<PAGE> 1
[INTERCEL LOGO]
INTERCEL, INC.
1239 O.G. SKINNER DRIVE
WEST POINT, GEORGIA 31833
(706) 645-2000
May 9, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders (the
"Annual Meeting") of InterCel, Inc. ("InterCel" or the "Company") to be held on
Wednesday, June 5, 1996 at 10:00 a.m. local time, at The Cotton Duck, 6101 20th
Avenue, Valley, Alabama 36854. As described in the enclosed Proxy Statement, at
the Annual Meeting the stockholders of InterCel will be asked (i) to approve the
proposed issuance and terms of the Company's Series A Convertible Preferred
Stock (the "Series A Preferred Stock") and Series B Convertible Preferred Stock
(the "Series B Preferred Stock" and, together with the Series A Preferred Stock,
the "Series Preferred Stock"), which are proposed to be issued to two investors
pursuant to stock purchase agreements described below, (ii) to approve a
proposed amendment to the Restated Certificate of Incorporation to increase the
Company's authorized capital stock by increasing the number of authorized shares
of InterCel common stock (the "Common Stock"), (iii) to elect three directors to
serve on the Company's Board of Directors, each for a three-year term, (iv) to
ratify the appointment of Arthur Andersen LLP as independent public accountants
of the Company for the year ending December 31, 1996 and (v) to transact such
other business as may properly come before the Annual Meeting or any
adjournments thereof.
As described in the accompanying Proxy Statement, the Company has entered
into a stock purchase agreement (the "Stock Purchase Agreements") with each of
Ericsson Inc. ("Ericsson") and MPX Systems, Inc. ("MPX"), pursuant to which
Ericsson and MPX each will invest $75 million in the Company (the
"Transaction"). The Transaction will be effected through the issuance and sale
by the Company of 100,000 shares of Series A Preferred Stock at a price of $750
per share to Ericsson and 100,000 shares of Series B Preferred Stock at a price
of $750 per share to MPX. Ericsson and MPX each have the right to convert all or
a portion of their shares of Series Preferred Stock into 45.45 fully paid and
nonassessable shares of Common Stock for each share of Series Preferred Stock,
pursuant to the terms of the Stock Purchase Agreements. If both Ericsson and MPX
were to acquire all 4,545,455 shares of Common Stock upon conversion of the
Series Preferred Stock they would own approximately 12.7% and 25.3%,
respectively, of the outstanding Common Stock of the Company (based on the
number of shares of Common Stock outstanding on February 29, 1996). The
consummation of the Transaction is conditioned upon, among other things, the
approval by the Company's stockholders of the issuance and terms of the Series
Preferred Stock and of the amendment of the Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock.
The accompanying Proxy Statement describes the Transaction and the other
matters to be considered at the Annual Meeting. The Board of Directors has
carefully reviewed and considered the terms and conditions of the Transaction
and believes that it is in the best interests of the Company and its
stockholders. The Board of Directors has approved the matters being submitted by
the Company for stockholder approval at the Annual Meeting and recommends that
stockholders vote (i) FOR approval of the issuance and terms of the Series A
Preferred Stock and Series B Preferred Stock in the Transaction, (ii) FOR
approval and adoption of the proposed amendment to the Restated Certificate of
Incorporation to increase the Company's authorized capital stock, (iii) FOR the
election of the three nominees of the Board of Directors as directors, each for
a three-year term and (iv) FOR ratification of the appointment of Arthur
Andersen LLP as independent public accountants of the Company for the year
ending December 31, 1996.
<PAGE> 2
At the close of business on February 29, 1996, ITC Holding Company, Inc.
("ITC Holding") beneficially owned 7,337,711 shares of Common Stock and MPX
beneficially owned 4,494,892 shares of Common Stock, representing approximately
27.5% and 16.8%, respectively, of the total number of shares of Common Stock
entitled to vote at the Annual Meeting. Prior to execution of the Stock Purchase
Agreements, ITC Holding, MPX, and executive officers and directors of the
Company advised the Company that they would vote all shares of Common Stock
beneficially owned by them (representing approximately 57.2% of the outstanding
Common Stock) in favor of approval of all actions requiring stockholder approval
that are necessary to consummate the Transaction. Consequently, approval of the
issuance and terms of the Series Preferred Stock in connection therewith and the
amendment to the Restated Certificate of Incorporation to increase the number of
authorized shares of Common Stock is assured.
We urge you to review carefully the enclosed materials and to return your
proxy promptly. Whether or not you plan to attend the Annual Meeting, please
sign and promptly return your proxy card in the enclosed postage paid envelope.
If you attend the meeting, you may vote in person if you wish, even though you
have previously returned your proxy.
Sincerely,
/s/ Allen E. Smith
---------------
Allen E. Smith
Chief Executive Officer
2
<PAGE> 3
INTERCEL, INC.
1239 O.G. SKINNER DRIVE
WEST POINT, GEORGIA 31833
(706) 645-2000
---------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 5, 1996
---------------------------------------------
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders (the "Annual
Meeting") of InterCel, Inc. ("InterCel" or the "Company") will be held on
Wednesday, June 5, 1996 at 10:00 a.m. local time, at The Cotton Duck, 6101 20th
Avenue, Valley, Alabama 36854, for the following purposes:
1. To consider and vote upon the issuance and terms of the Company's
Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock to Ericsson Inc. and MPX Systems, Inc., respectively (Proposal 1);
2. To consider and vote upon the proposed amendment to the Restated
Certificate of Incorporation to increase the Company's authorized capital
stock by increasing the number of authorized shares of Common Stock from 39
million shares of Common Stock to 55 million shares of Common Stock
(Proposal 2);
3. To elect three directors to serve on the Company's Board of
Directors, each for a three-year term (Proposal 3);
4. To ratify the appointment by the Board of Directors of the firm of
Arthur Andersen LLP as independent public accountants of the Company for
the year ending December 31, 1996 (Proposal 4); and
5. To transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
Pursuant to the Restated By-laws, the Board of Directors of the Company has
fixed the close of business on Tuesday, April 23, 1996 as the record date for
the determination of stockholders entitled to notice of and to vote at the
Annual Meeting. Only record holders of the Common Stock of the Company at the
close of business on that date are entitled to notice of and to vote at the
Annual Meeting or any adjournments thereof.
By Order of the Board of Directors
/s/ Allen E. Smith
---------------
Allen E. Smith
Chief Executive Officer
West Point, Georgia
May 9, 1996
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE, WHETHER OR
NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE, DATE, SIGN AND
RETURN THE ENCLOSED PROXY IN THE ENCLOSED POSTAGE PAID ENVELOPE. YOU MAY, IF YOU
WISH, REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS VOTED.
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY............................................................................... 1
INTRODUCTION.......................................................................... 5
ANNUAL MEETING........................................................................ 5
Outstanding Shares and Voting Rights................................................ 5
Record Date...................................................................... 5
Quorum........................................................................... 5
Voting Rights and Related Matters................................................ 5
Dissenters' Rights............................................................... 6
Proxies............................................................................. 6
APPROVAL OF ISSUANCE AND TERMS OF SERIES PREFERRED STOCK.............................. 7
General............................................................................. 7
Background of the Transaction....................................................... 7
PCS Markets...................................................................... 7
PCS Strategy..................................................................... 7
Initial Buildout................................................................. 8
The Atlanta MTA Acquisition...................................................... 8
Financing the Company's Growth...................................................... 8
The Transaction..................................................................... 9
Parties.......................................................................... 9
Use of Proceeds.................................................................. 10
The Ericsson Stock Purchase Agreement............................................ 10
The MPX Stock Purchase Agreement................................................. 13
Beneficial Ownership of Capital Stock Prior to and After the Transaction......... 16
Vendor Financing Agreement with Ericsson............................................ 16
Potential Conflicts of Interest; Interests of Certain Persons....................... 17
Recommendation of the Board; Factors and Conclusions of the Board Involved in
Its Determination................................................................ 18
Required Vote and Related Matters................................................... 18
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION.................................... 19
Text of Amendment................................................................... 19
Reasons for and Possible Effects of the Proposed Amendment.......................... 19
Anti-takeover Effect of Proposed Amendment.......................................... 19
Required Vote and Related Matters................................................... 20
ELECTION OF DIRECTORS................................................................. 21
Information as to Nominees, Other Directors and Executive Officers.................. 21
Director Nominees................................................................... 22
Other Directors and Executive Officers.............................................. 22
Committees of the Board of Directors and Nominations by Stockholders................ 24
EXECUTIVE COMPENSATION................................................................ 25
Option Grants....................................................................... 26
Option Exercises and Holdings....................................................... 26
Benefit Plans....................................................................... 26
Restricted Stock Plan............................................................ 26
Employee Stock Option Plan....................................................... 27
401(k) Plan...................................................................... 27
Compensation of the Company's Directors............................................. 27
Director Fees and Related Matters................................................ 27
Nonemployee Stock Option Plan.................................................... 28
Compensation Committee Interlocks and Insider Participation......................... 28
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Compensation/Stock Option Committee Report on Executive Compensation................ 29
Base Salary...................................................................... 29
Management Incentive Compensation Plan........................................... 29
Long-term Incentive Compensation................................................. 29
Other............................................................................ 30
1995 Compensation of Chief Executive Officer..................................... 30
Pay Deductibility Limit.......................................................... 30
Comparative Company Performance..................................................... 31
Certain Relationships and Related Transactions...................................... 32
Powertel......................................................................... 32
ITC Holding...................................................................... 32
Other Transactions............................................................... 33
Compliance with Section 16(a) of the Exchange Act................................... 34
BENEFICIAL OWNERSHIP OF CAPITAL STOCK................................................. 35
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS......................... 37
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS.......................................... 37
VOTING PROCEDURES..................................................................... 37
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE..................................... 37
AVAILABLE INFORMATION................................................................. 38
OTHER MATTERS......................................................................... 38
APPENDICES
Appendix A Ericsson Stock Purchase Agreement
Appendix B MPX Stock Purchase Agreement
</TABLE>
ii
<PAGE> 6
INTERCEL, INC.
1239 O.G. SKINNER DRIVE
WEST POINT, GEORGIA 31833
(706) 645-2000
---------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
JUNE 5, 1996
---------------------------------------------
This Proxy Statement is being furnished to the stockholders of InterCel,
Inc., a Delaware corporation ("InterCel" or the "Company"), in connection with
the solicitation of proxies by the Board of Directors of InterCel (the "Board of
Directors" or the "Board") for use at the Annual Meeting of Stockholders (the
"Annual Meeting") of InterCel to be held at 10:00 a.m. local time, on Wednesday,
June 5, 1996, at The Cotton Duck, 6101 20th Avenue, Valley, Alabama 36854, and
at any adjournments thereof. This Proxy Statement and the accompanying form of
proxy are first being mailed to the stockholders of the Company on or about May
10, 1996.
At the Annual Meeting, stockholders will be asked (i) to approve the
issuance and terms of the Company's Series A Convertible Preferred Stock (the
"Series A Preferred Stock") and Series B Convertible Preferred Stock (the
"Series B Preferred Stock" and, together with the Series A Preferred Stock, the
"Series Preferred Stock"), which are proposed to be issued to two investors
pursuant to stock purchase agreements described below, (ii) to approve a
proposed amendment to the Restated Certificate of Incorporation to increase the
Company's authorized capital stock by increasing the number of authorized shares
of InterCel Common Stock (the "Common Stock"), (iii) to elect three directors to
serve on the Board of Directors, each for a three-year term, (iv) to ratify the
appointment of Arthur Andersen LLP as independent public accountants of the
Company for the year ending December 31, 1996 and (v) to transact such other
business as may properly come before the Annual Meeting or any adjournments
thereof.
As described in this Proxy Statement, the Company has entered into a stock
purchase agreement with each of Ericsson Inc. ("Ericsson") and MPX Systems, Inc.
("MPX"), pursuant to which Ericsson and MPX each will invest $75 million in the
Company (the "Transaction"). The Transaction will be effected through the
issuance and sale by the Company of 100,000 shares of Series A Preferred Stock
at a price of $750 per share to Ericsson and 100,000 shares of Series B
Preferred Stock at a price of $750 per share to MPX. Ericsson and MPX each have
the right to convert all or a portion of their shares of Series Preferred Stock
into 45.45 fully paid and nonassessable shares of Common Stock (subject to
adjustment) per share of Series Preferred Stock, pursuant to the terms of the
Series Preferred Stock. The consummation of the Transaction is conditioned upon,
among other things, the approval by the Company's stockholders of the issuance
and terms of the Series Preferred Stock and of the amendment of the Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock.
The Company is seeking stockholder approval of the issuance and terms of
the Series Preferred Stock pursuant to certain requirements of the National
Association of Securities Dealers, Inc. ("NASD"), regarding the continued
listing of the Company's Common Stock on the Nasdaq National Market.
At the close of business on February 29, 1996, ITC Holding Company, Inc.
("ITC Holding") beneficially owned 7,337,711 shares of Common Stock and MPX
beneficially owned 4,494,892 shares of Common Stock, representing approximately
27.5% and 16.8%, respectively, of the total number of shares of Common Stock
entitled to vote at the Annual Meeting. Prior to execution of the Stock Purchase
Agreements (as defined below), ITC Holding, MPX, and executive officers and
directors of the Company advised the Company that they would vote all shares of
Common Stock beneficially owned by them (representing approximately 57.2% of the
outstanding Common Stock) in favor of approval of all actions requiring
stockholder approval that are necessary to consummate the Transaction.
Consequently, approval of the issuance and terms of the Series Preferred Stock
in connection therewith and the amendment to the Restated Certificate of
Incorporation to increase the number of authorized shares of Common Stock is
assured.
---------------------
IN DETERMINING WHETHER TO APPROVE THE TRANSACTION AND THE AMENDMENT TO THE
RESTATED CERTIFICATE OF INCORPORATION, STOCKHOLDERS SHOULD CAREFULLY CONSIDER
ALL OF THE INFORMATION INCLUDED IN THIS PROXY STATEMENT, INCLUDING THE
APPENDICES ATTACHED HERETO.
---------------------
THE DATE OF THIS PROXY STATEMENT IS MAY 9, 1996.
<PAGE> 7
SUMMARY
The following is a summary of certain information contained in this Proxy
Statement and/or the Appendices attached hereto. Reference is made to, and this
Summary is qualified in its entirety by, the more detailed information contained
in this Proxy Statement and the Appendices. Stockholders are urged to review
carefully the entire Proxy Statement, including the Appendices attached hereto
and the documents incorporated by reference herein.
ANNUAL MEETING
Date, Time, Place of
Meeting and Matters to be
Presented for Action..... The Annual Meeting of Stockholders of InterCel will
be held on Wednesday, June 5, 1996 at 10:00 a.m.
local time at The Cotton Duck, 6101 20th Avenue,
Valley, Alabama 36854.
At the Annual Meeting, and at any adjournments
thereof, stockholders will be asked (i) to
approve the issuance and terms of the Series A
Preferred and Series B Preferred Stock (Proposal
1, see page 7), (ii) to approve a proposed
amendment to the Restated Certificate of
Incorporation to increase the Company's
authorized capital stock by increasing the number
of authorized shares of Common Stock from 39
million shares to 55 million shares (Proposal 2,
see page 19), (iii) to elect three directors to
serve on the Board of Directors, each for a
three-year term (Proposal 3, see page 21), (iv)
to ratify the appointment of Arthur Andersen LLP
as independent public accountants of the Company
for the year ending December 31, 1996 (Proposal
4, see page 37) and (v) to transact such other
business as may properly come before the Annual
Meeting or any adjournments thereof. See
"Introduction" and "Annual Meeting."
Record Date................ Only stockholders of record at the close of
business on Tuesday, April 23, 1996 (the "Record
Date") are entitled to notice of and to vote at
the Annual Meeting or any adjournment thereof.
See "Annual Meeting -- Outstanding Shares and
Voting Rights -- Record Date."
Quorum..................... The holders of a majority of the stock issued and
outstanding and entitled to vote, present in
person or represented by proxy, shall constitute
a quorum. See "Annual Meeting -- Outstanding
Shares and Voting Rights -- Quorum."
Voting Rights and Related
Matters.................. Each stockholder is entitled to one vote per share
with respect to all matters, including the
election of directors. See "Annual Meeting --
Outstanding Shares and Voting Rights -- Voting
Rights and Related Matters."
Approval of the issuance and terms of the Series
Preferred Stock is not required by Delaware law,
the Restated Certificate of Incorporation or the
Restated By-laws. The Company is seeking
stockholder approval of the foregoing matter
pursuant to certain requirements of the NASD
regarding the continued listing of the Company's
Common Stock on the Nasdaq National Market. The
affirmative vote of a majority of the total votes
cast is required to approve the issuance and
terms of the Series Preferred Stock. See "Annual
Meeting -- Outstanding Shares and Voting
Rights -- Voting Rights and Related Matters."
1
<PAGE> 8
The affirmative vote of (i) a majority of the
outstanding shares of Common Stock entitled to
vote thereon is required to approve the amendment
to the Restated Certificate of Incorporation to
increase the Company's authorized capital stock
by increasing the number of authorized shares of
Common Stock, and (ii) a majority of the total
votes cast is required to ratify the appointment
of Arthur Andersen LLP as independent public
accountants of the Company for the year ending
December 31, 1996. Directors will be elected by a
plurality of the votes cast by the shares
entitled to vote. See "Annual Meeting --
Outstanding Shares and Voting Rights -- Voting
Rights and Related Matters."
At the close of business on February 29, 1996, ITC
Holding beneficially owned 7,337,711 shares of
Common Stock and MPX beneficially owned 4,494,892
shares of Common Stock, representing
approximately 27.5% and 16.8%, respectively, of
the total number of shares of Common Stock
entitled to vote at the Annual Meeting. Prior to
execution of the Stock Purchase Agreements (as
defined below), ITC Holding, MPX, and executive
officers and directors of the Company advised the
Company that they would vote all such shares of
Common Stock beneficially owned by them
(representing approximately 57.2% of the
outstanding Common Stock) in favor of approval of
all actions requiring stockholder approval that
are necessary to consummate the Transaction.
Consequently, approval of the issuance and terms
of the Series Preferred Stock and the amendment
to the Restated Certificate of Incorporation to
increase the number of authorized shares is
assured. See "Annual Meeting -- Outstanding
Shares and Voting Rights -- Voting Rights and
Related Matters."
Dissenters' Rights......... Stockholders have no dissenters' rights in
connection with the approval of the issuance and
terms of the Series Preferred Stock and the
amendment to the Restated Certificate of
Incorporation to increase the number of
authorized shares of Common Stock. See "Annual
Meeting -- Outstanding Shares and Voting
Rights -- Dissenters' Rights."
Revocability of Proxies.... An InterCel stockholder giving a proxy in the form
accompanying this Proxy Statement has the power
to revoke the proxy prior to its exercise. A
proxy may be revoked by (i) delivering a written
notice of revocation to the Secretary of the
Company prior to the Annual Meeting, (ii)
delivering to the Company a duly executed proxy
bearing a later date or (iii) attending the
Annual Meeting and voting in person. See "Annual
Meeting -- Proxies."
THE TRANSACTION
General.................... Pursuant to a Stock Purchase Agreement dated as of
March 4, 1996, between the Company and Ericsson
entered into in connection with an equipment
purchase agreement (the "Equipment Purchase
Agreement"), Ericsson has agreed to purchase
100,000 shares of nonvoting Series A Preferred
Stock from the Company in a private placement for
an aggregate purchase price of $75 million (the
"Ericsson Stock Purchase Agreement"). Pursuant to
a Stock Purchase Agreement dated as of March 4,
1996 between the Company and MPX, a wholly owned
subsidiary of SCANA Corporation ("SCANA"), MPX
has
2
<PAGE> 9
agreed to purchase 100,000 shares of nonvoting
Series B Preferred Stock from the Company in a
private placement for an aggregate purchase price
of $75 million (the "MPX Stock Purchase
Agreement," and together with the Ericsson Stock
Purchase Agreement, the "Stock Purchase
Agreements"). See "Approval of Issuance and Terms
of Series Preferred Stock -- The Transaction --
The Ericsson Stock Purchase Agreement" and
"Approval of Issuance and Terms of Series
Preferred Stock -- The Transaction -- The MPX
Stock Purchase Agreement."
Stock Purchase
Agreements................. Preferred Stock Terms. The holders of the Series
Preferred Stock have no voting rights, except as
required by law and certain specified exceptions
(including with respect to the Series A Preferred
Stock, the right to vote with the Common Stock on
any merger, consolidation or sale of all or
substantially all of the assets of the Company or
other extraordinary transaction). Each share of
Series Preferred Stock has a liquidation
preference over the Common Stock and other junior
stock of $750.00 per share plus declared and
unpaid dividends. The Series Preferred Stock
ranks, as to dividends, on a parity with the
Common Stock. The Series Preferred Stock is
redeemable, in whole or in part, at the option of
the Company, on and after the fifth anniversary
of closing of the Transaction, at a redemption
price of $750 per share plus declared and unpaid
dividends. The Series A Preferred Stock is
convertible into Common Stock after the second
anniversary of closing of the Transaction, and
the Series B Preferred Stock is convertible into
Common Stock after the fourth anniversary of
closing of the Transaction, at the option of the
holder, at a conversion price of $16.50, subject
to adjustment. See "Approval of Issuance and
Terms of Series Preferred Stock -- The
Transaction -- The Ericsson Stock Purchase
Agreement" and "Approval of Issuance and Terms of
Series Preferred Stock -- The Transaction -- The
MPX Stock Purchase Agreement."
Conditions to Closing. The closing of each of the
Stock Purchase Agreements is conditioned upon,
among other things, the closing of the other
Stock Purchase Agreement and the closing of the
acquisition of a license to provide personal
communications services ("PCS") in certain
portions of the southeastern United States,
including the metropolitan areas of Atlanta,
Augusta, Macon, Savannah, Columbus, Athens and
Albany, Georgia and Chattanooga, Tennessee (the
"Atlanta MTA"). The closings are also conditioned
upon the approval by the Company's stockholders
of (i) the proposal to increase the authorized
number of shares of Common Stock from 39 million
to 55 million and (ii) the issuance and terms of
the Series A Preferred Stock and Series B
Preferred Stock, including without limitation the
convertibility thereof into Common Stock. See
"Approval of Issuance and Terms of Series
Preferred Stock -- The Transaction -- The
Ericsson Stock Purchase Agreement" and "Approval
of Issuance and Terms of Series Preferred
Stock -- The Transaction -- The MPX Stock
Purchase Agreement."
Registration Rights. Neither the Series A
Preferred Stock, the Series B Preferred Stock nor
the shares of Common Stock into which such Series
Preferred Stock is convertible are registered
under the Securi-
3
<PAGE> 10
ties Act of 1933, as amended (the
"Securities Act"). Ericsson and MPX have been
granted certain "demand" and "piggyback"
registration rights. See "Approval of Issuance and
Terms of Series Preferred Stock -- The Transaction
-- The Ericsson Stock Purchase Agreement" and
"Approval of Issuance and Terms of Series
Preferred Stock -- The Transaction -- The MPX
Stock Purchase Agreement."
Representations, Warranties and
Indemnification. InterCel has agreed to
indemnify Ericsson and MPX, and Ericsson and MPX
each have agreed to indemnify InterCel, for
certain losses arising out of any breaches of
their respective representations and covenants
contained in the Stock Purchase Agreements,
subject to certain exceptions and limitations.
See "Approval of Issuance and Terms of Series
Preferred Stock -- The Transaction -- The
Ericsson Stock Purchase Agreement" and "Approval
of Issuance and Terms of Series Preferred
Stock -- The Transaction -- The MPX Stock
Purchase Agreement."
Resale Restrictions. Each of Ericsson and MPX has
agreed, among other things, and subject to
limited exceptions, that it will not transfer,
directly or indirectly, any shares of Series A
Preferred Stock or Series B Preferred Stock, as
the case may be, or any shares of Common Stock
into which such Series Preferred Stock is
convertible, for one year after the closing of
the Transaction without the prior written consent
of the Company. See "Approval of Issuance and
Terms of Series Preferred Stock -- The
Transaction -- The Ericsson Stock Purchase
Agreement" and "Approval of Issuance and Terms of
Series Preferred Stock -- The Transaction -- The
MPX Stock Purchase Agreement."
Use of Proceeds............ The Company currently expects that the net proceeds
of the Transaction will be used to partially fund
the acquisition of the Atlanta MTA license. See
"Approval of Issuance and Terms of Series
Preferred Stock -- The Transaction -- Use of
Proceeds."
BOARD RECOMMENDATIONS
The Board of Directors has approved the Transaction
and determined that the Transaction is in the
best interests of the Company and its
stockholders. The Board recommends that
stockholders vote "FOR" approval of the
Transaction. The Board believes that the
Transaction is in the best interests of the
Company and its stockholders because it provides
the Company with $150 million of capital on
favorable economic terms. See "Approval of
Issuance and Terms of Series Preferred
Stock -- Recommendations of the Board; Factors
and Conclusions of the Board Involved in its
Determination."
The Board also has approved and recommends the
approval by the stockholders of (i) the proposed
amendment to Section 5.1 of the Restated
Certificate of Incorporation to increase the
Company's authorized capital stock by increasing
the number of authorized shares of Common Stock,
(ii) the election of three directors to serve on
the Company's Board of Directors and (iii) the
ratification of the appointment of Arthur
Andersen LLP as the Company's independent public
accountants for the year ending December 31,
1996.
4
<PAGE> 11
INTRODUCTION
This Proxy Statement is being furnished to the stockholders of InterCel in
connection with the solicitation of proxies for use at the Annual Meeting of
Stockholders to be held on Wednesday, June 5, 1996 at 10:00 a.m. local time, at
The Cotton Duck, 6101 20th Avenue, Valley, Alabama 36854.
At the Annual Meeting, stockholders will be asked (i) to approve the
issuance and terms of Series A Preferred Stock and Series B Preferred Stock
(Proposal 1), (ii) to approve a proposed amendment to the Restated Certificate
of Incorporation to increase the Company's authorized capital stock by
increasing the number of authorized shares of Common Stock (Proposal 2), (iii)
to elect three directors to serve on the Board of Directors, each for a
three-year term (Proposal 3), (iv) to ratify the appointment of Arthur Andersen
LLP as independent public accountants of the Company for the year ending
December 31, 1996 (Proposal 4) and (v) to transact such other business as may
properly come before the Annual Meeting or any adjournments thereof.
Except for procedural matters incident to the conduct of the Annual
Meeting, the Company does not know of any matters other than those described in
the Notice of Annual Meeting that are to come before the Annual Meeting. If any
other matters are properly brought before the Annual Meeting, the persons named
in the accompanying proxy will vote the shares represented by such proxies on
such matters as determined by a majority of the Board of Directors.
ANNUAL MEETING
OUTSTANDING SHARES AND VOTING RIGHTS
Record Date. Only stockholders of record at the close of business on
Tuesday, April 23, 1996 are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof. At the close of business on the Record Date,
the Company had outstanding 26,807,718 shares of Common Stock, held of record by
approximately 466 persons.
Quorum. The Restated By-laws provide that the holders of a majority of the
stock issued and outstanding and entitled to vote, present in person or
represented by proxy, shall constitute a quorum. Abstentions and broker
non-votes will be treated as shares that are present, or represented, and
entitled to vote for purposes of determining the presence of a quorum at the
Annual Meeting.
Voting Rights and Related Matters. Each stockholder is entitled to one
vote per share with respect to all matters, including the election of directors.
There is no cumulative voting of shares. Stockholders' votes will be tabulated
by the persons appointed by the Chairman of the Annual Meeting to act as
inspectors of election for the Annual Meeting.
Approval of the issuance and terms of the Series Preferred Stock is not
required by Delaware law, the Restated Certificate of Incorporation or the
Restated By-laws. The Company is seeking stockholder approval of the foregoing
matter pursuant to certain requirements of the NASD regarding the continued
listing of the Company's Common Stock on the Nasdaq National Market. The
affirmative vote of a majority of the total votes cast is required to approve
the terms and issuance of the Series Preferred Stock.
The affirmative vote of (i) a majority of the outstanding shares of Common
Stock entitled to vote thereon is required to approve the amendment to the
Restated Certificate of Incorporation to increase the Company's authorized
capital stock by increasing the number of authorized shares of Common Stock, and
(ii) a majority of the total votes cast is required to ratify the appointment of
Arthur Andersen LLP as independent public accountants of the Company for the
year ending December 31, 1996. Directors will be elected by a plurality of the
votes cast by the shares entitled to vote. Abstentions are considered shares
present and entitled to vote under the Delaware General Corporation Law and
therefore will have the same effect as a negative vote with respect to the
proposal to amend the Restated Certificate of Incorporation to increase the
number of authorized shares. Broker non-votes will have the same effect as a
negative vote with respect to the proposal to amend the Restated Certificate of
Incorporation.
5
<PAGE> 12
At the close of business on February 29, 1996, ITC Holding beneficially
owned 7,337,711 shares of Common Stock and MPX beneficially owned 4,494,892
shares of Common Stock, representing approximately 27.5% and 16.8%,
respectively, of the total number of shares of Common Stock entitled to vote at
the Annual Meeting. Prior to execution of the Stock Purchase Agreements, ITC
Holding, MPX, and executive officers and directors of the Company advised the
Company that they would vote all such shares of Common Stock beneficially owned
by them (representing approximately 57.2% of the outstanding Common Stock) in
favor of approval of all actions requiring stockholder approval that are
necessary to consummate the Transaction. CONSEQUENTLY, APPROVAL OF THE ISSUANCE
AND TERMS OF THE SERIES PREFERRED STOCK AND THE AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES IS
ASSURED.
Dissenters' Rights. Stockholders are not entitled under Delaware law to
appraisal rights in connection with the approval of the issuance and terms of
the Series Preferred Stock or the amendment to the InterCel Restated Certificate
of Incorporation to increase the number of authorized shares of Common Stock.
PROXIES
The presence of a stockholder at the Annual Meeting will not automatically
revoke such stockholder's proxy. However, a stockholder giving a proxy in the
form accompanying this Proxy Statement has the power to revoke the proxy prior
to its exercise by (i) delivering prior to the Annual Meeting a written notice
of revocation bearing a later date to William H. Scott, III, Secretary,
InterCel, Inc., 1239 O.G. Skinner Drive, West Point, Georgia 31833, (ii)
delivering to the Company a duly executed proxy bearing a later date or (iii)
attending the Annual Meeting and voting in person. The shares represented by
each properly executed proxy not subsequently revoked will be voted at the
Annual Meeting in accordance with the instructions contained therein. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED (I) FOR PROPOSAL 1 TO APPROVE THE
ISSUANCE AND TERMS OF THE SERIES A PREFERRED STOCK AND SERIES B PREFERRED STOCK,
(II) FOR PROPOSAL 2 TO APPROVE AND ADOPT THE PROPOSED AMENDMENT TO THE RESTATED
CERTIFICATE OF INCORPORATION TO INCREASE THE COMPANY'S AUTHORIZED CAPITAL STOCK
BY INCREASING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK, (III) FOR
PROPOSAL 3 TO ELECT THE THREE NOMINEES OF THE BOARD OF DIRECTORS AS DIRECTORS,
EACH FOR A THREE-YEAR TERM AND (IV) FOR PROPOSAL 4 TO RATIFY THE APPOINTMENT OF
ARTHUR ANDERSEN LLP AS INDEPENDENT PUBLIC ACCOUNTANTS OF THE COMPANY FOR THE
YEAR ENDING DECEMBER 31, 1996.
The cost of soliciting proxies will be borne by the Company. In addition to
the use of the mails, proxies may be solicited personally or by telephone or
facsimile transmission by officers, directors and employees of the Company, who
will not be specifically compensated for such solicitation activities.
Arrangements also will be made with brokerage houses and other custodians,
nominees and fiduciaries for forwarding solicitation materials to the beneficial
owners of shares held of record by such persons, and the Company will reimburse
such persons for their reasonable expenses incurred in that connection.
HOLDERS OF SHARES OF COMMON STOCK ARE REQUESTED TO COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY AND RETURN IT PROMPTLY TO THE COMPANY IN THE POSTAGE-PAID
ENVELOPE THAT HAS BEEN PROVIDED.
THE BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF
THE ISSUANCE AND TERMS OF THE SERIES PREFERRED STOCK AND "FOR" THE OTHER
PROPOSALS SET FORTH IN THIS PROXY STATEMENT.
6
<PAGE> 13
APPROVAL OF ISSUANCE AND TERMS OF SERIES PREFERRED STOCK
(PROPOSAL 1)
The following discussion summarizes the material aspects of the
Transaction, as set forth in the Stock Purchase Agreements and the various
exhibits thereto. This summary is not intended to be a complete description of
the Stock Purchase Agreements or the exhibits thereto and is subject to, and
qualified in its entirety by, reference to the Stock Purchase Agreements, copies
of which are attached hereto as appendices and incorporated herein by reference.
GENERAL
The Company believes that the market for wireless telecommunications will
expand significantly as equipment costs and service rates continue to decline,
equipment becomes more convenient and functional and wireless services become
more diverse. The Company believes that, by expanding its presence in the
southeastern United States, it will be well positioned to capitalize on this
market opportunity and on the region's positive demographics. The Company
intends to build on the extensive experience of its management team in the
telecommunications industry, the Company's experience and reputation in the
southeastern cellular market and its relationships with other telecommunications
providers to create a broad regional wireless telecommunications company by
being among the first PCS operators in its service areas to market advanced
digital PCS wireless systems with increased capacity, improved quality and
functionality relative to traditional analog cellular systems.
BACKGROUND OF THE TRANSACTION
PCS Markets. InterCel intends to become a leading provider of wireless
telecommunications services in the southeastern United States. The Company
currently provides cellular telephone service in contiguous portions of western
Georgia and eastern Alabama, as well as in major areas of Maine. The Company
recently expanded its presence in the southeastern United States through the
acquisition (the "Powertel Combination") of Powertel PCS Partners, L.P.
("Powertel"), the owner of three licenses to provide PCS in contiguous parts of
nine southeastern states. The service areas represented by the Company's PCS and
cellular licenses currently encompass approximately 145,000 square miles and 9.7
million persons (based on 1990 U.S. Census data), including the metropolitan
areas of Jacksonville, Gainesville and Tallahassee, Florida; Memphis, Tennessee;
Jackson, Mississippi; Birmingham, Huntsville and Montgomery, Alabama; and
Augusta and Bangor, Maine. In order to increase its PCS coverage to
approximately 16 million potential customers (based on 1990 U.S. Census data)
and provide the Company with one of the largest contiguous PCS footprints in the
southeastern United States, the Company has entered into a definitive agreement
to acquire (as further defined below, the "Atlanta MTA Acquisition") a PCS
license to provide service in markets covering over 58,000 square miles,
including the metropolitan areas of Atlanta, Augusta, Macon, Savannah, Columbus,
Athens and Albany, Georgia and Chattanooga, Tennessee (as previously defined,
the "Atlanta MTA"). The Company believes that its enhanced coverage footprint,
particularly the addition of Atlanta to its coverage area, will provide an
incremental competitive advantage in attracting new customers in its current PCS
and cellular markets.
PCS Strategy. Upon consummation of the Atlanta MTA Acquisition, InterCel's
PCS licenses will encompass approximately 180,000 contiguous square miles and
include a population of approximately 16 million persons (based on 1990 U.S.
Census data) in the major trading areas ("MTAs") of Jacksonville, Florida;
Memphis, Tennessee/Jackson, Mississippi; and Birmingham, Alabama (the "Current
PCS Markets"); and Atlanta, Georgia (together with the Current PCS Markets, the
"PCS Markets"). The Company's PCS strategy is to (i) rapidly build out a
high-quality PCS system and to be among the first to offer PCS services in the
PCS Markets, (ii) offer a broad range of services, including enhanced services,
(iii) become a low-cost provider of digital wireless telecommunications
services, and (iv) expand the Company's regional market presence by managing and
affiliating with other PCS licensees, as well as potentially acquiring
additional strategic PCS licenses. Because the Company believes that being among
the first to offer PCS services in its PCS Markets across a broad geographic
area will be a key competitive advantage, it plans to simultaneously build out
its metropolitan areas and connecting transportation corridors. The Company
expects
7
<PAGE> 14
to begin offering service in the Current PCS Markets during the fourth quarter
of 1996 and in the Atlanta MTA in late 1997.
Initial Buildout. The Company is in the site acquisition and construction
phase of the implementation of its PCS system in the Current PCS Markets (the
"Current PCS Market System") and expects to begin offering PCS services in late
1996. The Company expects to complete the initial buildout of the Current PCS
Market System by December 31, 1997, at which time the Current PCS Market System
is expected to cover approximately 66,000 square miles with approximately 55% of
the population within the Current PCS Markets. This initial coverage will extend
across each of the 14 major metropolitan areas within the Current PCS Markets
(Memphis, Tennessee; Jackson, Mississippi; Florence, Huntsville, Anniston,
Gadsden, Birmingham, Tuscaloosa, Montgomery and Dothan, Alabama; and Panama
City, Tallahassee, Jacksonville and Gainesville, Florida), as well as the major
highway corridors connecting those areas. The Company expects to complete the
initial buildout of its PCS system in the Atlanta MTA (the "Atlanta PCS System"
and, together with the Current PCS Market System, the "PCS System") by late
1997, at which time the Atlanta PCS System is expected to cover approximately
15,000 square miles with approximately 66% of the population within the Atlanta
MTA. This initial coverage will extend across each of the eight major
metropolitan areas within the Atlanta MTA (Atlanta, Augusta, Macon, Savannah,
Columbus, Athens and Albany, Georgia and Chattanooga, Tennessee), as well as the
major highway corridors connecting those areas. The Company thereafter expects
to continue to build the PCS System in less populous areas of the PCS Markets,
based on customer needs and competitive factors (in the same way that most of
the country's cellular systems have been built).
The Company currently estimates that capital expenditures will total
approximately $214 million ($152 million in 1996 and $62 million in 1997)
relating to the initial buildout of the Current PCS Market System and $127
million ($27.8 million in 1996 and $99.2 million in 1997) relating to the
initial buildout of the Atlanta PCS System. Upon completion of the initial
buildouts, which are expected to be completed by late 1997, the Company's PCS
System is expected to cover 81,000 square miles with approximately 60% of the
population within the PCS Markets. The initial coverage will extend across each
of the 22 major metropolitan areas within the PCS Markets, as well as the major
highway corridors connecting those areas. The Company thereafter expects to
continue to build the PCS System in less populous areas of the PCS Markets,
based on customer needs and competitive factors (in the same way that most of
the country's cellular systems have been built).
The Atlanta MTA Acquisition. InterCel Atlanta Licenses, Inc., a wholly
owned subsidiary of the Company (the "Atlanta License Subsidiary"), entered into
an Asset Purchase Agreement, dated as of March 5, 1996 (the "Atlanta Asset
Purchase Agreement"), with GTE Mobilnet Incorporated ("GTE Mobilnet"), pursuant
to which the Atlanta License Subsidiary will purchase GTE Mobilnet's license
(the "Atlanta License") to provide PCS in the Atlanta MTA for approximately $192
million plus accrued interest (the "Atlanta MTA Acquisition"). The Atlanta MTA
Acquisition enables the Company to expand its presence in the southeastern
United States by providing PCS in markets covering over 58,000 square miles with
6.9 million persons (based on 1990 U.S. Census data), including the metropolitan
areas of Atlanta, Augusta, Macon, Savannah, Columbus, Athens and Albany, Georgia
and Chattanooga, Tennessee.
Consummation of the Atlanta MTA Acquisition is subject to a number of
conditions, including the prior approval of the Federal Communications
Commission ("FCC") and any other federal or state regulatory agency or
commission having jurisdiction over the transactions contemplated in the Atlanta
Asset Purchase Agreement. The Company filed an application on March 12, 1996
with the FCC for approval of its acquisition of the Atlanta MTA license.
FINANCING THE COMPANY'S GROWTH
The development, construction and initial start-up phase associated with
the implementation of the Company's PCS system will require substantial capital.
To enable the Company to partially finance the buildout and operating costs and
certain acquisition expenses associated with the Atlanta MTA, the Company
8
<PAGE> 15
has entered into the Stock Purchase Agreements pursuant to which Ericsson and
MPX each will invest $75 million in the Company.
To provide additional financing for the buildout and operating costs and
certain acquisition expenses associated with the Atlanta MTA and the Current PCS
Market System the Company consummated the following transactions:
(i) in February and early March 1996, the Company received (a)
approximately $110.1 million of net proceeds from the sale of 7,124,322
shares of its Common Stock in a public offering (the "Stock Offering"); and
(b) approximately $192.5 million of net proceeds from the sale of 35,747
units (the "Units"), consisting in the aggregate of $357,470,000 principal
amount at maturity of the Company's 12% Senior Discount Notes due 2006 (the
"February Notes") and 1,143,904 warrants (the "February Warrants") to
purchase an equal number of shares of Common Stock at an exercise price of
$18.15 per share, subject to adjustment (the "Unit Offering", and together
with the Stock Offering, the "February Offerings"); and
(ii) in April 1996, the Company received approximately $193.2 million
of net proceeds from the sale of 12% Senior Discount Notes due May 1, 2006
(the "April Notes").
To provide the Company with further financing flexibility, the Company
entered into the Equipment Purchase Agreement and a $125 million vendor
financing agreement (the "Vendor Financing Agreement") with Ericsson regarding
the purchase of, and vendor financing for, PCS equipment and services. See
"-- Vendor Financing Agreement with Ericsson." In addition, two of the Company's
subsidiaries have entered into a commitment letter for a $25 million revolving
credit facility (the "Bank Facility") to be used for working capital and other
purposes, including capital expenditures.
The Company believes that the net proceeds from the Transaction, together
with the net proceeds from the February Offerings and the April Notes, cash on
hand and borrowings under the Vendor Financing Agreement and the Bank Facility,
will be sufficient to consummate the Atlanta MTA Acquisition and to finance the
development, construction and operating costs associated with the initial
buildout of the Company's PCS System through 1997. Although the Company is
currently unable to predict the amount of expenditures that may be made after
1997, the Company expects that it may require additional capital for the
buildout of the PCS System after 1997. Sources of additional capital may include
vendor financing, cash flow from cellular operations, public and private equity
and debt financings by the Company and proceeds received from any exercises of
the February Warrants. The Company may also require additional financing in the
event it decides to make additional acquisitions. The extent of additional
financing required will depend on the success of the Company's businesses. The
Company currently has no other sources of income or cash flows, other than its
cellular operations and the interest income earned from investing the net
proceeds of the February Offerings and the April Notes. There can be no
assurance that additional financing will be available to the Company, or if
available, that it can be obtained on terms that are acceptable to the Company
and within the limitations contained in the indenture relating to the February
Notes, the indenture relating to the April Notes, the Bank Facility or the
Vendor Financing Agreement or that may be contained in any future financing
arrangements.
THE TRANSACTION
Parties. Ericsson is a wholly owned subsidiary of Ericsson Holding II Inc.
which is, in turn, a subsidiary of Telefon AB LM Ericsson. Ericsson, located in
Richardson, Texas, operates as a manufacturer and wholesaler of electronic
telephone equipment. Telefon AB LM Ericsson, headquartered in Stockholm, Sweden,
is a worldwide manufacturer of communications equipment and supplies, including
cellular telephone switch equipment, radio base stations and cell sites, public
and private land mobile radios and radio systems, subscriber equipment, mobile
data systems and mobile data terminals, and telecommunications switching
equipment and services. The stock of Telefon AB LM Ericsson is listed on the
Nasdaq National Market.
MPX, a telecommunications company located in Cayce, South Carolina, is a
wholly owned subsidiary of SCANA. SCANA, headquartered in Columbia, South
Carolina, is a holding company whose principal
9
<PAGE> 16
subsidiary, South Carolina Electric & Gas Co., provides retail electric and
natural gas services and public transportation services. The stock of SCANA is
traded on the New York, Boston, Chicago, Cincinnati, Pacific, and Philadelphia
Stock Exchanges.
Use of Proceeds. The Company currently expects that the net proceeds of
the Transaction ($150 million) will be used to partially fund the acquisition of
the Atlanta MTA License.
The Ericsson Stock Purchase Agreement. Pursuant to the Ericsson Stock
Purchase Agreement, Ericsson has agreed to purchase 100,000 shares of Series A
Preferred Stock of the Company in a private placement for an aggregate purchase
price of $75 million. The Company and Ericsson entered into the Ericsson Stock
Purchase Agreement in connection with an Equipment Purchase Agreement between
InterCel PCS Services, Inc., a wholly owned subsidiary of the Company ("InterCel
PCS Services"), and Ericsson for the purchase of PCS equipment and services and
a Vendor Financing Agreement between InterCel PCS Services and Ericsson to
finance up to $125 million of such purchase. The Equipment Purchase Agreement
and the Vendor Financing Agreement are described more fully below. See
"-- Vendor Financing Agreement with Ericsson."
The following is a summary of certain provisions of the Ericsson Stock
Purchase Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the Ericsson Stock Purchase Agreement,
a copy of which is filed as an appendix to this Proxy Statement. Defined terms
that are used but not defined in this section have the meanings that were given
such terms in the Ericsson Stock Purchase Agreement.
- Representations and Warranties. InterCel and Ericsson have made
representations and warranties to each other in the Ericsson Stock Purchase
Agreement. Among other things, the Company has represented and warranted to
Ericsson that: (i) by the date of the closing of the Ericsson Stock Purchase
Agreement (the "Ericsson Closing"), the Company will have increased its
authorized capital stock to consist of 55 million shares of Common Stock and one
million shares of Preferred Stock; (ii) the offer and sale of the Series A
Preferred Stock is exempt from registration under the Securities Act; and (iii)
the Equipment Purchase Agreement is enforceable against InterCel PCS Services in
accordance with its terms. Among other things, Ericsson has represented and
warranted to the Company that: (i) it is an "accredited investor" within the
meaning of Rule 501 under the Securities Act; (ii) it is acquiring the Series A
Preferred Stock solely for the purpose of investment; and (iii) the Equipment
Purchase Agreement is enforceable against Ericsson in accordance with its terms.
- Additional Agreements. In addition, the Company has agreed, among other
things, that: (i) prior to the Ericsson Closing, it will have filed the
Certificate of Designation for the Series A Preferred Stock (the "Ericsson
Certificate of Designation") with the State of Delaware; (ii) it will treat the
100,000 shares of Series A Preferred Stock as equity, and not as debt, for
accounting and tax purposes; (iii) for a period of three years from the date of
the Ericsson Stock Purchase Agreement, it will file all reports necessary in
order that the conditions to the availability of Rule 144 under the Securities
Act shall be met; and (iv) prior to the Ericsson Closing, it will not take any
action that, if the Series A Preferred Stock were outstanding at the time of the
action, (a) would result in an adjustment to the Conversion Price (as defined in
the Ericsson Certificate of Designation) pursuant to Section (7)(d) of the
Ericsson Certificate of Designation or (b) in respect of which holders of shares
of Series A Preferred Stock would be entitled to vote pursuant to Section (9) of
the Ericsson Certificate of Designation. Among other things, Ericsson has agreed
that the Series A Preferred Stock is subject to resale restrictions (as
described below). The Company and Ericsson have agreed that Ericsson shall have
certain "demand" and "piggyback" registration rights (as described below).
