any ERISA Affiliate
(with respect to their relationship with such
entities).
(7) PBGC. "PBGC" shall
mean the Pension Benefits Guaranty Corporation.
(8) Pension Plan.
"Pension Plan" shall mean any "employee pension
benefit plan" as defined in Section 3(2) of
ERISA (other than a Multiemployer Plan)
(A) which the Company or any ERISA Affiliate
maintains, administers, contributes to or is
required to contribute to, or, within the five
years prior to the Closing Date, maintained,
administered, contributed to or was required to
contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and
(B) which covers any employee or former
employee
10
<PAGE>
of the Company or any ERISA Affiliate
(with respect to their relationship with such
entities).
(9) Subsidiary.
"Subsidiary" shall mean (i) any corporation in
an unbroken chain of corporations beginning
with the Company if each of the corporations
other than the last corporation in the unbroken
chain then owns stock possessing 50% or more of
the total combined voting power of all classes
of stock in one of the other corporations in
such chain; (ii) any partnership in which the
Company is a general partner; or (iii) any
partnership in which the Company possesses a
50% or greater interest in the total capital or
total income of such partnership.
(10) Welfare Plan.
"Welfare Plan" shall mean any "employee welfare
benefit plan" as defined in Section 3(1) of
ERISA including, without limitation, any
"voluntary employees' beneficiary association"
as defined in Section 501(c)(9) of the Code
providing welfare benefits, (A) which the
Company or any ERISA Affiliate maintains,
administers, contributes to or is required to
contribute to, or under which the Company or
any ERISA Affiliate may incur any liability and
(B) which covers any employee or former
employee of the Company or any ERISA Affiliate
(with respect to their relationship with such
entities).
(b) Disclosure; Delivery of Copies
of Relevant Documents and Other Information. The
Disclosure Schedules contain a complete list of
Employee Plans which cover or have covered employees of
the Company, Licensee or a Subsidiary (with respect to
their relationship with such entities). True and com-
plete copies of each of the following documents have
been delivered by the Company to Buyer: (i) each
Welfare Plan, Pension Plan and Multiemployer Plan (and,
if applicable, related trust agreements) which cover or
have covered employees of the Company or a Subsidiary
(with respect to their relationship with such entities)
and all amendments thereto, all written interpretations
thereof and written descriptions thereof which have
been distributed to the Company's and Licensee's
employees and all annuity contracts or other funding
instruments, (ii) each written Benefit Arrangement
which cover or have covered employees of the Company,
Licensee or a Subsidiary (with respect to their
relationship with such entities) including written
interpretations thereof and written descriptions
thereof which have been distributed to the Company's
and Licensee's employees (including descriptions of the
number and level of employees covered thereby) and a
complete description of any such Benefit Arrangement
which is not in writing, (iii) the most recent
determination letter issued by the Internal Revenue
Service, with respect to each Pension Plan which cover
or have covered employees of the Company, Licensee or a
Subsidiary (with respect to their relationship with
such entities) (iv) for the three most recent plan
years, Annual Reports on Form 5500 Series
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<PAGE>
required to be filed with any governmental agency for each
Pension Plan which cover or have covered employees of the
Company, Licensee or a Subsidiary (with respect to
their relationship with such entities) (v) all
actuarial reports prepared for the last three plan
years for each Pension Plan which cover or have covered
employees of the Company, Licensee or a Subsidiary
(with respect to their relationship with such
entities), (vi) a description of complete age, salary,
service and related data as of the last day of the last
plan year for employees and former employees of the
Company, Licensee and each Subsidiary, and (vii) a
description setting forth the amount of any liability
of the Company as of the Closing Date for payments more
than thirty days past due with respect to each Welfare
Plan which covers or has covered employees or former
employees of the Company, Licensee or a Subsidiary.
(c) Representations. Except as
set forth in the Disclosure Schedules, Seller
represents as follows:
(1) Pension Plans
(i) The funding
method used in connection with each
Pension Plan which is subject to the
minimum funding requirements of ERISA
is acceptable and the actuarial
assumptions used in connection with
funding each such plan are reasonable.
As of the last day of the last plan
year of each Pension Plan and as of
the Closing Date, the "amount of
unfunded benefit liabilities" as
defined in Section 4001(a)(18) of
ERISA (but excluding from the defini-
tion of "current value" of "assets" of
such Pension Plan, accrued but unpaid
contributions) did not and will not
exceed zero. No "accumulated funding
deficiency" (for which an excise tax
is due or would be due in the absence
of a waiver) as defined in Section 412
of the Code or as defined in Section
302(a)(2) of ERISA, whichever may
apply, has been incurred with respect
to any Pension Plan with respect to
any plan year, whether or not waived.