- Conditions to Closing. The Ericsson Closing is conditioned on, among
other things: (i) the occurrence of the MPX Closing (as defined below) and the
closing of the Atlanta MTA Acquisition before or concurrently with the Ericsson
Closing; (ii) approval by the Company's stockholders of (a) the issuance and
terms of the Series A Preferred Stock, including without limitation the
convertibility of the Series A Preferred Stock into Common Stock (Proposal 1),
and (b) the proposed amendment to the Restated Certificate of Incorporation to
increase the Company's authorized capital stock by increasing the number of
authorized shares of Common Stock from 39 million shares to 55 million shares
(Proposal 2); and (iii) the execution and
10
<PAGE> 17
delivery of the Equipment Purchase Agreement. In addition, the representations
and warranties of the Company and Ericsson contained in the Ericsson Stock
Purchase Agreement must be true and correct in all material respects as of the
Ericsson Closing, and, at the time of the Ericsson Closing, no event shall have
occurred that, individually or in the aggregate, had or could have a Material
Adverse Effect (as defined in the Ericsson Stock Purchase Agreement) on the
Company.
- Indemnification. The representations and warranties of the Company and
Ericsson contained in the Ericsson Stock Purchase Agreement survive until the
second anniversary of the date of the Ericsson Closing. InterCel and Ericsson
have agreed to indemnify each other for any Loss (as defined in the Ericsson
Stock Purchase Agreement) arising out of the breach of any of their respective
representations, warranties, covenants, and agreements contained in the Ericsson
Stock Purchase Agreement, its Exhibits and Disclosure Schedule. The maximum
amount of indemnifiable Losses that may be recovered from an indemnifying party
is $75 million.
- Termination. The Company has the right to terminate the Ericsson Stock
Purchase Agreement prior to the Ericsson Closing if: (i) any representation or
warranty of Ericsson was not true and correct in all material respects when
made; (ii) Ericsson does not comply in all material respects with all of its
covenants and agreements; or (iii) any bankruptcy or similar proceeding is
instituted by or against Ericsson. Ericsson has the right to terminate the
Ericsson Stock Purchase Agreement prior to the Ericsson Closing if: (i) an event
or condition occurs that results in a Material Adverse Effect (as defined in the
Ericsson Stock Purchase Agreement); (ii) any representation or warranty of the
Company was not true and correct in all material respects when made; (iii) the
Company does not comply in all material respects with all of its covenants and
agreements; or (iv) any bankruptcy or similar proceeding is instituted by or
against the Company or any subsidiary. Either the Company or Ericsson may
terminate the Ericsson Stock Purchase Agreement if: (i) the Ericsson Closing has
not occurred on or prior to September 30, 1996; (ii) any Governmental Authority
(as defined in the Ericsson Stock Purchase Agreement) takes any action that
restrains, enjoins, or otherwise prohibits the transactions contemplated in the
Ericsson Stock Purchase Agreement, and such action has become final and
nonappealable; or (iii) by mutual written consent.
- Escrow. The Company and Ericsson have agreed to enter into an Escrow
Agreement, pursuant to which Ericsson has deposited the purchase price for its
Series A Preferred Stock into escrow, to be held and disbursed by the escrow
agent to the Company upon the Ericsson Closing.
- Resale Restrictions. Pursuant to the Ericsson Stock Purchase Agreement,
Ericsson may not sell or otherwise transfer the Series A Preferred Stock or any
shares of Common Stock into which the Series A Preferred Stock is convertible
unless such shares are registered under the Securities Act or unless such sale
or transfer is exempt from registration. During a one-year period following the
Ericsson Closing, Ericsson may not, without the prior written consent of the
Company, (i) offer, pledge, sell or otherwise transfer or dispose of, directly
or indirectly, any shares of Series A Preferred Stock or any shares of Common
Stock into which any of such Series A Preferred Stock is convertible or (ii)
enter into any swap or similar agreement that transfers, in whole or in part,
any of the economic consequences of the ownership of Series A Preferred Stock or
any shares of Common Stock into which any of such Series A Preferred Stock is
convertible. Ericsson may, however, enter into any such transaction with an
Affiliate (as defined in the Ericsson Stock Purchase Agreement) of Ericsson.
- Registration Rights. The Series A Preferred Stock being issued and the
shares of Common Stock into which the Series A Preferred Stock is convertible
are not registered under the Securities Act and are being issued by the Company
in reliance on an exemption from registration. Such shares will be deemed
"restricted securities" within the meaning of Rule 144 under the Securities Act
and may not be sold in the absence of registration under the Securities Act
unless an exemption from registration is available. In Annex II to the Ericsson
Stock Purchase Agreement, the Company grants certain registration rights to
Ericsson, as summarized below.
(i) "Demand" registration rights. Ericsson shall have the right at any
time after the Ericsson Closing to make three written requests of the Company
for registration under the Securities Act of shares of Common Stock into which
its shares of Series A Preferred Stock are convertible or have been converted.
The first such
11
<PAGE> 18
request for registration must involve shares worth at least $20 million in
market value (the "Ericsson Subject Stock"), and each subsequent request for
registration must occur at least six months following the completion of the
prior offering. The Company must use all reasonable efforts to cause the
Ericsson Subject Stock to be registered under the Securities Act as soon as
reasonably practicable after receipt of a request. The registration must remain
effective until the earlier of the completion of the offering or three months.
The Company also must use all reasonable efforts to list all Ericsson Subject
Stock on any national securities exchange on which the Common Stock is then
listed or to list the Ericsson Subject Stock on the Nasdaq National Market. The
Company is entitled to postpone for a reasonable time (not to exceed 90 days)
the filing of any registration statement if the Company, at such time: (a) is
proposing to file with the Commission within 90 days a registration statement
for an underwritten public offering of its equity securities; (b) is subject to
an existing contractual obligation to its underwriters not to engage in a public
offering; or (c) determines that effecting the registration at such time might
adversely affect a pending or contemplated financing, acquisition, disposition
of assets or stock, merger or other significant transaction, or would require
the Company to make a public disclosure of information that could have a
significant adverse effect on the Company.
(ii) "Piggyback" registration rights. At any time after the Ericsson
Closing, if the Company proposes to file a registration statement under the
Securities Act for an offering of its equity securities (the "Original
Securities"), the Company shall give written notice of the proposed filing to
Ericsson as soon as practicable (but in no event less than five Business Days
(as defined in the Ericsson Stock Purchase Agreement) before the anticipated
filing date), and the notice shall offer Ericsson the opportunity to register
any number of its shares. If Ericsson wishes to register securities of the same
class or series as the Original Securities, such registration shall be on the
same terms and conditions as the registration of the Original Securities. If,
however, the lead underwriter delivers a written opinion to the Company that the
success of the offering would be materially and adversely affected by inclusion
of all the securities requested to be included, then the number of Ericsson's
securities shall be reduced prior to any reduction in the number of Original
Securities. Ericsson shall have the right at any time to convert its request for
a "piggyback" registration into a "demand" registration.
(iii) Payment of fees and expenses; indemnification. The Company shall pay
all fees and expenses in connection with the first requested "demand"
registration, and shall share equally with Ericsson all fees and expenses in
connection with the second and third requested "demand" registrations, except
that Ericsson shall pay all underwriting discounts and commissions relating to
shares of Ericsson Subject Stock and the fees of its counsel and other advisors.
The Company, Ericsson, and each underwriter shall agree to indemnify each other
in certain circumstances for all losses arising out of statements made in
connection with the registration statement, preliminary prospectus or
prospectus, up to a maximum amount of $75 million.
- Ericsson Certificate of Designation. Pursuant to the Ericsson Stock
Purchase Agreement, the Company has agreed that, prior to the Ericsson Closing,
it will have filed the Ericsson Certificate of Designation with the State of
Delaware. The terms of the Series A Preferred Stock are as follows:
(i) Voting rights. Except as otherwise required by law, holders of Series
A Preferred Stock shall have no voting rights; provided, however, that, so long
as any shares of the Series A Preferred Stock remain outstanding, the consent of
the holders of at least two-thirds of the shares of Series A Preferred Stock
outstanding shall be necessary to permit, effect or validate (a) the
authorization, creation or issuance, or any increase in the authorized or issued
amount, of any class or series of stock ranking prior to the Series A Preferred
Stock; (b) the increase in the authorized or issued amount of the Series A
Preferred Stock; or (c) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Restated Certificate
of Incorporation of the Company that would affect any right, preference or
voting power of the Series A Preferred Stock or the holders thereof. In
addition, so long as any shares of the Series A Preferred Stock remain
outstanding, each share of the Series A Preferred Stock shall entitle the holder
thereof to vote on any merger or consolidation of the Company, sale of all or
substantially all of the Company's assets, statutory share exchange, or other
extraordinary transaction, with the shares of Series A Preferred Stock voting
together as a single class with the shares of Common Stock.
12
<PAGE> 19
(ii) Liquidation rights. In the event of any liquidation, dissolution or
winding up of the Company, before any payment or distribution of assets of the
Company (whether capital or surplus) shall be made to or set apart for the
holders of Common Stock or any other series or class or classes of stock of the
Company ranking junior to the Series A Preferred Stock, upon liquidation,
dissolution or winding up, the holders of the shares of Series A Preferred Stock
shall be entitled to receive $750.00 per share plus an amount equal to all
dividends declared and unpaid thereon to the date of final distribution to such
holders; thereafter, such holders shall be entitled to share ratably with the
holders of the Common Stock, subject to the rights of the holders of any shares
of capital stock of the Company ranking on a parity with or prior to the Series
A Preferred Stock.
(iii) Dividends. The Series A Preferred Stock ranks, as to dividends, on a
parity with the Series B Preferred Stock and the Common Stock. Holders of shares
of the Series A Preferred Stock shall be entitled to receive, when and if
declared by the Board of Directors out of funds legally available therefor,
dividends in an amount per share of Series A Preferred Stock equal to the
dividends payable on the number of shares of Common Stock into which one share
of Series A Preferred Stock is then convertible.
(iv) Redemption. Series A Preferred Stock may not be redeemed by the
Company prior to the fifth anniversary of the issuance of the Series A Preferred
Stock. After the fifth anniversary of the issuance of the Series A Preferred
Stock, the Company, at its option, may redeem the shares of Series A Preferred
Stock, in whole or in part, for an aggregate redemption price of $750.00 per
share plus an amount per share equal to declared and unpaid dividends, if any;
provided that the Company must redeem the shares of Series A Preferred Stock and
Series B Preferred Stock on a pro rata basis.
(v) Conversion into Common Stock. Holders of Series A Preferred Stock will
have the right, at any time after the second anniversary of the issuance of the
Series A Preferred Stock, to convert all or a portion of such shares into the
number of fully paid and nonassessable shares of Common Stock obtained by
dividing the aggregate liquidation preference of such shares by the Conversion
Price, initially $16.50, subject to adjustment.
The MPX Stock Purchase Agreement. Pursuant to the MPX Stock Purchase
Agreement, MPX has agreed to purchase 100,000 shares of Series B Preferred Stock
of the Company in a private placement for an aggregate purchase price of $75
million. The following is a summary of certain provisions of the MPX Stock
Purchase Agreement. This summary does not purport to be complete and is
qualified in its entirety by reference to the MPX Stock Purchase Agreement, a
copy of which is filed as an appendix to this Proxy Statement. Defined terms
that are used but not defined in this section have the meanings that were given
such terms in the MPX Stock Purchase Agreement.
- Representations and Warranties. InterCel and MPX have made
representations and warranties to each other in the MPX Stock Purchase
Agreement. Among other things, the Company has represented and warranted to MPX
that: (i) prior to the closing of the MPX Stock Purchase Agreement (the "MPX
Closing"), the Company will have increased its authorized capital stock to
consist of 55 million shares of Common Stock and one million shares of Preferred
Stock and (ii) the offer and sale of the Series B Preferred Stock is exempt from
registration under the Securities Act. Among other things, MPX has represented
and warranted to the Company that: (i) it is an "accredited investor" within the
meaning of Rule 501 under the Securities Act and (ii) it is acquiring the Series
B Preferred Stock solely for the purpose of investment.
- Additional Agreements. In addition, the Company has agreed, among other
things, that: (i) prior to the MPX Closing, it will have filed the Certificate
of Designation for the Series B Preferred Stock ("MPX Certificate of
Designation") with the State of Delaware; (ii) it will treat the 100,000 shares
of Series B Preferred Stock as equity, and not as debt, for accounting and tax
purposes; (iii) for a period of three years from the date of the MPX Stock
Purchase Agreement, it will file all reports necessary in order that the
conditions to the availability of Rule 144 under the Securities Act shall be
met; and (iv) prior to the MPX Closing, it will not take any action that, if the
Series B Preferred Stock were outstanding at the time of the action, (a) would
result in an adjustment to the Conversion Price (as defined in the MPX
Certificate of Designation) pursuant to Section (7)(d) of the MPX Certificate of
Designation or (b) in respect of which holders of shares of Series B Preferred
Stock would be entitled to vote pursuant to Section (9) of the MPX Certificate
of Designation. Among other things, MPX has agreed that the Series B Preferred
Stock is subject
13
<PAGE> 20
to resale restrictions (as described below). The Company and MPX have agreed
that MPX shall have certain "demand" and "piggyback" registration rights (as
described below).
- Conditions to Closing. The MPX Closing is conditioned on, among other
things: (i) the occurrence of the Ericsson Closing and the closing of the
Atlanta MTA Acquisition before or concurrently with the MPX Closing; (ii)
approval by the Company's stockholders of (a) the issuance and terms of the
Series B Preferred Stock, including without limitation the convertibility of the
Series B Preferred Stock into Common Stock (Proposal 1), and (b) the proposed
amendment to the Restated Certificate of Incorporation to increase the Company's
authorized capital stock by increasing the number of authorized shares of Common
Stock from 39 million shares to 55 million shares (Proposal 2); and (iii) the
execution and delivery of the Equipment Purchase Agreement. In addition,
representations and warranties of the Company and MPX contained in the MPX Stock
Purchase Agreement must be true and correct in all material respects as of the
MPX Closing, and, at the time of the MPX Closing, no event shall have occurred
that, individually or in the aggregate, had or could have a Material Adverse
Effect (as defined in the MPX Stock Purchase Agreement) on the Company.
- Indemnification. The representations and warranties of the Company and
MPX contained in the MPX Stock Purchase Agreement survive until the second
anniversary of the date of the MPX Closing. InterCel and MPX have agreed to
indemnify each other for any Loss (as defined in the MPX Stock Purchase
Agreement) arising out of the breach of any of their respective representations,
warranties, covenants, and agreements contained in the MPX Stock Purchase
Agreement, its Exhibits and Disclosure Schedule. The maximum amount of
indemnifiable Losses that may be recovered from an indemnifying party is $75
million.
- Termination. The Company has the right to terminate the MPX Stock
Purchase Agreement prior to the MPX Closing if: (i) any representation or
warranty of MPX was not true and correct in all material respects when made;
(ii) MPX does not comply in all material respects with all of its covenants and
agreements; or (iii) any bankruptcy or similar proceeding is instituted by or
against MPX. MPX has the right to terminate the MPX Stock Purchase Agreement
prior to the MPX Closing if: (i) an event or condition occurs that results in a
Material Adverse Effect (as defined in the MPX Stock Purchase Agreement); (ii)
any representation or warranty of the Company was not true and correct in all
material respects when made; (iii) the Company does not comply in all material
respects with all of its covenants and agreements; or (iv) any bankruptcy or
similar proceeding is instituted by or against the Company or any subsidiary.
Either the Company or MPX may terminate the MPX Stock Purchase Agreement if: (i)
the MPX Closing has not occurred on or prior to September 30, 1996; (ii) any
Governmental Authority (as defined in the MPX Stock Purchase Agreement) takes
any action that restrains, enjoins, or otherwise prohibits the transactions
contemplated in the MPX Stock Purchase Agreement, and such action has become
final and nonappealable; or (iii) by mutual written consent.
- Escrow. The Company and MPX have agreed to enter into an Escrow
Agreement, pursuant to which MPX has deposited the purchase price for its Series
B Preferred Stock into escrow, to be held and disbursed by the escrow agent to
the Company upon the MPX Closing.
- Resale Restrictions. Pursuant to the MPX Stock Purchase Agreement, MPX
may not sell or otherwise transfer the Series B Preferred Stock or any shares of
Common Stock into which the Series B Preferred Stock is convertible unless such
shares are registered under the Securities Act or unless such sale or transfer
is exempt from registration. During a one-year period following the MPX Closing,
MPX may not, without the prior written consent of the Company, (i) offer,
pledge, sell or otherwise transfer or dispose of, directly or indirectly, any
shares of Series B Preferred Stock or any shares of Common Stock into which any
of such Series B Preferred Stock is convertible or (ii) enter into any swap or
similar agreement that transfers, in whole or in part, any of the economic
consequences of the ownership of Series B Preferred Stock or any shares of
Common Stock into which any of such Series B Preferred Stock is convertible. MPX
may, however, enter into any such transaction with an Affiliate (as defined in
the MPX Stock Purchase Agreement) of MPX.
- Registration Rights. The Series B Preferred Stock being issued and the
shares of Common Stock into which the Series B Preferred Stock is convertible
are not registered under the Securities Act and are being issued by the Company
in reliance on an exemption from registration. Such shares will be deemed
"restricted
14
<PAGE> 21
securities" within the meaning of Rule 144 under the Securities Act and may not
be sold in the absence of registration under the Securities Act unless an
exemption from registration is available. In Annex II to the MPX Stock Purchase
Agreement, the Company grants certain registration rights to MPX, as summarized
below.
(i) "Demand" registration rights. MPX shall have the right at any time
after the MPX Closing to make three written requests of the Company for
registration under the Securities Act of shares of Common Stock into which its
shares of Series B Preferred Stock are convertible or have been converted. The
first such request for registration must involve shares worth at least $20
million in market value (the "MPX Subject Stock"), and each subsequent request
for registration must occur at least six months following the completion of the
prior offering. The Company must use all reasonable efforts to cause the MPX
Subject Stock to be registered under the Securities Act as soon as reasonably
practicable after receipt of a request. The registration must remain effective
until the earlier of the completion of the offering or three months. The Company
also must use all reasonable efforts to list all MPX Subject Stock on any
national securities exchange on which the Common Stock is then listed or to list
the MPX Subject Stock on the Nasdaq National Market. The Company is entitled to
postpone for a reasonable time (not to exceed 90 days) the filing of any
registration statement if the Company, at such time: (a) is proposing to file
with the Commission within 90 days a registration statement for an underwritten
public offering of its equity securities; (b) is subject to an existing
contractual obligation to its underwriters not to engage in a public offering;
or (c) determines that effecting the registration at such time might adversely
affect a pending or contemplated financing, acquisition, disposition of assets
or stock, merger or other significant transaction, or would require the Company
to make a public disclosure of information that could have a significant adverse
effect on the Company.
(ii) "Piggyback" registration rights. At any time after the MPX Closing,
if the Company proposes to file a registration statement under the Securities
Act for an offering of its equity securities (as previously defined, the
"Original Securities"), the Company shall give written notice of the proposed
filing to MPX as soon as practicable (but in no event less than five Business
Days (as defined in the MPX Stock Purchase Agreement) before the anticipated
filing date), and the notice shall offer MPX the opportunity to register any
number of its shares. If MPX wishes to register securities of the same class or
series as the Original Securities, such registration shall be on the same terms
and conditions as the registration of the Original Securities. If, however, the
lead underwriter delivers a written opinion to the Company that the success of
the offering would be materially and adversely affected by inclusion of all the
securities requested to be included, then the number of MPX's securities shall
be reduced prior to any reduction in the number of Original Securities. MPX
shall have the right at any time to convert its request for a "piggyback"
registration into a "demand" registration.
(iii) Payment of fees and expenses; indemnification. The Company shall pay
all fees and expenses in connection with the first requested "demand"
registration, and shall share equally with MPX all fees and expenses in
connection with the second and third requested "demand" registrations, except
that MPX shall pay all underwriting discounts and commissions relating to shares
of MPX Subject Stock and the fees of its counsel and other advisors. The
Company, MPX, and each underwriter shall agree to indemnify each other in
certain circumstances for all losses arising out of statements made in
connection with the registration statement, preliminary prospectus or
prospectus, up to a maximum amount of $75 million.
- MPX Certificate of Designation. Pursuant to the MPX Stock Purchase
Agreement, the Company has agreed that, prior to the MPX Closing, it will have
filed the MPX Certificate of Designation with the State of Delaware. The terms
of the Series B Preferred Stock are as follows:
(i) Voting rights. Except as otherwise required by law, holders of Series
B Preferred Stock shall have no voting rights; provided, however, that, so long
as any shares of the Series B Preferred Stock remain outstanding, the consent of
the holders of at least two-thirds of the shares of Series B Preferred Stock
outstanding shall be necessary to permit, effect or validate (a) the
authorization, creation or issuance, or any increase in the authorized or issued
amount, of any class or series of stock ranking prior to the Series B Preferred
Stock; (b) the increase in the authorized or issued amount of the Series B
Preferred Stock; or (c) the amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the
15
<PAGE> 22
provisions of the Restated Certificate of Incorporation of the Company that
would affect any right, preference or voting power of the Series B Preferred
Stock or the holders thereof.
(ii) Liquidation rights. In the event of any liquidation, dissolution or
winding up of the Company, before any payment or distribution of assets of the
Company (whether capital or surplus) shall be made to or set apart for the
holders of Common Stock or any other series or class or classes of stock of the
Company ranking junior to the Series B Preferred Stock, upon liquidation,
dissolution or winding up, the holders of the shares of Series B Preferred Stock
shall be entitled to receive $750.00 per share plus an amount equal to all
dividends declared and unpaid thereon to the date of final distribution to such
holders; thereafter, such holders shall be entitled to share ratably with the
holders of the Common Stock, subject to the rights of the holders of any shares
of capital stock of the Company ranking on a parity with or prior to the Series
B Preferred Stock.
(iii) Dividends. The Series B Preferred Stock ranks, as to dividends, on a
parity with the Series A Preferred Stock and the Common Stock. Holders of shares
of the Series B Preferred Stock shall be entitled to receive, when and if
declared by the Board of Directors out of funds legally available therefor,
dividends in an amount per share of Series B Preferred Stock equal to the
dividends payable on the number of shares of Common Stock into which one share
of Series B Preferred Stock is then convertible.
(iv) Redemption. Series B Preferred Stock may not be redeemed by the
Company prior to the fifth anniversary of the issuance of the Series B Preferred
Stock. After the fifth anniversary of the issuance of the Series B Preferred
Stock, the Company, at its option, may redeem the shares of Series B Preferred
Stock, in whole or in part, for an aggregate redemption price of $750.00 per
share plus an amount per share equal to declared and unpaid dividends, if any;
provided that the Company must redeem the shares of Series A Preferred Stock and
Series B Preferred Stock on a pro rata basis.
(v) Conversion into Common Stock. Holders of Series B Preferred Stock will
have the right, at any time after the fourth anniversary of the issuance of the
Series B Preferred Stock, to convert all or a portion of such shares into the
number of fully paid and nonassessable shares of Common Stock obtained by
dividing the aggregate liquidation preference of such shares by the Conversion
Price, initially $16.50, subject to adjustment.
Beneficial Ownership of Capital Stock Prior to and After the
Transaction. At the close of business on February 29, 1996, MPX beneficially
owned 4,494,892 shares of Common Stock, representing approximately 16.8% of the
total number of shares of Common Stock outstanding on that date, and Ericsson
did not beneficially own any shares of Common Stock. If Ericsson were to convert
all of its shares of Series A Preferred Stock into Common Stock, Ericsson would
beneficially own approximately 14.5% of the outstanding Common Stock (or
approximately 12.7% of the outstanding Common Stock if MPX converted its Series
B Preferred Stock), based on the number of shares of Common Stock outstanding on
February 29, 1996. If MPX were to convert all of its shares of Series B
Preferred Stock into Common Stock, MPX would beneficially own approximately
28.9% of the outstanding Common Stock (or approximately 25.3% of the outstanding
Common Stock if Ericsson converted its Series A Preferred Stock), based on the
number of shares of Common Stock outstanding on February 29, 1996.
VENDOR FINANCING AGREEMENT WITH ERICSSON
InterCel PCS Services has entered into the Equipment Purchase Agreement
with Ericsson for the purchase of PCS equipment and services and the Vendor
Financing Agreement with Ericsson to finance up to $125 million of such
purchase. Under certain circumstances, the amount of vendor financing available
under the Vendor Financing Agreement may be increased to $165 million.
Under the Equipment Purchase Agreement, InterCel PCS Services has agreed to
purchase, and Ericsson has agreed to sell, certain equipment, software and
installation services required for the initial buildout and operation of the PCS
System (in each case subject to the terms and conditions of the Equipment
Purchase Agreement). In the event the Atlanta MTA Acquisition and the Ericsson
Stock Purchase Agreement are consummated, InterCel PCS Services has agreed to
(i) purchase its first $75 million worth of PCS equipment, software and/or
services for the Atlanta PCS System from Ericsson, and (ii) for a term of three
16
<PAGE> 23
years, utilize Ericsson as its exclusive provider of PCS 1900 equipment for the
Current PCS System. In the event the total amount available under the Vendor
Financing Agreement is increased to $165 million, InterCel PCS Services is
required (subject to the terms and conditions of the Equipment Purchase
Agreement) to (i) utilize Ericsson as its exclusive provider of PCS 1900
equipment for the PCS System for a period of three years and (ii) pledge the
stock of its subsidiary that holds the PCS license for the Atlanta MTA as
additional collateral for the Vendor Financing Agreement. If the total credit
available under the Vendor Financing Agreement is not increased, (i) the first
$75 million in purchases under the Equipment Purchase Agreement for the Atlanta
PCS System shall be paid for in cash, (ii) there shall be no exclusivity
requirement for the Atlanta PCS System beyond the original $75 million
obligation, and (iii) there shall be no pledge of the stock in the corporation
that holds the Atlanta MTA license as collateral for the Vendor Financing
Agreement.
The term of exclusivity will run independently for each MTA and will
commence six months prior to the date the Company first uses the PCS 1900
equipment to provide In Revenue Service (as defined in the Equipment Purchase
Agreement) for such MTA. InterCel PCS Services' grant of exclusivity is
conditioned upon (i) Ericsson's continuing to provide sufficient quantities of
PCS 1900 equipment to meet the Company's needs in the PCS Markets; (ii)
Ericsson's ability to provide commercial service for each of the Current PCS
Markets by October 1, 1996 and for the Atlanta MTA by June 1, 1997; and (iii)
Ericsson's continuing to provide "state-of-the-art" equipment.
Under the Vendor Financing Agreement, Ericsson has agreed to provide
financing to InterCel PCS Services for the cost of equipment, software and
installation services acquired by InterCel PCS Services under the Equipment
Purchase Agreement for the PCS System (subject to the terms and conditions of
the Vendor Financing Agreement). All advances made under the line of credit
established by the Vendor Financing Agreement during any calendar year will
accrue interest at a spread (not exceeding 5%) above LIBOR, or, under certain
circumstances, at a spread (not exceeding 3%) over Citibank N.A.'s prime rate,
payable quarterly in arrears at the end of each calendar quarter, during the
remainder of such calendar year and for three succeeding years; thereafter, the
principal amount will amortize and be repaid (together with interest accrued
thereon), in equal quarterly installments. A significant amount of indebtedness
may mature prior to the February Notes and the April Notes. In addition, the
Company will be required to repay indebtedness outstanding under the Vendor
Financing Agreement in connection with certain sales of assets other than in the
ordinary course of business, including proceeds from the sale of PCS licenses.
The Vendor Financing Agreement contains a number of covenants including,
among others, covenants limiting the License Subsidiaries' (as defined below)
ability to incur debt and covenants requiring InterCel to provide financial and
other information. In addition, an event of default will occur under the Vendor
Financing Agreement if the Company does not maintain minimum consolidated
EBITDA, working capital and net asset levels or if the Company's ratio of
consolidated total liabilities to consolidated total assets exceeds specified
amounts. The Vendor Financing Agreement also includes customary events of
default, including a default for a change in control of the Company.
InterCel PCS Services' obligations under the Vendor Financing Agreement are
secured by all tangible assets purchased with the proceeds therefrom and by a
pledge of the capital stock of InterCel Birmingham Licenses, Inc., InterCel
Jacksonville Licenses, Inc., and InterCel Memphis Licenses, Inc. (the "License
Subsidiaries"). In addition, as described above, in the event the total credit
available under the Vendor Financing Agreement is increased, InterCel PCS
Services' obligations will also be secured by the stock of the subsidiary that
holds the PCS license for the Atlanta MTA. Repayment of InterCel PCS Services'
obligations under the Vendor Financing Agreement is guaranteed by InterCel, the
License Subsidiaries, and InterCel Birmingham MTA, Inc., InterCel Jacksonville
MTA, Inc., and InterCel Memphis MTA, Inc.
POTENTIAL CONFLICTS OF INTEREST; INTERESTS OF CERTAIN PERSONS
Certain directors of the Company also serve in various capacities with
SCANA, which owns all of the outstanding capital stock of MPX. Lawrence M.
Gressette, Jr. is the Chairman, President and Chief Executive Officer of SCANA,
and William B. Timmerman is a director and President of SCANA. The Board
17
<PAGE> 24
of Directors was aware of these relationships and considered them, among other
factors, in approving the Transaction and making its recommendation to the
stockholders.
As of February 29, 1996, MPX beneficially owned 4,494,892 shares of Common
Stock, which represents 16.8% of the total number of shares of Common Stock
outstanding.
RECOMMENDATION OF THE BOARD; FACTORS AND CONCLUSIONS OF THE BOARD INVOLVED IN
ITS DETERMINATION
The Board of Directors has approved the Transaction and the proposed
amendment to the Restated Certificate of Incorporation to increase the Company's
authorized capital stock by increasing the number of authorized shares of Common
Stock and has determined that the Transaction and the amendment are in the best
interests of the Company and its stockholders.
THE BOARD RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" APPROVAL OF THE
PROPOSALS.
The Board believes that the Transaction and the related proposed amendment
are in the best interests of the Company and its stockholders because it
provides the Company with $150 million of capital on favorable economic terms,
which capital will be utilized to partially finance the buildout and operating
costs and certain acquisition expenses associated with the Atlanta MTA.
REQUIRED VOTE AND RELATED MATTERS
The affirmative vote of a majority of the total votes cast is required to
approve the terms and issuance of the Series Preferred Stock. The receipt of
such approval shall be deemed to satisfy the requirements of the NASD By-Laws
with respect to the continued listing of the Common Stock on the Nasdaq National
Market.
APPROVAL OF THE ISSUANCE AND TERMS OF THE SERIES PREFERRED STOCK BY THE
STOCKHOLDERS OF THE COMPANY IS A CONDITION TO CONSUMMATION OF THE TRANSACTION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
18
<PAGE> 25
AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
(PROPOSAL 2)
The Company's Board of Directors has approved and recommends the adoption
by stockholders of the following amendment to Section 5.1 of the Restated
Certificate of Incorporation, which amendment would increase the Company's
authorized capital stock by increasing the number of authorized shares of Common
Stock from 39 million shares to 55 million shares.
TEXT OF AMENDMENT
"The Restated Certificate of Incorporation of the Corporation hereby is
amended by deleting Section 5.1 thereof in its entirety, and inserting in lieu
thereof the following:
5.1 AUTHORIZED SHARES. The aggregate number of shares of stock which
the Corporation shall have the authority to issue is 56,000,000. 1,000,000
of such shares shall be Preferred Stock, having a par value of $.01 per
share ("Preferred Stock"). 55,000,000 of such shares shall be Common Stock,
all of one class, having a par value of $.01 per share ("Common Stock")."
The Restated Certificate of Incorporation, as presently in effect, provides
that the aggregate number of shares of stock which the Company shall have
authority to issue is 40 million shares, consisting of 39 million shares of
Common Stock and one million shares of Preferred Stock. On February 29, 1996,
there were 26,699,372 issued and outstanding shares of Common Stock, including
35,000 shares under the Company's 1995 Employee Restricted Stock Plan. No shares
of Preferred Stock have been issued. Thus, as of such date, 12,300,628 shares of
Common Stock and one million shares of Preferred Stock remained available for
issuance without further action by the Company's stockholders.
REASONS FOR AND POSSIBLE EFFECTS OF THE PROPOSED AMENDMENT
The current number of authorized but unissued shares of Common Stock is
insufficient to permit the issuance of shares of Common Stock called for in
connection with the conversion rights of the Series Preferred Stock.
Additionally, the Board of Directors believes that the proposed increase in the
authorized shares of Common Stock in excess of the number of shares necessary
for a Series Preferred Stock conversion is desirable to enhance the Company's
flexibility in connection with possible future actions, such as use in employee
benefit plans, stock splits, stock dividends, financings, corporate mergers,
acquisitions of property and other general corporate purposes. Having such
authorized capital stock available for issuance in the future would give the
Company greater flexibility and would allow additional shares of Common Stock to
be issued without the expense and delay of a special meeting of stockholders.
Elimination of the delay occasioned by the necessity of obtaining stockholder
approval will better enable the Company to engage in financing transactions and
acquisitions which take full advantage of changing market conditions. The
Company is not presently engaged in any negotiations concerning the issuance of
any shares of the additional authorized Common Stock, nor are there any present
arrangements, understandings or plans concerning the issuance of such shares,
apart from the transactions described in this Proxy Statement.
The proposed shares of Common Stock for which authorization is sought would
be part of the existing class of such stock and would increase the number of
shares of Common Stock available for issuance by the Company, but would have no
effect upon the terms of the Common Stock or the rights of the holders of such
stock. If and when issued, the proposed additional authorized shares of Common
Stock would have the same rights and privileges as the shares of Common Stock
presently outstanding. Holders of Common Stock will not have preemptive rights
to purchase additional shares of Common Stock.
ANTI-TAKEOVER EFFECT OF PROPOSED AMENDMENT
Although the Board of Directors has no present intention of doing so, it
could issue shares of Common Stock or Preferred Stock in a public or private
sale to purchasers who might agree with the Board of Directors in opposing an
attempt to obtain control of the Company by means of a merger, tender offer,
proxy contest or other means.
19
<PAGE> 26
The existence of the additional authorized shares of Common Stock could
have the effect of discouraging an attempt by any person or entity, through the
acquisition of a substantial number of shares of Common Stock, to acquire
control of the Company with a view to imposing a merger, sale of all or any part
of the Company's assets or a similar transaction, since the issuance of the
additional shares of Common Stock could be used to dilute the stock ownership of
a takeover bidder. In addition, the Board of Directors may issue, without
stockholder action, Common Stock, or warrants or other rights to acquire such
stock, with terms designed to protect against certain takeovers, including
partial takeovers and front-end loaded, two-step takeovers and freeze-outs and
to control stockholder acquisitions, should the Board of Directors consider the
action of such entity or person not to be in the best interests of the Company
and its stockholders. To the extent that potential takeovers are thereby
discouraged, stockholders may not have the opportunity to dispose of all or a
part of their stock at a price that may be higher than that prevailing in the
market. However, it also is possible that making shares of authorized, but
unissued, Common Stock and Preferred Stock available for issuance may have the
effect of increasing the price offered to the Company's stockholders in a tender
or exchange offer.
The proposed amendment to the Restated Certificate of Incorporation is not
part of a plan by the Board of Directors to adopt a series of anti-takeover
measures. The Company's Board of Directors does not presently intend to propose
any additional measures designed to discourage any unfair or unnegotiated
takeovers apart from the amendment proposed in this Proxy Statement and those
measures that previously have been adopted, but reserves the right to propose
and adopt additional measures if the Board of Directors determines that such
measures are in the best interests of the Company and its stockholders.
REQUIRED VOTE AND RELATED MATTERS
The affirmative vote of a majority of the outstanding shares of Common
Stock entitled to vote thereon is required to approve the amendment to the
Restated Certificate of Incorporation to increase the Company's authorized
capital by increasing the number of authorized shares of Common Stock from 39
million shares to 55 million shares.
THE APPROVAL OF THIS AMENDMENT TO THE RESTATED CERTIFICATE OF INCORPORATION
BY THE STOCKHOLDERS OF THE COMPANY IS A CONDITION TO CONSUMMATION OF THE
TRANSACTION.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 2.
20
<PAGE> 27
ELECTION OF DIRECTORS
(PROPOSAL 3)
Pursuant to the Restated Certificate of Incorporation, the Board of
Directors shall consist of not fewer than three nor more than 15 directors,
divided into three classes, as nearly equal in number as possible, with the
number of directors determined within such limits by resolution of the Board of
Directors. The term of office of only one class of directors expires in each
year, and their successors are elected for terms of three years and until their
successors are elected and qualified. The directors elected at the Annual
Meeting will hold office for a term of three years and until their successors
are elected and qualified.
At the Annual Meeting, three directors will be elected, each for a
three-year term. Unless otherwise specified on the proxy, it is the intention of
the persons named in the proxy to vote the shares represented by each properly
executed proxy for the election as directors of the persons named below as
nominees. All nominees are now directors of the Company. The Board of Directors
believes that the nominees will stand for election and will serve if elected as
directors. If, however, any person nominated by the Board fails to stand for
election or is unable to accept election, the proxies will be voted for the
election of such other person as the Board of Directors may recommend. Directors
will be elected by a plurality of the votes cast by the shares of Common Stock
entitled to vote in the election at the Annual Meeting. There are no cumulative
voting rights in the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF THE BOARD'S
NOMINEES FOR ELECTION AS DIRECTORS OF THE COMPANY.
INFORMATION AS TO NOMINEES, OTHER DIRECTORS AND EXECUTIVE OFFICERS
The director nominees, other directors and executive officers of the
Company and their ages and terms of office (in the case of directors) as of
February 29, 1996 are as follows:
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
DIRECTOR NOMINEES AGE POSITION(S) WITH COMPANY EXPIRES
----------------------------------- --- ----------------------------------- --------
<S> <C> <C> <C>
Donald W. Burton................... 52 Director 1996
Bert G. Clifford................... 76 Director 1996
Maurice P. O'Connor................ 45 Vice President and Director 1996
</TABLE>
<TABLE>
<CAPTION>
TERM AS
OTHER DIRECTORS AND EXECUTIVE DIRECTOR
OFFICERS AGE POSITION(S) WITH COMPANY EXPIRES
----------------------------------- --- ----------------------------------- --------
<S> <C> <C> <C>
Campbell B. Lanier, III............ 45 Chairman of the Board of Directors 1998
Allen E. Smith..................... 46 President, Chief Executive Officer 1998
and Director
Fred G. Astor, Jr.................. 44 Executive Vice President and Chief --
Financial Officer
Nicholas J. Jebbia................. 48 Executive Vice President -- PCS --
George R. Johnson.................. 54 Executive Vice President -- PCS --
Walter R. Pettiss.................. 62 Executive Vice President -- PCS --
O. Gene Gabbard.................... 55 Director 1997
Lawrence M. Gressette, Jr.......... 64 Director 1998
William H. Scott, III.............. 47 Director 1997
William B. Timmerman............... 49 Director 1997
Donald W. Weber.................... 59 Director 1997
</TABLE>
Certain of the executive officers and directors listed above hold or have
held positions in several corporations related to the Company, including ITC
Holding and various subsidiaries of ITC Holding. In addition, certain officers
and directors have ownership interests in ITC Holding. The Company has adopted a
policy requiring that any material transactions between the Company and persons
or entities affiliated with officers, directors or principal stockholders of the
Company be on terms no less favorable to the Company than reasonably could have
been obtained in arms' length transactions with independent third parties. Any
other matters involving potential conflicts of interests are to be resolved on a
case-by-case basis. See "Executive Compensation -- Certain Relationships and
Related Transactions."
21
<PAGE> 28
Officers of the Company are appointed at the Board's first meeting after
each annual meeting of stockholders. Officers hold office for a term of one year
and until their successors are chosen and qualify or until their earlier
resignation or removal.
DIRECTOR NOMINEES
DONALD W. BURTON was appointed a director of the Company in connection with
the consummation of the Powertel Combination. He has served as the Managing
General Partner of the South Atlantic Venture Funds since 1983. He has served as
the General Partner of The Burton Partnership, Limited Partnership since 1979.
Mr. Burton serves as a Director of MTL Inc., a bulk transportation service
company, and several private companies.
BERT G. CLIFFORD was appointed Vice Chairman of the Board of Directors of
the Company on March 28, 1994, in connection with the Company's business
combination (the "Unicel Merger") with Unity Cellular Systems, Inc. ("Unicel").
Mr. Clifford was the Chairman of the Board, President and General Manager of
Unity Telephone from 1963 until the time of the Unicel Merger in 1994. In
connection with the Unicel Merger, Mr. Clifford retired from his positions as
the Chairman of the Board of Directors, President and Chief Executive Officer of
Unicel, which positions he had held since Unicel's inception 1987. Mr. Clifford
is the Chairman of the Board of Trustees of Unity College in Unity, Maine. Mr.
Clifford is the father-in-law of Maurice P. O'Connor.
MAURICE P. O'CONNOR was appointed a director and Vice President of the
Company, with general responsibility for the Unicel operations, on March 28,
1994 in connection with the Unicel Merger. He also serves as a director of
Unitel, Inc., a local exchange carrier. Mr. O'Connor served as General Manager
of Unicel from 1991 until the Unicel Merger in 1994 and had been employed by
Unicel in other management capacities since 1989. From 1984 until joining Unicel
in 1989, Mr. O'Connor was President and General Manager of New England Landscape
& Irrigation Company in Palmer, Massachusetts. From 1977 to 1984 he was the
President of Cypress Landscaping & Construction in Houston, Texas. Mr. O'Connor
is the son-in-law of Bert and Coral Clifford.
OTHER DIRECTORS AND EXECUTIVE OFFICERS
CAMPBELL B. LANIER, III has served as Chairman of the Board of Directors of
the Company since its inception in April 1991 and was Chief Executive Officer of
the Company from its inception to September 1993. Mr. Lanier serves as Chairman
of the Board and Chief Executive Officer of ITC Holding and has served as a
director of ITC Holding since its inception in 1985 through a predecessor
company. In addition, Mr. Lanier served as a director and President of
Interstate Cellular, Inc. since its inception in 1989 until its dissolution in
June 1995, and he also is an officer and director of several ITC Holding
subsidiaries. Since 1994, he has been a director of MindSpring Enterprises, Inc.
("MindSpring"), an Internet access provider. Since 1990, he has been a director
of National Vision Associates, Ltd., a full service optical retailer, and Vice
Chairman of the Board of AvData Systems, Inc. ("AvData"), a company providing
satellite data transmission services. He served as Chairman of the Board of
AvData from 1988 to 1990. From 1984 to 1989, Mr. Lanier served as Chairman of
the Board of Async Corporation ("Async"), a company providing voice message
services. Mr. Lanier also served as Vice President -- Industry Relations of
Telecom*USA, Inc. ("Telecom") from 1984 to 1988 and as Senior Vice
President -- Industry Relations from January 1989 until Telecom's merger with
MCI Communications Corporation ("MCI") in August 1990. From 1984 to 1985, he
served as Chief Executive Officer of SouthernNet, Inc. ("SouthernNet"), a long
distance telecommunications company which was the predecessor to Telecom, and
from 1985 to 1986 he was Vice Chairman of the Board of SouthernNet.
ALLEN E. SMITH has been Chief Executive Officer of the Company since
September 1993, has been the President and a director of the Company since its
inception, and was Chief Operating Officer of the Company from its inception to
September 1993, when he became Chief Executive Officer. Mr. Smith has been a
Vice President of ITC Holding since January 1991. From 1988 to 1990, Mr. Smith
held several executive positions with Telecom, including Senior Vice
President -- Customer Services, Senior Vice President -- Administration and
Senior Vice President -- Human Resources and Administration. During 1988, Mr.
Smith was Vice President -- Telemarketing and Training at SouthernNet. From 1987
to 1988, Mr. Smith was the Vice
22
<PAGE> 29
President of Marketing of Southland Communications Corporation ("Southland"), a
telecommunications company. During 1986, Mr. Smith was the Executive Vice
President and General Manager of Southland Cellular, Inc., a subsidiary of
Southland, where he managed the Pensacola, Florida metropolitan service area, as
well as voice and digital paging services.
FRED G. ASTOR, JR. has been Chief Financial Officer of the Company since
May 1991, served as Treasurer of the Company from May 1991 until May 1995, and
was Vice President of the Company from May 1991 until May 1995, when he was
named Executive Vice President. Mr. Astor worked for Contel Corporation
("Contel"), a telecommunications company that merged with GTE Corporation in
March 1991, from 1976 to 1989 in various financial capacities. From 1983 to
1987, he served as the Assistant Corporate Controller in charge of financial
reporting, and from 1987 until late 1989, he served as Vice President -- Finance
for Contel Credit Corporation, a finance subsidiary that was acquired by GE
Capital. In January 1990, he joined Telecom as its Vice
President -- Finance/Southern Division, and he served in that capacity until
Telecom's merger with MCI was consummated. In November 1990, Mr. Astor accepted
a position with ProAir Services, L.P. as Vice President -- Finance. He served as
that company's Chief Financial Officer until accepting his current position with
the Company.
NICHOLAS J. JEBBIA joined the Company in January 1996 as Executive Vice
President and General Manager for the Memphis, Tennessee/Jackson, Mississippi
MTA. From 1990 to 1995, Mr. Jebbia served as Vice President and General Manager
of New Ventures for National Data Corporation. From 1983 to 1990, he was Vice
President of Service with United Telecommunications. Prior to 1983, he served in
various management positions with Ohio Bell Telephone.
GEORGE R. JOHNSON joined the Company as a Vice President -- PCS in May 1995
and was named Executive Vice President in August 1995. From 1990 to 1995, he
served as a Product Manager for BellSouth Telecommunications, Inc. From 1989 to
1990, he was National Sales Manager for BellSouth Products, Inc., a consumer
telephone products company.
WALTER R. PETTISS joined the Company as a Vice President -- PCS in April
1995 and was named Executive Vice President in August 1995. From 1992 to 1994,
Mr. Pettiss served as Chief Operating Officer of WJB-TV, L.P., a provider of
wireless cable television service, and its successor corporation, Wireless
Broadcasting System of America, Inc. Since 1991, he has served as a director of
Electronic Power Technology, Inc. ("EPT"). In 1995, he became chairman of the
board of directors of EPT. In December 1995, EPT filed for protection of its
assets under Chapter 7 of the U.S. Bankruptcy Code. From 1990 to 1992, he served
as Chief Operating Officer of WJB-Video, L.P., a Blockbuster Video franchisee.
From 1987 through 1989, he was a Senior Vice President of SouthernNet.
O. GENE GABBARD has been a director of the Company since February 1992. He
has worked independently as an entrepreneur and consultant since February 1993.
Mr. Gabbard currently serves as a director of ITC Holding, MindSpring, Masada
Security, Inc., a security monitoring services company, and two
telecommunications technology companies, Dynatech Corporation and Adtran, Inc.
From August 1990 through January 1993, he served as Executive Vice President and
Chief Financial Officer of MCI. He served in various senior executive
capacities, including Chairman of the Board, President and Chief Executive
Officer of Telecom from December 1988 until Telecom's merger with MCI in August
1990. From July 1984 to December 1988, he was Chairman and/or President of
SouthernNet.
LAWRENCE M. GRESSETTE, JR. was appointed a director of the Company in
connection with the consummation of the Powertel Combination. Since 1990, he has
served as Chairman, President and Chief Executive Officer of SCANA, a
diversified utility company. He also is a director of Wachovia Corporation, a
bank holding company, and The Liberty Corporation, a holding company of Liberty
Life Insurance Co. and Cosmos Broadcasting Corp.
WILLIAM H. SCOTT, III served as Vice Chairman of the Board of Directors of
the Company from its inception in April 1991 until the consummation of the
Powertel Combination and was reappointed as a director on March 21, 1996. Mr.
Scott has served as President of ITC Holding since December 1991 and has been a
director of ITC Holding since May 1989. He served as a director and Executive
Vice President of
23
<PAGE> 30
Interstate Cellular from May 1989 until its dissolution in June 1995, and he
also is an officer and director of several other ITC Holding subsidiaries. Mr.
Scott has served on the AvData Board of Directors since 1988. From 1985 to 1989,
Mr. Scott was an officer and director of Async. Between 1984 and 1988, Mr. Scott
held several offices with SouthernNet, including Chief Operating Officer, Chief
Financial Officer and Vice President -- Administration. He was a director of
that company from 1984 to 1987.
WILLIAM B. TIMMERMAN was appointed a director of the Company in connection
with the consummation of the Powertel Combination. Since 1978, he has served in
a variety of management positions at SCANA, including President, Senior Vice
President, Executive Vice President and Chief Financial Officer. Mr. Timmerman
also is a director of SCANA.
DONALD W. WEBER has been a director of the Company since December 1991. Mr.
Weber also is a director of ITC Holding, Intermedia Communications of Florida,
Inc., a provider of competitive local telephone access services, and Chairman of
the Board and Chief Executive Officer of ViewStar Entertainment Services, Inc.,
a company providing DBS satellite systems hardware and programming. From 1981
until his retirement in October 1991, Mr. Weber held various executive
positions, including President and Chief Executive Officer, at Contel. Mr. Weber
was a director of Contel from 1985 until 1991 and was a director of Contel
Cellular, Inc., a cellular telephone company, from 1981 until 1991.
COMMITTEES OF THE BOARD OF DIRECTORS AND NOMINATIONS BY STOCKHOLDERS
The Audit Committee of the Board of Directors reviews, with the Company's
independent public accountants, the annual financial statements of the Company
prior to publication; reviews the work of such independent public accountants;
and makes annual recommendations to the Board of Directors for the appointment
of independent public accountants for the ensuing year. The Audit Committee also
reviews the effectiveness of the financial and accounting functions,
organization, operations and management of the Company. During the year ended
December 31, 1995, the Audit Committee was composed of Mary Eunice Jones,
Campbell B. Lanier, III and Donald W. Weber, and held one meeting.
The Compensation Committee reviews and recommends to the Board of Directors
the compensation and benefits of all officers of the Company. The Compensation
Committee also reviews general policy matters relating to compensation and
benefits of employees of the Company. During the year ended December 31, 1995,
the Compensation Committee was composed of William T. Parr, William H. Scott,
III and Donald W. Weber, and held one meeting.
The Stock Option Committee administers the issuance of stock options to the
Company's officers, employees, consultants and advisors. During the year ended
December 31, 1995, the Stock Option Committee was composed of Mary Eunice Jones,
J. Smith Lanier, II and Robert G. Wyman (all of whom were nonemployee
directors), and held four meetings. In February 1996, the Compensation Committee
and the Stock Option Committee combined, to become the Compensation/Stock Option
Committee.
The Company does not have a standing nominating committee. The Board of
Directors nominates candidates to stand for election as directors. The Restated
Certificate of Incorporation permits stockholders to make nominations for
directors but only if such nominations are made pursuant to timely notice in
writing to the Secretary of the Company. To be timely, notice of stockholder
nominations for directors must be delivered in writing to the Secretary of the
Company no later than 90 days prior to the meeting of stockholders at which such
directors are to be elected, together with the identity of the nominator and the
number of shares of Common Stock owned, directly or indirectly, by the
nominator.
During the year ended December 31, 1995, the Board of Directors of the
Company held six meetings. All directors of the Company attended 75% or more of
the aggregate of all board meetings and all meetings of committees of which they
were members, except for Mr. Clifford.
24
<PAGE> 31
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the cash and
non-cash compensation during the fiscal years 1995, 1994 and 1993 earned by or
awarded to the Chief Executive Officer and to the other most highly compensated
executive officers of the Company whose combined salary and bonus exceeded
$100,000 during the fiscal year ended December 31, 1995 (the "Named Executive
Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
ANNUAL -------------------------
COMPENSATION RESTRICTED SECURITIES
-------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS YEAR SALARY BONUS AWARDS OPTIONS COMPENSATION(A)
- ----------------------------------- ---- -------- ------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Allen E. Smith..................... 1995 $132,714 $93,759 $ 211,725(b) 41,174 $ 5,424
President and Chief 1994 97,423 96,974 -- 20,750 --
Executive Officer 1993 90,593 68,348 -- -- --
Fred G. Astor, Jr.................. 1995 104,269 57,430 211,725(b) 34,030 $ 5,424
Executive Vice President and 1994 85,715 57,811 -- 12,550 --
Chief Financial Officer 1993 81,633 43,160 -- -- --
Walter R. Pettiss.................. 1995 76,675 45,336 -- 20,000 1,186
Executive Vice President -- PCS
George R. Johnson.................. 1995 62,118 37,186 -- 20,000 1,062
Executive Vice President -- PCS
Maurice P. O'Connor................ 1995 93,660 46,983 70,575(b) 18,389 4,966
Vice President 1994 75,224 53,753 -- 22,200 --
</TABLE>
- ---------------
(a) All other compensation represents matching contributions made by the Company
to the InterCel, Inc. 401(k) Plan on behalf of each of the Named Executive
Officers.
(b) On April 24, 1995, the Compensation Committee awarded Messrs. Smith, Astor
and O'Connor 15,000, 15,000 and 5,000 shares of restricted Common Stock,
respectively, in accordance with the provisions of the 1995 Employee
Restricted Stock Plan. The market value of the Company's Common Stock on the
date of award was $14.125 per share.
25
<PAGE> 32
OPTION GRANTS
The following table sets forth information with respect to grants of stock
options to each of the Named Executive Officers during the year ended December
31, 1995.
OPTION GRANTS DURING 1995
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A) POTENTIAL REALIZED
----------------------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(B)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------
NAME GRANTED FISCAL YEAR PRICE GRANT DATE DATE 5% 10%
- ------------------------------- ---------- ------------ ------- --------------- --------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Allen E. Smith................. 16,174 3.9% $11.500 March 10, 1995 March 10, 2000 $51,389 $113,555
25,000 6.0 14.125 April 24, 1995 April 24, 2000 97,562 215,586
Fred G. Astor, Jr.............. 9,030 2.2 11.500 March 10, 1995 March 10, 2005 28,690 63,398
25,000 6.0 14.125 April 24, 1995 April 24, 2005 97,562 215,586
Walter R. Pettiss.............. 20,000 4.8 14.125 April 24, 1995 April 24, 2000 78,050 172,469
George R. Johnson.............. 20,000 4.8 13.625 May 15, 1995 May 15, 2000 75,287 166,364
Maurice P. O'Connor............ 8,389 2.0 11.500 March 10, 1995 March 10, 2000 26,654 58,898
10,000 2.4 14.125 April 24, 1995 April 24, 2000 39,025 86,235
</TABLE>
- ---------------
(a) All options grants were made at 100% of the fair market value of the Common
Stock on the date of grant. Options will become exercisable as follows: (i)
50% of the options will become exercisable on the second anniversary of the
date of grant, (ii) an additional 25% of the options will become
exercisable on the third anniversary of the date of grant and (iii) the
remaining 25% of the options will become exercisable on the fourth
anniversary of the date of grant.
(b) Based on exercise price.
OPTION EXERCISES AND HOLDINGS
During the year ended December 31, 1995, no stock options were exercised by
the Named Executive Officers. The following table sets forth information with
respect to each of the Named Executive Officers concerning the value of all
unexercised options held by such individuals at December 31, 1995.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL YEAR-END AT FISCAL YEAR-END
EXERCISABLE/ EXERCISABLE/
NAME UNEXERCISABLE UNEXERCISABLE(A)
--------------------------------------- -------------------------- ------------------------
<S> <C> <C>
Allen E. Smith......................... 131,924 $1,211,245
Fred G. Astor, Jr...................... 97,580 870,353
Walter R. Pettiss...................... 20,000 57,500
George R. Johnson...................... 20,000 67,500
Maurice P. O'Connor.................... 40,589 246,940
</TABLE>
- ---------------
(a) Represents the difference between the exercise price per share and the
market value of the Common Stock at December 31, 1995.
BENEFIT PLANS
Restricted Stock Plan. Under the Company's 1995 Employee Restricted Stock
Plan adopted by the Board of Directors on April 24, 1995 and approved by
stockholders on December 20, 1995 (the "Restricted Stock Plan"), 200,000 shares
of authorized but unissued Common Stock (approximately 2% of the outstanding
shares of Common Stock at December 31, 1995 or approximately 0.8% of the
outstanding shares of Common Stock upon the consummation of the February
Offerings and the April Notes), are reserved for issuance, 35,000 shares of
which were issued and outstanding as of December 31, 1995. The Restricted Stock
26
<PAGE> 33
Plan is administered by the Compensation/Stock Option Committee of the Board of
Directors. The purpose of the Restricted Stock Plan is to further the growth and
success of the Company by enabling selected employees of the Company to acquire
shares of Common Stock of the Company, thereby increasing their personal
interest in such growth and success and to provide a means of rewarding
outstanding performance by such persons. Recipients of restricted stock awards
generally have the rights and privileges of a stockholder of the Company,
including the right to vote and receive dividends, except that the recipient may
not sell, transfer or otherwise dispose of shares covered by the award until a
specified time period, set by the Compensation/Stock Option Committee, has
lapsed. Restricted stock awards vest in three equal installments on the first,
second and third anniversaries of the date of grant. On April 24, 1995, the
Compensation Committee awarded Messrs. Smith, Astor and O'Connor 15,000, 15,000
and 5,000 shares of restricted Common Stock, respectively.
Employee Stock Option Plan. Under the Company's 1991 Employee Stock Option
Plan (the "Employee Plan"), two million shares of Common Stock have been
authorized for issuance upon exercise of options. All employees of the Company
and its subsidiaries are eligible to receive options under the Employee Plan.
The Employee Plan is administered by the Compensation/Stock Option Committee of
the Board of Directors. The purpose of the Employee Plan is to further the
growth and success of the Company by enabling selected employees of the Company
to acquire shares of Common Stock of the Company, thereby increasing their
personal interest in such growth and success and to provide a means of rewarding
outstanding performance by such persons. Options granted under the Employee Plan
are intended to qualify as "incentive stock options" under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). Options generally become
exercisable as to 50% two years after the date of grant, as to an additional 25%
three years after the date of grant, and as to the remaining 25% four years
after the date of grant. As of December 31, 1995, 801,570 options granted
pursuant to the Employee Plan were outstanding.
401(k) Plan. On February 1, 1995, the Company established a savings plan
qualified under Section 401(k) of the Code for the benefit of all full-time
employees with at least one year of service. Prior to February 1, 1995, the
Company, as a subsidiary of ITC Holding, included its employees as participants
in the ITC Holding Company Pension Plan (the "ITC Plan"). The ITC Plan provided
all eligible employees of ITC Holding and its majority-owned subsidiaries with
retirement, disability and survivor benefits. Benefits that employees had
accrued under the terms of the ITC Plan were frozen as of February 1, 1995. In
addition, following consummation of the Unicel Merger on January 31, 1994,
benefits that employees of Unicel had accrued under the terms of the plan
sponsored by Unity Telephone (the "Unity Plan") were frozen as of April 29,
1994. Messrs. Smith, Astor and O'Connor had 3, 3 and 0 years respectively, of
credited service under the ITC Plan and 0, 0 and 3 years, respectively, of
credited service under the Unity Plan as of the respective dates benefits under
such plans were frozen. Messrs. Pettiss and Johnson joined the Company after
February 1, 1995. The annual benefits payable from the ITC Plan upon retirement
at normal retirement age for Messrs. Smith, Astor and O'Connor are $10,583,
$8,145 and $0, respectively, and the annual benefits payable from the Unity Plan
upon retirement at normal retirement age for Messrs. Smith, Astor and O'Connor
are $0, $0 and $3,729, respectively.
COMPENSATION OF THE COMPANY'S DIRECTORS
Director Fees and Related Matters. Prior to January 17, 1994, directors of
the Company (other than the Chairman and Vice Chairman, who were considered
employees of the Company and received salaries for their services as such) did
not receive cash compensation for their services on the Board of Directors.
Pursuant to a policy instituted by the Company on January 17, 1994, the Company
now compensates nonemployee directors $750 for each Board meeting attended in
person, $200 for each Board meeting attended by telephone conference and $200
for each Board committee meeting attended (whether in person or by telephone
conference). In addition, the Company reimburses nonemployee directors for
out-of-pocket travel expenditures relating to their service on the Board. The
Company provides to each of its directors (and to all of its employees) a free
cellular telephone and monthly airtime allowance of 250 minutes; the users are
responsible for payment of all additional airtime charges and long distance and
roaming charges they incur.
27
<PAGE> 34
For the year ended December 31, 1995, Bert G. Clifford, J. Douglas Cox,
Campbell B. Lanier, III and William H. Scott, III received additional
compensation in consideration of their performance of certain advisory and
administrative services for the Company in the amount of approximately $30,000,
$10,000, $40,000 and $30,000, respectively. Messrs. C. Lanier and Scott will be
paid similar compensation for the year ending December 31, 1996 in consideration
of their performance of such services for the Company.
Nonemployee Stock Option Plan. Under the Company's Nonemployee Stock
Option Plan (the "Nonemployee Plan"), 400,000 shares of Common Stock are
authorized for issuance upon exercise of options. All nonemployee directors of
the Company, and all employees of affiliates of the Company, are eligible to
receive options under the Nonemployee Plan. Options were granted to each
nonemployee director upon his or her election or appointment as a director, and
are exercisable at the fair market value of the Common Stock (as determined by
the Board) on the date of grant. Upon their appointment as directors, Earl I.
Mullen and Robert G. Wyman each received options to purchase 11,100 shares of
Common Stock. On January 17, 1994, the Company granted additional options to
purchase 10,000 shares of Common Stock to each of H. DuWayne Bridges, Sr.,
Malcolm C. Davenport, V, O. Gene Gabbard, Robert W. Hayes, Mary Eunice Jones, J.
Smith Lanier, II, William T. Parr and Donald W. Weber.
On March 28, 1994, the Nonemployee Plan was amended to provide that options
to purchase 10,000 shares of Common Stock (at an exercise price equal to the
fair market value of the Common Stock on the date of grant) would be granted
pursuant thereto to nonemployee directors upon their initial election or
appointment to the Board. The Nonemployee Plan, as so amended, does not provide
for discretionary option grants. Options generally become exercisable as to 50%
two years after the date of grant, as to an additional 25% three years after the
date of grant, and as to the remaining 25% four years after the date of grant.
On February 16, 1996, the Company granted options to purchase 10,000 shares
of Common Stock to each of Messrs. Burton, Gressette and Timmerman. Messrs.
Gressette and Timmerman subsequently declined such options. As of December 31,
1995, 193,200 options granted pursuant to the Nonemployee Plan were outstanding.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, William T. Parr, William H. Scott, III and Donald W. Weber
constituted the Compensation Committee. Mary Eunice Jones, J. Smith Lanier, II
and Robert G. Wyman constituted the Stock Option Committee. Messrs. Parr, J.
Lanier and Wyman and Ms. Jones resigned from the Board of Directors in
connection with the Powertel Combination. Mr. Scott also resigned from the Board
in connection with the Powertel Combination, but was reappointed to the Board on
March 21, 1996.
Mr. Scott is President and a director of ITC Holding, which, as of February
29, 1996 held approximately 27.5% of the outstanding Common Stock of the
Company. Mr. J. Lanier is also a member of the Board of Directors of ITC
Holding. Mr. Smith, the Chief Executive Officer of the Company, is a Vice
President of ITC Holding.
Beginning in November 1991 the Company has been leasing a building located
in Lanett, Alabama, from Riverside Corporation, in which the mother and sisters
of William H. Scott, III have the majority ownership interest. The lease runs
for a period of five years, with options to renew for three successive five-year
periods. ITC Holding subleased the building from the Company during the period
from November 1991 to April 1992. The total amount payable during the term of
this lease (not including any renewal thereof) is $141,000 (approximately $2.94
per square foot per year).
Until April 1992, the Company leased premises in West Point, Georgia from
J. Smith Lanier, II. The Company moved from this facility in 1992, and ITC
Holding assumed the lease on the premises effective as of April 1992. The lease
runs from July 1, 1990 for a period of 15 years. During the year ended December
31, 1992, the Company paid $7,451 pursuant to the lease.
The Company purchases its health, dental, life, property and liability
insurance through J. Smith Lanier & Co., an insurance sales company. J. Smith
Lanier, II is the Chairman of the Board and Chief Executive Officer of J. Smith
Lanier & Co.
28
<PAGE> 35
COMPENSATION/STOCK OPTION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's compensation program is based on two major principles. First,
the Company strives to provide competitive levels of compensation -- at
performance levels that meet or exceed stated objectives -- in order to attract,
motivate and retain skilled and experienced executives. Second, the compensation
program is structured to create a common interest between the Company's
executives and the Company's stockholders by linking a significant portion of
each executive's compensation directly to increases in stockholder value.
The executive compensation program is designed to reward performance that
directly contributes to the Company's short-term and long-term success.
Accordingly, the Company generally provides both short-term and long-term
incentive compensation that varies based on individual performance and Company
performance.
The three major components of the compensation program are base salary,
annual cash incentives and long-term incentives (stock options and restricted
stock awards). The Company's philosophy is (i) to pay to its executives base
salaries that generally alone (without the other compensation elements) provide
compensation equal to total compensation in the bottom quartile of the range of
total compensation generally paid to executives by comparable companies, (ii) to
provide cash incentive awards that, if fully earned, raise the executive's total
cash compensation (base salary plus cash awards) to the middle of the range of
total compensation generally paid to executives by comparable companies and
(iii) to provide long-term incentives in the form of stock options and
restricted stock awards that, if fully earned, raise the executive's total
compensation (cash and equity) to the 75th percentile of the range of total
compensation generally paid to executives by comparable companies. The Company
analyzes the range of compensation provided by comparable companies based on
information provided by publicly traded wireless telecommunications companies
and on survey data provided by Hay Management Consultants, an internationally
recognized independent consulting firm.
Base Salary. Salary levels are based on the level of compensation
generally paid to executives by comparable companies, as described above, and on
each individual executive's responsibilities with the Company and his
performance in that role. Consequently, executives with higher levels of
sustained performance over time and/or executives assuming greater
responsibilities will be paid correspondingly higher salaries. Salaries for
executives are reviewed annually with respect to a number of factors, including
individual performance, Company and (where appropriate) business unit results
(including revenue, net income or loss, and cash flow), and general levels of
salary increases in comparable companies.
Management Incentive Compensation Plan. The Company's Management Incentive
Compensation Plan (the "Incentive Plan") provides competitive cash compensation
opportunities for Incentive Plan participants based on Company, business unit
(where appropriate) and individual performance. Incentive cash awards are paid
annually if performance objectives are achieved.
The Compensation/Stock Option Committee develops, and the Board of
Directors reviews and approves, the criteria and financial targets established
for Incentive Plan participants each year. For 1995, the Incentive Plan included
targets for (i) total revenues, (ii) net income and (iii) cash flow (earnings
before taxes, interest, depreciation and amortization). Each factor was weighted
equally.
Annual cash incentive bonus opportunities vary by individual position and
are expressed as an annual cash objective and as a percentage of total
compensation mix. The amount a particular executive may earn is dependent on the
individual's position, responsibility and ability to influence the Company's
financial success, as well as on the individual executive's performance in
meeting stated objectives. No bonus is payable if the Company does not achieve
at least 70% of the Incentive Plan's targets, and bonus payments are capped at
achievement of 300% of the Incentive Plan's targets.
Long-term Incentive Compensation. The Company's long-term incentive
compensation, reflected in the Employee Plan and the Restricted Stock Plan, is
designed to focus executive efforts on the long-term goals of the Company,
including the important goal of maximizing total return to Company stockholders.
The Company believes that stock options align the interests of employees
with those of stockholders by providing value to employees through stock price
appreciation. Stock option grants are made by the Compensation/Stock Option
Committee of the Company's Board of Directors. The Company generally grants
29
<PAGE> 36
options with an exercise price equal to the fair market value of the Company's
Common Stock on the date of the option grant. Option grants and the number of
shares reserved for issuance under the Employee Plan are established by analysis
of practices at comparable companies. The number of options actually granted to
a particular participant is based on the Company's financial success and the
individual's performance, position and level of responsibility within the
Company.
Under the Company's Restricted Stock Plan, the Company may issue to
eligible employees shares of the Company's Common Stock that are subject to
certain restrictions, are non-transferable during the restriction period and are
subject to forfeiture if the employee leaves the Company during the restriction
period. The Compensation/Stock Option Committee establishes a period to time or
performance goals that apply to restricted shares issued with respect to each
award pursuant to the Restricted Stock Plan. Performance goals can be based on
one or more business criteria that apply to the individual recipient, a business
unit (where appropriate) or the Company. Performance goals generally will be
based on stock price, sales, earnings per share, earnings before taxes or return
on net assets. Performance goals may include positive results, maintaining the
status quo or limiting economic losses.
Other. In addition to the compensation paid to executive officers as
described above, executive officers receive, along with and on the same terms as
other employees, certain benefits pursuant to the Company's 401(k) Plan and,
prior to the adoption of the 401(k) Plan, the ITC Plan and/or the Unity Plan.
See "-- Benefit Plans."
1995 Compensation of Chief Executive Officer As previously described, the
Compensation/Stock Option Committee considers several factors in developing an
executive compensation package. For the Chief Executive Officer, these factors
generally include compensation practices of comparable companies, individual
performance, experience, achievement of strategic goals, and the Company's
financial and operational results. Specific actions taken by the
Compensation/Stock Option Committee regarding Mr. Smith's compensation for 1995
are summarized below.
- Base Salary. The Chief Executive Officer's 1995 base salary was
$132,714, an increase of 39% over his 1994 base salary. Mr. Smith's salary
increase reflects the Company's growth in revenues, net income, cash flow
and stockholder value, as well as a one-time adjustment to put his base
salary in the twenty-fifth percentile of compensation paid to chief
executives by comparable companies.
- Annual Incentive. In addition, Mr. Smith received an annual cash
incentive award for 1995 of $93,759. This award was based on results for
the year, which exceeded the performance benchmarks established by the
Compensation/Stock Option Committee and the Board. Mr. Smith's 1995
incentive targets were exceeded by 38.0% (net income), 7.3% (total service
revenues) and 15.7% (cash flow). The Company believes that Mr. Smith's
total 1995 cash (salary plus incentive) compensation was below the average
total cash compensation paid to chief executives by comparable companies.
- Long-term Incentive. Mr. Smith is eligible to participate in the
Company's Employee Plan and Restricted Stock Plan. During 1995, Mr. Smith
was granted options to purchase 16,174 shares of Common Stock at an
exercise price of $11.50 and 25,000 shares of Common Stock at an exercise
price of $14.125 (the fair market value of the Common Stock on the date of
option grant). Such options become exercisable (i) with respect to 50% of
the shares issuable thereunder on the second anniversary of the date of
grant, (ii) an additional 25% of the shares issuable thereunder on the
third anniversary of the date of grant, and (iii) the remaining 25% of the
shares issuable thereunder on the fourth anniversary of the date of grant.
Additionally, Mr. Smith received 15,000 restricted shares of Common Stock
under the Restricted Stock Plan for 1995.
Pay Deductibility Limit Under a 1993 amendment to the Code and proposed
federal tax regulations, public companies are prohibited from receiving a tax
deduction for compensation in excess of $1 million paid to the chief executive
officer or any of the four other most highly compensated executive officers for
any fiscal year. The prohibition does not apply to certain performance-based
compensation. The Company takes into consideration this compensation
deductibility limit in structuring its compensation programs and in determining
executive compensation. At this time, the Company's applicable executive officer
compensation does not
30
<PAGE> 37
exceed $1 million, and the Company does not expect that it is likely to be
affected by these nondeductibility rules in the near future.
COMPENSATION/STOCK OPTION COMMITTEE
O. Gene Gabbard
Lawrence M. Gressette, Jr.
William B. Timmerman
COMPARATIVE COMPANY PERFORMANCE
The graph shown below is a line-graph presentation comparing the Company's
cumulative stockholder return on an indexed basis based on an investment of $100
on December 31, 1993 with the CRSP Index for Nasdaq Telecommunications Stocks
and the CRSP Index for the Nasdaq National Market (U.S. Companies).
COMPARISON OF CUMULATIVE TOTAL STOCKHOLDER RETURN
<TABLE>
<CAPTION>
CRSP NASDAQ CRSP INDEX
STOCK MARKET FOR NASDAQ
MEASUREMENT PERIOD (U.S. TELECOMMUNICATIONS INTERCEL,
(FISCAL YEAR COVERED) COMPANIES) STOCKS INC.
<S> <C> <C> <C>
12/31/93 100.00 100 100
12/31/94 97.48 82.66 131.82
12/31/95 138.26 99.56 206.06
</TABLE>
NOTES:
A. The lines represent annual index levels derived from compounded daily
returns that include all dividends.
B. The indexes are reweighed daily, using the market capitalization on the
previous trading day.
C. If the fiscal year end is not a trading day, the preceding trading day is
used.
D. The index level for all series was set to 100.0 on December 31, 1993.
E. The Company's Common Stock began trading on the Nasdaq Stock Market on
February 7, 1994.
31
<PAGE> 38
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has adopted a policy requiring that any material transactions
between the Company and persons or entities affiliated with officers, directors
or principal stockholders of the Company be on terms no less favorable to the
Company than reasonably could have been obtained in arms' length transactions
with independent third parties. The following is a summary of certain
transactions and relationships among the Company and its associated entities,
and among the directors, executive officers and stockholders of the Company and
its associated entities.
Powertel. InterCel PCS Services and Powertel entered into a management
agreement, dated as of October 28, 1994, pursuant to which InterCel PCS Services
agreed to manage Powertel's acquisition of PCS licenses and its subsequent
development, construction and operation of its PCS system, in exchange for a
carried partnership interest in Powertel valued at 10% of the excess of the fair
value of Powertel (on the valuation date) over the capital contributions of the
partners (subject to certain restrictions).
The Company entered into the Powertel Business Combination Agreement dated
as of August 23, 1995 with Powertel, the Powertel Partners and the stockholders
of certain Powertel Partners pursuant to which the Company issued 9,686,410
shares of Common Stock in exchange for the transfer to the Company of the
partnership interests of Powertel or the common stock of the corporations
holding the partnership interests of Powertel. As of December 31, 1995 (prior to
consummation of the February Offerings and the April Notes), ITC Holding owned
approximately 50.2% of the outstanding Common Stock of the Company. Prior to the
Powertel Combination, ITC Holding was a partner in Powertel, holding (through a
wholly owned subsidiary) a 20.910% interest, as of December 31, 1995. In
addition, certain other former Powertel Partners and/or their affiliates
directly or indirectly owned interests in ITC Holding, including MPX (which, as
of December 31, 1995, owned approximately 9.9% of ITC Holding's outstanding
stock), and certain affiliates of NEIPCS Inc. (which, as of December 31, 1995,
owned approximately 11.2% of ITC Holding's outstanding stock) and certain
affiliates of South Atlantic PCS Corporation (which, as of December 31, 1995,
owned approximately 2.4% of ITC Holding's outstanding stock). Michael D.
Blackwell, Executive Vice President of MPX, and Robert A. Dolson, President of
NEIPCS Inc., serve on the Board of Directors of ITC Holding. ITC Holding and
certain directors and officers of ITC Holding and InterCel have substantial
investments in affiliates of South Atlantic PCS Corporation.
Powertel loaned approximately $900,000 to the Company, at an annual
interest rate of 8% (the "Powertel Loan") to pay expenses associated with the
Powertel Combination and the February Offerings. The Powertel Loan was
eliminated on February 7, 1996 in connection with the Powertel Combination.
ITC Holding. As of February 29, 1996, ITC Holding owned approximately
27.5% of the outstanding Common Stock of the Company. ITC Holding, through
certain of its subsidiaries, from time to time provides the Company with various
services, consisting principally of administrative and staff services, technical
services and access services (switch technicians and maintenance) and facilities
for the Company's switching office. The amounts paid by the Company to ITC
Holding during the fiscal years ended December 31, 1993, 1994 and 1995 for such
services were as follows: $58,832, $230,503 and $192,165, respectively, for
administrative and staff services; $232,307, $263,003 and $330,664,
respectively, for technical services; $33,000, $56,767 and $41,823,
respectively, for access services; and $3,900, $3,600 and $3,600, respectively,
for the switching facilities. The Company will periodically have outstanding
affiliated receivables and payables related to timing of payments for such
administrative services.
The Company has previously participated in a five million dollar credit
facility through Valley Finance, an indirect wholly owned subsidiary of ITC
Holding. Repayment of this prior credit facility was guaranteed by ITC Holding,
and ITC Holding had agreed with the Company that, among other things, ITC
Holding would obtain or provide alternative financing for the Company
substantially equivalent to the credit facility in the event that actions taken
by ITC Holding or any of its affiliates (other than the Company) were to result
in termination of the credit facility. In connection with the Unicel Merger,
Valley Finance entered into a credit facility (the "Credit Facility"),
originally in the amount of $30 million and currently in the amount of $28
million, with National Bank for Cooperatives. All amounts drawn under the Credit
Facility by Valley
32
<PAGE> 39
Finance were loaned by Valley Finance to InterCel and were repaid in full with a
portion of the proceeds from the February Offerings.
Between January 1, 1991 and January 1, 1993, the Company owned a .179%
interest in a Georgia general partnership organized for the purposes of
purchasing a cabin-class multi-engine airplane, arranging for joint use of the
airplane and providing administrative and accounting services to the parties
arising from the operation of the airplane. The Company's partners included ITC
Holding, Interstate Telephone and Valley Telephone. Between January 1, 1993 and
December 31, 1994, a joint venture, which included ITC Holding and other
parties, but not the Company, was formed to continue operation of the airplane
and to acquire and operate a new airplane. In exchange for continued use of the
original airplane and for use of the newly acquired airplane, the Company paid
fees to the new joint venture of approximately $30,755 and $23,943 for the
fiscal years ended December 31, 1993 and December 31, 1994, respectively. On
January 1, 1995, the Company, ITC Holding, InterServ Services Corporation, a
subsidiary of ITC Holding, and other parties entered into a new Georgia general
partnership, pursuant to which the partners own and operate a multi-engine
plane. The Company owns a .175% interest in this new partnership.
On March 10, 1994, the Company entered into a lending arrangement with ITC
Holding pursuant to which the Company borrowed $9,403,000 from ITC Holding to
repay previously outstanding borrowings under the Credit Facility. The loan from
ITC Holding, which is unsecured and prepayable (without penalty) at any time,
bears interest at the same rates that the Company would have been paying had the
amounts remained outstanding under the Credit Facility. Amounts due under the
loan are payable at various times through March 1997, but all amounts may be
made immediately due and payable on demand (with advance written notice) by ITC
Holding. The Company repaid the loan from ITC Holding with a portion of the net
proceeds of the February Offerings. ITC Holding paid all costs associated with
establishing this loan.
The Company has leased space for its headquarters in West Point, Georgia
from ITC Holding since May 1995. The Company has entered into a lease agreement,
effective July 1, 1995, pursuant to which InterCel pays ITC Holding rent in the
amount of $8,602 per month. The lease may be terminated by either party on 30
days' notice. The Company has also begun construction of an operation and
billing center on land owned by the city of West Point, Georgia. ITC Holding
leases the land from the city for a nominal lease payment and has an option to
purchase the land on or before October 1, 1999. The Company and ITC Holding are
in the process of documenting an oral agreement pursuant to which ITC Holding is
subleasing such land to the Company for the same lease payment and the Company
will have the right to purchase the land pursuant to the terms of ITC Holding's
option.
The Company leased space for its switching equipment in an ITC Holding
facility located in West Point, Georgia. Rent payments were $2,750 per month
until March 1995, at which time the rent increased to $4,750 per month. In
connection with its installation of a new switch for the Georgia/Alabama Market
in a Company-owned facility in Huguley, Alabama, the lease for the West Point
facility was canceled in August 1995.
The Company utilizes the fiber optic facilities of Interstate FiberNet,
Inc. ("Interstate FiberNet"), an ITC Holding subsidiary. In exchange for the use
of these facilities, the Company provides Interstate FiberNet with building
space and utilities valued (for each of the last three years) at $4,000 per
month.
The Company retained Elrick & Lavidge, Inc. a subsidiary of InterServ
Services Corporation, to conduct market research focus group sessions during
November 1995. InterServ Services Corporation is a majority owned subsidiary of
ITC Holding. The Company paid Elrick & Lavidge, Inc. approximately $23,000 for
these services.
Certain officers and directors of the Company hold or have held positions
in ITC Holding and various subsidiaries of ITC Holding. See "Election of
Directors -- Other Directors and Executive Officers." In addition, certain
Company officers and directors have ownership interests in ITC Holding.
Other Transactions. The Company sells cellular telephones and provides
cellular services to certain of its affiliates and their employees. Revenues
recorded by the Company for these sales and services were approximately
$278,272, $258,411 and $248,176 in 1993, 1994 and 1995, respectively.
33
<PAGE> 40
Until April 1992, the Company leased premises in West Point, Georgia from
J. Smith Lanier, II. The Company moved from this facility in 1992, and ITC
Holding assumed the lease on the premises effective as of April 1992. The lease
runs from July 1, 1990 for a period of 15 years. During the year ended December
31, 1992, the Company paid $7,451 pursuant to the lease.
The Company purchases its health, dental, life, property and liability
insurance through J. Smith Lanier & Co., an insurance sales company. J. Smith
Lanier, II is the Chairman of the Board and Chief Executive Officer of J. Smith
Lanier & Co.
Beginning in November 1991 the Company has been leasing a building located
in Lanett, Alabama, from Riverside Corporation, in which the mother and sisters
of William H. Scott, III have the majority ownership interest. The lease runs
for a period of five years, with options to renew for three successive five-year
periods. ITC Holding subleased the building from the Company during the period
from November 1991 to April 1992. The total amount payable during the term of
this lease (not including any renewal thereof) is $141,000 (approximately $2.94
per square foot per year).
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers and persons who own more than 10% of its Common Stock to file
with the SEC initial reports of ownership of the Company's equity securities and
to file subsequent reports when there are changes in such ownership. Based on a
review of reports submitted to the Company, InterCel believes that during the
fiscal year ended December 31, 1995, all Section 16(a) filing requirements
applicable to the Company's officers, directors and more than 10% owners were
compiled with.
34
<PAGE> 41
BENEFICIAL OWNERSHIP OF CAPITAL STOCK
The following table provides information, as of February 29, 1996,
concerning beneficial ownership of Common Stock by (i) each person or entity
known by the Company to beneficially own more than 5% of the outstanding Common
Stock, (ii) each director of the Company, (iii) each Named Executive Officer,
and (iv) all directors and executive officers of the Company as a group. The
information in the table is based on information from the named persons
regarding ownership of Common Stock. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
shown as beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF COMMON
NAME AND ADDRESS(A) OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(B) STOCK OUTSTANDING
- ------------------------------------------------------- ----------------------- -----------------
<S> <C> <C>
ITC Holding Company, Inc.(c)........................... 7,337,711 27.5%
MPX Systems, Inc....................................... 4,494,892 16.8
Fred G. Astor, Jr.(d).................................. 78,875 *
Donald W. Burton(e).................................... 1,583,727 5.9
Bert G. Clifford(f).................................... 1,172,821 4.4
O. Gene Gabbard(d)(g).................................. 191,191 *
Lawrence M. Gressette, Jr.............................. -- --
Nicholas J. Jebbia..................................... 2,500 *
George R. Johnson...................................... -- --
Campbell B. Lanier, III(g)............................. 228,991 *
Maurice P. O'Connor.................................... 16,719 *
Walter R. Pettiss...................................... 1,000 *
William H. Scott, III(d)(h)............................ 53,600 *
Allen E. Smith(d)...................................... 106,975 *
William B. Timmerman................................... -- --
Donald W. Weber(d)..................................... 17,000 *
All executive officers and directors as a group (13
persons)(d)-(h)...................................... 3,453,399 12.9
</TABLE>
- ---------------
*
Less than one percent.
(a) The addresses of the directors, officers and beneficial owners of more than
5% of the Common Stock are as follows: ITC Holding and Messrs. Astor, C.
Lanier, Pettiss, Scott and Smith -- 1239 O.G. Skinner Drive, West Point,
Georgia 31833; Mr. Clifford -- P.O. Box 136, Unity, Maine 04988; Mr.
O'Connor -- 1106 Kennebec Road, Hampden, Maine 04444; Mr. Gabbard -- 102
Marseille Place, Cary, North Carolina 27511; Mr. Weber -- 525 Old
Cobblestone Drive, Dunwoody, Georgia 30350; Messrs. Gressette and Timmerman
and MPX Systems, Inc. (a wholly owned subsidiary of SCANA Corp.) -- 440
Knox Abbott Drive, Suite 240, Cayce, South Carolina 29033; Mr.
Burton -- 614 West Bay Street, Suite 200, Tampa, Florida 33606; Mr.
Johnson -- 505 Seven Oaks Park, Birmingham, Alabama 35242; and Mr.
Jebbia -- 1445 Blyth Walk, Snellville, Georgia 30278.
(b) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed to
be the beneficial owner, for purposes of this table, of any shares of
Common Stock if such person has or shares voting power or investment power
with respect to such security, or has the right to acquire beneficial
ownership at any time within 60 days from December 31, 1995. As used
herein, "voting power" is the power to vote or direct the voting of shares
and "investment power" is the power to dispose or direct the disposition of
shares.
(c) ITC Holding has pledged all of its stock in the Company to certain lenders
in connection with a credit facility.
35
<PAGE> 42
(d) Includes the following shares that the named individuals have the right to
purchase within 60 days from February 29, 1996 pursuant to options:
<TABLE>
<S> <C>
Fred G. Astor, Jr............................................... 54,525
O. Gene Gabbard................................................. 15,000
Maurice P. O'Connor............................................. 11,100
Campbell B. Lanier, III......................................... 5,000
William H. Scott, III........................................... 35,000
Allen E. Smith.................................................. 76,625
Donald W. Weber................................................. 15,000
-------
Total......................................................... 212,250
=======
</TABLE>
(e) Includes 464,417 shares held of record by The Burton Partnership, Limited
Partnership, of which Mr. Burton is the sole general partner; 654,893
shares held of record by South Atlantic Venture Fund II, Limited
Partnership, of which South Atlantic Venture Partners II, Limited
Partnership is the sole general partner, of which Mr. Burton is the
managing general partner; and 464,417 shares held of record by South
Atlantic Venture Fund III, Limited Partnership, of which South Atlantic
Venture Partners III, Limited Partnership is the sole general partner, of
which Mr. Burton is the managing general partner.
(f) Includes 174,018 shares held in escrow by the First National Bank of West
Point pursuant to certain terms of the Unicel Merger. Also includes 596,319
shares (162,431 shares of which are currently held in escrow) held of
record by Coral B. Clifford, Mr. Clifford's wife.
(g) Includes 176,191 shares held of record by The Charitable Remainder
Education Trust III, of which Messrs. Gabbard and Lanier are trustees.
Messrs. Gabbard and Lanier disclaim beneficial ownership of these shares.
(h) Includes 500 shares held of record by Martha Scott, Mr. Scott's wife, of
which Mr. Scott disclaims beneficial ownership.
36
<PAGE> 43
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
(PROPOSAL 4)
The Board of Directors has appointed the firm of Arthur Andersen LLP to
continue as independent public accountants for the Company for the year ending
December 31, 1996, subject to ratification of such appointment by the
stockholders. Arthur Andersen LLP has served as the Company's independent public
accountants since 1991. Unless otherwise indicated, properly executed proxies
will be voted in favor of ratifying the appointment of Arthur Andersen LLP,
independent certified public accountants, to audit the books and accounts of the
Company for the year ending December 31, 1996. No determination has been made as
to what action the Board of Directors would take if the stockholders do not
ratify the appointment.
Representatives of Arthur Andersen LLP will be present at the Annual
Meeting. They will be given an opportunity to make a statement if they desire to
do so and will be available to respond to appropriate questions.
The approval by a majority of the total votes cast on the proposal is
required to approve the proposal to ratify the selection of Arthur Andersen LLP
as independent public accountants for the fiscal year ending December 31, 1996.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 4
DATE FOR SUBMISSION OF STOCKHOLDER PROPOSALS
The Company provides all stockholders with the opportunity, under certain
circumstances, to participate in the governance of the Company by submitting
proposals that they believe merit consideration at the next Annual Meeting of
Stockholders, which currently is expected to be held in June 1997. To enable
management to analyze and respond adequately to proposals and to prepare
appropriate proposals for presentation in the Company's Proxy Statement for the
next Annual Meeting of Stockholders, any such proposal should be submitted to
the Company no later than January 10, 1997, to the attention of its Secretary,
at its principal place of business in West Point, Georgia. Stockholders may also
submit the names of individuals who they wish to be considered by the Board of
Directors as nominees for directors.
VOTING PROCEDURES
Stockholders' votes will be tabulated by the persons appointed by the
chairman of the Annual Meeting to act as inspectors of election for the Annual
Meeting. All shares represented and entitled to vote on a proposal, whether
voted for or against the proposal, or abstaining from voting, will be counted as
present and entitled to vote on the proposal. Accordingly, an abstention from
voting on the proposal by a stockholder present in person or represented by
proxy at the Annual Meeting will have the same legal effect as a vote against
the matter, even though the stockholder may interpret an abstention differently.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company hereby incorporates by reference into this Proxy Statement the
following sections of the Company's 1995 Annual Report (which has been provided
to all stockholders): (i) Management's Discussion and Analysis set forth at
pages 15-26 thereof; (ii) Consolidated Financial Statements set forth at pages
27-31 thereof; (iii) Notes to Consolidated Financial Statements set forth at
pages 32-46 thereof; and (iv) Report of Independent Auditors set forth at page
47 thereof. In addition, the Company hereby incorporates by reference into this
Proxy Statement the unaudited financial statements and Management's Discussion
and Analysis set forth at pages 2-13 thereof of the Company's Form 10-Q for its
first quarter ended March 31, 1996.
The Company will provide without charge to each person to whom a copy of
this Proxy Statement is delivered, on the written or oral request of such person
and by first class mail or other equally prompt means within one business day of
receipt of such request, a copy of any and all of the documents referred to
above which have been incorporated by reference in this Proxy Statement. Such
written or oral request should be
37
<PAGE> 44
directed to Fred G. Astor, Jr., Executive Vice President and Chief Financial
Officer, InterCel, Inc., 1239 O.G. Skinner Drive, West Point, Georgia 31833;
(706) 645-2000.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act, and, in accordance therewith, is required to file reports, proxy statements
and other information with the SEC. Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of the reports, proxy statements and other
information can be obtained from the Public Reference Section of the Commission,
Washington, D.C. 20549, at prescribed rates. The Common Stock of the Company is
traded on the Nasdaq National Market (Symbol: ICEL), and such reports, proxy
statements and other information concerning the Company also can be inspected at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
A copy of the Annual Report to Stockholders for the fiscal year ended
December 31, 1995 has previously been provided or accompanies this Proxy
Statement. THE COMPANY IS REQUIRED TO FILE AN ANNUAL REPORT ON FORM 10-K FOR ITS
1995 FISCAL YEAR WITH THE SEC. STOCKHOLDERS MAY OBTAIN, FREE OF CHARGE, A COPY
OF THE ANNUAL REPORT ON FORM 10-K BY WRITING TO OR TELEPHONING FRED G. ASTOR,
JR., EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER, INTERCEL, INC., 1239
O.G. SKINNER DRIVE, WEST POINT, GEORGIA 31833; (706) 645-2000.
OTHER MATTERS
The Board of Directors does not know of any other matters to be presented
for action by the stockholders at the Annual Meeting. If, however, any other
matters not now known are properly brought before the Annual Meeting, the
persons named in the accompanying proxy will vote such proxy on such matters as
determined by a majority of the Board of Directors.
By Order of the Board of Directors
/s/ Allen E. Smith
-----------------------
Allen E. Smith
Chief Executive Officer
West Point, Georgia
Dated: May 9, 1996
38
<PAGE> 45
APPENDIX A
STOCK PURCHASE AGREEMENT
BETWEEN
INTERCEL, INC.
AND
ERICSSON INC.