Neither the Company nor any ERISA
Affiliate has any liability for unpaid
contributions with respect to any
Pension Plan.
(ii) Neither the
Company nor any ERISA Affiliate is
required to provide security to a
Pension Plan which covers or has
covered employees or former employees
of the Company, Licensee or a
Subsidiary under Section 401(a)(29) of
the Code.
(iii) Each Pension
Plan and each related trust agreement,
annuity contract or other funding
instrument which covers or has covered
employees or former employees of the
Company, Licensee or a Subsidiary
(with respect to their relationship
with such entities) is
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<PAGE>
qualified and tax-exempt under the
provisions of Code Sections 401(a) (or
403(a), as appropriate) and 501(a) and has
been so qualified during the period from
its adoption to date.
(iv) Each Pension
Plan, each related trust agreement,
annuity contract or other funding
instrument which covers or has covered
employees or former employees of the
Company, Licensee or a Subsidiary
presently complies and has been
maintained in material compliance with
its terms and, both as to form and in
operation, with the requirements
prescribed by any and all statutes,
orders, rules and regulations which
are applicable to such plans,
including but not limited to ERISA and
the Code except to the extent
permitted under Section 401(b) of the
Code.
(v) The Company
has paid all premiums (and interest
charges and penalties for late
payment, if applicable) due the PBGC
with respect to each Pension Plan for
each plan year thereof for which such
premiums are required. Neither the
Company nor any ERISA Affiliate has
engaged in, or is a successor or
parent corporation to an entity that
has engaged in, a transaction
described in Section 4069 of ERISA.
There has been no "reportable event"
(as defined in Section 4043(b) of
ERISA and the PBGC regulations under
such Section) with respect to any
Pension Plan. No filing has been made
by the Company or any ERISA Affiliate
with the PBGC, and no proceeding has
been commenced by the PBGC, to
terminate any Pension Plan. No
condition exists and no event has
occurred that could constitute grounds
for the termination of any Pension
Plan by the PBGC. Neither the Company
nor any ERISA Affiliate has, at any
time, (A) ceased operations at a
facility so as to become subject to
the provisions of Section 4068(f) of
ERISA, (B) withdrawn as a substantial
employer so as to become subject to
the provisions of Section 4063 of
ERISA, or (C) ceased making
contributions on or before the Closing
Date to any Pension Plan subject to
Section 4064(a) of ERISA to which the
Company or any ERISA Affiliate made
contributions during the five years
prior to the Closing Date.
(2) Multiemployer Plans
(i) Neither the
Company nor any ERISA Affiliate has,
at any time, withdrawn from a
Multiemployer Plan in a "complete
withdrawal" or a "partial withdrawal"
as defined in Sections 4203 and 4205
of ERISA, respectively, so as to
result in a liability, contingent or
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<PAGE>
otherwise (including, but not limited
to, the obligations pursuant to an
agreement entered into in accordance
with Section 4204 of ERISA), of the
Company or any ERISA Affiliate.
(ii) All
contributions required to be made by
the Company or any ERISA Affiliate to
each Multiemployer Plan have been made
when due.
(iii) If, as of the
Closing Date, the Company (and all
ERISA Affiliates) were to withdraw
from all Multiemployer Plans to which
it (or any of them) has contributed or
been obligated to contribute, it (and
they) would incur no liabilities to
such plans under Title IV of ERISA.
(iv) To the best
of Seller's and the Company's
knowledge, with respect to each
Multiemployer Plan: (A) no such
Multiemployer Plan has been terminated
or has been in reorganization under
ERISA so as to result, directly or
indirectly, in any liability,
contingent or otherwise, of the
Company or any ERISA Affiliate under
Title IV of ERISA; (B) no proceeding
has been initiated by any person
(including the PBGC) to terminate any
Multiemployer Plan; (C) the Company
and the ERISA Affiliates have no
reason to believe that any
Multiemployer Plan will be terminated
or will be reorganized under ERISA;
and (D) the Company and the ERISA
Affiliates do not expect to withdraw
from any Multiemployer Plan.
(3) Welfare Plans
(i) Each Welfare
Plan which covers or has covered
employees or former employees of the
Company, Licensee or a Subsidiary
(with respect to their relationship
with such entities) has been
maintained in material compliance with
its terms and, both as to form and
operation, with the requirements
prescribed by any and all statutes,
orders, rules and regulations which
are applicable to such Welfare Plan,
including but not limited to ERISA and
the Code.
(ii) None of the
Company, any ERISA Affiliate or any
Welfare Plan has any present or future
obligation to make any payment to or
with respect to any present or former
employee of the Company or any ERISA
Affiliate pursuant to any retiree
medical benefit plan, or other retiree
Welfare Plan except as required by the
Consolidated Omnibus Budget
Reconciliation Act of 1985 or
corresponding state
14
<PAGE>
rights, and no condition exists which would
prevent the Company from amending or
terminating any such benefit plan or
Welfare Plan on a prospective basis.
(iii) Each Welfare
Plan which covers or has covered
employees or former employees of the
Company, Licensee or a Subsidiary and
which is a "group health plan," as
defined in Section 607(1) of ERISA,
has been operated in material
compliance with provisions of Part 6
of Title I of ERISA and Sections
162(k) and 4980B of the Code at all
times.
(4) Benefit Arrangements.
Each Benefit Arrangement which covers or has
covered employees or former employees of the
Company, Licensee or a Subsidiary (with respect
to their relationship with such entities) has
been maintained in compliance with its terms
and with the requirements prescribed by any and
all statutes, orders, rules and regulations
which are applicable to such Benefit Arrange-
ment, including but not limited to the Code.
Except as set forth on the Disclosure
Schedules, and except as provided by law, the
employment of all persons presently employed or
retained by the Company, Licensee or a Sub-
sidiary is terminable at will.
(5) Unrelated Business
Taxable Income. No Employee Plan (or trust or
other funding vehicle pursuant thereto) is
subject to any tax under Code Section 511.
(6) Deductibility of
Payments. There is no contract, agreement,
plan or arrangement covering any employee or
former employee of the Company, Licensee or a
Subsidiary (with respect to their relationship
with such entities) that, individually or
collectively, provides for the payment by the
Company or Licensee of any amount (i) that is
not deductible under Section 162(a)(1) or 404
of the Code or (ii) that is an "excess
parachute payment" pursuant to Section 280G of
the Code.
(7) Fiduciary Duties and
Prohibited Transactions. Neither the Company
nor, to the best of Seller's and the Company's
knowledge, any plan fiduciary of any Welfare
Plan or Pension Plan which covers or has
covered employees or former employees of the
Company or any ERISA Affiliate, has engaged in
any transaction in violation of Sections 404 or
406 of ERISA or any "prohibited transaction,"
as defined in Section 4975(c)(1) of the Code,
for which no exemption exists under Section 408
of ERISA or Section 4975(c)(2) or (d) of the
Code.
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<PAGE>
(8) Validity and
Enforceability. Each Welfare Plan, Pension
Plan, related trust agreement, annuity contract
or other funding instrument and Benefit
Arrangement which covers or has covered
employees or former employees of the Company,
Licensee or a Subsidiary (with respect to their
relationship with such entities) is (or was at
all relevant times) legally valid and binding
and in full force and effect.
(9) Litigation. None of
the Company, any ERISA Affiliate nor any
Employee Plan which covers or has covered
employees or former employees of the Company,
Licensee or a Subsidiary (with respect to their
relationship with such entities) is a party to
any litigation relating to or seeking benefits
under any Employee Plan.
(10) No Amendments.
Neither the Company nor any ERISA Affiliate has
any announced plan or legally binding
commitment to create any additional Employee
Plans which are intended to cover employees or
former employees of the Company, Licensee or a
Subsidiary (with respect to their relationship
with such entities) or to amend or modify any
existing Employee Plan which covers or has
covered employees or former employees of the
Company, Licensee or a Subsidiary (with respect
to their relationship with such entities).
(11) No Other Material
Liability. No event has occurred in connection
with which the Company or any ERISA Affiliate
or any Employee Plan, directly or indirectly,
could be subject to any material liability (i)-
under any statute, regulation or governmental
order relating to any Employee Plans or
(ii) pursuant to any obligation of the Company,
Licensee or any Subsidiary to indemnify any
person against liability incurred under, any
such statute, regulation or order as they
relate to the Employee Plans.
22. Transactions with Certain
Persons. Neither any officer, director or employee of
Seller, the Company or Licensee nor any member of any
such person's immediate family is presently a party to
any material transaction with the Company relating to
the Company's business, including without limitation,
any contract, agreement or other arrangement (i) provi-
ding for the furnishing of material services by, (ii)
providing for the rental of material real or personal
property from, or (iii) otherwise requiring material
payments to (other than for services as officers,
directors or employees of Seller, the Company or
Licensee) any such person or corporation, partnership,
trust or other entity in which any such person has a
substantial interest as a shareholder, officer,
director, trustee or partner.
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<PAGE>
23. Tax Matters. (a) Filing of
Tax Returns. The Company has timely filed with the
appropriate taxing authorities all Returns required to
be filed through the date hereof and will timely file
any such Returns required to be filed on or prior to
the Closing Date. The Returns filed (or to be filed)
are complete and accurate in all material respects.