DATED AS OF MARCH 4, 1996
<PAGE> 46
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms 1
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares 6
SECTION 2.02. Purchase Price 6
SECTION 2.03. Closing 6
SECTION 2.04. Escrow 6
SECTION 2.05. Closing Deliveries by the Seller 6
SECTION 2.06. Closing Deliveries by the Purchaser 7
SECTION 2.07. Closing Deliveries by the Escrow Agent 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 3.01. Organization, Authority and Qualification of the Seller 7
SECTION 3.02. Capital Stock of the Seller 8
SECTION 3.03. Subsidiaries 8
SECTION 3.04. No Conflict 8
SECTION 3.05. Governmental Consents and Approvals 9
SECTION 3.06. Seller SEC Documents; Financial Statements 9
SECTION 3.07. No Undisclosed Liabilities 10
SECTION 3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions 10
SECTION 3.09. Litigation 10
SECTION 3.10. Compliance with Laws 11
SECTION 3.11. Full Disclosure 11
SECTION 3.12. Delivery of Certain Documents 11
SECTION 3.13. Private Placement 11
SECTION 3.14. FCC Regulations 11
SECTION 3.15. Equipment Purchase Agreement 11
SECTION 3.16. Brokers 11
</TABLE>
-i-
<PAGE> 47
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Organization and Authority of the Purchaser 12
SECTION 4.02. No Conflict 12
SECTION 4.03. Governmental Consents and Approvals 13
SECTION 4.04. Litigation 13
SECTION 4.05. Investment Purpose 13
SECTION 4.06. Accredited Investor 13
SECTION 4.07. Equipment Purchase Agreement 13
SECTION 4.08. Brokers 13
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Filing of Certificate of Designation 13
SECTION 5.02. Treatment of Shares as Equity 14
SECTION 5.03. Regulatory and Other Authorizations; Notices and Consents 14
SECTION 5.04. Notice of Developments 14
SECTION 5.05. Registration Rights 15
SECTION 5.06. Resale Restrictions 15
SECTION 5.07. Registration of Shares 15
SECTION 5.08. Delivery of Certain Documents 15
SECTION 5.09. Seller Stockholders' Meeting 15
SECTION 5.10. Certain Information 16
SECTION 5.11 Conduct of Business of the Seller 16
SECTION 5.12. Further Action 16
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller 17
SECTION 6.02. Conditions to Obligations of the Purchaser 18
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties 20
SECTION 7.02. Indemnification 21
</TABLE>
-ii-
<PAGE> 48
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
SECTION 7.03. Limits on Indemnification 22
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination 23
SECTION 8.02. Effect of Termination 24
SECTION 8.03. Waiver 24
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses 24
SECTION 9.02. Notices 24
SECTION 9.03. Public Announcements 25
SECTION 9.04. Headings 26
SECTION 9.05. Severability 26
SECTION 9.06. Entire Agreement 26
SECTION 9.07. Assignment 26
SECTION 9.08. No Third Party Beneficiaries 26
SECTION 9.09. Amendment 26
SECTION 9.10. Governing Law 27
SECTION 9.11. Counterparts 27
SECTION 9.12. Specific Performance 27
EXHIBITS
Exhibit 2.04 Form of Escrow Agreement
ANNEXES
Annex I Certificate of the Designations, Powers, Preferences and Relative,
Participating or Other Rights, and the Qualifications, Limitations
or Restrictions Thereof, of Series A Convertible Preferred Stock
($0.01 Par Value) of InterCel, Inc.
Annex II Registration Rights
</TABLE>
-iii-
<PAGE> 49
STOCK PURCHASE AGREEMENT, dated as of March 4, 1996, between INTERCEL,
INC., a Delaware corporation (the "Seller"), and ERICSSON INC., a Delaware
corporation (the "Purchaser").
WITNESSETH:
WHEREAS, the Seller wishes to issue and to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, 100,000 shares (the "Shares") of
a new series of convertible preferred stock of the Seller designated Series A
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the terms of the Preferred Stock are set forth in the form of
Certificate of Designation attached as Annex I hereto (the "Certificate of
Designation"); and
WHEREAS, the Equipment Purchase Agreement and the consummation of the
transactions contemplated thereby are the primary inducement for the Purchaser
to enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser and the Seller hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Documents" has the meaning specified in Section 7.01.
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
<PAGE> 50
2
"Agreement" or "this Agreement" means this Stock Purchase Agreement, dated
as of March 4, 1996, between the Seller and the Purchaser (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 9.09.
"Assets" means the properties, assets and contract rights used or intended
to be used in the conduct of Business or otherwise owned, leased or used by the
Seller or any Subsidiary or, with respect to contract rights, to which the
Seller or any Subsidiary is a party.
"Atlanta Asset Purchase Agreement" means the Asset Purchase Agreement
among GTE Mobilnet Incorporated, InterCel Atlanta Licenses, Inc. and the
Seller, pursuant to which the Seller proposes to acquire the license granted by
the United States Federal Communications Commission to provide personal
communications services utilizing 1.8 Ghz in the Atlanta Major Trading Area.
"Atlanta MTA Acquisition Closing" means the closing of the transactions
contemplated by the Atlanta Asset Purchase Agreement.
"Beneficially Own" with respect to any securities and "Beneficial
Ownership" mean having beneficial ownership as determined pursuant to Rule
13d-3 under the Exchange Act including pursuant to any agreement, arrangement
or understanding, whether or not in writing.
"Business" means the business of the Seller and the Subsidiaries as
currently conducted and contemplated as of the date hereof by the Seller to be
conducted (as described in the Prospectus or contemplated by this Agreement,
the Atlanta Asset Purchase Agreement, the Equipment Purchase Agreement and the
SCANA Agreement).
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate of Designation" has the meaning specified in the recitals to
this Agreement.
"Closing" has the meaning specified in Section 2.03.
"Closing Date" has the meaning specified in Section 2.03.
"Commission" means the United States Securities and Exchange Commission.
<PAGE> 51
3
"Common Stock" means the common stock, par value $0.01 per share, of the
Seller.
"control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs of
such Person.
"Current Market Value" means, as of a particular date, the average of the
high bid and low asked prices per share of Common Stock in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other system then in use, or such other
exchange or inter-dealer quotation system on which the Common Stock is then
principally traded or authorized to be quoted.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, and forming a part of this Agreement.
"Encumbrance" means any security interest, pledge, mortgage, lien, charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Equipment Purchase Agreement" means the Acquisition Agreement, dated as
of March 4, 1996, between the Purchaser and InterCel PCS Services, Inc., in
connection with the sale by the Purchaser to InterCel PCS Services, Inc. of
switches and PCS 1900 equipment.
"Escrow Agent" has the meaning specified in the Escrow Agreement.
"Escrow Agreement" has the meaning specified in Section 2.04.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Governmental Authority" means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
<PAGE> 52
4
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Law" means any United States federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, order, other requirement or rule of
law, including, without limitation, any requirement or rule of law of the
United States Federal Communications Commission.
"Liabilities" means, any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Loss" has the meaning specified in Section 7.02.
"Material Adverse Effect" means any circumstance, change in, or effect on
the Business, the Seller or any Subsidiary that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the
Business, the Seller or any Subsidiary: (a) is, or would reasonably be expected
to be, materially adverse to the business, operations, Assets or Liabilities,
prospects, results of operations or financial condition of the Seller and the
Subsidiaries, taken as a whole, or (b) would reasonably be expected to
materially adversely affect the ability of the Seller and the Subsidiaries to
operate or conduct the Business in the manner in which it is currently operated
or conducted or contemplated to be operated or conducted by the Seller and the
Subsidiaries.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Preferred Stock" has the meaning specified in the recitals to this
Agreement.
"Prospectus" means the Seller's Prospectus dated February 1, 1996,
relating to 7,373,211 shares of Common Stock.
"Purchase Price" has the meaning specified in Section 2.02.
"Purchaser" has the meaning specified in the preamble to this Agreement.
<PAGE> 53
5
"Reference Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Seller, dated as of
December 31, 1995, a copy of which the Seller has provided to the Purchaser
prior to the execution of this Agreement.
"Reference Balance Sheet Date" means December 31, 1995.
"Sale" has the meaning specified in Section 5.10(b).
"SCANA Agreement" means the Stock Purchase Agreement, dated as of March 4,
1996, between the Seller and MPX Systems, Inc., a wholly owned subsidiary of
SCANA Corporation, relating to the purchase of 100,000 shares of Series B
Convertible Preferred Stock, par value $0.01 per share, of the Seller.
"SCANA Closing" means the closing of the transactions contemplated by the
SCANA Agreement.
"SEC Reports" has the meaning specified in Section 3.06(a).
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Seller" has the meaning specified in the preamble to this Agreement.
"Shares" has the meaning specified in the recitals to this Agreement.
"Subsidiaries" means any and all corporations, partnerships, limited
liability companies, joint ventures, associations and other entities controlled
by the Seller directly or indirectly through one or more intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority, including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties, tariffs, and similar
charges.
"Third Party Claims" has the meaning specified in Section 7.02(b).
<PAGE> 54
6
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently
throughout the periods involved.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject
to the conditions of this Agreement, at the Closing, the Seller shall sell to
the Purchaser, and the Purchaser shall purchase from the Seller, the Shares.
SECTION 2.02. Purchase Price. The aggregate purchase price for the Shares
shall be $75,000,000.00 (the "Purchase Price"), representing a purchase price of
$750.00 per Share.
SECTION 2.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the issuance, sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at
10:00 A.M. local time on a date and at a location mutually agreed to by the
parties upon the satisfaction or waiver of all conditions to the obligations of
the parties set forth in Article VI, or at such other place or at such other
time or on such other date as the Seller and the Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date".
SECTION 2.04. Escrow. On a date mutually agreed by the Seller and the
Purchaser (but no later than the closing date of the Senior Note offering
contemplated by the Seller), the Seller and the Purchaser shall enter into an
Escrow Agreement with the Escrow Agent substantially in the form of Exhibit
2.04 (the "Escrow Agreement"). In accordance with the terms of the Escrow
Agreement, on such date (or as soon thereafter as practicable, as mutually
agreed by the Seller and the Purchaser), the Purchaser shall deposit with the
Escrow Agent the Purchase Price, to be managed and paid out by the Escrow
Agent in accordance with the terms of the Escrow Agreement.
SECTION 2.05. Closing Deliveries by the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to the Purchaser:
(a) a receipt for the Purchase Price;
(b) stock certificates evidencing the Shares duly registered in the name
of the Purchaser, in form reasonably satisfactory to the Purchaser; and
<PAGE> 55
7
(c) the opinions, certificates and other documents required to be
delivered pursuant to Section 6.02.
SECTION 2.06. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller the opinions, certificates and other
documents required to be delivered pursuant to Section 6.01.
SECTION 2.07. Closing Deliveries by the Escrow Agent. At the Closing,
pursuant to the terms of the Escrow Agreement, the Escrow Agent shall deliver
to the Seller the Purchase Price in cash by wire transfer in immediately
available funds to a bank account in the United States to be designated by the
Seller, by written notice to the Purchaser at least five Business Days prior to
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the Seller
hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the Seller.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The Seller is duly licensed or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned or leased by it or the operation of its business makes
such licensing or qualification necessary. The execution and delivery of this
Agreement and the Escrow Agreement by the Seller, the performance by the Seller
of its obligations hereunder and thereunder and the consummation by the Seller
of the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the Preferred Stock in accordance with the terms of
this Agreement and the Certificate of Designation, have been duly authorized by
all requisite action on the part of the Seller, except for the stockholder
approval contemplated by Section 5.09 (which shall have been obtained prior to
the Closing). This Agreement has been, and upon its execution the Escrow
Agreement shall have been, duly executed and delivered by the Seller, and
(assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes, and upon its execution the Escrow Agreement will
constitute, a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms.
<PAGE> 56
8
SECTION 3.02. Capital Stock of the Seller. The authorized capital stock
of the Seller consists of 39,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, par value $0.01 per share. By the Closing Date, the
Seller will duly increase the authorized capital stock of the Seller to consist
of 55,000,000 shares of Common Stock and 1,000,000 shares of preferred stock,
par value $0.01 per share. As of the date hereof, (i) 26,823,694 shares of
Common Stock are issued and outstanding, all of which are validly issued, fully
paid and nonassessable and (ii) no shares of preferred stock are issued and
outstanding. None of the issued and outstanding shares of Common Stock was
issued in violation of any preemptive rights. Except as disclosed in Section
3.02 of the Disclosure Schedule, there are no options, warrants, convertible
securities or other rights, agreements, arrangements or commitments of any
character to which the Seller is a party relating to the issuance or sale of
capital stock of the Seller or obligating the Seller to issue or sell any
shares of capital stock of, or any other equity interest in, the Seller.
Except as disclosed in Section 3.02 of the Disclosure Schedule, there are no
outstanding contractual obligations of the Seller to repurchase, redeem or
otherwise acquire any shares of Common Stock. Upon issuance of the Shares to
the Purchaser at the Closing and payment therefor pursuant to this Agreement
and the Certificate of Designation, the Shares will be validly issued, fully
paid and nonassessable and free of preemptive rights. By the Closing Date, the
shares of Common Stock issuable upon conversion of the Shares will be duly
authorized and reserved for issuance upon such conversion and, upon issuance of
such shares in accordance with the Certificate of Designation, will be
validly-issued, fully paid and nonassessable and free of preemptive rights.
Upon consummation of the transactions contemplated by this Agreement, including
the issuance of the Shares and registration of the Shares in the name of the
Purchaser in the stock records of the Seller, the Purchaser will own the Shares
free and clear of all Encumbrances, other than Encumbrances resulting from any
action, or failure to take action, by the Purchaser.
SECTION 3.03. Subsidiaries. Each Subsidiary: (i) is duly organized and
validly existing under the laws of its jurisdiction of organization, (ii) has
all necessary power and authority to own, operate or lease the properties and
assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary and (iii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary or desirable,
except where the failure to be so duly licensed or qualified would not have a
Material Adverse Effect.
SECTION 3.04. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained
and all filings and notifications listed in Section 3.05 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement and the Escrow Agreement by the Seller, and the issuance of the
Shares and the performance of the Seller's obligations in accordance with the
Certificate of Designation, do not and will not, as of the date hereof and
<PAGE> 57
9
as of the Closing Date, (a) violate, conflict with or result in the breach of
any provision of the certificate of incorporation or by-laws (or similar
organizational documents) of the Seller or any Subsidiary, (b) conflict with or
violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to the Seller, any
Subsidiary or any of their respective assets, properties or businesses or (c)
except as set forth in Section 3.04(c) of the Disclosure Schedule, conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any of the Shares or on any of the assets
or properties of the Seller or any Subsidiary pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Seller or any
Subsidiary is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
SECTION 3.05. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Seller do not and will not require any consent, approval, authorization or
other order of, action by, filing with or notification to any Governmental
Authority, except (a) as described in Section 3.05 of the Disclosure Schedule,
(b) pursuant to the notification requirements of the HSR Act, (c) the filing
with the Secretary of State of the State of Delaware of the Certificate of
Designation contemplated by Section 5.01, and (d) any filings required to
effect any registration pursuant to Section 5.05.
SECTION 3.06. Seller SEC Documents; Financial Statements. (a) The Seller
has filed all forms, reports and documents required to be filed by it with the
Commission, and has heretofore made available to the Purchaser, in the form
filed with the Commission (excluding any exhibits thereto), (A) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1994, (B) its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1995, June 30,
1995, and September 30, 1995, (C) all proxy statements relating to the Seller's
meetings of stockholders (whether annual or special) held since December 31,
1994, (D) the Prospectus and the related Registration Statement on Form S-1 and
(E) its Current Reports on Form 8-K dated after December 31, 1994 (the forms,
reports and other documents referred to in clauses (A), (B), (C), (D) and (E)
above being referred to herein, collectively, as the "SEC Reports").
(b) The SEC Reports and any other forms, reports and other documents filed
by the Seller with the Commission after the date of this Agreement (i) were
prepared in all material respects in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a
<PAGE> 58
10
material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
(c) The financial statements (including, in each case, any notes thereto)
contained in the SEC Reports were prepared in accordance with U.S. GAAP applied
on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each fairly presented the financial
position, results of operations and cash flows of the Seller and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaided
statements, to normal and recurring year-end adjustments which were not and are
not expected, individually or in the aggregate, to be material in amount).
(d) Since December 31, 1994 there has not been any change, occurrence or
circumstance in the business, results of operations or financial condition of
the Seller or any Subsidiary having, individually or in the aggregate, a
Material Adverse Effect, other than changes, occurrences and circumstances
referred to in any subsequently filed SEC Reports.
SECTION 3.07. No Undisclosed Liabilities. There are no Liabilities of the
Seller or any Subsidiary, other than Liabilities (i) disclosed in Section 3.07
of the Disclosure Schedule, (ii) reflected in the SEC Reports, (iii) not
required to be reflected in a consolidated balance sheet of the Seller and its
Subsidiaries or in the notes thereto prepared in accordance with U.S. GAAP or
(iv) incurred since the Reference Balance Sheet Date in the ordinary course of
business.
SECTION 3.08. Conduct in the Ordinary Courses; Absence of Certain Changes,
Events and Conditions. Since the Reference Balance Sheet Date, except as
disclosed in any subsequently filed SEC Reports or as contemplated by this
Agreement, the business of the Seller and the Subsidiaries has been conducted
in the ordinary course and the Seller has not suffered any Material Adverse
Effect
SECTION 3.09. Litigation. Except as set forth in the SEC Reports or as
disclosed in Section 3.09 of the Disclosure Schedule, there are no Actions by
or against the Seller or any Subsidiary (or by or against any Affiliate thereof
and relating to the Business, the Seller or any Subsidiary), or affecting any
of the Assets, pending before any Governmental Authority (or, to the best
knowledge of the Seller, threatened to be brought by or before any Governmental
Authority) that has, has had or could have a Material Adverse Effect or could
reasonably be expected to affect the legality, validity or enforceability of
this Agreement or the Escrow Agreement or the consummation of the actions
contemplated hereby or thereby. None of the Seller, the Subsidiaries nor any
of the Assets is subject to any Governmental Order (nor, to the best knowledge
of the Seller, are there any such Governmental Orders threatened to be imposed
by any Governmental Authority) which has, has had or could have a Material
Adverse Effect.
<PAGE> 59
11
SECTION 3.10. Compliance with Laws. The Seller and the Subsidiaries
have each conducted and continue to conduct the Business in all material
respects in accordance with all Laws and Governmental Orders applicable to the
Seller or any Subsidiary or any of the Assets or the Business, and neither the
Seller nor any Subsidiary is in material violation of any such Law or
Governmental Order.
SECTION 3.11. Full Disclosure. The Seller is not aware of any facts
pertaining to the Seller, any Subsidiary or the Business which could have a
Material Adverse Effect and which have not been disclosed in this Agreement,
the Disclosure Schedule or the SEC Documents or otherwise disclosed to the
Purchaser by the Seller in writing.
SECTION 3.12. Delivery of Certain Documents. The Seller has delivered to
the Purchaser a true and complete copy of the most recent draft of each of the
Atlanta Asset Purchase Agreement, the SCANA Agreement and all exhibits,
schedules and agreements related thereto or in any way entered into in
connection with the transactions contemplated thereby.
SECTION 3.13. Private Placement. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Sections 4.05 and
4.06, the offer and sale of the Shares to the Purchaser pursuant to this
Agreement is exempt from registration under the Securities Act.
SECTION 3.14. FCC Regulations. After giving effect to the issuance of
Shares to the Purchaser, the ownership of capital stock of the Seller by aliens
or their representatives or by a foreign government or representative thereof
or by any corporation organized under the laws of a foreign country does not
exceed the limitations set forth in rules and regulations of the United States
Federal Communications Commission.
SECTION 3.15. Equipment Purchase Agreement. The representations and
warranties made by InterCel PCS Services, Inc. in the Equipment Purchase
Agreement are true and correct. The Equipment Purchase Agreement is
enforceable against InterCel PCS Services, Inc. in accordance with its terms.
SECTION 3.16. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Seller.
<PAGE> 60
12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser
is a corporation duly organized, validly existing and in good standing under
the laws of Delaware and has all necessary corporate power and authority to
enter into this Agreement and the Escrow Agreement, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Escrow Agreement by the Purchaser, the performance by the Purchaser of
its obligations hereunder and thereunder and the consummation by the Purchaser
of the actions contemplated hereby and thereby have been duly authorized by all
requisite action on the part of the Purchaser. This Agreement has been, and
upon its execution the Escrow Agreement will be, duly executed and delivered by
the Purchaser, and (assuming due authorization, execution and delivery by the
Seller) this Agreement constitutes, and upon its execution the Escrow Agreement
will constitute, a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred
to in Section 4.03, except as may result from any facts or circumstances
relating solely to the Seller, the execution, delivery and performance of this
Agreement and the Escrow Agreement by the Purchaser do not and will not, as of
the date hereof and as of the Closing Date, (a) violate, conflict with or
result in the breach of any provision of the Certificate of Incorporation or
By-laws of the Purchaser, (b) conflict with or violate any Law or Governmental
Order applicable to the Purchaser or (c) conflict with, or result in any breach
of, constitute a default (or event which with the giving of notice or lapse or
time, or both, would become a default) under, require any consent under, or
give to others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Purchaser is a party
or by which any of such assets or properties are bound or affected, which in
any such case would have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement or the
Escrow Agreement.
<PAGE> 61
13
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Purchaser do not and will not require any consent, approval, authorization or
other order of, action by, filing with, or notification to, any Governmental
Authority, except pursuant to the notification requirements of the HSR Act.
SECTION 4.04. Litigation. There are no Actions by or against the
Purchaser, pending before any Governmental Authority (or, to the best knowledge
of the Purchaser, threatened to be brought by or before any Governmental
Authority) that could reasonably be expected to affect the legality, validity
or enforceability of this Agreement or the Escrow Agreement or the consummation
of the actions contemplated hereby or thereby. The Purchaser is not subject to
any Governmental Order (nor, to the best knowledge of the Purchaser, are there
any such Governmental Orders threatened to be imposed by any Governmental
Authority), which could reasonably be expected to affect the legality, validity
or enforceability of this Agreement or the Escrow Agreement or the consummation
of the transactions contemplated hereby or thereby.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring the Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.06. Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act.
SECTION 4.07. Equipment Purchase Agreement. The representations and
warranties made by the Purchaser in the Equipment Purchase Agreement are true
and correct. The Equipment Purchase Agreement is enforceable against the
Purchaser in accordance with its terms.
SECTION 4.08. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Filing of Certificate of Designation. The Seller covenants
and agrees that, as promptly as practicable after the stockholder approval
referred to in Section 6.02(g) is obtained and, in any event, prior to the
Closing, the Seller will file the
<PAGE> 62
14
Certificate of Designation with the Secretary of State of the State of Delaware
in accordance with the Delaware General Corporation Law.
SECTION 5.02. Treatment of Shares as Equity. The Seller covenants and
agrees that it will treat the Shares as equity, and not as debt, for accounting
and tax purposes and further covenants and agrees that it will not take any
action or position that is inconsistent with such treatment.
SECTION 5.03. Regulatory and Other Authorizations; Notices and Consents.
(a) The Seller and the Purchaser shall use all reasonable efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials that may be or become necessary for their execution and delivery
of, and the performance of their respective obligations pursuant to, this
Agreement and the Escrow Agreement. Each party hereto agrees to make an
appropriate filing pursuant to the HSR Act, if required, with respect to the
conversion of the Shares at such times as the Purchaser may request and to
supply as promptly as practicable to the appropriate Governmental Authorities
any additional information and documentary material that may be requested
pursuant to the HSR Act.
(b) The Seller shall or shall cause the Subsidiaries to give promptly such
notices to third parties and use its or their reasonable efforts to obtain such
third party consents as are necessary in connection with the transactions
contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to assist
the Seller in giving such notices and obtaining such consents; provided,
however, that the Purchaser shall have no obligation to give any guarantee or
other consideration of any nature in connection with any such notice or consent
or to consent to any change in the terms of any agreement or arrangement which
the Purchaser in its sole and absolute discretion may deem adverse to the
interests of the Purchaser.
SECTION 5.04. Notice of Developments. (a) Prior to the Closing, the Seller
shall promptly notify the Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of the Seller in this Agreement or which
could reasonably be expected to have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any respect and
(ii) all other developments material to the Seller and the Subsidiaries, taken
as a whole, affecting the assets, Liabilities, business, financial condition,
operations, results of operations or prospects of the Seller, any Subsidiary or
the Business.
(b) Prior to the Closing, the Purchaser shall promptly notify the Seller
in writing of all events, circumstances, facts and occurrences arising
subsequent to the date of
<PAGE> 63
15
this Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of the Purchaser in this Agreement or
which could reasonably be expected to have the effect of making any
representation or warranty of the Purchaser in this Agreement untrue or
incorrect in any respect.
SECTION 5.05. Registration Rights. Effective at the Closing, the
Purchaser and the Seller shall each have the rights and obligations set forth
in Annex II.
SECTION 5.06. Resale Restrictions. (a) The Purchaser acknowledges that the
Shares and the shares of Common Stock into which the Shares are convertible
have not been registered under the Securities Act or any state securities law,
and hereby agrees not to offer, sell or otherwise transfer, pledge or
hypothecate such shares unless and until registered under the Securities Act
and any applicable state securities law or unless such offer, sale, transfer,
pledge or hypothecation is exempt from registration or is otherwise in
compliance with the Securities Act and such laws.
(b) During the period ending one year after the Closing Date, the
Purchaser shall not, without the prior written consent of the Seller, (i)
offer, pledge, sell or otherwise transfer or dispose of, directly or
indirectly, any Shares or any shares of Common Stock into which any of such
Shares may be converted, or (ii) enter into any swap or similar agreement that
transfers, in whole or in part, any of the economic consequences of ownership
of such Shares or any shares of Common Stock into which such Shares may be
converted, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Shares or such other securities, in cash or
otherwise, other than a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated pledgee;
provided, however, that the Purchaser may at any time enter into any such
transaction described in clause (i) or (ii) above with an Affiliate of the
Purchaser.
SECTION 5.07. Registration of Shares. The Seller shall, upon issuance of
the Shares and prior to the delivery of stock certificates evidencing the
Shares pursuant to Section 2.05, register the Shares in the name of the
Purchaser in the stock records of the Seller.
SECTION 5.08. Delivery of Certain Documents. The Seller shall deliver
to the Purchaser true and correct copies of the Atlanta Asset Purchase
Agreement, the SCANA Agreement and all exhibits, schedules and agreements
related thereto or in any way entered into in connection with the transactions
contemplated thereby, as soon as practicable following the execution and
delivery thereof by the parties thereto.
SECTION 5.09. Seller Stockholders' Meeting. The Seller shall call and hold
a meeting of its stockholders as promptly as practicable after the execution of
this Agreement
<PAGE> 64
16
to consider and vote upon (i) a proposal to increase the authorized number of
shares of Common Stock and (ii) the issuance and terms of the Shares,
including, without limitation, the convertibility thereof into shares of Common
Stock. The Board of Directors of the Seller shall recommend approval of such
matters, and the Seller shall take all lawful action to solicit such approval.
The Seller represents and warrants to the Purchaser that stockholders
Beneficially Owning more than 50% of the outstanding shares of Common Stock
have agreed to vote in favor of such approval.
SECTION 5. 10. Certain Information. (a) For a period of at least three
years from the date of this Agreement, the Seller shall file all reports and
other information required to be filed by Section 13 or 15(d) under the
Exchange Act, as the case may be, as shall be necessary in order that the
conditions to the availability of Rule 144 under the Securities Act in
connection with any Sale of shares of Common Stock by the Purchaser shall be
met. For so long as the Seller is required to file reports and other
information pursuant to Section 13 or 15(d) of the Exchange Act, the Seller
shall provide the Purchaser with a copy of each such report and other
information.
(b) For purposes of this Agreement, "Sale" means any sale, assignment,
transfer, distribution or other disposition of shares of Common Stock or of a
participation therein, whether voluntarily or by operation of law.
SECTION 5. 11. Conduct of Business of the Seller. Prior to the Closing,
the Seller agrees (except to the extent that the Purchaser shall otherwise
consent in writing) as follows:
(a) Dividends; Changes in Stock. The Seller shall not take or permit to
be taken any action that would result in an adjustment to the Conversion Price
(as defined in the Certificate of Designation) pursuant to Section (7)(d) of
the Certificate of Designation if the Shares were issued and outstanding at the
time of such action.
(b) Certain Matters. The Seller shall not take or permit to be taken any
action in respect of which holders of Shares would be entitled to vote pursuant
to Section (9) of the Certificate of Designation if the Shares were outstanding
at the time of such action.
SECTION 5. 12. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
<PAGE> 65
17
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction (or waiver by the Seller, at its sole
discretion), at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Closing, with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 6.01(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by the Purchaser at
or before the Closing shall have been complied with in all material respects,
and the Seller shall have received a certificate from the Purchaser to such
effect signed by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced by
or before any Governmental Authority against either the Seller or the
Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Seller, is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the
provisions of this Section 6.01(b) shall not apply if the Seller has directly
or indirectly solicited or encouraged any such Action;
(c) Resolutions of the Purchaser. The Seller shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of the
Purchaser, of the resolutions duly and validly adopted by the Board of
Directors of the Purchaser evidencing its authorization of the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby;
(d) Incumbency Certificate of the Purchaser. The Seller shall have
received a certificate of the Secretary or an Assistant Secretary of the
Purchaser certifying the names and signatures of the officers of the Purchaser
authorized to sign this Agreement and the other documents to be delivered
hereunder;
<PAGE> 66
18
(e) Legal Opinion. The Seller shall have received from Shearman &
Sterling, counsel to the Purchaser, a legal opinion, addressed to the Seller
and dated the Closing Date, in form and substance reasonably satisfactory to
the Seller, as to (i) the due authorization, execution and delivery by the
Purchaser of this Agreement and the Escrow Agreement and (ii) the
enforceability against the Purchaser of this Agreement and the Escrow
Agreement;
(f) Consents and Approvals. The Purchaser and the Seller shall have
received, each in form and substance reasonably satisfactory to the Seller, all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials and all third party consents necessary or desirable for the
consummation of the actions contemplated by this Agreement;
(g) Related Transactions. Each of the SCANA Closing and the Atlanta MTA
Acquisition Closing shall have occurred or shall occur simultaneously with the
Closing; and
(h) Commercial Agreement. The Purchaser and the Seller shall have executed
and delivered the Equipment Purchase Agreement.
SECTION 6.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction (or waiver by the Purchaser, at its sole
discretion), at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Seller contained in this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing with the same force and effect as if made
as of the Closing, other than such representations and warranties as are made
as of another date, which shall be true and correct as of such date (provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.02(a) has been satisfied with respect to such portion of such representation
or warranty, such portion of such representation or warranty as so qualified
must be true and correct in all respects), and the covenants and agreements
contained in this Agreement to be complied with by the Seller at or before the
Closing shall have been complied with in all material respects, and the
Purchaser shall have received a certificate of the Seller to such effect signed
by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced by
or before any Governmental Authority against either the Seller or the
Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement
<PAGE> 67
19
which, in the reasonable, good faith determination of the Purchaser, is likely
to render it impossible or unlawful to consummate such transactions or which
could have a Material Adverse Effect; provided, however, that the provisions of
this Section 6.02(b) shall not apply if the Purchaser has directly or
indirectly solicited or encouraged any such Action;
(c) Resolutions of the Seller. The Purchaser shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of the
Seller, of the resolutions duly and validly adopted by the Board of Directors
of the Seller and, to the extent that such authorization is necessary, the
shareholders of the Seller evidencing their authorization of the execution and
delivery of this Agreement, the issuance and terms of the Shares including,
without limitation, the convertibility thereof into shares of Common Stock, and
the consummation of the transactions contemplated hereby;
(d) Incumbency Certificate of the Seller. The Purchaser shall have
received a certificate of the Secretary or an Assistant Secretary of the Seller
certifying the names and signatures of the officers of the Seller authorized to
sign this Agreement and the other documents to be delivered hereunder;
(e) Legal Opinion. The Purchaser shall have received from Hogan & Hartson
L.L.P., counsel to the Seller, a legal opinion, addressed to the Purchaser and
dated the Closing Date, in form and substance reasonably satisfactory to the
Purchaser, as to (i) the due authorization, execution and delivery by the
Seller of this Agreement and the Escrow Agreement, (ii) the enforceability
against the Seller of this Agreement and the Escrow Agreement and (iii) the
validity of the Shares, the due authorization of the shares of Common Stock
into which the Shares may be converted and related matters;
(f) Consents and Approvals. The Purchaser and the Seller shall have
received, each in form and substance reasonably satisfactory to the Purchaser,
all authorizations, consents, orders and approvals of all Governmental
Authorities and officials and all third party consents necessary or desirable
for the consummation of the transactions contemplated by this Agreement;
(g) Stockholder Approval. The stockholders of the Seller shall have
approved (i) the increase in the authorized number of shares of Common Stock
and (ii) the issuance and terms of the Shares, including the convertibility
thereof into shares of Common Stock;
(h) Related Transactions. (i) Each of the SCANA Closing and the Atlanta
MTA Acquisition Closing shall have occurred or shall occur simultaneously with
the Closing and (ii) the Purchaser shall have received true and correct copies
of the Atlanta Asset Purchase Agreement, the SCANA Agreement and all exhibits,
schedules and agreements related thereto or in any way entered into in
connection with the actions contemplated
<PAGE> 68
20
thereby, which shall be substantially identical to the drafts of each such
agreement delivered pursuant to Section 3.12;
(i) Commercial Agreements. The Purchaser and the Seller shall have
executed and delivered the Equipment Purchase Agreement;
(j) Organizational Documents. The Purchaser shall have received a copy
of (i) the Certificate of Incorporation, as amended, of the Seller, certified
by the Secretary of State of the State of Delaware, as of a date not earlier
than five Business Days prior to the Closing Date and accompanied by a
certificate of the Secretary or Assistant Secretary of the Seller, dated as of
the Closing Date, stating that no amendments have been made to such
Certificate of Incorporation since such date, and (ii) the By-laws of the
Seller, certified by the Secretary or Assistant Secretary of the Seller;
(k) Good Standing. The Purchaser shall have received a good standing
certificate for the Seller from the Secretary of State of the State of
Delaware, dated as of a date not earlier than five Business Days prior to the
Closing Date and accompanied by a bring-down certificate dated the Closing
Date; and
(l) No Material Adverse Effect. No event or events shall have occurred
which, individually or in the aggregate, have, or could have, a Material
Adverse Effect.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. (a) The
representations and warranties of the Seller contained in this Agreement and in
the Exhibits to this Agreement and the Disclosure Schedule (collectively, the
"Acquisition Documents"), shall survive the Closing until the second
anniversary of the Closing Date. Neither the period of survival nor the
liability of the Seller with respect to the Seller's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Purchaser. If written notice of a claim has been given prior to
the expiration of the applicable representations and warranties by the
Purchaser to the Seller, then the relevant representations and warranties shall
survive as to such claim, until such claim has been finally resolved.
(b) The representations and warranties of the Purchaser contained in the
Acquisition Documents shall survive the Closing until the second anniversary of
the Closing Date. Neither the period of survival nor the liability of the
Purchaser with respect to the Purchaser's representations and warranties shall
be reduced by any investigation made at any
<PAGE> 69
21
time by or on behalf of the Seller. If written notice of a claim has been
given prior to the expiration of the applicable representations and warranties
by the Seller to the Purchaser. then the relevant representations and
warranties shall survive as to such claim, until such claim has been finally
resolved.
SECTION 7.02. Indemnification. (a)(i) The Purchaser, its successors and
assigns, and the stockholders, officers, directors, employees, Affiliates and
agents of the Purchaser and its successors and assigns shall be indemnified and
held harmless by the Seller for any and all Liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, attorneys' and consultants' fees and expenses)
actually suffered or incurred by them (including, without limitation, any
Action brought or otherwise initiated by any of them) (hereinafter a "Loss"),
arising out of or resulting from:
(A) the breach of any representation or warranty made by the Seller
contained in the Acquisition Documents; or
(B) the breach of any covenant or agreement by the Seller contained in
the Acquisition Documents.
(ii) The Seller, its successors and assigns, and the stockholders,
officers, directors, employees, Affiliates and agents of the Seller and its
successors and assigns shall be indemnified and held harmless by the Purchaser
for any and all Losses actually suffered or incurred by them, arising out of or
resulting from:
(A) the breach of any representation or warranty made by the Purchaser
in the Acquisition Documents; or
(B) the breach of any covenant or agreement by the Purchaser contained
in the Acquisition Documents.
To the extent that the Seller's or the Purchaser's undertakings set forth in
this Section 7.02 may be unenforceable, the Seller or the Purchaser, as the
case may be, shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Losses
incurred by the Purchaser or the Seller, as the case may be.
(b) An indemnified party shall give the party from whom indemnification
is sought notice of any matter which an indemnified party has determined has
given or could give rise to a right of indemnification under this Agreement,
within 60 days of such determination, stating the amount of the Loss, if known,
and method of computation thereof, and containing a reference to the provisions
of this Agreement in respect of which such right of indemnification is claimed
or arises; provided, however, that the failure to provide such
<PAGE> 70
22
notice shall not release the indemnifying party from any of its obligations
under this Article VII except to the extent the indemnifying party is
materially prejudiced by such failure and shall not relieve the indemnifying
party from any other obligation or Liability that it may have to any
indemnified party otherwise than under this Article VII. The obligations and
Liabilities of an indemnifying party under this Article VII with respect to
Losses arising from claims of any third party which are subject to the
indemnification provided for in this Article VII ("Third Party Claims") shall
be governed by and contingent upon the following additional terms and
conditions: If an indemnified party shall receive notice of any Third Party
Claim, the indemnified party shall give the indemnifying party notice of such
Third Party Claim within 30 days of the receipt by the indemnified party of
such notice; provided, however, that the failure to provide such notice shall
not release the indemnifying party from any of its obligations under this
Article VII except to the extent the indemnifying party is materially
prejudiced by such failure and shall not relieve the indemnifying party from
any other obligation or Liability that it may have to any indemnified party
otherwise than under this Article VII. If the indemnifying party acknowledges
in writing its obligation to indemnify the indemnified party hereunder against
any Losses that may result from such Third Party Claim, then the indemnifying
party shall be entitled to assume and control the defense of such Third Party
Claim at its expense and through counsel of its choice if it gives notice of
its intention to do so to the indemnified party within five days of the receipt
of such notice from the indemnified party; provided, however, that if there
exists or is reasonably likely to exist a conflict of interest that would make
it inappropriate in the judgment of the indemnified party, in its sole and
absolute discretion, for the same counsel to represent both the indemnified
party and the indemnifying party, then the indemnified party shall be entitled
to retain its own counsel, in each jurisdiction for which the indemnified party
determines counsel is required, at the expense of the indemnifying party.
In the event the indemnifying party exercises the right to undertake any such
defense against any such Third Party Claim as provided above, the indemnified
party shall cooperate with the indemnifying party in such defense and make
available to the indemnifying party, at the indemnifying party's expense, all
witnesses, pertinent records, materials and information in the indemnified
party's possession or under the indemnified party's control relating thereto as
is reasonably required by the indemnifying party. Similarly, in the event the
indemnified party is, directly or indirectly, conducting the defense against
any such Third Party Claim, the indemnifying party shall cooperate with the
indemnified party in such defense and make available to the indemnified party,
at the indemnifying party's expense, all such witnesses, pertinent records,
materials and information in the indemnifying party's possession or under the
indemnifying party's control relating thereto as is reasonably required by the
indemnified party. No such Third Party Claim may be settled by the
indemnifying party or the indemnified party without the prior written consent
of the other.
SECTION 7.03. Limits on Indemnification. Notwithstanding anything to the
contrary contained in this Agreement, the maximum amount of indemnifiable
Losses which
<PAGE> 71
23
may be recovered from an indemnifying party arising out of or resulting from
the causes enumerated in Section 7.02 shall be an amount equal to the Purchase
Price.
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the Purchaser if, between the date hereof and the time scheduled
for the Closing: (i) an event or condition occurs that has resulted in a
Material Adverse Effect, (ii) any representation or warranty of the Seller
contained in this Agreement shall not have been true and correct in all
material respects when made, (iii) the Seller shall not have complied in all
material respects with any covenant or agreement to be complied with by it and
contained in this Agreement; or (iv) the Seller or any Subsidiary makes a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the Seller or any Subsidiary seeking to adjudicate any
of them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any Law relating to bankruptcy, insolvency or reorganization;
or
(b) by the Seller if, between the date hereof and the time
scheduled for the Closing: (i) any representation or warranty of the Purchaser
contained in this Agreement shall not have been true and correct in all
material respects when made, (ii) the Purchaser shall not have complied in all
material respects with any covenant or agreement to be complied with by it and
contained in this Agreement; or (iii) the Purchaser makes a general assignment
for the benefit of creditors, or any proceeding shall be instituted by or
against the Purchaser seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization; or
(c) by either the Seller or the Purchaser if the Closing shall not have
occurred on or prior to September 30, 1996; or
(d) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(e) by the mutual written consent of the Seller and the Purchaser.
<PAGE> 72
24
SECTION 8.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 8.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except that nothing herein shall relieve either party from liability for any
breach of this Agreement.
(b) In the event of termination of this Agreement as provided in Section
8.01, the Escrow Agent shall, pursuant to the provisions of the Escrow
Agreement, return the Purchase Price to the Purchaser.
SECTION 8.03. Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder
shall not constitute a waiver of any of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements
of counsel, financial advisors and accountants, incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
<PAGE> 73
25
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopy: (202) 637-5910
Attention: Kimberley E. Thompson, Esq.
(b) if to the Purchaser:
Ericsson Inc.
740 East Campbell Road
Richardson, Texas 75081
Telecopy: (214) 952-8783
Attention: John Mottram
with a copy (which shall not constitute notice) to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
Attention: Jeanne C. Olivier, Esq.
SECTION 9.03. Public Announcements. No party to this Agreement shall make,
or cause to be made, any press release or public announcement or otherwise
communicate with any news media in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party (which shall not be unreasonably withheld or delayed), and the parties
shall cooperate as to the timing and contents of any such press release or
public announcement; provided, however, that with respect to any disclosure
required by law or by a listing agreement with the National Association of
Securities Dealers, Inc. Automated Quotation System National Market System or
any national securities exchange to which the Purchaser or the Seller is a
party, the party required to make such disclosure shall use its best efforts to
consult with the other party as to
<PAGE> 74
26
the timing and contents of such disclosure and to obtain such consent prior to
the time such disclosure is required to be made.
SECTION 9.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 9.06. Entire Agreement. This Agreement and the Escrow Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Seller and the Purchaser with
respect to the subject matter hereof and thereof.
SECTION 9.07. Assignment. This Agreement may not be assigned by operation
of Law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller or the Purchaser); provided, however, that the Purchaser may,
without the consent of the Seller, assign this Agreement prior to the Closing
to a subsidiary controlled by Telefonaktiebolaget L.M. Ericsson, but no such
assignment shall relieve the Purchaser of any of its obligations under this
Agreement.
SECTION 9.08. No Third Party Beneficiaries. Except for the provisions of
Article VII relating to indemnified parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their successors
and permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the Seller
and the Purchaser or (b) by a waiver in accordance with Section 8.03.
<PAGE> 75
27
SECTION 9.10. Governing Law. This Agreement shall be governed by the
laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the City of New York, and the parties hereto
irrevocably submit to the jurisdiction of such courts and waive any defense of
an inconvenient forum to the maintenance of such action or proceeding.
SECTION 9.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
<PAGE> 76
28
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTERCEL, INC.
By:
--------------------------------------
Name:
Title:
ERICSSON INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 77
EXHIBIT 2.04
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of [___________], 1996 (this "Agreement"), among
INTERCEL, INC., a Delaware corporation (the "Seller"), ERICSSON INC., a
Delaware corporation (the "Purchaser"), and _____________ a _______________
(the "Escrow Agent").
WITNESSETH:
WHEREAS, the Purchaser and the Seller have entered into a Stock Purchase
Agreement, dated as of March 4, 1996 (the "Purchase Agreement"; terms defined
in the Purchase Agreement and not otherwise defined herein being used herein as
therein defined), pursuant to which the Purchaser has agreed to purchase from
the Seller, and the Seller has agreed to sell to the Purchaser, the Shares;
WHEREAS, it is contemplated under the Purchase Agreement that the
Purchaser will deposit or cause to be deposited into escrow the sum of
$75,000,000 in cash (the "Escrow Amount"), to be held and disbursed by the
Escrow Agent in accordance with this Agreement; and
WHEREAS, a copy of the Purchase Agreement has been delivered to the Escrow
Agent, and the Escrow Agent is willing to act as the Escrow Agent hereunder;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein and in the Purchase Agreement, and intending to be
legally bound hereby, the parties hereby agree as follows:
1. Appointment and Agreement of Escrow Agent. The Purchaser and the
Seller hereby appoint the Escrow Agent to serve as, and the Escrow Agent hereby
agrees to act as, escrow agent upon the terms and conditions of this Agreement.
2. Establishment of the Escrow Fund. (a) Pursuant to Section 2.04 of the
Purchase Agreement, the Purchaser shall deliver to the Escrow Agent on the date
hereof the Escrow Amount. The Escrow Agent shall hold the Escrow Amount and
all interest and other amounts earned thereon (the "Escrow Fund") in escrow
pursuant to this Agreement.
<PAGE> 78
2
(b) Each of the Purchaser and the Seller confirms to the Escrow Agent and
to each other that the Escrow Fund is free and clear of all Encumbrances except
as may be created by this Agreement and the Purchase Agreement.
3. Distributions from the Escrow Fund. (a) Upon the satisfaction or waiver
of all conditions to the Closing set forth in Article VI of the Purchase
Agreement, and upon receipt by the Purchaser of the stock certificates
evidencing the Shares as contemplated by Section 2.05 of the Purchase
Agreement, the Purchaser shall notify the Escrow Agent in writing to such
effect, and the Escrow Agent shall, as promptly as practicable after its
receipt of such notice, liquidate all investments in the Escrow Fund and pay in
full to the Seller at the Closing in immediately available funds all such
amounts as shall be received upon the liquidation of such investments (and any
and all other amounts then on deposit in the Escrow Fund).
(b) Upon the termination of the Purchase Agreement, the Seller or the
Purchaser shall notify the Escrow Agent in writing to such effect, and the
Escrow Agent shall, as promptly as practicable after its receipt of such
notice, liquidate all investments in the Escrow Fund and pay in full to the
Purchaser in immediately available funds all such amounts as shall be received
upon the liquidation of such investments (and any and all other amounts then on
deposit in the Purchaser Escrow Fund).
4. Maintenance of the Escrow Fund; Termination of the Escrow Fund.
(a) The Escrow Agent shall continue to maintain the Escrow Fund until the
earlier of (i) the time at which the Escrow Fund is disbursed in accordance
with Section 3 and (ii) the termination of this Agreement.
(b) The Escrow Agent shall invest and reinvest moneys on deposit in the
Escrow Fund, unless joint written notice to the contrary is received from the
Seller and the Purchaser, in any combination of the following: (a) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or readily marketable obligations
unconditionally guaranteed by the full faith and credit of the Government of
the United States, (b) insured certificates of deposit of, or time deposits
with, any commercial bank that is a member of the Federal Reserve System and
which issues (or the parent of which issues) commercial paper rated as
described in clause (c), is organized under the laws of the United States or
any State thereof and has combined capital and surplus of at least $1 billion
or (c) commercial paper in an aggregate amount of no more than $1,000,000 per
issuer outstanding at any time, issued by any corporation organized under the
laws of any State of the United States, rated at least "Prime-1" (or the then
equivalent grade) by Moody's Investors Services, Inc. or "A-1" (or the then
equivalent grade) by Standard & Poors Ratings Group.
<PAGE> 79
3
5. Assignment, Successors. This Agreement may not be assigned by
operation of Law or otherwise without the express written consent of the other
parties hereto (which consent may be granted or withheld in the sole discretion
of such other parties); provided, however, that the Purchaser may, without the
consent of the other parties, assign this Agreement prior to the Closing to a
subsidiary controlled by Telefonaktiebolaget L.M. Ericsson to which the
Purchaser has assigned any of its rights under the Purchase Agreement, but no
such assignment shall relieve the Purchaser of any of its obligations under
this Agreement. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their permitted assigns.
6. Escrow Agent. (a) Except as expressly contemplated by this Agreement or
by joint written instructions from the Purchaser and the Seller, the Escrow
Agent shall not sell, transfer or otherwise dispose of in any manner all or any
portion of the Escrow Fund, except pursuant to an order of a court of competent
jurisdiction.
(b) The duties and obligations of the Escrow Agent shall be determined
solely by this Agreement, and the Escrow Agent shall not be liable except for
the performance of such duties and obligations as are specifically set forth in
this Agreement.
(c) In the performance of its duties hereunder, the Escrow Agent shall be
entitled to rely upon any document, instrument or signature believed by it in
good faith to be genuine and signed by any party hereto or an authorized
officer or agent thereof, and shall not be required to investigate the truth or
accuracy of any statement contained in any such document or instrument. The
Escrow Agent may assume that any Person purporting to give any notice in
accordance with the provisions of this Agreement has been duly authorized to do
so.
(d) The Escrow Agent shall not be liable for any error of judgment, or any
action taken, suffered or omitted to be taken, hereunder except in the case of
its gross negligence, bad faith or willful misconduct. The Escrow Agent may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder
in good faith and in accordance with the opinion of such counsel.
(e) The Escrow Agent shall have no duty as to the collection or
protection of the Escrow Fund or income thereon, nor as to the preservation of
any rights pertaining thereto, beyond the safe custody of any such property
actually in its possession.
(f) As compensation for its services to be rendered under this Agreement,
for each year or any portion thereof, the Escrow Agent shall receive a fee in
the amount specified in Schedule A to this Agreement and shall be reimbursed
upon request for all expenses, disbursements and advances, including reasonable
fees of outside counsel, if any,
<PAGE> 80
4
incurred or made by it in connection with the preparation of this Agreement and
the carrying out of its duties under this Agreement. All such fees and
expenses shall be the responsibility of the Seller.
(g) The Seller shall reimburse and indemnify the Escrow Agent for, and
hold it harmless against, any loss, liability or expense, including, without
limitation, reasonable attorneys' fees, incurred without gross negligence, bad
faith or willful misconduct on the part of the Escrow Agent arising out of, or
in connection with the acceptance of, or the performance of, its duties and
obligations under this Agreement; provided that the Purchaser shall reimburse
and indemnify the Escrow Agent for, and hold it harmless against, any such
loss, liability or expense incurred as a result of gross negligence, bad faith
or willful misconduct on the part of the Purchaser.
(h) The Escrow Agent may at any time resign by giving twenty Business
Days' prior written notice of resignation to the Seller and the Purchaser. The
Seller and the Purchaser may at any time jointly remove the Escrow Agent by
giving ten Business Days' prior written notice signed by each of them to the
Escrow Agent. If the Escrow Agent shall resign or be removed, a successor
Escrow Agent, which shall be a bank or trust company having assets in excess of
$2 billion, shall be appointed by the Seller and the Purchaser by written
instrument executed by the Seller and the Purchaser and delivered to the Escrow
Agent and to such successor Escrow Agent and, thereupon, the resignation or
removal of the predecessor Escrow Agent shall become effective and such
successor Escrow Agent, without any further act, deed or conveyance, shall
become vested with all right, title and interest to all cash and property held
hereunder of such predecessor Escrow Agent, and such predecessor Escrow Agent
shall, on the written request of the Seller, the Purchaser or the successor
Escrow Agent, execute and deliver to such successor Escrow Agent all the
right, title and interest hereunder in and to the Escrow Fund of such
predecessor Escrow Agent and all other rights hereunder of such predecessor
Escrow Agent. If no successor Escrow Agent shall have been appointed within
twenty Business Days of a notice of resignation by the Escrow Agent, the Escrow
Agent's sole responsibility shall thereafter be to hold the Escrow Fund until
the earlier of its receipt of designation of a successor Escrow Agent, a joint
written instruction by the Seller and the Purchaser and termination of this
Agreement in accordance with its terms.
7. Termination. This Escrow Agreement shall terminate on the date on
which there is no property remaining in the Escrow Fund.
8. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt
<PAGE> 81
5
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopy: (202) 637-5910
Attention: Kimberley E. Thompson, Esq.
(b) if to the Purchaser:
Ericsson Inc.
740 East Campbell Road
Richardson, Texas 75081
Telecopy: (214) 952-8783
Attention: John Mottram
with a copy (which shall not constitute notice) to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopy: (212) 848-7179
Attention: Jeanne C. Olivier, Esq.
<PAGE> 82
6
(c) if to the Escrow Agent, to:
----------------------------------
----------------------------------
----------------------------------
----------------------------------
Telecopy:
------------------------
Attention:
-----------------------
9. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
10. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the transactions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the actions contemplated by this Agreement are
consummated as originally contemplated to the greatest extent possible.
11. Entire Agreement. This Agreement and the Purchase Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the Seller, the Purchaser and the Escrow Agent with
respect to the subject matter hereof.
12. No Third Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein, express
or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
13. Amendment. This Agreement may not be amended or modified except
(a) by an instrument in writing signed by, or on behalf of, the Seller, the
Purchaser and the Escrow Agent or (b) by a waiver in accordance with Section 14
of this Agreement.
14. Waiver. Amy party hereto may (i) extend the time for the performance
of any obligation or other act of any other party hereto or (ii) waive
compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. Any
<PAGE> 83
7
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
15. Governing Law. This Agreement shall be governed by the
laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the City of New York, and the parties hereto
irrevocably submit to the jurisdiction of such courts and waive any defense of
an inconvenient forum to the maintenance of any such action or proceeding.
16. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
when taken together shall constitute one and the same agreement.
<PAGE> 84
8
IN WITNESS WHEREOF. the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
INTERCEL, INC.
By
--------------------------------------
Title:
ERICSSON INC.
By
--------------------------------------
Title:
[ESCROW AGENT]
By
--------------------------------------
Title:
<PAGE> 85
SCHEDULE A
[Escrow Agent Fees]
<PAGE> 86
ANNEX I
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES A CONVERTIBLE PREFERRED STOCK
($0.01 Par Value)
OF
INTERCEL, INC.
_________
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
_________
INTERCEL, INC., a Delaware corporation (the "Corporation"), does hereby
certify that the following resolutions were duly adopted by the Board of
Directors of the Corporation pursuant to authority conferred upon the Board of
Directors by Article FOURTH of the Certificate of Incorporation of the
Corporation, which authorizes the issuance of up to 1,000,000 shares of
preferred stock, at a meeting of the Board of Directors duly held on ______,
1996:
RESOLVED, that the issue of a series of preferred stock. $0.01 par value,
of the Corporation is hereby authorized and the designation, powers,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, in addition to those set
forth in the Certificate of Incorporation of the Corporation, are hereby fixed
as follows:
Section (1) Number of Shares and Designation. 100,000 shares of the
preferred stock, $0.01 par value, of the Corporation are hereby
constituted as a series of the preferred stock designated as Series A
Convertible Preferred Stock (the "Series A Preferred Stock"). Without the
consent of the then current holders of shares of Series A Preferred Stock
as provided for herein, the number of shares of Series A Preferred Stock
may not be increased and may not be decreased below the number of then
currently outstanding shares of Series A Preferred Stock.
<PAGE> 87
2
Section (2) Definitions. For purposes of the Series A Preferred Stock.
the following terms shall have the meanings indicated:
"Board of Directors" shall mean the board of directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series A
Preferred Stock.
"Business Day" shall mean any day other than a Saturday, Sunday
or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock of the Corporation,
par value $0.01 per share.
"Conversion Price" shall mean the conversion price per share of
Common Stock into which the Series A Preferred Stock is convertible, as
such Conversion Price may be adjusted pursuant to Section (7). The
initial Conversion Price shall be $16.50 (equivalent to the rate of
45.4545 shares of Common Stock for each share of Series A Preferred
Stock).
"Current Market Price" shall mean, as of a particular date, the
average of the high bid and low ranked prices per share of Common Stock
in the over-the-counter market, as reported by the NASDAQ Stock Market
or such other system then in use, or such other exchange or
inter-dealer quotation system on which the Common Stock is principally
traded or authorized to be quoted.
"Issue Date" shall mean the first date on which shares of
Series A Preferred Stock are issued.
"NASDAQ Stock Market" shall mean the National Market System of
the National Association of Securities Dealers, Inc. Automated
Quotation System.
"Person" shall mean any individual, firm, partnership,
corporation or other entity, and shall include any successor (by merger
or otherwise) of such entity.
"Securities" shall have the meaning set forth in paragraph
(d)(iii) of Section (7).
<PAGE> 88
3
"Series B Preferred Stock" shall mean the series of preferred
stock, $0.01 par value, of the Corporation designated as Series B
Convertible Preferred Stock.
"Subsidiaries" shall mean any and all corporations,
partnerships, limited liability companies, joint ventures, associations
and other entities controlled by the Corporation directly or indirectly
through one or more intermediaries.
"Trading Day" means a day on which the NASDAQ Stock Market, or
such other exchange or inter-dealer quotation system on which the
Common Stock is principally traded or authorized to be quoted, is open
for the transaction of business.
"Transaction" shall have the meaning set forth in paragraph (e)
of Section (7).
"Transfer Agent" means such agent or agents of the Corporation
as may be designated by the Board of Directors of the Corporation as
the transfer agent for the Series A Preferred Stock.
Section (3) Dividends. (a) The holders of shares of the Series A
Preferred Stock shall be entitled to receive, when and if declared by the
Board of Directors out of funds legally available therefor, dividends in
an amount per share of Series A Preferred Stock equal to the dividends
payable on the number of shares of Common Stock into which one share of
Series A Preferred Stock is then convertible, determined as of the date
fixed for determining holders of shares of Common Stock entitled to
receive such dividends. Each such dividend shall be payable in arrears to
the holders of record of shares of the Series A Preferred Stock, as they
appear on the stock records of the Corporation at the close of business on
such record dates, not more than 60 days preceding the payment dates
thereof, as shall be fixed by the Board of Directors.
(b) Except as provided in Section 5(a), holders of shares of Series A
Preferred Stock called for redemption on a redemption date between a
dividend payment record date and the dividend payment date shall not be
entitled to receive the dividend payable on such dividend payment date.
(c) So long as any shares of the Series A Preferred Stork are
outstanding, no dividends shall be declared or paid or set apart for
payment on any class or series of stock of the Corporation ranking, as to
dividends, on a parity with the Series A Preferred Stock, for any period,
nor shall any shares ranking on a parity with the
<PAGE> 89
4
Series A Preferred Stock be redeemed or purchased by the Corporation or
any Subsidiary, unless dividends declared and paid on the Common Stock
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the
Series A Preferred Stock in accordance with paragraph (a) of this Section
(3).
Section (4) Liquidation Preference. (a) In the event of any
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution of the assets
of the Corporation (whether capital or surplus) shall be made to or set
apart for the holders of Common Stock or any other series or class or
classes of stock of the Corporation ranking junior to the Series A
Preferred Stock, upon liquidation, dissolution or winding up, the holders
of the shares of Series A Preferred Stock shall be entitled to receive
$750.00 per share plus an amount equal to all dividends declared and
unpaid thereon to the date of final distribution to such holders;
thereafter, such holders shall be entitled to share ratably with the
holders of the shares of Common Stock as provided in paragraph (b) of this
Section (4). If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof,
distributed among the holders of the shares of Series A Preferred Stock,
Series B Preferred Stock and any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the Series A
Preferred Stock, shall be insufficient to pay in full the preferential
amount aforesaid and liquidating payments in respect thereof, then such
assets, or the proceeds thereof, shall be distributed among the holders of
shares of Series A Preferred Stock, Series B Preferred Stock and any such
other stock ratably in accordance with the respective amounts which would
be payable on such shares of Series A Preferred Stock, Series B Preferred
Stock and any such other stock if all amounts payable thereon were paid in
full. For the purposes of this Section (4), (i) a consolidation or merger
of the Corporation with one or more corporations, (ii) a sale or transfer
of all or substantially all of the Corporation's assets or (iii) a
statutory share exchange shall not be deemed to be a liquidation,
dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or
class or classes of stock ranking on a parity with or prior to Series A
Preferred Stock, upon any liquidation, dissolution or winding up of the
Corporation, after payment shall have been made in full to the holders of
Series A Preferred Stock, as provided in paragraph (a) of this Section
(4), holders of shares of Series A Preferred Stock shall be entitled to
share ratably with holders of shares of Common Stock and any other class
or series entitled to participate with the Common Stock in the event of
liquidation, dissolution or winding up, in any and all assets remaining to
be paid or distributed, such that distributions shall be made in respect
of each share of Series A Preferred Stock in an amount equal to the
distributions made in respect of the number
<PAGE> 90
5
of shares of Common Stock into which such share of Series A Preferred
Stock is then convertible.
Section (5) Redemption at the Option of the Corporation. (a) Series A
Preferred Stock may not be redeemed by the Corporation prior to the fifth
anniversary of the Issue Date. After the fifth anniversary of the Issue
Date, the Corporation, at its option, may redeem the shares of Series A
Preferred Stock, in whole or in part, for an aggregate redemption price of
$750.00 per share plus an amount per share equal to declared and unpaid
dividends, if any, to the date fixed for redemption, out of funds legally
available therefor, at any time or from time to time, subject to the
notice provisions and provisions for partial redemption described below;
provided, however, that the Corporation must redeem the shares of Series A
Preferred Stock and the shares of Series B Preferred Stock on a pro rata
basis.
(b) In the event the Corporation shall redeem shares of Series A
Preferred Stock and Series B Preferred Stock, notice of such redemption
shall be given by first class mail, postage prepaid, mailed not less than
20 nor more than 60 days prior to the redemption date, to each holder of
record of the shares to be redeemed, at such holder's address as the same
appears on the stock records of the Corporation, which notice shall be
unconditional and irrevocable. Each such notice shall state: (1) the
redemption date; (2) the number of shares of Series A Preferred Stock and
Series B Preferred Stock to be redeemed and, if less than all the shares
held by such holder are to be redeemed, the number of such shares to be
redeemed from such holder; (3) the redemption price; (4) the place or
places where certificates for such shares are to be surrendered for
payment of the redemption price; and (5) the then current conversion
price. Notice having been mailed as aforesaid, from and after the
redemption date (unless default shall be made by the Corporation in
providing money for the prompt payment of the redemption price), (i) the
shares of the Series A Preferred Stock so called for redemption shall no
longer be deemed to be outstanding, and (ii) all rights of the holders
thereof as stockholders of the Corporation (except the right to receive
from the Corporation the redemption price without interest thereon after
the redemption date) shall cease. If the Corporation fails to provide
money for the payment of the redemption price within 30 days after the
redemption date, the redemption price shall accrue interest at the rate of
15% per annum.
Upon surrender in accordance with said notice of the certificates for
any such shares so redeemed (properly endorsed or assigned for transfer,
if the Corporation shall so require and the notice shall so state), such
shares shall be redeemed by the Corporation at the applicable redemption
price aforesaid. If fewer than all the outstanding shares of Series A
Preferred Stock and Series B Preferred Stock are to be redeemed, shares to
be redeemed shall be selected pro rata (as nearly as may be) by the
Corporation from outstanding shares of Series A Preferred Stock and Series
B
<PAGE> 91
6
Preferred Stock not previously called for redemption. If fewer than
all the shares represented by any certificate are redeemed, a new
certificate shall be issued representing the unredeemed shares without
cost to the holder thereof.
Section (6) Shares to be Retired. All shares of Series A Preferred
Stock purchased or redeemed by the Corporation or converted shall be
retired and cancelled and shall be restored to the status of authorized
but unissued shares of preferred stock, without designation as to series.
Section (7) Conversion. Holders of shares of Series A Preferred Stock
shall have the right to convert all or a portion of such shares into
shares of Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this Section
(7), a holder of shares of Series A Preferred Stock shall have the right,
at his, her or its option, at any time after the second anniversary of the
Issue Date, to convert such shares, in whole or in part, into the number
of fully paid and nonassessable shares of Common Stock (calculated as to
each conversion to the nearest 1/100th of a share) obtained by dividing
the aggregate liquidation preference of such shares by the Conversion
Price and by surrender of such shares so to be converted by the holder
thereof, such surrender to be made in the manner provided in paragraph (b)
of this Section (7); provided, however, that the right to convert shares
called for redemption pursuant to Section (5) shall terminate at the close
of business on the date fixed for such redemption, unless the Corporation
shall default in making prompt payment of the amount payable upon such
redemption. Any share of Series A Preferred Stock may be converted, at
the request of its holder, in part into Common Stock. If a part of a
share of Series A Preferred Stock is converted, then the Corporation will
convert such share into the requested shares of Common Stock (subject to
paragraph (c) of this Section (7)) and issue a fractional share of Series
A Preferred Stock evidencing the remaining interest of such holder.
(b) In order to exercise the conversion right, the holder of each share
of Series A Preferred Stock to be converted shall surrender the
certificate representing such share, duly endorsed or assigned to the
Corporation or in blank, at the office of the Transfer Agent or, if no
Transfer Agent has been appointed by the Corporation, at the principal
office of the Corporation, accompanied by written notice to the
Corporation that the holder thereof elects to convert its shares of Series
A Preferred Stock or a specified portion thereof. Unless the shares
issuable on conversion are to be issued in the same name as the name in
which such share of Series A Preferred Stock is registered, each share
surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by the
holder or such holder's duly authorized attorney and an amount sufficient
to pay any
<PAGE> 92
7
transfer or similar tax (or evidence reasonably satisfactory to the
Corporation demonstrating that such taxes have been paid).
Holders of shares of Series A Preferred Stock at the close of business
on a dividend payment record date shall be entitled to receive the
dividend payable on such shares (except that holders of shares called for
redemption on a redemption date between such record date and the dividend
payment date shall not be entitled to receive such dividend on such
dividend payment date) on the corresponding dividend payment date
notwithstanding the conversion thereof following such dividend payment
record date and prior to such dividend payment date.
As promptly as practicable after the surrender of certificates for
shares of Series A Preferred Stock as aforesaid, the Corporation shall
issue and shall deliver at such office to such holder, or on his, her or
its written order, (i) a certificate or certificates for the number of
full shares of Common Stock issuable upon the conversion of such shares in
accordance with the provisions of this Section (7), (ii) if less than the
full number of shares of Series A Preferred Stock evidenced by the
surrendered certificates is being converted, a new certificate or
certificates, of like tenor, for the number of shares evidenced by such
surrendered certificates less the number of shares being converted, and
(iii) any fractional interest in respect of a share of Common Stock
arising upon such conversion shall be settled as provided in paragraph (c)
of this Section (7).
Each conversion shall be deemed to have been effected immediately prior
to the close of business on the date on which the certificates for shares
of Series A Preferred Stock shall have been surrendered and such notice
received by the Corporation as aforesaid, and the person or persons in
whose name or names any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented thereby
at such time on such date and such conversion shall be at the Conversion
Price in effect at such time on such date, unless the stock transfer books
of the Corporation shall be closed on that date, in which event such
person or persons shall be deemed to have become such holder or holders of
record at the close of business on the next succeeding day on which such
stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such shares shall have
been surrendered and such notice received by the Corporation. All shares
of Common Stock delivered upon conversion of the Series A Preferred Stock
shall upon delivery be duly and validly issued and fully paid and
nonassessable.
(c) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series A Preferred
Stock. Instead of any fractional interest in a share of Common Stock which
would otherwise
<PAGE> 93
8
be deliverable upon the conversion of a share of Series A Preferred
Stock, the Corporation shall pay to the holder of such share an amount in
cash (computed to the nearest cent) equal to such fraction of a share
multiplied by the Current Market Price of one share of Common Stock on the
Trading Day immediately preceding the date of conversion. If more than
one share shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock issuable upon conversion
thereof shall be computed on the basis of the aggregate number of shares
of Series A Preferred Stock so surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall after the Issue Date (A) pay
a dividend or make a distribution on its Common Stock in shares of its
Common Stock, (B) subdivide its outstanding Common Stock into a
greater number of shares, (C) combine its outstanding Common Stock
into a smaller number of shares or (D) issue any shares of capital
stock by reclassification of its Common Stock, the Conversion Price in
effect immediately prior thereto shall be adjusted so that the holder
of any share of Series A Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common
Stock of the Corporation which such holder would have owned or have
been entitled to receive after the happening of any of the events
described above had such share of Series A Preferred Stock been
converted immediately prior to the happening of such event or the
record date therefor, whichever is earlier. An adjustment made
pursuant to this subparagraph (i) shall become effective immediately
after the close of business on the record date in the case of a
dividend or distribution (except as provided in paragraph (h) below)
and shall become effective immediately after the close of business on
the record date in the case of a subdivision, combination or
reclassification.
(ii) In case the Corporation shall issue after the Issue Date
(a) rights or warrants to all holders of Common Stock entitling them
(for a period expiring within 180 days after the record date mentioned
below) to subscribe for or purchase Common Stock at a price per share
less than the Conversion Price at the record date for the
determination of shareholders entitled to receive such rights or
warrants or (b) shares of Common Stock or securities exercisable for
(including rights or warrants other than those referred to in clause
(a) above and subparagraph (iii) below) or exchangeable or convertible
into shares of Common Stock at a price per share (or having an
exercise, exchange or conversion price per share) less than the then
current Conversion Price (other than securities issued in a
transaction in which a pro rata share of such securities have been
reserved by the Corporation for distribution to the holders of Series
A Preferred Stock upon conversion), then in each such case
<PAGE> 94
9
the Conversion Price in effect immediately prior thereto shall
be adjusted to equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the date of issuance
of such rights, warrants or shares of Common Stock (or securities
exercisable for or exchangeable or convertible into shares of Common
Stock) by (II) a fraction, the numerator of which shall be the sum of
(A) the number of shares of Common Stock outstanding on the date of
issuance of such rights, warrants or shares of Common Stock (or
securities exercisable for or exchangeable or convertible into shares
of Common Stock) (without giving effect to any such issuance) and (B),
in the case of (a) above, the number of shares which the aggregate
proceeds from the exercise of such rights or warrants for Common Stock
or, in the case of (b) above, the number of shares which the aggregate
consideration receivable by the Corporation for the total number of
shares of Common Stock (or securities exercisable for or exchangeable
or convertible into shares of Common Stock) so issued would purchase
at the Conversion Price in effect immediately prior to the date of
issuance, and the denominator of which shall be the sum of (A) the
number of shares of Common Stock outstanding on the date of issuance
of such rights, warrants or shares of Common Stock (or securities
exercisable for or exchangeable or convertible into Common Stock)
(without giving effect to any such issuance) and (B), in the case of
clause (a) above, the number of additional shares of Common Stock
offered for subscription or purchase or, in the case of clause (b)
above, the number of shares of Common Stock so issued or into which
the exercisable, exchangeable or convertible securities may be
exercised, exchanged or converted. Such adjustment shall be made
successively whenever any such rights, warrants or shares of Common
Stock (or securities exercisable for or exchangeable or convertible
into Common Stock) are issued, and shall become effective immediately
after such record date or, in the case of the issuance of Common
Stock, after the date of issuance thereof (or in the case of
securities exercisable for or exchangeable or convertible into shares
of Common Stock, the date on which holders may first exercise,
exchange or convert the same in accordance with the respective terms
thereof). In determining whether any rights or warrants entitle the
holders of Common Stock to subscribe for or purchase shares of Common
Stock at less than the Conversion Price in effect immediately prior to
the date of such issuance, and in determining the aggregate offering
price of shares of Common Stock (or securities exercisable for or
exchangeable or convertible into shares of Common Stock), there shall
be taken into account any net consideration received or receivable by
the Corporation upon issuance and upon exercise of such rights or
warrants or upon issuance of shares of Common Stock (or securities
exercisable for or exchangeable or convertible into shares of Common
Stock), the value of such consideration, if other than cash, to be
determined by the Board of Directors in good faith or, if higher,
<PAGE> 95
10
the aggregate exercise, exchange or conversion price set forth
in such exercisable, exchangeable or convertible securities. The
aggregate consideration received by the Corporation in connection with
the issuance of shares of Common Stock or of rights, warrants or
securities exercisable for or exchangeable or convertible into shares
of Common Stock shall be deemed to be equal to the sum of the
aggregate net offering price of all such securities plus the minimum
aggregate amount, if any, payable upon the exercise of such rights or
warrants and conversion of any such exercisable, exchangeable or
convertible securities into shares of Common Stock.
(iii) In case the Corporation shall distribute to all holders
of its Common Stock any shares of capital stock of the Corporation
(other than Common Stock) or evidences of its indebtedness or assets
(other than a regular cash dividend that the Board of Directors
determines, in good faith, can be maintained by the Corporation for at
least four consecutive periods covering not less than one year and
that the Board of Directors intends to maintain for at least four
consecutive periods covering not less than one year, out of profits or
surplus) or rights or warrants to subscribe for or purchase any of its
securities (excluding those referred to in subparagraph (ii)(a) above)
(any of the foregoing being hereinafter in this subparagraph (iii)
called the "Securities"), then in each such case, unless the
Corporation elects to reserve shares or other units of such Securities
for distribution to the holders of the Series A Preferred Stock upon
the conversion of the shares of Series A Preferred Stock so that any
such holder converting shares of Series A Preferred Stock will receive
upon such conversion, in addition to the shares of the Common Stock to
which such holder is entitled, the amount and kind of such Securities
which such holder would have received if such holder had, immediately
prior to the record date for the distribution of the Securities,
converted his or her shares of Series A Preferred Stock into Common
Stock (such election to be based upon a determination by the Board of
Directors that such reservation will not materially adversely affect
the interests of any holder of Series A Preferred Stock in any such
reserved Securities), the Conversion Price shall be adjusted so that
the same shall equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the date of such
distribution by (II) a fraction, the numerator of which shall be the
Current Market Price per share of the Common Stock on the record date
mentioned below less the fair market value (as determined by the Board
of Directors, whose determination shall, if made in good faith, be
conclusive) of the portion of the capital stock or assets or evidences
of indebtedness so distributed or of such rights or warrants
applicable to one share of Common Stock, and the denominator of which
shall be the Current Market Price per share of the Common Stock. Such
adjustment shall become effective
<PAGE> 96
11
immediately, except as provided in paragraph (h) below, after
the record date for the determination of stockholders entitled to
receive such distribution.
(iv) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1 % in such price; provided, however, that any adjustments which
by reason of this subparagraph (iv) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment; and provided further that any adjustment shall be required
and made in accordance with the provisions of this Section (7) (other
than this subparagraph (iv)) not later than such time as may be
required in order to preserve the tax-free nature of a distribution to
the holders of shares of Common Stock. All calculations under this
Section (7) shall be made to the nearest cent (with $.005 being
rounded upward) or to the nearest 1/100 of a share (with .005 of a
share being rounded upward), as the case may be. Anything in this
paragraph (d) to the contrary notwithstanding, the Corporation shall
be entitled, to the extent permitted by law, to make such reductions
in the Conversion Price, in addition to those required by this
paragraph (d), as it in its discretion shall determine to be advisable
in order that any stock dividends, subdivision of shares, distribution
of rights or warrants to purchase stock or securities, or a
distribution of other assets (other than cash dividends) hereafter
made by the Corporation to its stockholders shall not be taxable.
(v) No adjustment in the Conversion Price shall be required in
the event of any dividend, distribution or issuance to holders of
shares of Common Stock pursuant to subparagraph (i), (ii) or (iii)
above if holders of shares of Series A Preferred Stock have received
the same dividend, distribution or issuance in accordance with
Section (3).
(e) In case the Corporation shall be a party to any action (including
without limitation a merger, consolidation, sale of all or substantially
all of the Corporation's assets or recapitalization of the Common Stock
and excluding any transaction as to which paragraph (d)(i) of this Section
(7) applies) (each of the foregoing being referred to as a "Transaction"),
in each case as a result of which shares of Common Stock shall be
converted into the right to receive stock, securities or other property
(including cash or any combination thereof), each share of Series A
Preferred Stock which is not converted into the right to receive stock,
securities or other property in connection with such Transaction shall
thereafter be convertible into the kind and amount of shares of stock and
other securities and property receivable (including cash) upon the
consummation of such Transaction by a holder of that number of shares or
fraction thereof of Common Stock into which one share of Series A
Preferred Stock was convertible immediately prior to such Transaction.
The
<PAGE> 97
12
Corporation shall not be a party to any Transaction unless the terms of
such Transaction are consistent with the provisions of this paragraph (e)
and it shall not consent or agree to the occurrence of any Transaction
until the Corporation has entered into an agreement with the successor or
purchasing entity, as the case may be, for the benefit of the holders of
the Series A Preferred Stock which will contain provisions enabling the
holders of the Series A Preferred Stock which remains outstanding after
such Transaction to convert into the consideration received by holders of
Common Stock at the Conversion Price immediately after such Transaction.
The provisions of this paragraph (e) shall similarly apply to successive
Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than a regular cash dividend
that the Board of Directors determines can be maintained by the
Corporation for at least four consecutive periods covering at least
one year and that the Board of Directors intends to maintain for at
least four consecutive periods covering at least one year out of
profits or surplus); or
(ii) the Corporation shall authorize the granting to the
holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or
(iii) there shall be any reclassification of the Common Stock
(other than an event to which paragraph (d)(i) of this Section (7)
applies) or any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or the sale or transfer of all or substantially all of the
assets of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent
and shall cause to be mailed to the holders of shares of the Series A
Preferred Stock at their addresses as shown on the stock records of the
Corporation, as promptly as possible, but at least 15 days prior to the
applicable date specified in clauses (A) and (B) below, a notice stating
(A) the date on which a record is to be taken for the purpose of such
dividend, distribution or rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be
entitled to such dividend, distribution or rights or warrants are to be
determined or (B) the date on which such reclassification, consolidation,
merger, sale or transfer is expected, that holders of Common Stock of
record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification,
consolidation,
<PAGE> 98
13
merger, sale or transfer. Failure to give such notice or any defect
therein shall not affect the legality or validity of the proceedings
described in this Section (7).
(g) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall prepare a notice of such adjustment of the Conversion
Price setting forth the adjusted Conversion Price and the date on which
such adjustment becomes effective and shall promptly mail such notice of
such adjustment of the Conversion Price to the holder of each share of
Series A Preferred Stock at his, her or its last address as shown on the
stock records of the Corporation.
(h) In any case in which paragraph (d) of this Section (7) provides
that an adjustment shall become effective immediately after a record date
for an event, the Corporation may defer until the occurrence of such event
(A) issuing to the holder of any share of Series A Preferred Stock
converted after such record date and before the occurrence of such event
the additional shares of Common Stock issuable upon such conversion by
reason of the adjustment required by such event over and above the Common
Stock issuable upon such conversion before giving effect to such
adjustment and (B) paying to such holder any amount in cash in lieu of any
fraction pursuant to paragraph (c) of this Section (7).
(i) For purposes of this Section (7), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held by or for the account of the Corporation.
(j) If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section (7),
only one adjustment shall be made and such adjustment shall be the amount
of adjustment which has the highest absolute value.
(k) In case the Corporation shall take any action affecting the Common
Stock other than action described in this Section (7), which in the
opinion of the Board of Directors would materially adversely affect the
conversion rights of the holders of the shares of Series A Preferred
Stock, the Conversion Price for the Series A Preferred Stock may be
adjusted, to the extent permitted by law, in such manner, if any, and at
such time, as the Board of Directors may determine to be equitable in the
circumstances.
(l) The Corporation covenants that it will at all times reserve and
keep available, free from preemptive rights, out of the aggregate of its
authorized but unissued shares of Common Stock or its issued shares of
Common Stock held in its treasury, or both, for the purpose of effecting
conversion of the Series A Preferred Stock, the full number of shares of
Common Stock deliverable upon the conversion of
<PAGE> 99
14
all outstanding shares of Series A Preferred Stock not theretofore
converted. For purposes of this paragraph (l), the number of shares of
Common Stock which shall be deliverable upon the conversion of all
outstanding shares of Series A Preferred Stock shall be computed as if at
the time of computation all such outstanding shares were held by a single
holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the Series A Preferred Stock, the
Corporation shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Corporation may validly and
legally issue fully paid and nonassessable shares of Common Stock at such
adjusted Conversion Price.
The Corporation shall use all reasonable efforts to list the shares of
Common Stock required to be delivered upon conversion of the Series A
Preferred Stock prior to such delivery, on the NASDAQ Stock Market or such
other exchange or interdealer quotation system on which the Common Stock
is principally traded or authorized to be quoted.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the Series A Preferred Stock, the
Corporation shall use all reasonable efforts to comply with all federal
and state laws and regulations thereunder requiring the registration of
such securities with, or any approval of or consent to the delivery
thereof by, any governmental authority, and any such conversion or
delivery shall be subject to any applicable requirements of law or
regulation.
(m) The Corporation shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of the Series A Preferred Stock
pursuant hereto; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issue or delivery of shares of Common Stock in a name
other than that of the holder of the Series A Preferred Stock to be
converted and no such issue or delivery shall be made unless and until the
person requesting such issue or delivery has paid to the Corporation the
amount of any such tax or has established, to the reasonable satisfaction
of the Corporation, that such tax has been paid.
Section (8) Ranking. Any class or classes of stock of the Corporation
shall be deemed to rank:
<PAGE> 100
15
(i) prior to the Series A Preferred Stock, as to dividends or
as to distribution of assets upon liquidation, dissolution or winding
up, if the holders of such class shall be entitled to the receipt of
dividends or of amounts distributable upon liquidation, dissolution or
winding up, as the case may be, in preference or priority to the
holders of Series A Preferred Stock;
(ii) on a parity with the Series A Preferred Stock, (A) as to
dividends, if such stock shall be Series B Preferred Stock or Common
Stock or if the holders of such class of stock and the Series A
Preferred Stock shall be entitled to the receipt of dividends in
proportion to their respective amounts of declared and unpaid
dividends per share, without preference or priority one over the
other, or (B) as to distribution of assets upon liquidation,
dissolution or winding up, whether or not the redemption or
liquidation prices per share thereof be different from those of the
Series A Preferred Stock, if such stock shall be Series B Preferred
Stock or if the holders of such class of stock and the Series A
Preferred Stock shall be entitled to the receipt of amounts
distributable upon liquidation, dissolution or winding up in
proportion to their respective amounts of liquidation prices, without
preference or priority one over the other; and
(iii) junior to the Series A Preferred Stock, (A) as to
dividends, if the holders of Series A Preferred Stock shall be
entitled to the receipt of dividends in preference or priority to the
holders of shares of such stock, or (B) as to distribution of assets
upon liquidation, dissolution or winding up, if such stock shall be
Common Stock or if the holders of Series A Preferred Stock shall be
entitled to receipt of amounts distributable upon liquidation,
dissolution or winding up in preference or priority to the holders of
shares of such stock.
Section (9) Voting. (a) Except as herein provided or as otherwise from
time to time required by law, holders of Series A Preferred Stock shall
have no voting rights.
(b) So long as any shares of the Series A Preferred Stock remain
outstanding, the consent of the holders of at least two-thirds of the
shares of Series A Preferred Stock outstanding at the time given in person
or by proxy, either in writing or at any special or annual meeting, shall
be necessary to permit, effect or validate any one or more of the
following:
(i) The authorization, creation or issuance, or any increase in
the authorized or issued amount, of any class or series of stock
ranking prior to
<PAGE> 101
16
Series A Preferred Stock as to dividends or the distribution of
assets upon liquidation, dissolution or winding up;
(ii) The increase in the authorized or issued amount of Series
A Preferred Stock; or
(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the
Certificate of Incorporation of the Corporation (including any of the
provisions hereof) which would affect any right, preference or voting
power of Series A Preferred Stock or of the holders thereof; provided,
however, that any increase in the amount of authorized preferred stock
or the creation and issuance of other series of preferred stock, or
any increase in the amount of authorized shares of such series or of
any other series of preferred stock, in each case ranking on a parity
with or junior to the Series A Preferred Stock with respect to the
payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up, shall not be deemed to affect such rights,
preferences or voting powers.
(c) So long as any shares of the Series A Preferred Stock remain
outstanding, each share of Series A Preferred Stock shall entitle the
holder thereof to vote on any merger or consolidation of the Corporation,
sale of all or substantially all of the Corporation's assets, statutory
share exchange, or other extraordinary transaction, with the shares of
Series A Preferred Stock voting together as a single class with the shares
of Common Stock. With respect to any such vote, each share of Series A
Preferred Stock shall entitle the holder thereof to cast the number of
votes equal to the number of votes which could be cast in such vote by a
holder of the Common Stock into which such share of Series A Preferred
Stock is convertible (or would be convertible, if not for the two-year
restriction on conversion set forth in Section (7)(a)) on the record date
for such vote.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series A Preferred
Stock shall have been redeemed or sufficient funds shall have been
deposited in trust to effect such redemption, scheduled to be consummated
within 30 days after such time.
Section (10) Record Holders. The Corporation and the Transfer Agent
may deem and treat the record holder of any shares of Series A Preferred
Stock as the true and lawful owner thereof for all purposes, and neither
the Corporation nor the Transfer Agent shall be affected by any notice to
the contrary.
<PAGE> 102
17
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be made
under the seal of the Corporation and signed by [__________], its
[_________], and attested by [___________], its [___________], this
[___] day of [____________], 1996.
INTERCEL, INC.
By
---------------------------------
(Corporate Seal)
Attest:
By
---------------------------------
<PAGE> 103
ANNEX II
Registration Rights
(a) The Purchaser shall have the right at any time after the Closing to
make three requests of the Seller in writing for registration under the
Securities Act of shares of Common Stock into which Shares have been converted
or are to be converted prior to the closing of the offering pursuant to such
registration (the "Securities"): with respect to the first such request to
register under the Securities Act at least $20 million in market value of
Securities Beneficially Owned by the Purchaser (the shares subject to any such
request hereunder being referred to as the "Subject Stock"), and with each
subsequent such request being at least 6 months following the completion of the
prior offering pursuant to a registration statement with respect to the Subject
Stock which was effective until the earlier of the completion of such offering
or three months. The Seller shall use all reasonable efforts to cause the
Subject Stock to be registered under the Securities Act as soon as reasonably
practicable after receipt of a request so as to permit promptly the sale
thereof, and in connection therewith, the Seller shall prepare and file, on
such appropriate form as the Seller in its discretion shall determine, a
registration statement under the Securities Act to effect such registration.
The Seller shall use all reasonable efforts to list all Subject Stock covered
by such registration statement on any national securities exchange on which the
Common Stock is then listed or to list such Subject Stock on the National
Association of Securities Dealers, Inc. Automated Quotation System or National
Market System. The Purchaser hereby undertakes to provide all such information
and materials and take all such action as may be required in order to permit
the Seller to comply with all applicable requirements of the Commission and to
obtain any desired acceleration of the effective date of such registration
statement. Any registration statement filed at the Purchaser's request
hereunder will not count as a requested registration unless effectiveness is
maintained until the earlier of completion of the offering or three months.
Notwithstanding the foregoing, the Seller (i) shall not be obligated to cause
any special audit to be undertaken in connection with any such registration
(provided that this provision shall not relieve the Seller of its obligation to
obtain any required consents with respect to financial statements in prior
periods) and (ii) shall be entitled to postpone for a reasonable period (not to
exceed 90 days) of time the filing of any registration statement otherwise
required to be prepared and filed by the Seller if the Seller is, at such time,
either (A) conducting, or proposing to file with the Commission within 90 days
a registration statement with respect to, an underwritten public offering for
the account of the Seller of equity securities (or securities convertible into
equity securities) or is subject to a contractual obligation not to engage in a
public offering and is advised in writing by its managing underwriter or
underwriters (with a copy to the Purchaser) that such offering would in its or
their opinion be adversely affected by the registration so requested or (B)
subject to an existing contractual obligation to its underwriters not to engage
in a public offering. Notwithstanding any other provision of this Annex II,
the Seller may postpone action under this Annex II for as long as it reasonably
deems necessary (but no longer than 90 days) if the Seller determines, in its
reasonable discretion, that effecting the registration at
<PAGE> 104
2
such time might (i) adversely affect a pending or contemplated financing,
acquisition, disposition of assets or stock, merger or other significant
transaction, or (ii) require the Seller to make public disclosure of
information the public disclosure of which at such time the Seller in good
faith believes could have a significant adverse effect upon the Seller.
No securities may be registered on a registration statement requested by
the Purchaser pursuant to the first paragraph of paragraph (a) of this Annex II
without the Purchaser's express written consent, unless the amount of such
securities is subject to reduction prior to any reduction in the number of
securities originally requested by the Purchaser in the event the lead
underwriter of the related offering believes that the success of such offering
would be materially and adversely affected by inclusion of all the securities
requested to be included therein.
At any time after the Closing, if the Seller proposes to file a
registration statement under the Securities Act with respect to an offering of
its equity securities (i) for its own account (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission)) or (ii) for the account of any holders of its securities
(including pursuant to a demand registration), then the Seller shall give
written notice of such proposed filing to the Purchaser as soon as practicable
(but in any event not less than 5 Business Days before the anticipated filing
date), and such notice shall offer the Purchaser the opportunity to register
such number of shares of Securities as the Purchaser requests. If the Purchaser
wishes to register securities of the same class or series as the Seller or such
holder, such registration shall be on the same terms and conditions as the
registration of the Seller's or such holders' securities (a "Piggyback
Registration"). Notwithstanding anything contained herein, if the lead
underwriter of an offering involving a Piggyback Registration delivers a
written opinion to the Seller that the success of such offering would be
materially and adversely affected by inclusion of all the securities requested
to be included, then the number of securities to be registered by the Purchaser
shall be reduced prior to any reduction in the number of securities originally
requested by them; provided, however, that the Seller must provide prompt
written notice of such written opinion to the Purchaser. The Purchaser shall
have the right at any time to convert its request for a Piggyback Registration
into a requested registration pursuant to the first paragraph of paragraph (a)
of this Annex H.
(b) In connection with any offering of shares of Subject Stock
registered pursuant to this Annex II, the Seller (i) shall furnish to the
Purchaser such number of copies of any prospectus (including any preliminary
prospectus) as it may reasonably request in order to effect the offering and
sale of the Subject Stock to be offered and sold, but only while the Seller
shall be required under the provisions hereof to cause the registration
statement to remain current and (ii) take such action as shall be necessary to
qualify the shares covered by such registration statement under such "blue sky"
or other state securities laws for offer and sale as the Purchaser shall
reasonably request; provided, however, that the
<PAGE> 105
3
Seller shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it shall not then be
qualified or to file any general consent to service of process in any
jurisdiction in which such a consent has not been previously filed. If
applicable, the Seller shall enter into an underwriting agreement with a
managing underwriter or underwriters selected by the Purchaser (reasonably
satisfactory to the Seller) containing representations, warranties,
indemnities and agreements then customarily included by an issuer in
underwriting agreements with respect to secondary distributions; provided,
however, that such underwriter or underwriters shall agree to use their best
efforts to ensure that the offering results in a distribution of the Subject
Stock sold in accordance with the terms of this Agreement. In connection with
any offering of Subject Stock registered pursuant to this Annex II, the Seller
shall (x) furnish to the underwriter, at the Seller's expense, unlegended
certificates representing ownership of the Subject Stock being sold in such
denominations as reasonably requested and (y) instruct any transfer agent and
registrar of the Subject Stock to release any stop transfer orders with
respect to such Subject Stock. Upon any registration becoming effective
pursuant to this Annex II, the Seller shall use all reasonable efforts to keep
such registration statement current for such period as shall be required for
the disposition of all of said Subject Stock, provided, however, that such
period need not exceed three months.
(c) The Purchaser shall pay all underwriting discounts and
commissions related to shares of Subject Stock being sold by the Purchaser and
the fees and disbursements of counsel and other advisors to the Purchaser. All
other fees and expenses in connection with the first requested registration
pursuant to the first paragraph of paragraph (a) of this Annex II, including,
without limitation, all registration and filing fees, all fees and expenses of
complying with securities or "blue sky" laws, fees and disbursements of the
Seller's counsel and accountants (including the expenses of "cold comfort"
letters required by or incident to such performance and compliance) and any
fees and disbursements of underwriters customarily paid by issuers in secondary
offerings, shall be paid by the Seller, and all such other fees and expenses in
connection with the second and third requested registration pursuant to this
Annex II shall be borne equally by the Purchaser and the Seller; provided,
however, that in the event the Purchaser fails to convert Shares into Common
Stock prior to any such offering, such that such offering is not able to be
completed, the Purchaser shall pay all such other fees and expenses.
(d) In the case of any offering registered pursuant to this Annex
II, the Seller agrees to indemnify and hold the Purchaser, each underwriter of
Securities under such registration and each person who controls any of the
foregoing within the meaning of Section 15 of the Securities Act and the
directors and officers of the Purchaser, harmless against any and all losses,
claims, damages, liabilities or action to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, and to reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such
<PAGE> 106
4
losses, claims, damages, liabilities or actions shall arise out of or shall be
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement relating to the sale of such
Subject Stock, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus (as amended or supplemented if the
Seller shall have filed with the Commission any amendment thereof or supplement
thereto), if used prior to the effective date of such registration statement,
or contained in the prospectus (as amended or supplemented if the Seller shall
have filed with the Commission any amendment thereof or supplement thereto), or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the indemnification
agreement contained in this paragraph (d) shall not apply to such losses,
claims, damages, liabilities or actions which shall arise from the sale of
Subject Stock by the Purchaser if such losses, claims, damages, liabilities or
actions shall arise out of or shall be based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, (x) made
in reliance upon and in conformity with information furnished in writing to the
Seller by the Purchaser or any such underwriter specifically for use in
connection with the preparation of the registration statement or any
preliminary prospectus or prospectus contained in the registration statement or
any such amendment thereof or supplement thereto or (y) made in any preliminary
prospectus, and the prospectus contained in the registration statement in the
form filed by the Seller with the Commission pursuant to Rule 424(b) under the
Securities Act shall have corrected such statement or omission and a copy of
such prospectus shall not have been sent or given to such person at or prior to
the confirmation of such sale to him.