The Company has not requested any extension of time
within which to file Returns in respect of any Taxes
that have not been filed.
(b) Payment of Taxes. All Taxes
of the Company, or for which the Company is or could be
liable, whether to taxing authorities (as, for example,
under law) or to other persons or entities (as, for
example, under tax allocation agreements) in respect of
periods ending on or before the Closing Date, have been
timely paid, or will be timely paid prior to the
Closing Date, all applicable tax laws and agreements
have been fully complied with, and the Company has no
material liability for Taxes in excess of the amounts
so paid. The Company has made adequate provision,
pursuant to tax basis accounting principles
consistently applied, for the payment of all Taxes
which may subsequently become due. All Taxes that the
Company has been required to collect or withhold has
been duly collected or withheld and, to the extent
required when due, have been or will be (prior to the
Closing Date) duly paid to the proper taxing authority.
(c) Audits, Investigations or
Claims. No issues have been raised (and are currently
pending) by any taxing authority in connection with any
of the Returns. No waivers of statutes of limitation
with respect to the Returns have been given by or
requested from the Company. On the Disclosure
Schedules are set forth (i) the taxable years of the
Company which have not expired, and (ii) with respect
to such taxable years, those years for which
examinations have been completed, those years for which
examinations are presently being conducted, those years
for which examinations have not been initiated, and
those years for which required Returns have not yet
been filed. Except to the extent shown on the
Disclosure Schedules, all deficiencies asserted or
assessments made as a result of any examinations have
been fully paid, or are fully reflected as a liability
in the financial statements of the Company, or are
being contested and an adequate reserve therefor has
been established and is fully reflected on the
financial statements of the Company.
(d) Tax Sharing Agreements. The
Company is not a party to or bound by (nor will any of
them become a party to or bound by) any tax indemnity,
tax sharing, or tax allocation agreement.
(e) Prior Affiliated Groups.
Except for the Licensee, the Company has no
Subsidiaries (as defined in Paragraph 21) and the
Company is not, and has never been a member of an
affiliated group of corporations within the meaning of
Section 1504 of the Code.
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<PAGE>
(f) Section 341(f) Consent. The
Company has not filed a consent pursuant to the
collapsible corporation provisions of Section 341(f) of
the Code (or any corresponding provision of state or
local law) or agreed to have Section 341(f)(2) of the
Code (or any corresponding provision of state or local
law) apply to any disposition of any asset owned by it.
(g) Safe Harbor Lease Property.
The Company has not made an election, and is not
required, to treat any asset as owned by another person
or as tax-exempt bond financed property or tax-exempt
use property within the meaning of section 168 of the
Code or under any comparable state or local income tax
or other tax provision.
(h) Tax-Exempt Use Property. No
asset of the Company is "tax-exempt use property"
within the meaning of Section 168(h) of the Code.
(i) Section 481(a). The Company
has not agreed to make, and is not required to make,
any adjustment under Section 481(a) of the Code by
reason of a change in accounting method or otherwise.
(j) Excess Parachute Payments.
The Company is not a party to any agreement, contract,
arrangement or plan that has resulted or would result,
separately or in the aggregate, in the payment of any
"excess parachute payments" within the meaning of
Section 280G of the Code.
(k) U.S. Real Property Holding
Corporation. The Company is not and has not been a
United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii)
of the Code.
(l) Foreign Person. The Seller is
not a person other than a United States person within
the meaning of the Code.
(m) No Withholding. The
transaction contemplated herein is not subject to the
tax withholding provisions of Section 3406 of the Code,
or of Subchapter A of Chapter 3 of the Code, or of any
other provision of law.
(n) Permanent Establishment. The
Company does not have (and has not at any time had) a
permanent establishment in any foreign country, as
defined in any applicable tax treaty or convention
between the United States and such foreign country.
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(o) No Joint Venture. The Company
is not a party to any joint venture, partnership, or
other arrangement or contract which could be treated as
a partnership for federal income tax purposes (except
that the Company is a general partner in the Licensee).
(p) Net Operating Losses. Seller
makes no representation or warranty regarding the
amount of net operating losses of the Company within
the meaning of Section 172 of the Code that might be
available to offset income of the Company or Buyer in
the future or the Taxes which may result from any
election under Section 338 of the Code or any similar
provision under state law with respect to the Company,
on or following the Closing Date.
24. Severance Arrangements.
Neither the Company nor Licensee has entered into any
severance or similar arrangement in respect of any
present or former Personnel that will result in any
obligation (absolute or contingent) of Buyer, the
Company or Licensee to make any payment to any present
or former Personnel following termination of
employment.