(e) In the case of each offering registered pursuant to this Annex
II, the Purchaser and each underwriter participating therein shall agree, in the
same manner and to the same extent as set forth in paragraph (d) of this Annex
II, severally to indemnify and hold harmless the Seller and each person, if any,
who controls the Seller within the meaning of Section 15 of the Securities Act,
and the directors and officers of the Seller, and in the case of each such
underwriter, the Purchaser, each person, if any, who controls the Purchaser
within the meaning of the Securities Act and the directors, officers and
partners of the Purchaser, with respect to any statement in or omission from
such registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or prospectus contained
in such registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid), if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Seller by the Purchaser or such underwriter specifically for use in connection
with the preparation of such registration statement or any preliminary
prospectus or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
<PAGE> 107
5
(f) Each party indemnified under paragraph (d) or (e) of this Annex II
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party inspect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party to so notify an indemnifying
party of any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such indemnified party
on account of the indemnity agreement contained in paragraph (d) or (e) of this
Annex II, unless the indemnifying party was prejudiced by such omission, and in
no event shall relieve the indemnifying party from any other liability which it
may have to such indemnified party. In case any such action shall be brought
against any indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may desire, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under paragraph (d) or (e) of this Annex II for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation; provided, however, that if there exists or is reasonably likely
to exist a conflict of interest that would make it inappropriate in the
judgment of the indemnified party, in its sole and absolute discretion, for the
same counsel to represent both the indemnified party and the indemnifying
party, then the indemnified party shall be entitled to retain its own counsel,
in each jurisdiction for which the indemnified party determines counsel is
required, at the expense of the indemnifying party. No such third party claim
may be settled by the indemnifying party or the indemnified party without the
prior written consent of the other, which consent shall not be unreasonably
withheld.
(g) If the indemnification provided for under paragraph (d) or (e)
shall for any reason be held by a court to be unavailable to an indemnified
party under paragraph (d) or (e) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount
paid or payable under paragraph (d) or (e) hereof, the indemnified party and
the indemnifying party under paragraph (d) or (e) hereof shall contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Seller
and the prospective seller of Securities covered by the registration statement
which resulted in such loss, claim, damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the Seller
and such prospective seller from the offering of the securities covered by such
registration statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled
<PAGE> 108
6
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.
(h) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable losses which may be recovered
from an indemnifying party arising out of or resulting from the causes
enumerated in paragraph (d) or (e) shall be an amount equal to the Purchase
Price.
(i) Capitalized terms not defined in this Annex shall have the
meanings set forth in the Agreement.
<PAGE> 109
APPENDIX B
================================================================================
------------------------------------------
STOCK PURCHASE AGREEMENT
------------------------------------------
BETWEEN
INTERCEL, INC.
AND
MPX SYSTEMS, INC.
DATED AS OF MARCH 4, 1996
================================================================================
<PAGE> 110
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
ARTICLE I
DEFINITIONS
<S> <C> <C>
SECTION 1.01. Certain Defined Terms 1
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares 6
SECTION 2.02. Purchase Price 6
SECTION 2.03. Closing 6
SECTION 2.04. Escrow 6
SECTION 2.05. Closing Deliveries by the Seller 6
SECTION 2.06. Closing Deliveries by the Purchaser 7
SECTION 2.07. Closing Deliveries by the Escrow Agent 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
SECTION 3.01. Organization, Authority and Qualification of the Seller 7
SECTION 3.02. Capital Stock of the Seller 7
SECTION 3.03. Subsidiaries 8
SECTION 3.04. No Conflict 8
SECTION 3.05. Governmental Consents and Approvals 9
SECTION 3.06. Seller SEC Documents; Financial Statements 9
SECTION 3.07. No Undisclosed Liabilities 10
SECTION 3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions 10
SECTION 3.09. Litigation 10
SECTION 3.10. Compliance with Laws 10
SECTION 3.11. Full Disclosure 11
SECTION 3.12. Delivery of Certain Documents 11
SECTION 3.13. Private Placement 11
SECTION 3.14. FCC Regulations 11
SECTION 3.15. Brokers 11
</TABLE>
-i-
<PAGE> 111
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
SECTION 4.01. Organization and Authority of the Purchaser 11
SECTION 4.02. No Conflict 12
SECTION 4.03. Governmental Consents and Approvals 12
SECTION 4.04. Litigation 12
SECTION 4.05. Investment Purpose 13
SECTION 4.06. Accredited Investor 13
SECTION 4.07. Brokers 13
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Filing of Certificate of Designation 13
SECTION 5.02. Treatment of Shares as Equity 13
SECTION 5.03. Regulatory and Other Authorizations; Notices and Consents 13
SECTION 5.04. Notice of Developments 14
SECTION 5.05. Registration Rights 14
SECTION 5.06. Resale Restrictions 14
SECTION 5.07. Registration of Shares 15
SECTION 5.08. Delivery of Certain Documents 15
SECTION 5.09. Seller Stockholders' Meeting 15
SECTION 5.10. Certain Information 15
SECTION 5.11. Conduct of Business of the Seller 16
SECTION 5.12. Further Action 16
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller 16
SECTION 6.02. Conditions to Obligations of the Purchaser 18
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties 20
SECTION 7.02. Indemnification 20
SECTION 7.03. Limits on Indemnification 22
</TABLE>
-ii-
<PAGE> 112
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C> <C>
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination 22
SECTION 8.02. Effect of Termination 23
SECTION 8.03. Waiver 23
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expenses 24
SECTION 9.02. Notices 24
SECTION 9.03. Public Announcements 25
SECTION 9.04. Headings 25
SECTION 9.05. Severability 25
SECTION 9.06. Entire Agreement 26
SECTION 9.07. Assignment 26
SECTION 9.08. No Third Party Beneficiaries 26
SECTION 9.09. Amendment 26
SECTION 9.10. Governing Law 26
SECTION 9.11. Counterparts 26
SECTION 9.12. Specific Performance 26
</TABLE>
EXHIBITS
Exhibit 2.04 Form of Escrow Agreement
ANNEXES
Annex I Certificate of the Designations, Powers, Preferences and Relative,
Participating or Other Rights, and the Qualifications, Limitations or
Restrictions Thereof, of Series B Convertible Preferred Stock ($0.01
Par Value) of InterCel, Inc.
Annex II Registration Rights
-iii-
<PAGE> 113
STOCK PURCHASE AGREEMENT, dated as of March 4, 1996, between INTERCEL,
INC., a Delaware corporation (the "Seller"), and MPX SYSTEMS, INC., a South
Carolina corporation (the "Purchaser").
WITNESSETH:
WHEREAS, the Seller wishes to issue and to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, 100,000 shares (the "Shares") of
a new series of convertible preferred stock of the Seller designated Series B
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the terms of the Preferred Stock are set forth in the form of
Certificate of Designation attached as Annex I hereto (the "Certificate of
Designation");
NOW, THEREFORE, in consideration of the premises and the mutual agreements
and covenants hereinafter set forth, the Purchaser and the Seller hereby agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Documents" has the meaning specified in Section 7.01.
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Agreement" or "this Agreement" means this Stock Purchase Agreement, dated
as of March 4, 1996, between the Seller and the Purchaser (including the
Exhibits hereto and the Disclosure Schedule) and all amendments hereto made in
accordance with the provisions of Section 9.09.
<PAGE> 114
2
"Assets" means the properties, assets and contract rights used or intended
to be used in the conduct of Business or otherwise owned, leased or used by
the Seller or any Subsidiary or, with respect to contract rights, to which the
Seller or any Subsidiary is a party.
"Atlanta Asset Purchase Agreement" means the Asset Purchase Agreement
among GTE Mobilnet Incorporated, Intercel Atlanta Licenses, Inc. and the
Seller, pursuant to which the Seller proposes to acquire the license granted by
the United States Federal Communications Commission to provide personal
communications services utilizing 1.8 Ghz in the Atlanta Major Trading Area.
"Atlanta MTA Acquisition Closing" means the closing of the transactions
contemplated by the Atlanta Asset Purchase Agreement.
"Beneficially Own" with respect to any securities and "Beneficial
Ownership" mean having beneficial ownership as determined pursuant to Rule
13d-3 under the Exchange Act including pursuant to any agreement, arrangement
or understanding, whether or not in writing.
"Business" means the business of the Seller and the Subsidiaries as
currently conducted and contemplated as of the date hereof by the Seller to be
conducted (as described in the Prospectus or contemplated by this Agreement,
the Atlanta Asset Purchase Agreement, the Equipment Purchase Agreement and the
Ericsson Agreement).
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate of Designation" has the meaning specified in the recitals to
this Agreement.
"Closing" has the meaning specified in Section 2.03.
"Closing Date" has the meaning specified in Section 2.03.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock, par value $0.01 per share, of the
Seller.
"control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the
<PAGE> 115
3
possession, directly or indirectly or as trustee or executor, of the power to
direct or cause the direction of the affairs or management of a Person, whether
through the ownership of voting securities, as trustee or executor, by contract
or otherwise, including, without limitation, the ownership, directly or
indirectly, of securities having the power to elect a majority of the board of
directors or similar body governing the affairs of such Person.
"Credit Agreement" means the Credit Agreement, dated as of March 4, 1996,
among Intercel PCS Services, Inc., as Borrower, Ericsson Inc., as Initial
Lender, and Ericsson Inc., as Agent.
"Current Market Value" means, as of a particular date, the average of the
high bid and low asked prices per share of Common Stock in the over-the-counter
market, as reported by the National Association of Securities Dealers, Inc.
Automated Quotation System or such other system then in use, or such other
exchange or inter-dealer quotation system on which the Common Stock is then
principally traded or authorized to be quoted.
"Disclosure Schedule" means the Disclosure Schedule attached hereto, dated
as of the date hereof, and forming a part of this Agreement.
"Encumbrance" means any security interest, pledge, mortgage, lien, charge,
encumbrance, adverse claim, preferential arrangement or restriction of any
kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Equipment Purchase Agreement" means the Acquisition Agreement, dated as
of March 4, 1996, between Ericsson Inc. and Intercel PCS Services, Inc., in
connection with the sale by Ericsson Inc. to Intercel PCS Services, Inc. of
switches and PCS 1900 equipment.
"Ericsson Agreement" means the Stock Purchase Agreement, dated as of
March 4, 1996, between the Seller and Ericsson Inc., relating to the purchase
of 100,000 shares of Series A Convertible Preferred Stock, par value $0.01 per
share, of the Seller.
"Ericsson Closing" means the closing of the transactions contemplated by
the Ericsson Agreement.
"Escrow Agreement" has the meaning specified in the Escrow Agreement.
"Escrow Agreement" has the meaning specified in Section 2.04.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
<PAGE> 116
4
"Governmental Authority" means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative
authority, agency or commission or any court, tribunal, or judicial or arbitral
body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Law" means any United States federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, order, other requirement or rule of
law, including, without limitation, any requirement or rule of law of the
United States Federal Communications Commission.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Loss" has the meaning specified in Section 7.02.
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business, the Seller or any Subsidiary that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the
Business, the Seller or any Subsidiary: (a) is, or would reasonably be expected
to be, materially adverse to the business, operations, Assets or Liabilities,
prospects, results of operations or financial condition of the Seller and the
Subsidiaries, taken as a whole, or (b) would reasonably be expected to
materially adversely affect the ability of the Seller and the Subsidiaries to
operate or conduct the Business in the manner in which it is currently operated
or conducted or contemplated to be operated or conducted by the Seller and the
Subsidiaries.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group that would be deemed to be a person
under Section 13(d)(3) of the Exchange Act.
"Preferred Stock" has the meaning specified in the recitals to this
Agreement.
"Prospectus" means, the Seller's Prospectus dated February 1, 1996,
relating to 7,373,211 shares of Common Stock.
<PAGE> 117
5
"Purchase Price" has the meaning specified in Section 2.02.
"Purchaser" has the meaning specified in the preamble to this Agreement.
"Reference Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Seller, dated as of
December 31, 1995, a copy of which the Seller has provided to the Purchaser
prior to the execution of this Agreement.
"Reference Balance Sheet Date" means December 31, 1995.
"Sale" has the meaning specified in Section 5.10(b).
"SEC Reports" has the meaning specified in Section 3.06(a).
"Securities Act" means the United States Securities Act of 1933,
as amended.
"Seller" has the meaning specified in the preamble to this
Agreement.
"Shares" has the meaning specified in the recitals to this
Agreement.
"Subsidiaries" means any and all corporations, partnerships, limited
liability companies, joint ventures, associations and other entities controlled
by the Seller directly or indirectly through one or more intermediaries.
"Tax" or "Taxes" means any and all taxes, fees, levies, duties, tariffs,
imposts, and other charges of any kind (together with any and all interest,
penalties, additions to tax and additional amounts imposed with respect
thereto) imposed by any government or taxing authority, including, without
limitation: taxes or other charges on or with respect to income, franchises,
windfall or other profits, gross receipts, property, sales, use, capital stock,
payroll, employment, social security, workers' compensation, unemployment
compensation, or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value added, or gains taxes; license,
registration and documentation fees; and customs duties, tariffs, and similar
charges.
"Third Party Claims" has the meaning specified in Section 7.02(b).
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently
throughout the periods involved.
<PAGE> 118
6
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale of the Shares. Upon the terms and subject
to the conditions of this Agreement, at the Closing, the Seller shall sell to
the Purchaser, and the Purchaser shall purchase from the Seller, the Shares.
SECTION 2.02. Purchase Price. The aggregate purchase price for the Shares
shall be $75,000,000.00 (the "Purchase Price"), representing a purchase price
of $750.00 per Share.
SECTION 2.03. Closing. Upon the terms and subject to the conditions of
this Agreement, the issuance sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at 10:00
A.M. local time on a date and at a location mutually agreed to by the parties
upon the satisfaction or waiver of all conditions to the obligations of the
parties set forth in Article VI, or at such other place or at such other time
or on such other date as the Seller and the Purchaser may mutually agree upon
in writing (the day on which the Closing takes place being the "Closing Date").
SECTION 2.04. Escrow. On a date mutually agreed by the Seller and the
Purchaser (but no later than the closing date of the Senior Note offering
contemplated by the Seller), the Seller and the Purchaser shall enter into an
Escrow Agreement with the Escrow Agent substantially in the form of Exhibit
2.04 (the "Escrow Agreement"). In accordance with the terms of the Escrow
Agreement, on such date (or as soon thereafter as practicable, as mutually
agreed by the Seller and the Purchaser), the Purchaser shall deposit with the
Escrow Agent the Purchase Price, to be managed and paid out by the Escrow Agent
in accordance with the terms of the Escrow Agreement.
SECTION 2.05. Closing Deliveries by the Seller. At the Closing, the
Seller shall deliver or cause to be delivered to the Purchaser:
(a) a receipt for the Purchase Price;
(b) stock certificates evidencing the Shares duly registered in
the name of the Purchaser, in form reasonably satisfactory to the Purchaser; and
(c) the opinions, certificates and other documents required to be
delivered pursuant to Section 6.02.
<PAGE> 119
7
SECTION 2.06. Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller the opinions, certificates and other
documents required to be delivered pursuant to Section 6.01.
SECTION 2.07. Closing Deliveries by the Escrow Agent. At the Closing,
pursuant to the terms of the Escrow Agreement, the Escrow Agent shall deliver
to the Seller the Purchase Price in cash by wire transfer in immediately
available funds to a bank account in the United States to be designated by the
Seller, by written notice to the Purchaser at least five Business Days prior to
the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the Seller
hereby represents and warrants to the Purchaser as follows:
SECTION 3.01. Organization, Authority and Qualification of the Seller.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The Seller is duly licensed or qualified to
do business and is in good standing in each jurisdiction in which the
properties owned or leased by it or the operation of its business makes such
licensing or qualification necessary. The execution and delivery of this
Agreement and the Escrow Agreement by the Seller, the performance by the Seller
of its obligations hereunder and thereunder and the consummation by the Seller
of the obligations contemplated hereby and thereby, including, without
limitation, the issuance of the Preferred Stock in accordance with the terms of
this Agreement and the Certificate of Designation, have been duly authorized by
all requisite action on the part of the Seller, except for the stockholder
approval contemplated by Section 5.09 (which shall have been obtained prior to
the Closing). This Agreement has been, and upon its execution the Escrow
Agreement shall have been, duly executed and delivered by the Seller, and
(assuming due authorization, execution and delivery by the Purchaser) this
Agreement constitutes, and upon its execution the Escrow Agreement will
constitute, a legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms.
SECTION 3.02. Capital Stock of the Seller. The authorized capital stock
of the Seller consists of 39,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, par value $0.01 per share. By the Closing Date, the
Seller will duly increase the authorized capital stock of the Seller to consist
of 55,000,000 shares of Common Stock and
<PAGE> 120
8
1,000,000 shares of preferred stock, par value $0.01 per share. As of the
date hereof, (i) 26,823,694 shares of Common Stock are issued and outstanding,
all of which are validly issued, fully paid and nonassessable and (ii) no
shares of preferred stock are issued and outstanding. None of the issued and
outstanding shares of Common Stock was issued in violation of any preemptive
rights. Except as disclosed in Section 3.02 of the Disclosure Schedule, there
are no options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character to which the Seller is a party
relating to the issuance or sale of capital stock of the Seller or obligating
the Seller to issue or sell any shares of capital stock of, or any other
equity interest in, the Seller. Except as disclosed in Section 3.02 of the
Disclosure Schedule, there are no outstanding contractual obligations of the
Seller to repurchase, redeem or otherwise acquire any shares of Common Stock.
Upon issuance of the Shares to the Purchaser, at the Closing and payment
therefor pursuant to this Agreement and the Certificate of Designation, the
Shares will be validly issued, fully paid and nonassessable and free of
preemptive rights. By the Closing Date, the shares of Common Stock issuable
upon conversion of the Shares will be duly authorized and reserved for
issuance upon such conversion and, upon issuance of such shares in accordance
with the Certificate of Designation, will be validly issued, fully paid and
nonassessable and free of preemptive rights. Upon consummation of the
transactions contemplated by this Agreement, including the issuance of the
Shares and registration of the Shares in the name of the Purchaser in the
stock records of the Seller, the Purchaser will own the Shares free and clear
of all Encumbrances, other than Encumbrances resulting from any action, or
failure to take action, by the Purchaser.
SECTION 3.03. Subsidiaries. Each Subsidiary: (i) is duly organized and
validly existing under the laws of its jurisdiction of organization, (ii) has
all necessary power and authority to own, operate or lease the properties and
assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary and (iii)
is duly licensed or qualified to do business and is in good standing in each
jurisdiction in which the properties owned or leased by it or the operation of
its business makes such licensing or qualification necessary or desirable,
except where the failure to be so duly licensed or qualified would not have a
Material Adverse Effect.
SECTION 3.04. No Conflict. Assuming that all consents, approvals,
authorizations and other actions described in Section 3.05 have been obtained
and all filings and notifications listed in Section 3.05 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement and the Escrow Agreement by the Seller, and the issuance of the
Shares and the performance of the Seller's obligations in accordance with the
Certificate of Designation, do not and will not, as of the date hereof and as
of the Closing Date, (a) violate, conflict with or result in the breach of any
provision of the certificate of incorporation or by-laws (or similar
organizational documents) of the Seller or any Subsidiary, (b) conflict with or
violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to the Seller, any
<PAGE> 121
9
Subsidiary or any of their respective assets, properties or businesses or (c)
except as set forth in Section 3.04(c) of the Disclosure Schedule, conflict
with, result in any breach of, constitute a default (or event which with the
giving of notice or lapse of time, or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any of the Shares or on any of the assets
or properties of the Seller or any Subsidiary pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Seller or any
Subsidiary is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
SECTION 3.05. Governmental Consents and approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Seller do not and will not require any consent, approval, authorization or
other order of, action by, filing with or notification to any Governmental
Authority, except (a) as described in Section 3.05 of the Disclosure Schedule,
(b) pursuant to the notification requirements of the HSR Act, (c) the filing
with the Secretary of State of the State of Delaware of the Certificate of
Designation contemplated by Section 5.01, and (d) any filings required to
effect any registration pursuant to Section 5.05.
SECTION 3.06. Seller SEC Documents; Financial Statements. (a) The Seller
has filed all forms, reports and documents required to be filed by it with the
Commission, and has heretofore made available to the Purchaser, in the form
filed with the Commission (excluding any exhibits thereto), (A) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1994, (B) its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1995, June 30,
1995, and September 30, 1995, (C) all proxy statements relating to the Seller's
meetings of stockholders (whether annual or special) held since December 31,
1994, (D) the Prospectus and the related Registration Statement on Form S-1 and
(E) its Current Reports on Form 8-K dated after December 31, 1994 (the forms,
reports and other documents referred to in clauses (A), (B), (C), (D) and (E)
above being referred to herein, collectively, as the "SEC Reports").
(b) The SEC Reports and any other forms, reports and other documents filed
by the Seller with the Commission after the date of this Agreement (i) were
prepared in all material respects in accordance with the requirements of the
Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(c) The financial statements (including, in each case, any notes thereto)
contained in the SEC Reports were prepared in accordance with U.S. GAAP applied
on a
<PAGE> 122
10
consistent basis throughout the periods indicated (except as may be indicated
in the notes thereto) and each fairly presented the financial position, results
of operations and cash flows of the Seller and its consolidated subsidiaries as
at the respective dates thereof and for the respective periods indicated
therein (subject, in the case of unaudited statements, to normal and recurring
year-end adjustments which were not and are not expected, individually or in
the aggregate, to be material in amount).
(d) Since December 31, 1994 there has not been any change, occurrence or
circumstance in the business, results of operations or financial condition of
the Seller or any Subsidiary having, individually or in the aggregate, a
Material Adverse Effect, other than changes, occurrences and circumstances
referred to in any subsequently filed SEC Reports.
SECTION 3.07. No Undisclosed Liabilities. There are no Liabilities of the
Seller or any Subsidiary, other than Liabilities (i) disclosed in Section 3.07
of the Disclosure Schedule, (ii) reflected in the SEC Reports, (iii) not
required to be reflected in a consolidated balance sheet of the Seller and its
Subsidiaries or in the notes thereto prepared in accordance with U.S. GAAP or
(iv) incurred since the Reference Balance Sheet Date in the ordinary course of
business.
SECTION 3.08. Conduct in the Ordinary Course; Absence of Certain Changes,
Events and Conditions. Since the Reference Balance Sheet Date, except as
disclosed in any subsequently filed SEC Reports or as contemplated by this
Agreement, the business of the Seller and the Subsidiaries has been conducted
in the ordinary course and the Seller has not suffered any Material Adverse
Effect
SECTION 3.09. Litigation. Except as set forth in the SEC Reports or as
disclosed in Section 3.09 of the Disclosure Schedule, there are no Actions by or
against the Seller or any Subsidiary (or by or against any Affiliate thereof
and relating to the Business, the Seller or any Subsidiary), or affecting any
of the Assets, pending before any Governmental Authority (or, to the best
knowledge of the Seller, threatened to be brought by or before any Governmental
Authority) that has, has had or could have a Material Adverse Effect or could
reasonably be expected to affect the legality, validity or enforceability of
this Agreement or the Escrow Agreement or the consummation of the transactions
contemplated hereby or thereby. None of the Seller, the Subsidiaries nor any
of the Assets is subject to any Governmental Order (nor, to the best knowledge
of the Seller, are there any such Governmental Orders threatened to be imposed
by any Governmental Authority) which has, has had or could have a Material
Adverse Effect.
SECTION 3. 10. Compliance with Laws. The Seller and the Subsidiaries
have each conducted and continue to conduct the Business in all material
respects in accordance with all Laws and Governmental Orders applicable to the
Seller or any Subsidiary
<PAGE> 123
or any of the Assets or the Business, and neither the Seller nor any Subsidiary
is in material violation of any such Law or Governmental Order.
SECTION 3.11. Full Disclosure. The Seller is not aware of any facts
pertaining to the Seller, any Subsidiary or the Business which could have a
Material Adverse Effect and which have not been disclosed in this Agreement, the
Disclosure Schedule or the SEC Documents or otherwise disclosed to the
Purchaser by the Seller in writing.
SECTION 3.12. Delivery of Certain Documents. The Seller has delivered to
the Purchaser a true and complete copy of the most recent draft of each of the
Atlanta Asset Purchase Agreement, the Equipment Purchase Agreement, the Credit
Agreement, the Ericsson Agreement and all exhibits, schedules and agreements
related thereto or in any way entered into in connection with the transactions
contemplated thereby.
SECTION 3.13. Private Placement. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Sections 4.05 and
4.06, the offer and sale of the Shares to the Purchaser pursuant to this
Agreement is exempt from registration under the Securities Act.
SECTION 3.14. FCC Regulations. After giving effect to the issuance of
Shares to the Purchaser, the ownership of capital stock of the Seller by aliens
or their representatives or by a foreign government or representative thereof
or by any corporation organized under the laws of a foreign country does not
exceed the limitations set forth in rules and regulations of the United States
Federal Communications Commission.
SECTION 3.15. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
actions contemplated by this Agreement based upon arrangements made by or on
behalf of the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the Purchaser
hereby represents and warrants to the Seller as follows:
SECTION 4.01. Organization and Authority of the Purchaser. The Purchaser
is a corporation duly organized, validly existing and in good standing under
the laws of the State of South Carolina and has all necessary corporate power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder
<PAGE> 124
12
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Escrow Agreement by the
Purchaser, the performance by the Purchaser of its obligations hereunder and
thereunder and the consummation by the Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
action on the part of the Purchaser. This Agreement has been, and upon its
execution the Escrow Agreement will be, duly executed and delivered by the
Purchaser, and (assuming due authorization, execution and delivery by the
Seller) this Agreement constitutes, and upon its execution the Escrow Agreement
will constitute, a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with its terms.
SECTION 4.02. No Conflict. Assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and other actions referred
to in Section 4.03, except as may result from any facts or circumstances
relating solely to the Seller, the execution, delivery and performance of this
Agreement and the Escrow Agreement by the Purchaser do not and will not, as of
the date hereof and as of the Closing Date, (a) violate, conflict with or
result in the breach of any provision of the Articles of Incorporation or
By-laws of the Purchaser, (b) conflict with or violate any Law or Governmental
Order applicable to the Purchaser or (c) conflict with, or result in any breach
of, constitute a default (or event which with the giving of notice or lapse or
time, or both, would become a default) under, require any consent under, or
give to others any rights of termination, amendment, acceleration, suspension,
revocation, or cancellation of, or result in the creation of any Encumbrance on
any of the assets or properties of the Purchaser pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Purchaser is a party
or by which any of such assets or properties are bound or affected, which in
any such case would have a material adverse effect on the ability of the
Purchaser to consummate the transactions contemplated by this Agreement or the
Escrow Agreement.
SECTION 4.03. Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Purchaser do not and will not require any consent, approval, authorization or
other order of, action by, filing with, or notification to, any Governmental
Authority, except pursuant to the notification requirements of the HSR Act.
SECTION 4.04. Litigation. There are no Actions by or against the
Purchaser, pending before any Governmental Authority (or, to the best knowledge
of the Purchaser, threatened to be brought by or before any Governmental
Authority) that could reasonably be expected to affect the legality, validity
or enforceability of this Agreement or the Escrow Agreement or the consummation
of the transactions contemplated hereby or thereby. The Purchaser is not
subject to any Governmental Order (nor, to the best
<PAGE> 125
13
knowledge of the Purchaser, are there any such Governmental Orders threatened
to be imposed by any Governmental Authority), which could reasonably be
expected to affect the legality, validity or enforceability of this Agreement
or the Escrow Agreement or the consummation of the transactions contemplated
hereby or thereby.
SECTION 4.05. Investment Purpose. The Purchaser is acquiring the Shares
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.06. Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act.
SECTION 4.07. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.01. Filing of Certificate of Designation. The Seller covenants
and agrees that, as promptly as practicable after the stockholder approval
referred to in Section 6.02(g) is obtained and, in any event, prior to the
Closing, the Seller will file the Certificate of Designation with the Secretary
of State of the State of Delaware in accordance with the Delaware General
Corporation Law.
SECTION 5.02. Treatment of Shares as Equity. The Seller covenants and
agrees that it will treat the Shares as equity, and not as debt, for accounting
and tax purposes and further covenants and agrees that it will not take any
action or position that is inconsistent with such treatment.
SECTION 5.03. Regulatory and Other Authorizations; Notices and Consents.
(a) The Seller and the Purchaser shall use all reasonable efforts to obtain all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials that may be or become necessary for their execution and delivery
of, and the performance of their respective obligations pursuant to, this
Agreement and the Escrow Agreement. Each party hereto agrees to make an
appropriate filing pursuant to the HSR Act, if required, with respect to the
conversion of the Shares at such times as the Purchaser may request and to
supply as promptly as practicable to the appropriate Governmental Authorities
any additional information and documentary material that may be requested
pursuant to the HSR Act.
<PAGE> 126
14
(b) The Seller shall or shall cause the Subsidiaries to give promptly such
notices to third parties and use its or their reasonable efforts to obtain such
third party consents as are necessary in connection with the transactions
contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable efforts to assist
the Seller in giving such notices and obtaining such consents; provided,
however, that the Purchaser shall have no obligation to give any guarantee or
other consideration of any nature in connection with any such notice or consent
or to consent to any change in the terms of any agreement or arrangement which
the Purchaser in its sole and absolute discretion may deem adverse to the
interests of the Purchaser.
SECTION 5.04. Notice of Developments. (a) Prior to the Closing, the Seller
shall promptly notify the Purchaser in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of the Seller in this Agreement or which
could reasonably be expected to have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any respect and
(ii) all other developments material to the Seller and the Subsidiaries, taken
as a whole, affecting the assets, Liabilities, business, financial condition,
operations, results of operations or prospects of the Seller, any Subsidiary or
the Business.
(b) Prior to the Closing, the Purchaser shall promptly notify the Seller
in writing of all events, circumstances, facts and occurrences arising
subsequent to the date of this Agreement which could reasonably be expected to
result in any breach of a representation or warranty or covenant of the
Purchaser in this Agreement or which could reasonably be expected to have the
effect of making any representation or warranty of the Purchaser in this
Agreement untrue or incorrect in any respect.
SECTION 5.05. Registration Rights. Effective at the Closing, the
Purchaser and the Seller shall each have the rights and obligations set forth
in Annex II.
SECTION 5.06. Resale Restrictions. (a) The Purchaser acknowledges that the
Shares and the shares of Common Stock into which the Shares are convertible
have not been registered under the Securities Act or any state securities law,
and hereby agrees not to offer, sell or otherwise transfer, pledge or
hypothecate such shares unless and until registered under the Securities Act
and any applicable state securities law or unless such offer, sale, offer,
pledge or hypothecation is exempt from registration or is otherwise in
compliance with the Securities Act and such laws.
(b) During the period ending one year after the Closing Date, the Purchaser
shall not, without the prior written consent of the Seller, (i) offer, pledge,
sell or
<PAGE> 127
15
otherwise transfer or dispose of, directly or indirectly, any Shares or any
shares of Common Stock into which any of such Shares may be converted, or (ii)
enter into any swap or similar agreement that transfers, in whole or in part,
any of the economic consequences of ownership of such Shares or any shares of
Common Stock into which such Shares may be converted, whether any such
transaction described in clause (i) or (ii) above is to be settled by delivery
of Shares or such other securities, in cash or otherwise, other than a pledge,
grant of security interest or other encumbrance effected in a bona fide
transaction with an unrelated and unaffiliated pledgee; provided, however, that
the Purchaser may at any time enter into any such transaction described in
clause (i) or (ii) above with an Affiliate of the Purchaser.
SECTION 5.07. Registration of Shares. The Seller shall, upon issuance of
the Shares and prior to the delivery of stock certificates evidencing the
Shares pursuant to Section 2.05, register the Shares in the name of the
Purchaser in the stock records of the Seller.
SECTION 5.08. Delivery of Certain Documents. The Seller shall deliver to
the Purchaser true and correct copies of the Atlanta Asset Purchase Agreement,
the Equipment Purchase Agreement, the Credit Agreement, the Ericsson Agreement
and all exhibits, schedules and agreements related thereto or in any way
entered into in connection with the transactions contemplated thereby, as soon
as practicable following the execution and delivery thereof by the parties
thereto.
SECTION 5.09. Seller Stockholders' Meeting. The Seller shall call and
hold a meeting of its stockholders as promptly as practicable after the
execution of this Agreement to consider and vote upon (i) a proposal to
increase the authorized number of shares of Common Stock and (ii) the issuance
and terms of the Shares, including, without limitation, the convertibility
thereof into shares of Common Stock. The Board of Directors of the Seller
shall recommend approval of such matters, and the Seller shall take all lawful
action to solicit such approval. The Seller represents and warrants to the
Purchaser that stockholders Beneficially Owning more than 50% of the
outstanding shares of Common Stock have agreed to vote in favor of such
approval.
SECTION 5.10. Certain Information. (a) For a period of at least three
years from the date of this Agreement, the Seller shall file all reports and
other information required to be filed by Section 13 or 15(d) under the
Exchange Act, as the case may be, as shall be necessary in order that the
conditions to the availability of Rule 144 under the Securities Act in
connection with any Sale of shares of Common Stock by the Purchaser shall be
met. For so long as the Seller is required to file reports and other
information pursuant to Section 13 or 15(d) of the Exchange Act, the Seller
shall provide the Purchaser with a copy of each such report and other
information.
<PAGE> 128
16
(b) For purposes of this Agreement, "Sale" means any sale, assignment,
transfer, distribution or other disposition of shares of Common Stock or of a
participation therein, whether voluntarily or by operation of law.
SECTION 5.11. Conduct of Business of the Seller. Prior to the Closing,
the Seller agrees (except to the extent that the Purchaser shall otherwise
consent in writing) as follows:
(a) Dividends: Changes in Stock. The Seller shall not take or permit to
be taken any action that would result in an adjustment to the Conversion Price
(as defined in the Certificate of Designation) pursuant to Section (7)(d) of
the Certificate of Designation if the Shares were issued and outstanding at the
time of such action.
(b) Certain Matters. The Seller shall not take or permit to be taken any
action in respect of which holders of Shares would be entitled to vote pursuant
to Section (9) of the Certificate of Designation if the Shares were outstanding
at the time of such action.
SECTION 5.12. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01. Conditions to Obligations of the Seller. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction (or waiver by the Seller, at its sole
discretion), at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Closing, with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 6.01(a) has been satisfied with respect to such portion of such
representation or warranty,
<PAGE> 129
17
such portion of such representation or warranty as so qualified must be true
and correct in all respects), and the covenants and agreements contained in
this Agreement to be complied with by the Purchaser at or before the Closing
shall have been complied with in all material respects, and the Seller shall
have received a certificate from the Purchaser to such effect signed by a duly
authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced by
or before any Governmental Authority against either the Seller or the
Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Seller, is likely to render it impossible or
unlawful to consummate such actions; provided, however, that the provisions of
this Section 6.01(b) shall not apply if the Seller has directly or indirectly
solicited or encouraged any such Action;
(c) Resolutions of the Purchaser. The Seller shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of the
Purchaser, of the resolutions duly and validly adopted by the Board of
Directors of the Purchaser evidencing its authorization, if required by law, of
the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby;
(d) Incumbency Certificate of the Purchaser. The Seller shall have
received a Certificate of the Secretary or an Assistant Secretary of the
Purchaser certifying the names and signatures of the officers of the Purchaser
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(e) Legal Opinion. The Seller shall have received from McNair Law Firm,
P.A., counsel to the Purchaser, a legal opinion, addressed to the Seller and
dated the Closing Date, in form and substance reasonably satisfactory to
the Seller, as to (i) the due authorization, execution and delivery by the
Purchaser of this Agreement and the Escrow Agreement and (ii) the
enforceability against the Purchaser of this Agreement and the Escrow Agreement
(assuming New York law is identical in all respects to South Carolina law);
(f) Consents and Approvals. The Purchaser and the Seller shall have
received, each in form and substance reasonably satisfactory to the Seller, all
authorizations, consents, orders and approvals of all Governmental Authorities
and officials and all third party consents necessary or desirable for the
consummation of the transactions contemplated by this Agreement;
(g) Related Transactions. Each of the Ericsson Closing and the Atlanta
MTA Acquisition Closing shall have occurred or shall occur simultaneously with
the Closing; and
<PAGE> 130
18
(h) Commercial Agreements. Ericsson Inc. and the Seller shall have
executed and delivered the Equipment Purchase Agreement.
SECTION 6.02. Conditions to Obligations of the Purchaser. The obligations
of the Purchaser to consummate the transactions contemplated by this Agreement
shall be subject to the satisfaction (or waiver by the Purchaser, at its sole
discretion), at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Seller contained in this Agreement shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing with the same force and effect as if made
as of the Closing, other than such representations and warranties as are made
as of another date, which shall be true and correct as of such date (provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.02(a) has been satisfied with respect to such portion of such representation
or warranty, such portion of such representation or warranty as so qualified
must be true and correct in all respects), and the covenants and agreements
contained in this Agreement to be complied with by the Seller at or before the
Closing shall have been complied with in all material respects, and, the
Purchaser shall have received a certificate of the Seller to such effect signed
by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been commenced by
or before any Governmental Authority against either the Seller or the
Purchaser, seeking to restrain or materially and adversely alter the
obligations contemplated by this Agreement which, in the reasonable, good faith
determination of the Purchaser, is likely to render it impossible or unlawful
to consummate such transactions or which could have a Material Adverse Effect;
provided, however, that the provisions of this Section 6.02(b) shall not apply
if the Purchaser has directly or indirectly solicited or encouraged any such
Action;
(c) Resolutions of the Seller. The Purchaser shall have received a true
and complete copy, certified by the Secretary or an Assistant Secretary of the
Seller, of the resolutions duly and validly adopted by the Board of Directors
of the Seller and, to the extent that such authorization is necessary, the
shareholders of the Seller evidencing their authorization of the execution and
delivery of this Agreement, the issuance and terms of the Shares including,
without limitation, the convertibility thereof into shares of Common Stock, and
the consummation of the transactions contemplated hereby;
(d) Incumbency Certificate of the Seller. The Purchaser shall have
received a certificate of the Secretary or an Assistant Secretary of the Seller
certifying the names and signatures of the officers of the Seller authorized to
sign this Agreement and the other documents to be delivered hereunder;
<PAGE> 131
19
(e) Legal Opinion. The Purchaser shall have received from Hogan &
Hartson L.L.P., counsel to the Seller, a legal opinion, addressed to the
Purchaser and dated the Closing Date, in form and substance reasonably
satisfactory to the Purchaser, as to (i) the due authorization, execution and
delivery by the Seller of this Agreement and the Escrow Agreement, (ii) the
enforceability against the Seller of this Agreement and the Escrow Agreement
and (iii) the validity of the Shares, the due authorization of the shares of
Common Stock into which the Shares may be converted and related matters;
(f) Consents and Approval . The Purchaser and the Seller shall have
received, each in form and substance reasonably satisfactory to the Purchaser,
all authorizations, consents, orders and approvals of all Governmental
Authorities and officials and all third party consents necessary or desirable
for the consummation of the transactions contemplated by this Agreement;
(g) Stockholder Approval. The stockholders of the Seller shall have
approved (i) the increase in the authorized number of shares of Common Stock
and (ii) the issuance and terms of the Shares, including the convertibility
thereof into shares of Common Stock;
(h) Related Transactions (i) Each of the Ericsson Closing and the Atlanta
MTA Acquisition Closing shall have occurred or shall occur simultaneously with
the Closing and (ii) the Purchaser shall have received true and correct copies
of the Atlanta Asset Purchase Agreement, the Equipment Purchase Agreement, the
Credit Agreement, the Ericsson Agreement and all exhibits, schedules and
agreements related thereto or in any way entered into in connection with the
transactions contemplated thereby, which shall be substantially identical to
the drafts of each such agreement delivered pursuant to Section 3.12;
(i) Commercial Agreements. Ericsson Inc. and the Seller shall have
executed and delivered the Equipment Purchase Agreement;
(j) Organizational Documents. The Purchaser shall have received a copy of
(i) the Certificate of Incorporation, as amended, of the Seller, certified by
the Secretary of State of the State of Delaware, as of a date not earlier than
five Business Days prior to the the Closing Date and accompanied by a
certificate of the Secretary or Assistant Secretary of the Seller, dated as of
the Closing Date, stating that no amendments have been made to such Certificate
of Incorporation since such date, and (ii) the By-laws of the Seller, certified
by the Secretary or Assistant Secretary of the Seller;
(k) Good Standing. The Purchaser shall have received a good standing
certificate for the Seller from the Secretary of State of the State of
Delaware, dated as of a
<PAGE> 132
20
date not earlier than five Business Days prior to the Closing Date and
accompanied by a bring-down certificate dated the Closing Date; and
(1) No Material Adverse Effect. No event or events shall have occurred
which, individually or in the aggregate, have, or could have, a Material
Adverse Effect.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01. Survival of Representations and Warranties. (a) The
representations and warranties of the Seller contained in this Agreement and in
the Exhibits to this Agreement and the Disclosure Schedule (collectively, the
"Acquisition Documents"), shall survive the Closing until the second
anniversary of the Closing Date. Neither the period of survival nor the
liability of the Seller with respect to the Seller's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Purchaser. If written notice of a claim has been given prior to
the expiration of the applicable representations and warranties by the
Purchaser to the Seller, then the relevant representations and warranties shall
survive as to such claim, until such claim has been finally resolved.
(b) The representations and warranties of the Purchaser contained in the
Acquisition Documents shall survive the Closing until the second anniversary of
the Closing Date. Neither the period of survival nor the liability of the
Purchaser with respect to the Purchaser's representations and warranties shall
be reduced by any investigation made at any time by or on behalf of the Seller.
If written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by the Seller to the Purchaser, then
the relevant representations and warranties shall survive as to such claim,
until such claim has been finally resolved.
SECTION 7.02. Indemnification. (a)(i) The Purchaser, its successors and
assigns, and the stockholders, officers, directors, employees, Affiliates and
agents of the Purchaser and its successors and assigns shall be indemnified and
held harmless by the Seller for any and all Liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, attorneys' and consultants' fees and expenses)
actually suffered or incurred by them (including, without limitation, any
Action brought or otherwise initiated by any of them) (hereinafter a "Loss"),
arising out of or resulting from:
(A) the breach of any representation or warranty made by the Seller
contained in the Acquisition Documents; or
<PAGE> 133
21
(B) the breach of any covenant or agreement by the Seller contained in
the Acquisition Documents.
(ii) The Seller, its successors and assigns, and the stockholders,
officers, directors, employees, Affiliates and agents of the Seller and its
successors and assigns shall be indemnified and held harmless by the Purchaser
for any and all Losses actually suffered or incurred by them, arising out of or
resulting from:
(A) the breach of any representation or warranty made by the Purchaser in
the Acquisition Documents; or
(B) the breach of any covenant or agreement by the Purchaser contained in
the Acquisition Documents.
To the extent that the Seller's or the Purchaser's undertakings set forth in
this Section 7.02 may be unenforceable, the Seller or the Purchaser, as the
case may be, shall contribute the maximum amount that it is permitted to
contribute under applicable law to the payment and satisfaction of all Losses
incurred by the Purchaser or the Seller, as the case may be.
(b) An indemnified party shall give the party from whom indemnification is
sought notice of any matter which an indemnified party has determined has given
or could give rise to a right of indemnification under this Agreement, within
60 days of such determination, stating the amount of the Loss, if known, and
method of computation thereof, and containing a reference to the provisions of
this Agreement in respect of which such right of indemnification is claimed or
arises; provided, however, that the failure to provide such notice shall not
release the indemnifying party from any of its obligations under this Article
VII except to the extent the indemnifying party is materially prejudiced by
such failure and shall not relieve the indemnifying party from any other
obligation or Liability that it may have to any indemnified party otherwise
than under this Article VII. The obligations and Liabilities of an indemnifying
party under this Article VII with respect to Losses arising from claims of any
third party which are subject to the indemnification provided for in this
Article VII ("Third Party Claims") shall be governed by and contingent upon the
following additional terms and conditions: If an indemnified party shall
receive notice of any Third Party Claim, the indemnified party shall give the
indemnifying party notice of such Third Party Claim within 30 days of the
receipt by the indemnified party of such notice; provided, however, that the
failure to provide such notice shall not release the indemnifying party from
any of its obligations under this Article VII except to the extent the
indemnifying party is materially prejudiced by such failure and shall not
relieve the indemnifying party from any other obligation or Liability that it
may have to any indemnified party otherwise than under this Article VII. If
the indemnifying party acknowledges in writing its obligation to indemnify the
indemnified party hereunder against any Losses that may result from such Third
Party Claim, then the indemnifying party shall be entitled to assume and
control the
<PAGE> 134
22
defense of such Third Party Claim at its expense and through counsel of its
choice if it gives notice of its intention to do so to the indemnified party
within five days of the receipt of such notice from the indemnified party;
provided, however, that if there exists or is reasonably likely to exist a
conflict of interest that would make it inappropriate in the judgment of the
indemnified party, in its sole and absolute discretion, for the same counsel to
represent both the indemnified party and the indemnifying party, then the
indemnified party shall be entitled to retain its own counsel, in each
jurisdiction for which the indemnified party determines counsel is required, at
the expense of the indemnifying party. In the event the indemnifying party
exercises the right to undertake any such defense against any such Third Party
Claim as provided above, the indemnified party shall cooperate with the
indemnifying party in such defense and make available to the indemnifying
party, at the indemnifying party's expense, all witnesses, pertinent records,
materials and information in the indemnified party's possession or under the
indemnified party's control relating thereto as is reasonably required by the
indemnifying party. Similarly, in the event the indemnified party is, directly
or indirectly, conducting the defense against any such Third Party Claim, the
indemnifying party shall cooperate with the indemnified party in such defense
and make available to the indemnified party, at the indemnifying party's
expense, all such witnesses, pertinent records, materials and information in
the indemnifying party's possession or under the indemnifying party's control
relating thereto as is reasonably required by the indemnified party. No such
Third Party Claim may be settled by the indemnifying party or the indemnified
party without the prior written consent of the other.
SECTION 7.03. Limits on Indemnification. Notwithstanding anything to the
contrary contained in this Agreement, the maximum amount of indemnifiable
Losses which may be recovered from an indemnifying party arising out of or
resulting from the causes enumerated in Section 7.02 shall be an amount equal
to the Purchase Price.
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the Purchaser if, between the date hereof and the time scheduled
for the Closing: (i) an event or condition occurs that has resulted in a
Material Adverse Effect, (ii) any representation or warranty of the Seller
contained in this Agreement shall not have been true and correct in all
material respects when made, (iii) the Seller shall not have complied in all
material respects with any covenant or agreement to be complied with by it and
contained in this Agreement; or (iv) the Seller or any Subsidiary makes a
general assignment for the benefit of creditors, or any proceeding shall be
instituted by or against the
<PAGE> 135
23
Seller or any Subsidiary seeking to adjudicate any of them a bankrupt or
insolvent, or seeking liquidation, winding up or reorganization, arrangement,
adjustment, protection, relief or composition of its debts under any Law
relating to bankruptcy, insolvency or reorganization; or
(b) by the Seller if, between the date hereof and the time scheduled for
the Closing: (i) any representation or warranty of the Purchaser contained in
this Agreement shall not have been true and correct in all material respects
when made, (ii) the Purchaser shall not have complied in all material respects
with any covenant or agreement to be complied with by it and contained in this
Agreement; or (iii) the Purchaser makes a general assignment for the benefit
of creditors, or any proceeding shall be instituted by or against the
Purchaser seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment,
protection, relief or composition of its debts under any Law relating to
bankruptcy, insolvency or reorganization; or
(c) by either the Seller or the Purchaser if the Closing shall not have
occurred on or prior to September 30, 1996; or
(d) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the obligations
contemplated by this Agreement and such order, decree, ruling or other action
shall have become final and nonappealable; or
(e) by the mutual written consent of the Seller and the Purchaser.
SECTION 8.02. Effect of Termination. (a) In the event of termination of
this Agreement as provided in Section 8.01, this Agreement shall forthwith
become void and there shall be no liability on the part of either party hereto
except that nothing herein shall relieve either party from liability for any
breach of this Agreement.
(b) In the event of termination of this Agreement as provided in Section
8.01, the Escrow Agent shall, pursuant to the provisions of the Escrow
Agreement, return the Purchase Price to the Purchaser.
SECTION 8.03. Waiver. Either party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of the other
party, (b) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto or (c) waive compliance with any of the agreements or
conditions of the other party contained herein. Amy such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of
<PAGE> 136
24
any other term or condition, of this Agreement. The failure of any party to
assert any of its rights hereunder shall not constitute a waiver of any of such
rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Expense. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements
of counsel, financial advisors and accountants, incurred in connection with
this Agreement and the actions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.02):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopy: (202) 637-5910
Attention: Kimberley E. Thompson, Esq.
<PAGE> 137
25
(b) if to the Purchaser:
MPX Systems, Inc.
c/o SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: (803) 733-2887
Attention: Kevin Marsh
with a copy (which shall not constitute notice) to:
McNair Law Firm, P.A.
1301 Gervais Street
Columbia, South Carolina 29201
Telecopy: (803) 376-2277
Attention: John W. Currie, Esq.
SECTION 9.03. Public Announcements. No party to this Agreement shall make,
or cause to be made, any press release or public announcement or otherwise
communicate with any news media in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party (which shall not be unreasonably withheld or delayed), and the parties
shall cooperate as to the timing and contents of any such press release or
public announcement; provided, however, that with respect to any disclosure
required by law or by a listing agreement with the National Association of
Securities Dealers, Inc. Automated Quotation System National Market System or
any national securities exchange to which the Purchaser or the Seller is a
party, the party required to make such disclosure shall use its best efforts to
consult with the other party as to the timing and contents of such disclosure
and to obtain such consent prior to the time such disclosure is required to be
made.
SECTION 9.04. Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
SECTION 9.05. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the
<PAGE> 138
26
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
SECTION 9.06. Entire Agreement. This Agreement and the Escrow Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Seller and the Purchaser with
respect to the subject matter hereof and thereof.
SECTION 9.07. Assignment. This Agreement may not be assigned by operation
of Law or otherwise without the express written consent of the Seller and the
Purchaser (which consent may be granted or withheld in the sole discretion of
the Seller or the Purchaser); provided, however, that the Purchaser may,
without the consent of the Seller, assign this Agreement prior to the Closing
to SCANA Corporation or to a subsidiary controlled by SCANA Corporation, but no
such assignment shall relieve the Purchaser of any of its obligations under
this Agreement.
SECTION 9.08. No Third Party Beneficiaries. Except for the provisions of
Article VII relating to indemnified parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their successors
and permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.09. Amendment. This Agreement may not be amended or modified
except (a) by an instrument in writing signed by, or on behalf of, the
Seller and the Purchaser or (b) by a waiver in accordance with Section 8.03.
SECTION 9.10. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
SECTION 9.11. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.12. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
<PAGE> 139
27
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTERCEL, INC
By:
--------------------------------------
Name:
Title:
MPX SYSTEMS, INC.
By:
--------------------------------------
Name:
Title:
<PAGE> 140
EXHIBIT 2.04
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of [___], 1996 (this "Agreement"), among
INTERCEL, INC., a Delaware corporation (the "Seller"), MPX SYSTEMS, INC., a
South Carolina corporation (the "Purchaser"), and _____________, a _________
(the "Escrow Agent").
WITNESSETH:
WHEREAS, the Purchaser and the Seller have entered into a Stock Purchase
Agreement, dated as of March 4, 1996 (the "Purchase Agreement"; terms defined
in the Purchase Agreement and not otherwise defined herein being used herein as
therein defined), pursuant to which the Purchaser has agreed to purchase from
the Seller, and the Seller has agreed to sell to the Purchaser, the Shares;
WHEREAS, it is contemplated under the Purchase Agreement that the
Purchaser will deposit or cause to be deposited into escrow the sum of
$75,000,000 in cash (the "Escrow Amount"), to be held and disbursed by the
Escrow Agent in accordance with this Agreement; and
WHEREAS, a copy of the Purchase Agreement has been delivered to the Escrow
Agent, and the Escrow Agent is willing to act as the Escrow Agent hereunder;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein and in the Purchase Agreement, and intending to be
legally bound hereby, the parties hereby agree as follows:
1. Appointment and Agreement of Escrow Agent. The Purchaser and the
Seller hereby appoint the Escrow Agent to serve as, and the Escrow Agent hereby
agrees to act as, escrow agent upon the terms and conditions of this Agreement.
2. Establishment of the Escrow Fund. (a) Pursuant to Section 2.04 of the
Purchase Agreement, the Purchaser shall deliver to the Escrow Agent on the date
hereof the Escrow Amount. The Escrow Agent shall hold the Escrow Amount and
all interest and other amounts earned thereon (the "Escrow Fund") in escrow
pursuant to this Agreement.
<PAGE> 141
2
(b) Each of the Purchaser and the Seller confirms to the Escrow Agent and
to each other that the Escrow Fund is free and clear of all Encumbrances except
as may be created by this Agreement and the Purchase Agreement.
3. Distributions from the Escrow Fund. (a) Upon the satisfaction or
waiver of all conditions to the Closing set forth in Article VI of the Purchase
Agreement, and upon receipt by the Purchaser of the stock certificates
evidencing the Shares as contemplated by Section 2.05 of the Purchase
Agreement, the Purchaser shall notify the Escrow Agent in writing to such
effect, and the Escrow Agent shall, as promptly as practicable after its
receipt of such notice, liquidate all investments in the Escrow Fund and pay in
full to the Seller at the Closing in immediately available funds all such
amounts as shall be received upon the liquidation of such investments (and any
and all other amounts then on deposit in the Escrow Fund).
(b) Upon the termination of the Purchase Agreement, the Seller or the
Purchaser shall notify the Escrow Agent in writing to such effect, and the
Escrow Agent shall, as promptly as practicable after its receipt of such
notice, liquidate all investments in the Escrow Fund and pay in full to the
Purchaser in immediately available funds all such amounts as shall be received
upon the liquidation of such investments (and any and an other amounts then on
deposit in the Purchaser Escrow Fund).
4. Maintenance of the Escrow Fund; Termination of the Escrow Fund. (a)
The Escrow Agent shall continue to maintain the Escrow Fund until the
earlier of (i) the time at which the Escrow Fund is disbursed in accordance
with Section 3 and (ii) the termination of this Agreement.
(b) The Escrow Agent shall invest and reinvest moneys on deposit in the
Escrow Fund, unless joint written notice to the contrary is received from the
Seller and the Purchaser, in any combination of the following: (a) readily
marketable direct obligations of the Government of the United States or any
agency or instrumentality thereof or readily marketable obligations
unconditionally guaranteed by the full faith and credit of the Government of
the United States, (b) insured certificates of deposit of, or time deposits
with, any commercial bank that is a member of the Federal Reserve System and
which issues (or the parent of which issues) commercial paper rated as
described in clause (c), is organized under the laws of the United States or
any State thereof and has combined capital and surplus of at least $1 billion
or (c) commercial paper in an aggregate amount of no more than $1,000,000 per
issuer outstanding at any time, issued by any corporation organized under the
laws of any State of the United States, rated at least "Prime-1" (or the then
equivalent grade) by Moody's Investors Services, Inc. or "A-1" (or the then
equivalent grade) by Standard & Poors Ratings Group.
<PAGE> 142
3
5. Assignment; Successors. This Agreement may not be assigned by
operation of Law or otherwise without the express written consent of the other
parties hereto (which consent may be granted or withheld in the sole discretion
of such other parties); provided, however, that the Purchaser may, without the
consent of the other parties, assign this Agreement prior to the Closing to
SCANA Corporation or to a subsidiary controlled by SCANA Corporation to which
the Purchaser has assigned any of its rights under the Purchase Agreement, but
no such assignment shall relieve the Purchaser of any of its obligations under
this Agreement. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their permitted assigns.
6. Escrow Agent. (a) Except as expressly contemplated by this
Agreement or by joint written instructions from the Purchaser and the Seller,
the Escrow Agent shall not sell, transfer or otherwise dispose of in any manner
all or any portion of the Escrow Fund, except pursuant to an order of a court
of competent jurisdiction.
(b) The duties and obligations of the Escrow Agent shall be determined
solely by this Agreement, and the Escrow Agent shall not be liable except for
the performance of such duties and obligations as are specifically set forth in
this Agreement.
(c) In the performance of its duties hereunder, the Escrow Agent shall be
entitled to rely upon any document, instrument or signature believed by it in
good faith to be genuine and signed by any party hereto or an authorized
officer or agent thereof, and shall not be required to investigate the truth
or accuracy of any statement contained in any such document or instrument.
The Escrow Agent may assume that any Person purporting to give any notice in
accordance with the provisions of this Agreement has been duly authorized to
do so.
(d) The Escrow Agent shall not be liable for any error of judgment, or
any action taken, suffered or omitted to be taken, hereunder except in the case
of its gross negligence, bad faith or willful misconduct. The Escrow Agent may
consult with counsel of its own choice and shall have full and complete
authorization and protection for any action taken or suffered by it hereunder
in good faith and in accordance with the opinion of such counsel.
(e) The Escrow Agent shall have no duty as to the collection or protection
of the Escrow Fund or income thereon, nor as to the preservation of any rights
pertaining thereto, beyond the safe custody of any such property actually in
its possession.
(f) As compensation for its services to be rendered under this Agreement,
for each year or any portion thereof, the Escrow Agent shall receive a fee in
the amount specified in Schedule A to this Agreement and shall be reimbursed
upon request for all expenses, disbursements and advances, including reasonable
fees of outside counsel, if any,
<PAGE> 143
4
incurred or made by it in connection with the preparation of this Agreement and
the carrying out of its duties under this Agreement. All such fees and
expenses shall be the responsibility of the Seller.
(g) The Seller shall reimburse and indemnify the Escrow Agent for, and
hold it harmless against, any loss, liability or expense, including, without
limitation, reasonable attorneys' fees, incurred without gross negligence, bad
faith or willful misconduct on the part of the Escrow Agent arising out of, or
in connection with the acceptance of, or the performance of, its duties and
obligations under this Agreement; provided that the Purchaser shall reimburse
and indemnify the Escrow Agent for, and hold it harmless against, any such
loss, liability or expense incurred as a result of gross negligence, bad faith
or willful misconduct on the part of the Purchaser.
(h) The Escrow Agent may at any time resign by giving twenty Business
Days' prior written notice of resignation to the Seller and the Purchaser. The
Seller and the Purchaser may at any time jointly remove the Escrow Agent by
giving ten Business Days' prior written notice signed by each of them to the
Escrow Agent. If the Escrow Agent shall resign or be removed, a successor
Escrow Agent, which shall be a bank or trust company having assets in excess of
$2 billion, shall be appointed by the Seller and the Purchaser by written
instrument executed by the Seller and the Purchaser and delivered to the Escrow
Agent and to such successor Escrow Agent and, thereupon, the resignation or
removal of the predecessor Escrow Agent shall become effective and such
successor Escrow Agent, without any further act, deed or conveyance, shall
become vested with all right, title and interest to all cash and property held
hereunder of such predecessor Escrow Agent, and such predecessor Escrow Agent
shall, on the written request of the Seller, the Purchaser or the successor
Escrow Agent, execute and deliver to such successor Escrow Agent all the right,
title and interest hereunder in and to the Escrow Fund of such predecessor
Escrow Agent and all other rights hereunder of such predecessor Escrow Agent.
If no successor Escrow Agent shall have been appointed within twenty Business
Days of a notice of resignation by the Escrow Agent, the Escrow Agent's sole
responsibility shall thereafter be to hold the Escrow Fund until the earlier of
its receipt of designation of a successor Escrow Agent, a joint written
instruction by the Seller and the Purchaser and termination of this Agreement
in accordance with its terms.
7. Termination. This Escrow Agreement shall terminate on the date on
which there is no property remaining in the Escrow Fund.
8. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt
<PAGE> 144
5
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 8):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Telecopy: (202) 637-5910
Attention: Kimberley E. Thompson, Esq.
(b) if to the Purchaser:
MPX Systems, Inc.
c/o SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: (803) 733-2887
Attention: Kevin Marsh
with a copy (which shall not constitute notice) to:
McNair Law Firm, P.A.
1301 Gervais Street
Columbia, South Carolina 29201
Telecopy: (803) 376-2277
Attention: John W. Currie, Esq.
<PAGE> 145
6
(c) if to the Escrow Agent, to:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Telecopy:
-----------------------------
Attention:
----------------------------
9. Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the
meaning or interpretation of this Agreement.
10. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other terms and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic and legal substance of
the actions contemplated by this Agreement is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the actions contemplated by this Agreement are
consummated as originally contemplated to the greatest extent possible.
11. Entire Agreement. This Agreement and the Purchase Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior agreements and undertakings, both
written and oral, among the Seller, the Purchaser and the Escrow Agent with
respect to the subject matter hereof.
12. No Third Party Beneficiaries. This Agreement is for the sole benefit
of the parties hereto and their permitted assigns and nothing herein, express
or implied, is intended to or shall confer upon any other Person any legal or
equitable right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement.
13. Amendment. This Agreement may not be amended or modified except (a)
by an instrument in writing signed by, or on behalf of, the Seller, the
Purchaser and the Escrow Agent or (b) by a waiver in accordance with Section
14 of this Agreement.
14. Waiver. Any party hereto may (i) extend the time for the performance
of any obligation or other act of any other party hereto or (ii) waive
compliance with any agreement or condition contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. Any
<PAGE> 146
7
waiver of any term or condition shall not be construed as a waiver of any
subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
15. Governing Law. This Agreement shall be governed by the laws of the
State of New York.
16. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
when taken together shall constitute one and the same agreement.
<PAGE> 147
8
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
INTERCEL, INC.
By
----------------------------------
Title:
MPX SYSTEMS, INC.
By
----------------------------------
Title:
[ESCROW AGENT]
By
----------------------------------
Title:
<PAGE> 148
SCHEDULE A
[ESCROW AGENT FEES]
<PAGE> 149
ANNEX I
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES
AND RELATIVE, PARTICIPATING OR OTHER RIGHTS, AND THE
QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES B CONVERTIBLE PREFERRED STOCK
($0.01 Par Value)
OF
INTERCEL, INC.
-----------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
-----------------
INTERCEL, INC., a Delaware corporation (the "Corporation"), does hereby
certify that the following resolutions were duly adopted by the Board of
Directors of the Corporation pursuant to authority conferred upon the Board of
Directors by Article FOURTH of the Certificate of Incorporation of the
Corporation, which authorizes the issuance of up to 1,000,000 shares of
preferred stock, at a meeting of the Board of Directors duly held on
( ], 1996:
RESOLVED, that the issue of a series of preferred stock, $0.01 par value,
of the Corporation is hereby authorized and the designation, powers,
preferences and relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, in addition to those set
forth in the Certificate of Incorporation of the Corporation, are hereby fixed
as follows:
Section (1) Number of Shares and Designation. 100,000 shares of the
preferred stock, $0.01 par value, of the Corporation are hereby
constituted as a series of the preferred stock designated as Series B
Convertible Preferred Stock (the "Series B Preferred Stock"). Without
the consent of the then current holders of shares of Series B Preferred
Stock as provided for herein, the number of shares of Series B Preferred
Stock may not be increased and may not be decreased below the number of
then currently outstanding shares of Series B Preferred Stock.
<PAGE> 150
2
Section (2) Definitions. For purposes of the Series A Preferred Stock,
the following terms shall have the meanings indicated:
"Board of Directors" shall mean the board of directors of the
Corporation or any committee authorized by such Board of Directors to
perform any of its responsibilities with respect to the Series B Preferred
Stock.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law or executive order to close.
"Common Stock" shall mean the Common Stock of the Corporation, par
value $0.01 per share.
"Conversion Price" shall mean the conversion price per share of Common
Stock into which the Series B Preferred Stock is convertible, as such
Conversion Price may be adjusted pursuant to Section (7). The initial
Conversion Price shall be $16.50 (equivalent to the rate of 45.4545 shares
of Common Stock for each share of Series B Preferred Stock).
"Current Market Price" shall mean, as of a particular date, the
average of the high bid and low asked prices per share of Common Stock in
the over the-counter market, as reported by the NASDAQ Stock Market or
such other system then in use, or such other exchange or inter-dealer
quotation system on which the Common Stock is principally traded or
authorized to be quoted.
"Issue Date" shall mean the first date on which shares of Series B
Preferred Stock are issued.
"NASDAQ Stock Market" shall mean the National Market System of the
National Association of Securities Dealers, Inc. Automated Quotation
System.
"Person" shall mean any individual, firm, partnership, corporation or
other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Securities" shall have the meaning set forth in paragraph (d) (iii)
of Section (7).
<PAGE> 151
3
"Series A Preferred Stock" shall mean the series of preferred stock,
$0.01 par value, of the Corporation designated as Series A Convertible
Preferred Stock.
"Subsidiaries" shall mean any and all corporations, partnerships,
limited liability companies, joint ventures, associations and other
entities controlled by the Corporation directly or indirectly through one
or more intermediaries.
"Trading Day" means a day on which the NASDAQ Stock Market, or such
other exchange or inter-dealer quotation system on which the Common Stock
is principally traded or authorized to be quoted, is open for the action of
business.
"Transaction" shall have the meaning set forth in paragraph (e) of
Section (7).
"Transfer Agent" means such agent or agents of the Corporation as may
be designated by the Board of Directors of the Corporation as the transfer
agent for the Series B Preferred Stock.
Section (3) Dividends. (a) The holders of shares of the Series B Preferred
Stock shall be entitled to receive, when and if declared by the Board of
Directors out of funds legally available therefor, dividends in an amount per
share of Series B Preferred Stock equal to the dividends payable on the number
of shares of Common Stock into which one share of Series B Preferred Stock is
then convertible, determined as of the date fixed for determining holders of
shares of Common Stock entitled to receive such dividends. Each such dividend
shall be payable in arrears to the holders of record of shares of the Series B
Preferred Stock, as they appear on the stock records of the Corporation at the
close of business on such record dates, not more than 60 days preceding the
payment dates thereof, as shall be fixed by the Board of Directors.
(b) Except as provided in Section 5(a), holders of shares of Series B
Preferred Stock called for redemption on a redemption date between a dividend
payment record date and the dividend payment date shall not be entitled to
receive the dividend payable on such dividend payment date.
(c) So long as any shares of the Series B Preferred Stock are outstanding,
no dividends shall be declared or paid or set apart for payment on any class or
series of stock of the Corporation ranking, as to dividends, on a parity with
the Series B Preferred Stock, for any period, nor shall any shares ranking on a
parity with the
<PAGE> 152
4
Series B Preferred Stock be redeemed or purchased by the Corporation or any
Subsidiary, unless dividends declared and paid on the Common Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for such payment on the Series B Preferred Stock
in accordance with paragraph (a) of this Section (3).
Section (4) Liquidation Preference. (a) In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
before any payment or distribution of the assets of the Corporation (whether
capital or surplus) shall be made to or set apart for the holders of Common
Stock or any other series or class or classes of stock of the Corporation
ranking junior to the Series B Preferred Stock, upon liquidation, dissolution
or winding up, the holders of the shares of Series B Preferred Stock shall be
entitled to receive $750.00 per share plus an amount equal to all dividends
declared and unpaid thereon to the date of final distribution to such holders;
thereafter, such holders shall be entitled to share ratably with the holders of
the shares of Common Stock as provided in paragraph (b) of this Section (4).
If, upon any liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation, or proceeds thereof, distributable among the holders
of the shares of Series A Preferred Stock, Series B Preferred Stock and any
other shares of stock ranking, as to liquidation, dissolution or winding up, on
a parity with the Series B Preferred Stock, shall be insufficient to pay in
full the preferential amount aforesaid and liquidating payments in respect
thereof, then such assets, or the proceeds thereof, shall be distributed among
the holders of shares of Series A Preferred Stock, Series B Preferred Stock
and any such other stock ratably in accordance with the respective amounts
which would be payable on such shares of Series A Preferred Stock, Series B
Preferred Stock and any such other stock if all amounts payable thereon were
paid in full. For the purposes of this Section (4), (i) a consolidation or
merger of the Corporation with one or more corporations, (ii) a sale or
transfer of all or substantially all of the Corporation's assets or (iii) a
statutory share exchange shall not be deemed to be a liquidation, dissolution
or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or class
or classes of stock ranking on a parity with or prior to Series B Preferred
Stock, upon any liquidation, dissolution or winding up of the Corporation,
after payment shall have been made in full to the holders of Series B Preferred
Stock, as provided in paragraph (a) of this Section (4), holders of shares of
Series B Preferred Stock shall be entitled to share ratably with holders of
shares of Common Stock and any other class or series entitled to participate
with the Common Stock in the event of liquidation, dissolution or winding up,
in any and all assets remaining to be paid or distributed, such that
distributions shall be made in respect of each share of Series B Preferred
Stock in an amount equal to the distributions made in respect of the number
<PAGE> 153
5
of shares of Common Stock into which such share of Series B Preferred Stock
is then convertible.
Section (5) Redemption at the Option of the Corporation. (a) Series B
Preferred Stock may not be redeemed by the Corporation prior to the fifth
anniversary of the Issue Date. After the fifth anniversary of the Issue Date,
the Corporation, at its option, may redeem the shares of Series B Preferred
Stock, in whole or in part for an aggregate redemption price of $750.00 per
share plus an amount per share equal to declared and unpaid dividends, if any,
to the date fixed for redemption, out of funds legally available therefor, at
any time or from time to time, subject to the notice provisions and provisions
for partial redemption described below, provided, however, that the Corporation
must redeem the shares of Series A Preferred Stock and the shares of Series B
Preferred Stock on a pro rata basis.
(b) In the event the Corporation shall redeem shares of Series A Preferred
Stock and Series B Preferred Stock, notice of such redemption shall be given by
first class mail, postage prepaid, mailed not less than 20 nor more than 60
days prior to the redemption date, to each holder of record of the shares to be
redeemed, at such holder's address as the same appears on the stock records of
the Corporation, which notice shall be unconditional and in irrevocable. Each
such notice shall state: (1) the redemption date; (2) the number of shares of
Series A Preferred Stock and Series B Preferred Stock to be redeemed and, if
less than all the shares held by such holder are to be redeemed, the number of
such shares to be redeemed from such holder; (3) the redemption price; (4) the
place or places where certificates for such shares are to be surrendered for
payment of the redemption price; and (5) the then current conversion price.
Notice having been mailed as aforesaid, from and after the redemption date
(unless default shall be made by the Corporation in providing money for the
prompt payment of the redemption price), (i) the shares of the Series B
Preferred Stock so called for redemption shall no longer be deemed to be
outstanding, and (ii) all rights of the holders thereof as stockholders of the
Corporation (except the right to receive from the Corporation the redemption
price without interest thereon after the redemption date) shall cease. If the
Corporation fails to provide money for the payment of the redemption price
within 30 days after the redemption date, the redemption price shall accrue
interest at the rate of 15% per annum.
Upon surrender in accordance with said notice of the certificates for any
such shares so redeemed (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice shall so state), such shares shall
be redeemed by the Corporation at the applicable redemption price aforesaid.
If fewer than all the outstanding shares of Series A Preferred Stock and Series
B Preferred Stock are to be redeemed, shares to be redeemed shall be selected
pro rata (as nearly as may be) by the Corporation from outstanding shares of
Series A Preferred Stock and Series B
<PAGE> 154
6
Preferred Stock not previously called for redemption. If fewer than all the
shares represented by any certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the holder thereof.
Section (6) Shares to be Retired. All shares of Series B Preferred Stock
purchased or redeemed by the Corporation or converted shall be retired and
canceled and shall be restored to the status of authorized but unissued shares
of preferred stock, without designation as to series.
Section (7) Conversion. Holders of shares of Series B Preferred Stock
shall have the right to convert all or a portion of such shares into shares of
Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section (7), a holder of shares of Series B Preferred Stock shall have the
right, at his, her or its option, at any time after the fourth anniversary of
the Issue Date, to convert such shares, in whole or in part, into the number of
fully paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing the
aggregate liquidation preference of such shares by the Conversion Price and by
surrender of such shares so to be converted by the holder thereof, such
surrender to be made in the manner provided in paragraph (b) of this Section
(7); provided, however, that the right to convert shares called for redemption
pursuant to Section (5) shall terminate at the close of business on the date
fixed for such redemption, unless the Corporation shall default in making
prompt payment of the amount payable upon such redemption. Any share of Series
B Preferred Stock may be converted, at the request of its holder, in part into
Common Stock. If a part of a share of Series B Preferred Stock is converted,
then the Corporation will convert such share into the requested shares of
Common Stock (subject to paragraph (c) of this Section (7)) and issue a
fractional share of Series B Preferred Stock evidencing the remaining interest
of such holder.
(b) In order to exercise the conversion right, the holder of each share of
Series B Preferred Stock to be converted shall surrender the certificate
representing such share, duly endorsed or assigned to the Corporation or in
blank, at the office of the Transfer Agent or, if no Transfer Agent has
been appointed by the Corporation, at the principal office of the Corporation,
accompanied by written notice to the Corporation that the holder thereof elects
to convert its shares of Series B Preferred Stock or a specified portion
thereof. Unless the shares issuable on conversion are to be issued in the same
name as the name in which such share of Series B Preferred Stock is registered,
each share surrendered for conversion shall be accompanied by instruments of
transfer, in form satisfactory to the Corporation, duly executed by the holder
or such holder's duly authorized attorney and an amount sufficient to pay any
<PAGE> 155
7
transfer or similar tax (or evidence reasonably satisfactory to the Corporation
demonstrating that such taxes have been paid).
Holders of shares of Series B Preferred Stock at the close of business on
a dividend payment record date shall be entitled to receive the dividend
payable on such shares (except that holders of shares called for redemption on
a redemption date between such record date and the dividend payment date shall
not be entitled to receive such dividend on such dividend payment date) on the
corresponding dividend payment date notwithstanding the conversion thereof
following such dividend payment record date and prior to such dividend payment
date.
As promptly as practicable after the surrender of certificates for shares
of Series B Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver at such office to such holder, or on his, her or its written order, (i)
a certificate or certificates for the number of full shares of Common Stock
issuable upon the conversion of such shares in accordance with the provisions
of this Section (7), (ii) if less than the full number of shares of Series B
Preferred Stock evidenced by the surrendered certificates is being converted, a
new certificate or certificates, of like tenor, for the number of shares
evidenced by such surrendered certificates less the number of shares being
converted, and (iii) any fractional interest in respect of a share of Common
Stock arising upon such conversion shall be settled as provided in paragraph
(c) of this Section (7).
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which the certificates for shares of
Series B Preferred Stock shall have been surrendered and such notice received
by the Corporation as aforesaid, and the person or persons in whose name or
names any certificate or certificates for shares of Common Stock shall be
issuable upon such conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such time on such date
and such conversion shall be at the Conversion Price in effect at such time on
such date, unless the stock transfer books of the Corporation shall be closed
on that date, in which event such person or persons shall be deemed to have
become such holder or holders of record at the close of business on the next
succeeding day on which such stock transfer books are open, but such conversion
shall be at the Conversion Price in effect on the date upon which such shares
shall have been surrendered and such notice received by the Corporation. All
shares of Common Stock delivered upon conversion of the Series B Preferred
Stock shall upon delivery be duly and validly issued and fully paid and
nonassessable.
(c) No fractional shares or scrip representing fractions of shares of
Common Stock shall be issued upon conversion of the Series B Preferred Stock.
Instead of any fractional interest in a share of Common Stock which would
otherwise
<PAGE> 156
8
be deliverable upon the conversion of a share of Series B Preferred Stock, the
Corporation shall pay to the holder of such share an amount in cash (computed
to the nearest cent) equal to such fraction of a share multiplied by the
Current Market Price of one share of Common Stock on the Trading Day
immediately preceding the date of conversion. If more than one share shall be
surrendered for conversion at one time by the same holder, the number of full
shares of Common Stock issuable upon conversion thereof shall be computed on
the basis of the aggregate number of shares of Series B Preferred Stock so
surrendered.
(d) The Conversion Price shall be adjusted from time to time as
follows:
(i) In case the Corporation shall after the Issue Date (A)
pay a dividend or make a distribution on its Common Stock in
shares of its Common Stock, (B) subdivide its outstanding Common
Stock into a greater number of shares, (C) combine its outstanding
Common Stock into a smaller number of shares or (D) issue any
shares of capital stock by reclassification of its Common Stock,
the Conversion Price in effect immediately prior thereto shall be
adjusted so that the holder of any share of Series B Preferred
Stock thereafter surrendered for conversion shall be entitled to
receive the number of shares of Common Stock of the Corporation
which such holder would have owned or have been entitled to
receive after the happening of any of the events described above
had such share of Series B Preferred Stock been converted
immediately prior to the happening of such event or the record
date therefor, whichever is earlier. An adjustment made pursuant
to this subparagraph (i) shall become effective immediately after
the close of business on the record date in the case of a dividend
or distribution (except as provided in paragraph (h) below) and
shall become effective immediately after the close of business on
the record date in the case of a subdivision, combination or
reclassification.
(ii) In case the Corporation shall issue after the Issue Date
(a) rights or warrants to all holders of Common Stock entitling
them (for a period expiring within 180 days after the record date
mentioned below) to subscribe for or purchase Common Stock at a
price per share less than the Conversion Price at the record date
for the determination of shareholders entitled to receive such
rights or warrants or (b) shares of Common Stock or securities
exercisable for (including rights or warrants other than those
referred to in clause (a) above and subparagraph (iii) below) or
exchangeable or convertible into shares of Common Stock at a price
per share (or having an exercise, exchange or conversion price per
share) less than the current Conversion Price (other than
securities issued in a transaction in which a pro rata share of
such securities have been reserved by the Corporation for
distribution to the holders of Series B Preferred Stock upon
conversion), then in each such case
<PAGE> 157
9
the Conversion Price in effect immediately prior thereto shall be
adjusted to equal the price determined by multiplying (I) the
Conversion Price in effect immediately prior to the date of
issuance of such rights, warrants or shares of Common Stock (or
securities exercisable for or exchangeable or convertible into
shares of Common Stock) by (II) a fraction, the numerator of which
shall be the sum of (A) the number of shares of Common Stock
outstanding on the date of issuance of such rights, warrants or
shares of Common Stock (or securities exercisable for or
exchangeable or convertible into shares of Common Stock) (without
giving effect to any such issuance) and (B), in the case of (a)
above, the number of shares which the aggregate proceeds from the
exercise of such rights or warrants for Common Stock or, in the
case of (b) above, the number of shares which the aggregate
consideration receivable by the Corporation for the total number of
shares of Common Stock (or securities exercisable for or
exchangeable or convertible into shares of Common Stock) so issued
would purchase at the Conversion Price in effect immediately prior
to the date of issuance, and the denominator of which shall be the
sum of (A) the number of shares of Common Stock outstanding on the
date of issuance of such rights, warrants or shares of Common Stock
(or securities exercisable for or exchangeable or convertible into
Common Stock) (without giving effect to any such issuance) and (B),
in the case of clause (a) above, the number of additional shares of
Common Stock offered for subscription or purchase or, in the case
of clause (b) above, the number of shares of Common Stock so
issued or into which the exercisable, exchangeable or convertible
securities may be exercised, exchanged or converted. Such
adjustment shall be made successively whenever any such rights,
warrants or shares of Common Stock (or securities exercisable for
or exchangeable or convertible into Common Stock) are issued, and
shall become effective immediately after such record date or, in
the case of the issuance of Common Stock, after the date of
issuance thereof (or in the case of securities exercisable for or
exchangeable or convertible into shares of Common Stock, the date
on which holders may first exercise, exchange or convert the same
in accordance with the respective terms thereof). In determining
whether any rights or warrants entitle the holders of Common Stock
to subscribe for or purchase shares of Common Stock at less than
the Conversion Price in effect immediately prior to the date of
such issuance, and in determining the aggregate offering price of
shares of Common Stock (or securities exercisable for or
exchangeable or convertible into shares of Common Stock), there
shall be taken into account any net consideration received or
receivable by the Corporation upon issuance and upon exercise of
such rights or warrants or upon issuance of shares of Common Stock
(or securities exercisable for or exchangeable or convertible into
shares of Common Stock), the value of such consideration, if other
than cash, to be determined by the Board of Directors in good faith
or, if higher,
<PAGE> 158
10
the aggregate exercise, exchange or conversion price set forth in
such exercisable, exchangeable or convertible securities. The
aggregate consideration received by the Corporation in connection
with the issuance of shares of Common Stock or of rights,
warrants or securities exercisable for or exchangeable or
convertible into shares of Common Stock shall be deemed to be
equal to the sum of the aggregate net offering price of all such
securities plus the minimum aggregate amount, if any, payable
upon the exercise of such rights or warrants and conversion of
any such exercisable, exchangeable or convertible securities into
shares of Common Stock.
(iii) In case the Corporation shall distribute to all
holders of its Common Stock any shares of capital stock of the
Corporation (other than Common Stock) or evidences of its
indebtedness or assets (other than a regular cash dividend that
the Board of Directors determines, in good faith, can be
maintained by the Corporation for at least four consecutive
periods covering not less than one year and that the Board of
Directors intends to maintain for at least four consecutive
periods covering not less than one year, out of profits or
surplus) or rights or warrants to subscribe for or purchase any
of its securities (excluding those referred to in subparagraph
(ii)(a) above) (any of the foregoing being hereinafter in this
subparagraph (iii) called the "Securities"), then in each such
case, unless the Corporation elects to reserve shares or other
units of such Securities for distribution to the holders of the
Series B Preferred Stock upon the conversion of the shares of
Series B Preferred Stock so that any such holder converting
shares of Series B Preferred Stock will receive upon such
conversion, in addition to the shares of the Common Stock to
which such holder is entitled, the amount and kind of such
Securities which such holder would have received if such holder
had, immediately prior to the record date for the distribution of
the Securities, converted his or her shares of Series B Preferred
Stock into Common Stock (such election to be based upon a
determination by the Board of Directors that such reservation
will not materially adversely affect the interests of any holder
of Series B Preferred Stock in any such reserved Securities), the
Conversion Price shall be adjusted so that the same shall equal
the price determined by multiplying (I) the Conversion Price in
effect immediately prior to the date of such distribution by (II)
a fraction, the numerator of which shall be the Current Market
Price per share of the Common Stock on the record date mentioned
below less the fair market value (as determined by the Board of
Directors, whose determination shall, if made in good faith, be
conclusive) of the portion of the capital stock or assets or
evidences of indebtedness so distributed or of such rights or
warrants applicable to one share of Common Stock, and the
denominator of which shall be the Current Market Price per share
of the Common Stock. Such adjustment shall become effective
<PAGE> 159
11
immediately, except as provided in paragraph (h) below, after the
record date for the determination of stockholders entitled to
receive such distribution.
(iv) No adjustment in the Conversion Price shall be required
unless such adjustment would require an increase or decrease of at
least 1% in such price; provided, however, that any adjustments
which by reason of this paragraph (iv) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment; and provided further that any adjustment shall be
required and made in accordance with the provisions of this
Section (7) (other than this subparagraph (iv)) not later than such
time as may be required in order to preserve the tax-free nature
of a distribution to the holders of shares of Common Stock. All
calculations under this Section (7) shall be made to the nearest
cent (with $.005 being rounded upward) or to the nearest 1/100 of
a share (with .005 of a share being rounded upward), as the case
may be. Anything in this paragraph (d) to the contrary
notwithstanding, the Corporation shall be entitled, to the extent
permitted by law, to make such reductions in the Conversion Price,
in addition to those required by this paragraph (d), as it in its
discretion shall determine to be advisable in order that any stock
dividends, subdivision of shares, distribution of rights or
warrants to purchase stock or securities, or a distribution of
other assets (other than cash dividends) hereafter made by the
Corporation to its stockholders shall not be taxable.
(v) No adjustment in the Conversion Price shall be required
in the event of any dividend, distribution or issuance to holders
of shares of Common Stock pursuant to subparagraph (i), (ii) or
(iii) above if holders of shares of Series B Preferred Stock have
received the same dividend, distribution or issuance in accordance
with Section (3).
(e) In case the Corporation shall be a party to any transaction (including
without limitation a merger, consolidation, sale of all or substantially all of
the Corporation's assets or recapitalization of the Common Stock and excluding
any transaction as to which paragraph (d)(i) of this Section (7) applies) (each
of the foregoing being referred to as a "Transaction"), in each case as a
result of which shares of Common Stock shall be converted into the right to
receive stock, securities or other property (including cash or any combination
thereof), each share of Series B Preferred Stock which is not converted into
the right to receive stock, securities or other property in connection with
such Transaction shall thereafter be convertible into the kind and amount of
shares of stock and other securities and property receivable (including cash)
upon the consummation of such Transaction by a holder of that number of shares
or fraction thereof of Common Stock into which one share of Series B Preferred
Stock was convertible immediately prior to such Transaction. The
<PAGE> 160
12
Corporation shall not be a party to any Transaction unless the terms of such
Transaction are consistent with the provisions of this paragraph (e) and it
shall not consent or agree to the occurrence of any Transaction until the
Corporation has entered into an agreement with the successor or purchasing
entity, as the case may be, for the benefit of the holders of the Series B
Preferred Stock which will contain provisions enabling the holders of the
Series B Preferred Stock which remains outstanding after such Transaction to
convert into the consideration received by holders of Common Stock at the
Conversion Price immediately after such Transaction. The provisions of this
paragraph (e) shall similarly apply to successive Transactions.
(f) If:
(i) the Corporation shall declare a dividend (or any other
distribution) on the Common Stock (other than a regular cash dividend
that the Board of Directors determines can be maintained by the
Corporation for at least four consecutive periods covering at least one
year and that the Board of Directors intends to maintain for at least
four consecutive periods covering at least one year out of profits or
surplus); or
(ii) the Corporation shall authorize the granting to the holders
of the Common Stock of rights or warrants to subscribe for or purchase any
shares of any class or any other rights or warrants; or
(iii) there shall be any reclassification of the Common Stock
(other than an event to which paragraph (d)(i) of this Section (7)
applies) or any consolidation or merger to which the Corporation is a
party and for which approval of any stockholders of the Corporation is
required, or the sale or transfer of all or substantially all of the
assets of the Corporation,
then the Corporation shall cause to be filed with the Transfer Agent and shall
cause to be mailed to the holders of shares of the Series B Preferred Stock at
their addresses as shown on the stock records of the Corporation, as promptly
as possible, but at least 15 days prior to the applicable date specified in
clauses (A) and (B) below, a notice stating (A) the date on which a record is
to be taken for the purpose of such dividend, distribution or rights or
warrants, or, if a record is not to be taken, the date as of which the holders
of Common Stock of record to be entitled to such dividend, distribution or
rights or warrants are to be determined or (B) the date on which such
reclassification, consolidation, merger, sale or transfer is expected, that
holders of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities or other property deliverable upon such
reclassification, consolidation,
<PAGE> 161
13
merger, sale or transfer. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section (7).
(g) Whenever the Conversion Price is adjusted as herein provided, the
Corporation shall prepare a notice of such adjustment of the Conversion Price
setting forth the adjusted Conversion Price and the date on which such
adjustment becomes effective and shall promptly mail such notice of such
adjustment of the Conversion Price to the holder of each share of Series B
Preferred Stock at his, her or its last address as shown on the stock records
of the Corporation.
(h) In any case in which paragraph (d) of this Section (7) provides that
an adjustment shall become effective immediately after a record date for an
event, the Corporation may defer until the occurrence of such event (A) issuing
to the holder of any share of Series B Preferred Stock converted after such
record date and before the occurrence of such event the additional shares of
Common Stock issuable upon such conversion by reason of the adjustment required
by such event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment and (B) paying to such holder any
amount in cash in lieu of any fraction pursuant to paragraph (c) of this
Section (7).
(i) For purposes of this Section (7), the number of shares of Common Stock
at any time outstanding shall not include any shares of Common Stock then owned
or held by or for the account of the Corporation.
(j) If any action or transaction would require adjustment of the
Conversion Price pursuant to more than one paragraph of this Section (7), only
one adjustment shall be made and such adjustment shall be the amount of
adjustment which has the highest absolute value.
(k) In case the Corporation shall take any action affecting the Common
Stock other than action described in this Section (7), which in the opinion of
the Board of Directors would materially adversely affect the conversion rights
of the holders of the shares of Series B Preferred Stock, the Conversion Price
for the Series B Preferred Stock may be adjusted, to the extent permitted by
law, in such manner, if any, and at such time, as the Board of Directors may
determine to be equitable in the circumstances.
(l) The Corporation covenants that it will at all times reserve and keep
available, free from preemptive rights, out of the aggregate of its authorized
but unissued shares of Common Stock or its issued shares of Common Stock held
in its treasury, or both, for the purpose of effecting conversion of the Series
B Preferred Stock, the full number of shares of Common Stock deliverable upon
the conversion of
<PAGE> 162
14
all outstanding shares of Series B Preferred Stock not therefore converted. For
purposes of this paragraph (l), the number of shares of Common Stock which
shall be deliverable upon the conversion of all outstanding shares of Series B
Preferred Stock shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value of the shares of Common Stock
deliverable upon conversion of the Series B Preferred Stock, the Corporation
shall take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Corporation may validly and legally issue fully
paid and nonassessable shares of Common Stock at such adjusted Conversion
Price.
The Corporation shall use all reasonable efforts to list the shares of
Common Stock required to be delivered upon conversion of the Series B Preferred
Stock prior to such delivery, on the NASDAQ Stock Market or such other exchange
or interdealer quotation system on which the Common Stock is principally traded
or authorized to be quoted.
Prior to the delivery of any securities which the Corporation shall be
obligated to deliver upon conversion of the Series B Preferred Stock, the
Corporation shall use all reasonable efforts to comply with all federal and
state laws and regulations thereunder requiring the registration of such
securities with, or any approval of or consent to the delivery thereof by, any
governmental authority, and any such conversion or delivery shall be subject to
any applicable requirements of law or regulation.
(m) The Corporation shall pay any and all documentary stamp or similar
issue or transfer taxes payable in respect of the issue or delivery of shares
of Common Stock on conversion of the Series B Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issue
or delivery of shares of Common Stock in a name other than that of the holder
of the Series B Preferred Stock to be converted and no such issue or delivery
shall be made unless and until the person requesting such issue or delivery
has paid to the Corporation the amount of any such tax or has established, to
the reasonable satisfaction of the Corporation, that such tax has been paid.
Section (8) Ranking. Any class or classes of stock of the Corporation
shall be deemed to rank:
<PAGE> 163
15
(i) prior to the Series B Preferred Stock, as to dividends or
as to distribution of assets upon liquidation, dissolution or
winding up, if the holders of such class shall be entitled to the
receipt of dividends or of amounts distributable upon liquidation,
dissolution or winding up, as the case may be, in preference or
priority to the holders of Series B Preferred Stock;
(ii) on a parity with the Series B Preferred Stock, (A) as to
dividends, if such stock shall be Series A Preferred Stock or
Common Stock or if the holders of such class of stock and the
Series B Preferred Stock shall be entitled to the receipt of
dividends in proportion to their respective amounts of declared
and unpaid dividends per share, without preference or priority one
over the other, or (B) as to distribution of assets upon
liquidation, dissolution or winding up, whether or not the
redemption or liquidation prices per share thereof be different
from those of the Series B Preferred Stock, if such stock shall be
Series A Preferred Stock or if the holders of such class of stock
and the Series B Preferred Stock shall be entitled to the receipt
of amounts distributable upon liquidation, dissolution or winding
up in proportion to their respective amounts of liquidation
prices, without preference or priority one over the other; and
(iii) junior to the Series B Preferred Stock, (A) as to
dividends, if the holders of Series B Preferred Stock shall be
entitled to the receipt of dividends in preference or priority to
the holders of shares of such stock, or (B) as to distribution of
assets upon liquidation, dissolution or winding up, if such stock
shall be Common Stock or if the holders of Series B Preferred
Stock shall be entitled to receipt of amounts distributable upon
liquidation, dissolution or winding up in preference or priority
to the holders of shares of such stock.
Section (9) Voting. (a) Except as herein provided or as otherwise
from time to time required by law, holders of Series B Preferred Stock
shall have no voting rights.
(b) So long as any shares of the Series B Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds of
the shares of Series B Preferred Stock outstanding at the time given in
person or by proxy, either in writing or at any special or annual
meeting, shall be necessary to permit, effect or validate any one or more
of the following:
(i) The authorization, creation or issuance, or any increase
in the authorized or issued amount, of any class or series of
stock ranking prior to
<PAGE> 164
16
Series B Preferred Stock as to dividends or the distribution of assets
upon liquidation, dissolution or winding up;
(ii) The increase in the authorized or issued amount of Series B
Preferred Stock; or
(iii) The amendment, alteration or repeal, whether by merger,
consolidation or otherwise, of any of the provisions of the Certificate
of Incorporation of the Corporation (including any of the provisions
hereof) which would affect any right, preference or voting power of
Series B Preferred Stock or of the holders thereof; provided, however,
that any increase in the amount of authorized preferred stock or the
creation and issuance of other series of preferred stock, or any increase
in the amount of authorized shares of such series or of any other series
of preferred stock, in each case ranking on a parity with or junior to
the Series B Preferred Stock with respect to the payment of dividends and
the distribution of assets upon liquidation, dissolution or winding up,
shall not be deemed to affect such rights, preferences or voting powers.