25. Insurance. The Disclosure
Schedules contain an accurate list of all policies or
binders of fire, liability, title, worker's
compensation and other forms of insurance (showing as
to each policy or binder the carrier, policy number,
coverage limits, expiration dates, annual premiums and
a general description of the type of coverage provided)
maintained by the Company and Licensee on its
respective business, property or Personnel. All of
such policies are sufficient for compliance with all
requirements of law and of all Contracts to which the
Company or Licensee is a party. Neither the Company
nor Licensee is in default under any of such policies
or binders in any material respect, and neither the
Company nor Licensee has failed to give any notice or
to present any claim under any such policy or binder in
a due and timely fashion. There are no facts upon which
an insurer might be justified in reducing coverage or
increasing premiums on existing policies or binders.
There are no outstanding unpaid claims under any such
policies or binders. Such policies and binders provide
sufficient coverage for the risks insured against, are
in full force and effect on the date hereof and shall
be kept in full force and effect by the Company and
Licensee, as the case may be, through the Closing Date.
26. Accounts Receivable. The
accounts receivable reflected in the Balance Sheet, and
all accounts receivable arising since the Balance Sheet
Date, represent bona fide claims against debtors for
sales, services performed or other charges arising on
or before the date hereof, and all the goods delivered
and services performed which gave rise to said accounts
were delivered or performed in accordance with the
applicable orders, Contracts or customer requirements.
Said accounts receivable are subject to no defenses,
counterclaims or rights of setoff and are fully
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collectible in the ordinary course of business without
cost to Buyer in collection efforts therefor except, in
the case of accounts receivable shown on the Balance
Sheet, to the extent of the appropriate reserves set
forth on the Balance Sheet, and, in the case of
accounts receivable arising since the Balance Sheet
Date, to a reasonable allowance for bad debts which
does not reflect a rate of bad debts higher than that
reflected by the reserve for bad debts on the Balance
Sheet.
27. Payments. Neither the Company
nor Licensee has, directly or indirectly, paid or
delivered any fee, commission or other sum of money or
item or property, however characterized, to any finder,
agent, government official or other party, in the
United States or any other country, which is in any
manner related to the business or operations of the
Company or Licensee, which Seller or the Company knows
or has reason to believe to have been illegal under any
federal, state or local laws of the United States or
any other country having jurisdiction; and neither the
Company nor Licensee has participated, directly or
indirectly, in any boycotts or other similar practices
affecting any of its actual or potential customers and
has at all times done business in an open and ethical
manner.
28. Customers and Suppliers. The
Disclosure Schedules contain a complete and accurate
list of (i) the 30 largest customers of the Company and
Licensee in terms of usage during April, 1994, showing
the approximate total usage by each such customer
during such month; (ii) the five largest suppliers of
the Company and Licensee in terms of purchases during
the Company's and Licensee's last fiscal year, showing
the approximate total purchases by the Company and
Licensee from each such supplier during such fiscal
year. Since the Balance Sheet Date, there has been no
adverse change in the business relationship of the
Company with any customer or supplier named in the
Disclosure Schedules which is material to the business
or financial condition of the Company.
29. Compliance With Environmental
Laws. There are no toxic wastes or other toxic or
hazardous substances or materials being stored or
otherwise held on, under or about any of the
Facilities. During the ownership by the Company or
Licensee, as the case may be, and, to the best of
Seller's knowledge prior to such ownership, the
Facilities have been maintained in compliance with all
federal, state and local environmental protection,
occupational, health and safety or similar laws,
ordinances, restrictions, licenses and local
environmental protection, occupational, health and
safety or similar laws, ordinances, restrictions,
licenses and regulations, including but not limited to
the Federal Water Pollution Control Act (33
U.S.C. (section mark) 1251 et seq.), Resource Conservation
& Recovery Act (42 U.S.C. (section mark) 6901 et seq.),
Safe Drinking Water Act (21 U.S.C. (section mark) 349,
42 U.S.C. (section mark)(section mark) 201, 300f),
Toxic Substances Control Act (15 U.S.C. (section mark)
2601 et seq.), Clean Air Act (42 U.S.C. (section mark)
7401 et seq.), and
20
<PAGE>
Comprehensive Environmental Response, Compensation and
Liability Act (42 U.S.C. (section mark) 9601 et seq.).
30. Material Misstatements Or
Omissions. No representations or warranties by Seller
in this Agreement, nor any document, exhibit, written
statement, certificate or schedule furnished to Buyer
pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will
omit to state any material fact necessary to make the
statements or facts contained therein not misleading.
21
<PAGE>
ANNEX II
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as
follows:
1. Organization of Buyer. Buyer is duly
organized, validly existing and in good standing under
the laws of the State of North Carolina and has full
corporate power and authority to conduct its business
and to own and lease its properties. Buyer is duly
qualified to do business as a foreign limited
corporation and is in good standing in each
jurisdiction in which such qualification is necessary
under applicable law as a result of the conduct of its
business or the ownership of its properties and where
the failure to be so qualified would have a material
adverse effect on the business or financial condition
of Buyer. As of July 1, 1994, the authorized capital
stock of Buyer consists of (i) 60,000,000 shares of
Class A common stock, $.01 par value, 25,705,783 of
which are validly issued and outstanding, fully paid
and nonassessable; (ii) 30,000,000 shares of Class B
common stock, $.01 par value, none of which are issued
and outstanding; and (iii) 1,000,000 shares of
preferred stock, $.01 par value, none of which are
issued and outstanding.
2. Authorization. Buyer has all
necessary corporate authority to enter into this
Agreement and has taken all necessary corporate action
to consummate the transactions contemplated hereby and
to perform its obligations hereunder. This Agreement
has been duly executed and delivered by Buyer and is a
legal, valid and binding obligation of Buyer
enforceable against it in accordance with its terms.
3. Consents and Approvals. No
consent, approval or authorization of, or declaration,
filing or registration with, any United States federal
or state governmental or regulatory authority is
required to be made or obtained by Buyer in connection
with the execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby other than the filings required
under the HSR Act, the FCC Consents and the NYPSC
Approval.
4. No Brokers. Buyer has not
entered into nor will Buyer enter into any contract,
agreement, arrangement or understanding with any person
or firm which will result in the obligation of Seller
or the Company to pay any finder's fee, brokerage
commission or similar payment in connection with the
transactions contemplated hereby.
5. No Conflict or Violation.
Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated
hereby will result in (a) a violation of or a conflict
with any provision of the Certificate of
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Incorporation or Bylaws of Buyer, (b) a breach of, or a
default under, any term or provision of any contract,
agreement, indebtedness, lease, commitment, license,
franchise, permit, authorization or concession to which
Buyer is a party which breach or default would have a
material adverse effect on the business or financial
condition of Buyer or its ability to consummate the
transactions contemplated hereby or (c) a violation by
Buyer of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or
award, which violation would have a material adverse
effect on the business or financial condition of Buyer
or its ability to consummate the transactions
contemplated hereby.
6. Vanguard Stock. In the event
Buyer determines to pay the Purchase Price payable
pursuant to Section 2.2 hereof in Vanguard Stock, Buyer
represents that each of the shares of Vanguard Stock
will, upon the consummation of the transactions
contemplated hereby at the Closing Date, be duly
authorized, duly issued, fully paid and non-assessable,
and free and clear of any Liens, other than any Liens
imposed as a result of any action of or with the
consent of Seller.
7. Material Misstatements Or
Omissions. No representations or warranties by Buyer
in this Agreement, nor any document, exhibit, written
statement, certificate or schedule furnished to Seller
pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any
untrue statement of a material fact, or omits or will
omit to state any material fact necessary to make the
statements or facts contained therein not misleading.
8. Reports. Buyer has previously
furnished to Seller true and complete copies of its (i)
Form S-4 Registration Statement relating to shares of
Vanguard Stock as filed with the SEC and currently
effective, (ii) Annual Report on Form 10-K for the
fiscal year ended December 31, 1993, as filed with the
SEC, (iii) Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994, and (iv) all of its
current reports on Form 8-K filed with the SEC
subsequent to December 31, 1993 (collectively, the
items referenced in clauses (ii), (iii) and (iv) are
referred to as the "SEC Reports"). As of their
respective dates, the SEC Reports (including all
exhibits and schedules thereto and any documents
incorporated by reference therein) did not, and the
Form S-4 Registration Statement referenced in clause
(i) above (as updated by the documents incorporated by
reference therein) does not, contain any untrue
statement of a material fact or omit to state a
material fact necessary in order to make the statements
made therein, in light of the circumstances under which
they were made, not misleading.
2
<PAGE>
EXHIBIT B
OPINION OF BUYER'S COUNSEL
Buyer shall deliver to Seller an opinion of counsel in
form an substance acceptable to Seller, to the effect
that:
(a) Buyer is a corporation duly
incorporated, validly existing and in good standing
under the laws of the State of North Carolina;
(b) All requisite corporate action
has been taken by the Board of Directors of Buyer to
authorize the execution, delivery and performance of
this Agreement by Buyer; no other corporate proceedings
on the part of Buyer are required to authorize this
Agreement; and this Agreement has been duly executed
and delivered by Buyer and is the valid and binding
obligation of Buyer, enforceable against it in
accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to creditors' rights
generally or by equitable principles (whether consid-
ered in an action at law or in equity);
(c) Neither the execution and
delivery of this Agreement by Buyer nor the
consummation of the transactions contemplated hereby
will (i) violate the Certificate of Incorporation or
Bylaws of Buyer, (ii) breach or cause a default under,
any term or provision of any material contract or
agreement to which Buyer as a party and of which such
counsel has knowledge, or (iii) to the best knowledge
of such counsel, violate any judgment, decree,
injunction, writ or order applicable to Buyer; and
(d) No authorization, consent,
order, permit or approval of, or filing with, any
United States federal or state governmental body is
necessary, under any statute or rule known to such
counsel, for the consummation by Buyer of the
transactions contemplated on its part hereby other than
filings under the Antitrust Improvements Act.
<PAGE>
EXHIBIT C
OPINION OF SELLER'S COUNSEL
Seller shall deliver opinions of counsel to
Buyer, in the forms attached hereto.
SECOND AMENDMENT TO LOAN AGREEMENT
This Second Amendment to Loan Agreement (this "Amendment"), made as of
this 30th day of June, 1994 among Vanguard Cellular Systems, Inc., a North
Carolina corporation (the "Borrower"), the financial institutions whose names
appear on the signature pages hereof as Lenders (the "Lenders"), the financial
institutions whose names appear on the signature pages hereof as Co-Agents (the
"Co-Agents"), The Bank of New York and The Toronto-Dominion Bank as Managing
Agents (the "Managing Agents"), The Bank of New York as Administrative Agent
(the "Administrative Agent"), The Toronto-Dominion Bank as Documentation/Review
Agent (the "Documentation Agent") and Toronto Dominion (Texas), Inc., as
Collateral Agent (the "Collateral Agent" and, together with the Managing Agents,
the Administrative Agent and the Documentation Agent, the "Agents") as follows:
Recitals
WHEREAS, the parties hereto are parties to the Loan Agreement dated as
of April 21, 1993, as amended by that certain First Amendment to Loan Agreement
dated as of January 31, 1994 (the "Loan Agreement"); and
WHEREAS, the parties hereto wish to amend the Loan Agreement (a) to
permit the Borrower or one of its Subsidiaries to make certain Acquisitions,
(b) to modify the leverage covenant set forth therein, and (c) to make other
changes as otherwise set forth herein;
NOW, THEREFORE, for and in consideration of the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties agree that
all capitalized terms used herein shall have the meanings ascribed thereto in
the Loan Agreement, and further agree as follows:
1. Amendment to Article 1. Article 1 of the Loan Agreement,
Definitions, is hereby amended by deleting the existing definition of
"Allowable Cellular System" appearing therein and substituting, in lieu
thereof, the following:
"Allowable Cellular System" shall mean (a) any Cellular System,
the geographical boundaries for which are either within, or contiguous to, or
within fifty (50) miles from, any boundary of the Pennsylvania Supersystem,
and (b) so long as the aggregate purchase price for such Cellular Systems does
not exceed $11,000,000, the Cellular Systems located in Maine # 4 RSA and West
Virginia # 1 RSA."
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<PAGE>
2. Amendment to Section 7.10. Section 7.10 of the Loan Agreement,
Leverage Ratio, is hereby amended by deleting existing Section 7.10 in its
entirety and by substituting, in lieu thereof, the following:
"Section 7.10 Leverage Ratio. The Borrower shall not at any
time permit the Leverage Ratio to exceed the ratios set forth below (subject to
adjustment pursuant to Section 2.7(c) hereof) during the periods indicated:
Period Ratio
From June 30, 1994
through September 29, 1994 11.00:1
From September 30, 1994
through December 30, 1994 9.75:1
From December 31, 1994
through June 30, 1995 7.75:1
From July 1, 1995
through December 31, 1995 6.50:1
From January 1, 1996
through June 30, 1996 5.50:1
From July 1, 1996
and thereafter 4.50:1"
3. Representations and Warranties. The Borrower hereby represents
and warrants to the Agents and the Lenders as follows:
a. The Borrower has the corporate power and authority
(i) to enter into this Amendment and (ii) to do all other acts and
things as are required or contemplated hereunder to be done, observed
and performed by it;
b. This Amendment has been duly authorized, validly
executed and delivered by one or more Authorized Signatories of the
Borrower and constitutes the legal, valid and binding obligations of the
Borrower, enforceable against it in accordance with its terms; and
c. The execution and delivery of this Amendment and the
performance by the Borrower under the Loan Agreement and the other Loan
Documents to which it is a party, as amended hereby, do not and will not
require the consent or approval of any regulatory authority or
governmental authority or agency having jurisdiction over the Borrower
or any of its Subsidiaries which has not already been obtained, nor is
in contravention of or in conflict with the articles of
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<PAGE>
incorporation or by-laws of the Borrower or any of its Subsidiaries,
or any provision of any statute, judgment, order, indenture, instrument,
agreement, or undertaking, to which the Borrower or any of its
Subsidiaries is a party or by which any of its assets or properties are
or may become bound.
d. The representations and warranties contained in Section
4.1 of the Loan Agreement remain true and correct as of the date hereof,
both before and after giving effect to this Amendment and to the making
of the Acquisitions described in clause (b) of the amended definition of
"Allowable Cellular System" set forth above, except to the extent
previously fulfilled in accordance with the terms of the Loan Agreement
or to the extent relating specifically to the Agreement Date. No
Default or Event of Default now exists or will be caused hereby.
4. Conditions Precedent. The effectiveness of this Amendment is
subject to the receipt by the Agents of all documents, instruments, consents
or items which the Agents shall deem appropriate in connection herewith.
5. No Other Amendment or Waiver. Except for the amendments set
forth or referred to above, the text of the Loan Agreement and all other Loan
Documents shall remain unchanged and in full force and effect. The Borrower
acknowledges and expressly agrees that the Agents and the Lenders reserve the
right to, and do in fact, require strict compliance with all terms and
provisions of the Loan Agreement.
6. Counterparts. This Amendment may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which,
taken together, shall constitute one and the same agreement.
7. Law of Contract. This Amendment shall be deemed to be made
pursuant to the laws of the State of New York with respect to agreements made
and to be performed wholly in the State of New York and shall be construed,
interpreted, performed and enforced in accordance therewith.
8. Effective Date. Upon satisfaction of the conditions precedent
referred to in Section 4 above, this Amendment shall be effective as of
June 30, 1994.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment or
caused it to be executed under seal by their duly authorized officers, all as
of the day and year first above written.
BORROWER: VANGUARD CELLULAR SYSTEMS, INC.,
a North Carolina corporation
By: __________________________________
Its: ______________________________
[CORPORATE SEAL] Attest: ___________________________
Its: ______________________________
ADMINISTRATIVE AGENT: THE BANK OF NEW YORK
By: _______________________________
Its: __________________________
DOCUMENTATION AGENT: THE TORONTO-DOMINION BANK
By: ________________________________
Its: ___________________________
COLLATERAL AGENT: TORONTO DOMINION (TEXAS), INC.
By: ________________________________
Its: ___________________________
[Signatures Continued on Next Page]
<PAGE>
CO-AGENTS: NATIONSBANK OF NORTH CAROLINA, N.A.
By: __________________________________
Its:_______________________________
THE BANK OF NOVA SCOTIA
By: __________________________________
Its:_______________________________
LTCB TRUST COMPANY
By: __________________________________
Its:_______________________________
LENDERS: THE BANK OF NEW YORK
By: __________________________________
Its:_______________________________
THE TORONTO-DOMINION BANK
By: __________________________________
Its:_______________________________
[Signatures Continued on Next Page]
<PAGE>
NATIONSBANK OF NORTH CAROLINA, N.A.
By: __________________________________
Its:_______________________________
THE BANK OF NOVA SCOTIA
By: __________________________________
Its:_______________________________
LTCB TRUST COMPANY
By: __________________________________
Its:_______________________________
THE FIRST NATIONAL BANK OF BOSTON
By: __________________________________
Its:_______________________________
BANK OF MONTREAL
By: __________________________________
Its:_______________________________
BANQUE NATIONALE DE PARIS
By: __________________________________
Its:_______________________________
By: _________________________________
Its: ______________________________
[Signatures Continued on Next Page]
<PAGE>
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By: __________________________________
Its:_______________________________
THE FIRST NATIONAL BANK OF MARYLAND
By: __________________________________
Its:_______________________________
CIBC, INC.
By: __________________________________
Its:_______________________________
CORESTATES BANK, N.A.
By: __________________________________
Its:_______________________________
THE BANK OF TOKYO TRUST COMPANY
By: __________________________________
Its:_______________________________
FIRST UNION NATIONAL BANK OF NORTH
CAROLINA
By: __________________________________
Its:_______________________________
[Signatures Continued on Next Page]
<PAGE>
NATIONAL WESTMINSTER BANK USA
By: __________________________________
Its:_______________________________
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST
By: __________________________________
Its:_______________________________
MERIDIAN BANK
By: __________________________________
Its:_______________________________
BANK OF HAWAII
By: __________________________________
Its:_______________________________
THE SUMITOMO TRUST & BANKING CO.,
LTD., NEW YORK BRANCH
By: __________________________________
Its:_______________________________
BANQUE PARIBAS
By: __________________________________
Its:_______________________________