The foregoing voting provisions shall not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of Series B Preferred Stock shall
have been redeemed or sufficient funds shall have been deposited in trust to
effect such redemption, scheduled to be consummated within 30 days after such
time.
Section (10) Record Holders. The Corporation and the Transfer Agent may
deem and treat the record holder of any shares of Series B Preferred Stock as
the true and lawful owner thereof for all purposes, and neither the Corporation
nor the Transfer Agent shall be affected by any notice to the contrary.
<PAGE> 165
17
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be made
under the seal of the Corporation and signed by [ ], its [ ],
and attested by [ ], its [ ], this [ ]day of [ ],1996.
INTERCEL, INC.
By
----------------------------
(Corporate Seal)
Attest:
By
--------------------------
<PAGE> 166
ANNEX II
REGISTRATION RIGHTS
(a) The Purchaser shall have the right at any time after the Closing to
make three requests of the Seller in writing for registration under the
Securities Act of shares of Common Stock into which Shares have been converted
or are to be converted prior to the closing of the offering pursuant to such
registration (the "Securities"): with respect to the first such request to
register under the Securities Act at least $20 million in market value of
Securities Beneficially Owned by the Purchaser (the shares subject to any such
request hereunder being referred to as the "Subject Stock"), and with each
subsequent such request being at least 6 months following the completion of the
prior offering pursuant to a registration statement with respect to the Subject
Stock which was effective until the earlier of the completion of such offering
or three months. The Seller shall use all reasonable efforts to cause the
Subject Stock to be registered under the Securities Act as soon as reasonably
practicable after receipt of a request so as to permit promptly the sale
thereof, and in connection therewith, the Seller shall prepare and file, on such
appropriate form as the Seller in its discretion shall determine, a
registration statement under the Securities Act to effect such registration.
The Seller shall use all reasonable efforts to list all Subject Stock covered
by such registration statement on any national securities exchange on which the
Common Stock is then listed or to list such Subject Stock on the National
Association of Securities Dealers, Inc. Automated Quotation System or
National Market System. The Purchaser hereby undertakes to provide all such
information and materials and take all such action as may be required in order
to permit the Seller to comply with all applicable requirements of the
Commission and to obtain any desired acceleration of the effective date of such
registration statement. Any registration statement filed at the Purchaser's
request hereunder will not count as a requested registration unless
effectiveness is maintained until the earlier of completion of the offering or
three months. Notwithstanding the foregoing, the Seller (i) shall not be
obligated to cause any special audit to be undertaken in connection with any
such registration (provided that this provision shall not relieve the Seller of
its obligation to obtain any required consents with respect to financial
statements in prior periods) and (ii) shall be entitled to postpone for a
reasonable period (not to exceed 90 days) of time the filing of any
registration statement otherwise required to be prepared and filed by the
Seller if the Seller is, at such time, either (A) conducting, or proposing to
file with the Commission within 90 days a registration statement with respect
to, an underwritten public offering for the account of the Seller of equity
securities (or securities convertible into equity securities) or is subject to
a contractual obligation not to engage in a public offering and is advised in
writing by its managing underwriter or underwriters (with a copy to the
Purchaser) that such offering would in its or their opinion be adversely
affected by the registration so requested or (B) subject to an existing
contractual obligation to its underwriters not to engage in a public offering.
Notwithstanding any other provision of this Annex II, the Seller may postpone
action under this Annex II for as long as it reasonably deems necessary (but no
longer than 90 days) if the Seller determines, in its reasonable discretion,
that effecting the registration at
<PAGE> 167
2
such time might (i) adversely affect a pending or contemplated financing,
acquisition, disposition of assets or stock, merger or other significant
transaction, or (ii) require the Seller to make public disclosure of
information the public disclosure of which at such the Seller in good faith
believes could have a significant adverse effect upon the Seller.
No securities may be registered on a registration statement requested by
the Purchaser pursuant to the first paragraph of paragraph (a) of this Annex II
without the Purchaser's express written consent, unless the amount of such
securities is subject to reduction prior to any reduction in the number of
securities originally requested by the Purchaser in the event the lead
underwriter of the related offering believes that the success of such offering
would be materially and adversely affected by inclusion of all the securities
requested to be included therein.
At any time after the Closing, if the Seller proposes to file a
registration statement under the Securities Act with respect to an offering of
its equity securities (i) for its own account (other than a registration
statement on Form S-4 or S-8 (or any substitute form that may be adopted by the
Commission)) or (ii) for the account of any holders of its securities
(including pursuant to a demand registration), then the Seller shall give
written notice of such proposed filing to the Purchaser as soon as practicable
(but in any event not less than 5 Business Days before the anticipated filing
date), and such notice shall offer the Purchaser the opportunity to register
such number of shares of Securities as the Purchaser requests. If the
Purchaser wishes to register securities of the same class or series as the
Seller or such holder, such registration shall be on the same terms and
conditions as the registration of the Seller's or such holders' securities (a
"Piggyback Registration"). Notwithstanding anything contained herein, if the
lead underwriter of an offering involving a Piggyback Registration delivers a
written opinion to the Seller that the success of such offering would be
materially and adversely affected by inclusion of all the securities requested
to be included, then the number of securities to be registered by the Purchaser
shall be reduced prior to any reduction in the number of securities originally
requested by them; provided, however, that the Seller must provide prompt
written notice of such written opinion to the Purchaser. The Purchaser shall
have the right at any time to convert its request for a Piggyback Registration
into a requested registration pursuant to the first paragraph of paragraph (a)
of this Annex II.
(b) In connection with any offering of shares of Subject Stock registered
pursuant to this Annex II, the Seller (i) shall furnish to the Purchaser such
number of copies of any prospectus (including any preliminary prospectus) as it
may reasonably request in order to effect the offering and sale of the Subject
Stock to be offered and sold, but only while the Seller shall be required under
the provisions hereof to cause the registration statement to remain current and
(ii) take such action as shall be necessary to qualify the shares covered by
such registration statement under such "blue sky" or other state securities
laws for offer and sale as the Purchaser shall reasonably request; provided,
however, that the
<PAGE> 168
3
Seller shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it shall not then be
qualified or to file any general consent to service of process in any
jurisdiction in which such a consent has not been previously filed. If
applicable, the Seller shall enter into an underwriting agreement with a
managing underwriter or underwriters selected by the Purchaser (reasonably
satisfactory to the Seller) containing representations, warranties,
indemnities and agreements then customarily included by an issuer in
underwriting agreements with respect to secondary distributions; provided,
however, that such underwriter or underwriters shall agree to use their best
efforts to ensure that the offering results in a distribution of the Subject
Stock sold in accordance with the terms of this Agreement. In connection with
any offering of Subject Stock registered pursuant to this Annex II, the Seller
shall (x) furnish to the underwriter, at the Seller's expense, unlegended
certificates representing ownership of the Subject Stock being sold in such
denominations as reasonably requested and (y) instruct any transfer agent and
registrar of the Subject Stock to release any stop transfer orders with
respect to such Subject Stock. Upon any registration becoming effective
pursuant to this Annex II, the Seller shall use all reasonable efforts to
keep such registration statement current for such period as shall be required
for the disposition of all of said Subject Stock; provided, however, that
such period need not exceed three months.
(c) The Purchaser shall pay all underwriting discounts and commissions
related to shares of Subject Stock being sold by the Purchaser and the fees
and disbursements of counsel and other advisors to the Purchaser. All other
fees and expenses in connection with the first requested registration pursuant
to the first paragraph of paragraph (a) of this Annex II, including, without
limitation, all registration and filing fees, all fees and expenses of
complying with securities or "blue sky" laws, fees and disbursements of the
Seller's counsel and accountants (including the expenses of "cold comfort"
letters required by or incident to such performance and compliance) and any
fees and disbursements of underwriters customarily paid by issuers in
secondary offerings, shall be paid by the Seller, and all such other fees and
expenses in connection with the second and third requested registration
pursuant to this Annex II shall be borne equally by the Purchaser and the
Seller; provided, however, that in the event the Purchaser fails to convert
Shares into Common Stock prior to any such offering, such that such offering
is not able to be completed, the Purchaser shall pay all such other fees and
expenses.
(d) In the case of any offering registered pursuant to this Annex II, the
Seller agrees to indemnify and hold the Purchaser, each underwriter of
Securities under such registration and each person who controls any of the
foregoing within the meaning of Section 15 of the Securities Act and the
directors and officers of the Purchaser, harmless against any and all losses,
claims, damages, liabilities or action to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, and to reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such
<PAGE> 169
4
losses, claims, damages, liabilities or actions shall arise out of or shall be
based upon (i) any untrue statement or alleged untrue statement of a material
fact contained in the registration statement relating to the sale of such
Subject Stock, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading or
(ii) any untrue statement or alleged untrue statement of a material fact
contained in any preliminary prospectus (as amended or supplemented if the
Seller shall have filed with the Commission any amendment thereof or supplement
thereto), if used prior to the effective date of such registration statement,
or contained in the prospectus (as amended or supplemented if the Seller shall
have filed with the Commission any amendment thereof or supplement thereto), or
the omission or alleged omission to state therein a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading; provided, however, that the indemnification
agreement contained in this paragraph (d) shall not apply to such losses,
claims, damages, liabilities or actions which shall arise from the sale of
Subject Stock by the Purchaser if such losses, claims, damages, liabilities or
actions than arise out of or shall be based upon any such untrue statement or
alleged untrue statement, or any such omission or alleged omission, (x) made in
reliance upon and in conformity with information furnished in writing to the
Seller by the Purchaser or any such underwriter specifically for use in
connection with the preparation of the registration statement or any
preliminary prospectus or prospectus contained in the registration statement or
any such amendment thereof or supplement thereto or (y) made in any preliminary
prospectus, and the prospectus contained in the registration statement in the
form filed by the Seller with the Commission pursuant to Rule 424(b) under
the Securities Act shall have corrected such statement or Commission and a copy
of such prospectus shall not have been sent or given to such person at or prior
to the confirmation of such sale to him.
(e) In the case of each offering registered pursuant to this Annex II,
the Purchaser and each underwriter participating therein shall agree, in the
same manner and to the same extent as set forth in paragraph (d) of this Annex
II, severally to indemnify and hold harmless the Seller and each person, if
any, who controls the Seller within the meaning of Section 15 of the Securities
Act, and the directors and officers of the Seller, and in the case of each such
underwriter, the Purchaser, each person, if any, who controls the Purchaser
within the meaning of the Securities Act and the directors, officers and
partners of the Purchaser, with respect to any statement in or ommission from
such registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or prospectus contained
in such registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid), if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Seller by the Purchaser or such underwriter specifically for use in connection
with the preparation of such registration statement or any preliminary
prospectus or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
<PAGE> 170
5
(f) Each party indemnified under paragraph (d) or (e) of this Annex II
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party to so notify an indemnifying
parry of any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such indemnified
party on account of the indemnity agreement contained in paragraph (d) or (e)
of this Annex II, unless the indemnifying party was prejudiced by such
omission, and in no event shall relieve the indemnifying party from any other
liability which it may have to such indemnified party. In case any such
action shall be brought against any indemnified party and it shall notify an
indemnifying party of the commencement thereof, the indemnifying party shall
be entitled to participate therein and, to the extent that it may desire,
jointly with any other indemnifying party similarly notified, to assume the
defense thereof, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party under
paragraph (d) or (e) of this Annex II for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof, other than reasonable costs of investigation; provided, however, that
if there exists or is reasonably likely to exist a conflict of interest that
would make it inappropriate in the judgment of the indemnified party, in its
sole and absolute discretion, for the same counsel to represent both the
indemnified party and the indemnifying party, then the indemnified party shall
be entitled to retain its own counsel, in each jurisdiction for which the
indemnified party determines counsel is required, at the expense of the
indemnifying party. No such third party claim may be settled by the
indemnifying party or the indemnified party without the prior written
consent of the other, which consent shall not be unreasonably withheld.
(g) If the indemnification provided for under paragraph (d) or (e) shall
for any reason be held by a court to be unavailable to an indemnified party
under paragraph (d) or (e) hereof in respect of any loss, claim, damage or
liability, or any action in respect thereof, then, in lieu of the amount paid
or payable under paragraph (d) or (e) hereof, the indemnified party and the
indemnifying party under paragraph (d) or (e) hereof shall contribute to the
aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection on with investigating the same),
(i) in such proportion as is appropriate to reflect the relative fault of the
Seller and the prospective seller of Securities covered by the registration
statement which resulted in such loss, claim, damage or liability, or action
in respect thereof, with respect to the statements or omissions which resulted
in such loss, claim, damage or liability, or action in respect thereof, as
well as any other relevant equitable considerations or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as shall be appropriate to reflect the relative benefits received
by the Seller and such prospective seller from the offering of the securities
covered by such registration statement. No Person guilty of fraudulent
misrepresentation (within the meaning of Section II (f) of the Securities Act)
shall be entitled
<PAGE> 171
6
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.
(h) Notwithstanding anything to the contrary contained in this Agreement,
the maximum amount of indemnifiable losses which may be recovered from an
indemnifying party arising out of or resulting from the causes enumerated in
paragraph (d) or (e) shall be an amount equal to the Purchase Price.
(i) Capitalized terms not defined in this Annex shall have the meanings
set forth in the Agreement.
<PAGE> 172
APPENDIX C
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES ACT OF 1934
For the transition period from to
-------- --------
Commission file number 01-23102
--------------------------
INTERCEL, INC.
- --------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 58-1944750
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1239 O. G. Skinner Drive, West Point, Georgia 31833
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 645-9520
-----------------------------
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
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at March 31, 1996
-----------------------------
Common Stock at $.01 par value 26,787,503 Shares
<PAGE> 173
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
INTERCEL, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $255,439,450 $ 629,739
Short-term Investments 16,995,646 -
Accounts Receivable - Net of Allowance for Doubtful Accounts 4,407,394 4,233,139
Other Current Assets 1,271,202 1,415,719
Current Portion of Deferred Income Taxes 137,095 269,817
------------ ------------
278,250,787 6,548,414
------------ ------------
PROPERTY AND EQUIPMENT, AT COST: 35,804,578 23,274,314
Less: Accumulated Depreciation (5,963,653) (5,208,269)
------------ ------------
29,840,925 18,066,045
------------ ------------
OTHER ASSETS:
Licenses 135,078,935 -
Goodwill - Net of Amortization 23,130,009 23,282,911
Investment in Powertel - 19,224,456
Investments 12,498,552 105,892
Deferred Income Taxes 1,517,252 1,404,507
Deferred Charges and Other 11,032,044 5,697,369
------------ ------------
183,256,792 49,715,135
------------ ------------
Total Assets $491,348,504 $ 74,329,594
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable - Trade $ 1,878,797 $ 811,486
Accounts Payable - Related Parties 62,600 72,382
Advance Billings and Customer Deposits 866,523 828,220
Accrued Expenses and Other Current Liabilities 3,544,465 3,860,613
------------ ------------
6,352,385 5,572,701
------------ ------------
LONG TERM OBLIGATIONS:
12% Senior Discount Notes due February 2006 197,894,713 -
Credit Facility - 24,601,514
ITC Holding Company - 3,500,000
Other 399,997 919,189
------------ ------------
198,294,710 29,020,703
------------ ------------
DEFERRED REVENUE 389,515 389,515
------------ ------------
COMMITMENTS AND CONTINGENCIES - -
DEFERRED TAXES - -
MINORITY INTEREST IN SUBSIDIARY 2,772,516 2,674,159
------------ ------------
STOCKHOLDERS' EQUITY:
Common Stock 268,397 100,116
Warrants Outstanding 6,092,433 -
Paid-in Capital 272,471,494 32,437,733
Retained Earnings 5,381,027 4,845,288
Deferred Compensation (329,583) (370,781)
Treasury Stock (344,390) (339,840)
------------ ------------
283,539,378 36,672,516
------------ ------------
Total Liabilities and Stockholders' Equity $491,348,504 $ 74,329,594
============ ============
</TABLE>
The accompanying condensed notes to financial statements
are an integral part of these statements.
2
<PAGE> 174
FINANCIAL STATEMENTS - Continued
INTERCEL, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1996 1995
------------ -----------
<S> <C> <C>
REVENUES AND SALES
Monthly Access Revenue $ 3,428,493 $ 2,761,357
Airtime Revenue 1,316,514 1,011,364
Roaming Revenue 1,502,985 1,087,613
Toll Revenue 578,373 411,601
Installation/Connection Revenue 80,816 97,143
Other Revenue 89,526 49,582
------------ -----------
Total Service Revenues 6,996,707 5,418,660
Equipment Sales 853,470 859,779
------------ -----------
Total Revenues and Sales 7,850,177 6,278,439
------------ -----------
OPERATING EXPENSES
Cost of Services 684,031 523,657
Cost of Equipment Sold 693,608 710,529
Operations 1,204,398 754,187
Selling, General and Administrative 3,083,610 2,030,225
Depreciation and Amortization 1,612,215 1,116,550
------------ -----------
Total Operating Expenses 7,277,862 5,135,148
------------ -----------
OPERATING INCOME 572,315 1,143,291
------------ -----------
OTHER (INCOME) EXPENSE
Interest (Income) Expense (739,178) 299,322
Loss on Equity Investments 34,158 0
Minority Interest in Loss of Cellular Partnership (79,104) (55,101)
Miscellaneous (Income) Expense 348,785 (363,641)
------------ -----------
Total Other (Income) Expense (435,339) (119,420)
------------ -----------
INCOME BEFORE INCOME TAXES 1,007,654 1,262,711
Income Tax Expense 471,915 539,785
------------ -----------
NET INCOME $ 535,739 $ 722,926
============ ===========
NET INCOME PER SHARE $ 0.03 $ 0.07
============ ===========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 21,058,567 10,173,584
============ ===========
</TABLE>
The accompanying condensed notes to financial statements
are an integral part of these statements.
3
<PAGE> 175
FINANCIAL STATEMENTS - Continued
INTERCEL, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1996 1995
-------------- ----------
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ 535,739 $ 722,926
Adjustments to Reconcile Net Income to
Net Cash Provided By Operating Activities -
Minority Interest in Loss of Cellular Partnership (79,104) (55,101)
Depreciation 730,961 625,097
Amortization 881,254 491,453
Bond Accretion, Net of Amount Capitalized 1,327,677 0
Other 34,159 0
Deferred Compensation - Restricted Stock 41,198 0
Deferred Taxes, Net 19,977 235,736
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable (174,255) (297,191)
Decrease in Other Current Assets 206,290 7,653
Increase in Deferred Charges (697,008) (586,420)
Increase (Decrease) in Current Liabilities 299,822 (427,971)
-------------- ----------
Net Cash Provided By Operating Activities 3,126,710 716,182
-------------- ----------
Cash Flow From Investing Activities:
Capital Expenditures (10,873,688) (574,956)
Investment in Marketable Securities (29,388,306) 0
Cash Acquired in Powertel Acquisition 15,378,599 0
Investment in Powertel 0 (1,173,314)
Other Investments 0 1,804,712
-------------- ----------
Net Cash (Used) Provided By Investing Activities (24,883,395) 56,442
-------------- ----------
Cash Flow From Financing Activities:
Proceeds from Sale of Stock, Net 111,445,816 4,099
Proceeds from Issuance of Bonds, Net 192,997,526 0
Capital Investment in Partnership - Minority Partner 177,461 0
Proceeds from Credit Facility 0 1,173,314
Repayments of Long-term Obligations (28,101,514) (1,504,302)
Other 47,107 0
-------------- ----------
Net Cash Provided (Used) By Financing Activities 276,566,396 (326,889)
-------------- ----------
Net Increase in Cash 254,809,711 445,735
Cash and Cash Equivalents at Beginning of Period 629,739 506,854
-------------- ----------
Cash and Cash Equivalents at End of Period $ 255,439,450 $ 952,589
============== ==========
Supplemental Cash Flow Information:
Cash paid during the quarter for interest $ 391,454 $ 126,070
============== ==========
Cash paid during the quarter or income taxes $ 13,343 $ 160,000
============== ==========
Noncash Investing and Financing Activities:
Stock Issued for Acquisition of Powertel $ 130,040,997 $ 0
============== ==========
</TABLE>
The accompanying condensed notes to financial statements
are an integral part of these statements.
4
<PAGE> 176
FINANCIAL STATEMENTS - Continued
INTERCEL, INC. & SUBSIDIARIES
CONDENSED NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to Article 10
of Regulation S-X of the Securities and Exchange Commission. The
accompanying unaudited condensed consolidated financial statements reflect,
in the opinion of management, all adjustments necessary to achieve a fair
statement of financial position and results for the interim periods
presented. All such adjustments are of a normal and recurring nature. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
2. Certain prior period amounts have been reclassified to conform with the
current period presentation.
3. On February 7, 1996, the Company consummated the following transactions:
(i) pursuant to a Business Combination Agreement dated August 23, 1995,
among the Company, Powertel and the owners of Powertel, such owners (other
than the Company) exchanged their ownership interests in Powertel for an
aggregate of 9,686,410 shares of the Company's common stock in a private
placement (the "Powertel Combination"), (ii) the Company received
approximately $110.1 million of net proceeds from the sale of 7,124,322
shares of its Common Stock (which includes 124,322 shares purchased in
March 1996 under the underwriters' overallotment option) in a public
offering (the "Stock Offering"); and (iii) the Company received
approximately $192.2 million of net proceeds from the sale of 35,747 units,
consisting in the aggregate of $357,470,000 principal amount at maturity of
the Company's 12% Senior Discount Notes due February 2006 (the "12% Notes")
and 1,143,904 warrants (the "Warrants") to purchase an equal number of
shares of the Company's common stock at an exercise price of $18.15 per
share, subject to adjustment (the "Unit Offering"; and together with the
Stock Offering, the "February Offerings"). A portion of the net proceeds
from the February Offerings was used to repay all borrowings outstanding
under the Credit Facility and under the lending arrangement with ITC
Holding. The balance of the net proceeds from the February Offerings will
be used to partially finance the buildout and operating costs of the PCS
system for, and certain acquisition expenses associated with, the
Birmingham, Jacksonville and Memphis/Jackson MTAs.
4. Pursuant to an Asset Purchase Agreement, dated as of March 5, 1996, between
InterCel Atlanta Licenses, Inc., a wholly owned subsidiary of the
Company (the "Atlanta License Subsidiary") and GTE Mobilnet Incorporated
("GTE Mobilnet"), the Atlanta License Subsidiary will purchase GTE
Mobilnet's license to provide PCS in the Atlanta (MO11) PCS MTA for
approximately $192 million plus accrued interest (the "Atlanta MTA
Acquisition"). Pursuant to a Stock Purchase Agreement dated as of March 4,
1996, between the Company and Ericsson, Inc. ("Ericsson"), Ericsson has
agreed to purchase 100,000 shares of nonvoting Series A Convertible
Preferred Stock from the Company in a private placement for an aggregate
purchase price of $75 million (the "Ericsson Preferred Stock Sale"), and
pursuant to a Stock Purchase Agreement dated as of March 4, 1996, between
the Company and MPX Systems, Inc. ("MPX"), MPX has agreed to purchase
100,000 shares of nonvoting Series B Convertible Preferred Stock from the
Company in a private placement for an aggregate purchase price of $75
million (the "MPX Preferred Stock Sale"; and together with the Ericsson
Preferred Stock Sale, the "Preferred Stock Sales"). The closing of each
of the Preferred Stock Sales is conditioned upon, among other things, the
closing of the other, and the closing of the Atlanta MTA Acquisition.
5
<PAGE> 177
5. On April 16, 1996, the Company issued $360 million aggregate principal
amount at maturity (approximately $200.2 million gross proceeds) of the
Company's 12% Senior Discount Notes due May 2006 (the "Notes") in a public
offering (the "Atlanta Offering"). The Company intends to use the net
proceeds from the Atlanta Offering and the Preferred Stock Sales primarily
to partially finance development, construction and operating costs and
certain acquisition expenses associated with the Company's PCS system.
6. Two of the Company's subsidiaries have entered into a commitment letter
for a $25 million bank facility (the "Bank Facility") to be used for
working capital and other purposes, including capital expenditures. The
Company cannot predict whether (or, if so, when) the Company and the bank
will execute a definitive agreement with respect to such Bank Facility.
It is currently contemplated that the Company's obligations under any such
Bank Facility would be secured by all current and future cellular assets
and properties of the Company (excluding the capital stock of the
Company's PCS subsidiaries) and the Company's 51% partnership interest in
the Northern Maine Cellular Partnership, subject to obtaining the consent
of the other partner thereto. The Vendor Financing Agreement requires,
and the Bank Facility is expected to require, the Company to maintain
certain financial ratios. The failure of the Company and its subsidiaries
to maintain such ratios would constitute events of default under such
agreements, notwithstanding the ability of the Company to meet its debt
service obligations. An event of default under either such agreement
would allow the lenders thereunder to accelerate the maturity of such
indebtedness. In such event, a significant portion of the Company's other
indebtedness (including the Notes and the 12% Notes) may become due and
payable.
6
<PAGE> 178
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
InterCel provides cellular telecommunications services in Georgia, Alabama
(the "southern markets") and Maine (the "Maine markets"). In addition, on
February 7, 1996, the Company acquired Powertel, the owner of the Personal
Communications Services ("PCS") licenses for the Company's Current PCS Markets,
and is in the process of developing and constructing the Current PCS Market
System. In order to increase its PCS coverage from 9.7 million to approximately
16 million potential customers and provide the Company with one of the largest
contiguous PCS footprints in the southeastern United States, the Company has
entered into an agreement to acquire the license to provide PCS in the Atlanta
MTA from GTE Mobilnet. Upon consummation of the Atlanta MTA Acquisition, the
Company's PCS licenses will encompass approximately 180,000 contiguous square
miles and include a population of approximately 16 million persons in the
metropolitan areas of Atlanta, Augusta, Macon, Savannah, Columbus, Athens and
Albany, Georgia and Chattanooga, Tennessee. The Company believes that its
enhanced coverage footprint, particularly the addition of Atlanta to its
coverage area, will provide an incremental competitive advantage in attracting
new customers in its Current PCS Markets. Since the Company commenced cellular
service in October 1990, the number of cellular customers has grown rapidly to
40,403 at March 31, 1996 (a penetration of approximately 5.2% of the total
cellular service area population).
The cellular industry has seen average revenues per subscriber decline
during recent years. The Company believes that this downward trend reflects the
addition of new, lower-usage customers, who utilize cellular service for
personal convenience, security or as backup for their traditional landline
telephones. Although the Company also has experienced a slight decline in
average revenues per subscriber, the Company has introduced new services to
encourage higher usage from such customers in an effort to mitigate the effects
of this downward trend.
The Company expects that revenue per minute will continue to decline as
competition within the wireless telecommunications industry intensifies. The
Company believes the effect of this trend on the Company's earnings will be
mitigated by corresponding increases in the number of wireless
telecommunications subscribers and the number of minutes of usage per
subscriber.
The Company's overall financial performance has been impacted positively
by its efforts to attract and retain subscribers and to encourage more use of
its services. Unlike many other companies in the cellular industry that
continue to experience operating losses due to the substantial capital costs
associated with constructing a system and acquiring licenses, the Company has
been successful in achieving positive operating income. However, the Company
expects to incur significant operating losses beginning in 1996 as it develops
and constructs the PCS System and builds the PCS customer base.
7
<PAGE> 179
RESULTS OF OPERATIONS
The following tables reflect composition of the Company's service revenue
and equipment sales, and related gross margins, as well as overall operating
and other costs and margins, as a percentage of total revenue.
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31,
-----------------------------------------------------------------------
% OF % OF
1996 REVENUE/SALES 1995 REVENUE/SALES
---------- ------------- ---------- -------------
<C> <C> <C> <C> <C>
SERVICE REVENUE & COST
ANALYSIS:
Service Revenue
Local Customers -
Access Revenue $3,428,493 49.0% $2,761,357 51.0%
Airtime Revenue 1,316,514 18.8% 1,011,364 18.7%
Toll Revenue 165,703 2.4% 147,782 2.7%
---------- -------- ---------- -------
4,910,710 70.2% 3,920,503 72.4%
---------- -------- ---------- -------
Roamers -
Access & Airtime Revenue 1,502,985 21.5% 1,087,613 20.1%
Toll Revenue 412,670 5.9% 263,819 4.8%
---------- -------- ---------- -------
1,915,655 27.4% 1,351,432 24.9%
---------- -------- ---------- -------
Other Service Revenue 170,432 2.4% 146,725 2.7%
---------- -------- ---------- -------
Total Service Revenue 6,996,707 100.0% 5,418,660 100.0%
Cost of Services 684,031 9.8% 523,657 9.7%
---------- -------- ---------- -------
Gross Margin $6,312,676 90.2% $4,895,003 90.3%
========== ======== ========== =======
EQUIPMENT SALES & COST
ANALYSIS:
Equipment Sales $853,470 100.0% $859,779 100.0%
Cost of Equipment Sales 693,608 81.3% 710,529 82.6%
---------- -------- ---------- -------
Gross Margin $159,862 18.7% $149,250 17.4%
========== ======== ========== =======
OPERATING MARGIN
ANALYSIS:
Total Revenues $7,850,177 100.0% $6,278,439 100.0%
---------- -------- ---------- -------
Operating Expense -
Cost of Services & Equipment Sales 1,377,639 17.6% 1,234,186 19.7%
Operations 1,204,398 15.3% 754,187 12.0%
Selling, General, & Administrative 3,083,610 39.3% 2,030,225 32.3%
Depreciation & Amortization 1,612,215 20.5% 1,116,550 17.8%
---------- -------- ---------- -------
Total Operating Expenses 7,277,862 92.7% 5,135,148 81.8%
---------- -------- ---------- -------
Operating Income 572,315 7.3% 1,143,291 18.2%
Interest (Income) Expense, net (739,178) (9.4%) 299,322 4.8%
Loss on Equity Investments 34,158 0.4% 0 0.0%
Minority Interest in Cellular Partnership (79,104) (1.0%) (55,101) (0.9%)
Miscellaneous (Income) Expense 348,785 4.4% (363,641) (5.8%)
---------- -------- ---------- -------
Income Before Income Taxes 1,007,654 12.8% 1,262,711 20.1%
Income Tax Provision (471,915) (6.0%) (539,785) (8.6%)
---------- -------- ---------- -------
Net Income $535,739 6.8% $722,926 11.5%
========== ======== ========== =======
</TABLE>
8
<PAGE> 180
Quarter Ended March 31, 1996 Compared to Quarter Ended March 31, 1995
Service revenue from local customers increased $990,207, or 25.2%, for the
three months ended March 31, 1996, as compared to the same period of 1995. A
31.5% increase in the number of customers (to 40,403 at March 31, 1996, from
30,715 at March 31, 1995) was the primary factor driving this growth. The
substantial increase in new customers reflects the success of the Company's
marketing efforts.
The average monthly service revenue per customer (excluding roaming
revenue and equipment charges) decreased to $41.42 for the three months ended
March 31, 1996, from $44.16 for the same period of the prior year. This
decrease was due primarily to the addition of customers who tend to use
cellular service less frequently.
Toll revenue attributable to local customers for the three months ended
March 31, 1996 increased $17,921, or 12.1%, compared to the same period of
1995. The increase in long distance revenues is primarily attributable to the
increase in subscribers, despite the Company's network being designed in such a
way that customers in the southern cellular markets can call the Atlanta,
Georgia and Birmingham and Montgomery, Alabama Local Access and Transport Areas
("LATAs") at local airtime rates (toll-free) while still providing a profit to
the Company.
Roamer revenue (including roamer long distance) for the three months ended
March 31, 1996 increased $564,223, or 41.8%, compared to the same period of the
prior year. This increase relates primarily to increased market penetration
levels by the cellular industry as a whole. During the third quarter of 1995,
the Company agreed with BellSouth Mobility to provide discounted rates to
BellSouth Mobility for its customers roaming in the Company's service area in
Georgia and Alabama in exchange for discounted rates for the Company's Georgia
and Alabama customers roaming in certain parts of BellSouth Mobility's service
area. Although this agreement has initially resulted in a slight reduction in
overall roaming revenue, management believes that in the long term this
agreement will result in increased usage from the reduced pricing and enhanced
local subscriber marketing opportunities promoting the reduced BellSouth
Mobility roaming rates.
For the three months ended March 31, 1996, other service revenue, which
primarily includes connection and installation revenues, increased $23,707, or
16.2%. This increase was due primarily to the increased connection fee revenue
related to increased sales over the same period of the prior year.
Monthly access revenue remains the largest component of service revenue,
representing 49.0% of revenue during the quarter ended March 31, 1996, as
compared to 51.0% of revenue for the prior year. Roaming revenue increased to
27.4% of service revenue for the quarter ended March 31, 1996, as compared to
24.9% of service revenue for the same period of 1995. These changes are the
results of the stimulation received through the roaming agreement with
BellSouth Mobility.
Cost of services includes cost of access to local exchange company
facilities, cost of roaming validation (provided by a third-party clearing
house), cost for long distance toll services (provided by both interexchange
carriers and local exchange companies), cost of installation when performed by
outside contractors, costs associated with cellular fraud, and cost of
supplementary services (such as voice mail). For the three months ended March
31, 1996, cost of services was 9.8% of total service revenue, compared to 9.7%
for the same period in 1994.
Equipment sales amounted to $853,470 for the quarter ended March 31, 1996,
a decrease of $6,309, or 0.7%, over the same period of the prior year, despite
an increase in gross customers added during the first quarter of 1996 compared
to the prior year. The decrease between periods is attributable to the trend of
lower priced cellular handsets.
9
<PAGE> 181
Cost of equipment sales decreased $16,921 for three months ended March 31,
1996, a 2.4% decrease over the same period of the prior year. The gross margin
on equipment sales was 18.7% and 17.4% for quarter ended March 31, 1996 and
1995, respectively. Cost of sales decreased due to the decrease in the
Company's cost of cellular handsets. The increase in the margin is attributable
to the sale of a higher percentage of purchased phones, which have higher
profit margins than other types of phones.
Operations costs, which include the costs of maintaining the cellular
system, customer service, inventory management, and in-house installations,
totaled $1,204,398 for three months ended March 31, 1996, which represented an
increase of $450,211, or 59.7%, increase from the same period of 1995. As a
percentage of total revenue, operations costs increased from 12.0% for the
three months ended March 31, 1995 to 15.3% for the same period of 1996. The
main components of cost in this category are employee-related costs (salaries,
payroll taxes, and employee benefits), the provision for bad debts, and
communication costs (i.e. telephone, paging, etc.). The increase in the first
quarter of 1996 over the first quarter of 1995 was primarily due to the hiring
of additional personnel to manage the Company's entrance into the PCS business
(see "Liquidity and Capital Resources").
Selling, general, and administrative costs ("SG&A") were $3,083,610 for
three months ended March 31, 1996, an increase of $1,053,385, or 51.9%, as
compared to the same period of the prior year. This increase was primarily
attributable to several factors, including increases in employee-related costs
due to the hiring of more employees to facilitate the Company's expansion into
the PCS business, and increases in billing costs due to more customers.
Depreciation and amortization include principally the depreciation of the
cellular system and the amortization of the promotional credits associated with
the aforementioned promotion programs. Depreciation and amortization expense
totaled $1,612,215 for the three months ended March 31, 1996, as compared to
$1,116,550 for the same period in 1995. Depreciation expense increased as a
result of the conversion of the southern cellular markets system from an analog
system to a new digital system and the construction of nine additional cell
sites. As a percentage of revenue, depreciation and amortization increased from
17.8% to 20.5% for the three months ended March 31, 1995 and 1996,
respectively.
Operating income before depreciation and amortization decreased to 27.8%
of total revenue for the three months ended March 31, 1996, as compared to
36.0% for the same period of the prior year. This decrease reflects principally
the 1996 increase in operations and selling, general, and administrative costs.
The operating income margin decreased to 7.3% for three months ended March 31,
1996, from 18.2% for the same period in 1995 as a result of the increases in
operations and selling, general, and administrative costs and an increase in
depreciation and amortization. Operating income before depreciation and
amortization represents earnings before interest expense, income taxes,
depreciation and amortization. Operating income margin represents operating
income as a percentage of total revenues. Operating income before depreciation
and amortization and operating income margin are provided because they are
measures commonly used in the industry. Neither operating income before
depreciation and amortization nor operating income margin is a measurement of
financial performance under generally accepted accounting principles, and
neither should be considered an alternative to net income as a measure of
performance or to cash flow as a measure of liquidity.
The Company had net interest income of $739,178 for three months ended
March 31, 1996, as compared to an expense of $299,322 for the same period of
the prior year, as a result of the interest earned from the investment of the
proceeds of debt and equity offerings, which occurred on February 7, 1996 (see
"Liquidity and Capital Resources"). Additionally, approximately $2.7 million of
interest expense has been capitalized through March 31, 1996, during the
construction phase of the PCS system.
The results for the three months ended March 31, 1996 and 1995 reflect an
offset to expense of $79,104 and $55,101, respectively, related to the Northern
Maine Partnership and the minority partner's share of the loss in the
partnership for the periods. The amount represents 49% of the Northern Maine
Partnership's loss for the year.
10
<PAGE> 182
The effective income tax rates for three months ended March 31, 1996 and
1995 were 46.8% and 42.7%, respectively. This increase between the periods is
primarily attributable to the fact that goodwill amortization (which is
nondeductible for tax reporting purposes) becomes a larger percentage of pretax
income as pretax income decreases thus increasing the effective tax rate for
the period.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant amounts of capital for funding its entry
into the PCS business and for the operation of its cellular system,
construction of additional cell sites and equipment additions to expand
existing cellular capacity. The Company may also require additional financing
in the event it decides to make additional acquisitions.
On February 7, 1996, the Company consummated the following transactions:
(i) pursuant to a Business Combination Agreement dated August 23, 1995, among
the Company, Powertel and the owners of Powertel, such owners (other than the
Company) exchanged their ownership interests in Powertel for an aggregate of
9,686,410 shares of the Company's common stock in a private placement (the
"Powertel Combination"); (ii) the Company received approximately $110.1 million
of net proceeds from the sale of 7,124,322 shares of its Common Stock (which
includes 124,322 shares purchased in March 1996 under the underwriters'
overallotment option) in a public offering (the "Stock Offering"); and (iii)
the Company received approximately $192.2 million of net proceeds from the sale
of 35,747 units, consisting in the aggregate of $357,470,000 principal amount
at maturity of the Company's 12% Senior Discount Notes due 2006 (the "12%
Notes") and 1,143,904 warrants (the "Warrants") to purchase an equal number of
shares of the Company's common stock at an exercise price of $18.15 per share,
subject to adjustment (the "Unit Offering"; and together with the Stock
Offering, the "February Offerings"). A portion of the net proceeds from the
February Offerings was used to repay all outstanding borrowings under the
Credit Facility and under the lending arrangement with ITC Holding. The balance
of the net proceeds from the February Offerings will be used to partially
finance the buildout and operating costs of the PCS system for, and certain
acquisition expenses associated with, the Birmingham, Jacksonville and
Memphis/Jackson MTAs.
Pursuant to an Asset Purchase Agreement, dated as of March 5, 1996,
between InterCel Atlanta Licenses, Inc., a wholly owned subsidiary of the
Company (the "Atlanta License Subsidiary") and GTE Mobilnet Incorporated ("GTE
Mobilnet"), the Atlanta License Subsidiary will purchase GTE Mobilnet's license
to provide PCS in the Atlanta (M011) PCS MTA for approximately $192 million
(the "Atlanta MTA Acquisition") plus accrued interest. Pursuant to a Stock
Purchase Agreement dated as of March 4, 1996, between the Company and Ericsson,
Ericsson has agreed to purchase 100,000 shares of nonvoting Series A
Convertible Preferred Stock from the Company in a private placement for an
aggregate purchase price of $75 million (the "Ericsson Preferred Stock Sale"),
and pursuant to a Stock Purchase Agreement dated as of March 4, 1996, between
the Company and MPX Systems, Inc. ("MPX"), MPX has agreed to purchase 100,000
shares of nonvoting Series B Convertible Preferred Stock from the Company in a
private placement for an aggregate purchase price of $75 million (the "MPX
Preferred Stock Sale"; and together with the Ericsson Preferred Stock Sale, the
"Preferred Stock Sales"). The closing of each of the Preferred Stock Sales is
conditioned upon, among other things, the closing of the other, and the closing
of the Atlanta MTA Acquisition.
On April 16, 1996, the Company issued $360 million aggregate principal
amount at maturity (approximately $200.2 million gross proceeds) of the
Company's 12% Senior Discount Notes due May 2006 (the "Notes") in a public
offering (the "Atlanta Offering"). The Company intends to use the net proceeds
from the Atlanta Offering and the Preferred Stock Sales primarily to partially
finance development, construction and operating costs and certain acquisition
expenses associated with the PCS System.
11
<PAGE> 183
Two of the Company's subsidiaries have entered into a commitment letter
for a $25 million bank facility (the "Bank Facility") to be used for working
capital and other purposes, including capital expenditures. The Company cannot
predict whether (or, if so, when) the Company and the bank will execute a
definitive agreement with respect to such Bank Facility. It is currently
contemplated that the Company's obligations under any such Bank Facility would
be secured by all current and future cellular assets and properties of the
Company (excluding the capital stock of the Company's PCS subsidiaries) and the
Company's 51% partnership interest in the Northern Maine Cellular Partnership,
subject to obtaining the consent of the other partner thereto. The Vendor
Financing Agreement requires, and the Bank Facility is expected to require, the
Company to maintain certain financial ratios. The failure of the Company and
its subsidiaries to maintain such ratios would constitute events of default
under such agreements, notwithstanding the ability of the Company to meet its
debt service obligations. An event of default under either such agreement would
allow the lenders thereunder to accelerate the maturity of such indebtedness.
In such event, a significant portion of the Company's other indebtedness
(including the Notes and the 12% Notes) may become due and payable.
The development, construction and initial start-up phase associated with
the implementation of the Company's PCS system will require substantial
capital. Costs associated with the PCS system buildout include tower sites,
leasehold improvements, base station and switch equipment, microwave relocation
costs and labor expenses related to construction of sites. The Company
currently estimates that capital expenditures will total approximately $214
million ($152 million in 1996 and $62 million in 1997) relating to the initial
buildout of the Current PCS Markets system and $127 million ($27.8 million in
1996 and $99.2 million in 1997) relating to the initial buildout of the Atlanta
PCS system. Upon completion of the initial buildouts, the PCS system is
expected to cover approximately 81,000 square miles with approximately 60% of
the population within the Company's PCS markets. The initial coverage will
extend across each of the 22 major metropolitan areas within the Company's PCS
markets, as well as the major highway corridors connecting those areas. The
Company thereafter expects to continue to build the PCS system in less populous
areas of its PCS markets, based on customer needs and competitive factors (in
the same way that most of the country's cellular systems have been built).
Pursuant to a $125 million credit agreement with Ericsson (the "Vendor
Financing Agreement"), Ericsson has agreed, subject to the terms and conditions
therein, to provide the Company with up to $125 million of financing for
purchases of PCS equipment and services under the Equipment Purchase Agreement.
Under certain circumstances, the amount of vendor financing available under the
Vendor Financing Agreement may be increased to $165 million. The Company's
obligations under the Vendor Financing Agreement will be secured by all
tangible assets purchased with the proceeds therefrom and by a pledge of the
capital stock of the Company's subsidiaries that hold the PCS licenses for the
Current PCS Markets. In the event the amount available vendor financing is
increased, the Company's obligations will also be secured by a pledge of the
capital stock of the Company's subsidiary that holds the PCS license for the
Atlanta MTA.
The Company believes that the net proceeds from the Atlanta Offering,
together with the net proceeds from the Preferred Stock Sales, cash on hand and
borrowings under the Vendor Financing Agreement will be sufficient to
consummate the Atlanta MTA Acquisition and to finance the development,
construction and operating costs associated with the initial buildout of the
Company's PCS system through 1997.
Although the Company is currently unable to predict the amount of
expenditures that may be made after 1997, the Company expects that it may
require additional capital for the buildout of the PCS System after 1997.
Sources of additional capital may include vendor financing, cash flow from
cellular operations, public and private equity and debt financings by the
Company and proceeds received from any exercises of the Warrants. The Company
may also require additional financing in the event it decides to make
additional acquisitions. The extent of additional financing required will
depend on the success of the Company's businesses. The Company currently has no
other sources of income or cash flows other than its cellular operations and
the interest income earned from investing the net proceeds of the February
12
<PAGE> 184
Offerings and the Atlanta Offering. There can be no assurance that additional
financing will be available to the Company, or if available, that it can be
obtained on terms acceptable to the Company and within the limitations
contained in the Indentures, the Bank Facility or the Vendor Financing
Agreement or that may be contained in any future financing arrangements. The
restrictions on additional indebtedness under the indentures to the Notes and
the 12% Notes (the "Indentures") require the Company to satisfy specified
leverage ratios in order to incur indebtedness; however, they permit the
Company and its subsidiaries to incur an unlimited amount of additional
indebtedness to finance the acquisition of inventory or equipment.
The Company expects to incur significant operating losses and to generate
negative cash flow from operating activities during the next several years,
while it develops and constructs its PCS system and builds a PCS customer base.
Cash interest will not be payable on the Notes or the 12% Notes prior to 2001.
However, the accretion of original issue discount on the 12% Notes and the
Notes will cause an increase in the Company's indebtedness under the Indentures
of $323.4 million ($163.6 million by February 1, 2001, with respect to the 12%
Notes and $159.8 million by May 1, 2001, with respect to the Notes). The Notes
and the 12% Notes will require semi-annual cash interest payments beginning in
2001. Management believes that cash flow from operations may be insufficient
to repay the Notes and the 12% Notes in full at maturity and that they may need
to be refinanced at maturity. There can be no assurance that any such
refinancing could be effected successfully or on terms acceptable to the
Company.
During the quarter ended March 31, 1996, the Company generated net cash of
$3,126,710 from operating activities, which was an increase of $2,410,528 over
the same period of 1995. Operating income, before depreciation and
amortization, decreased from $2,259,841 for the first quarter of 1995 to
$2,184,530 for the first quarter of 1996. Operating income before depreciation
and amortization is not a measurement of financial performance under generally
accepted accounting principles and should not be considered an alternative to
net income as a measure of performance or to cash flow as a measure of
liquidity.
Cash used for investing activities was $24,883,395 for the three months
ended March 31, 1996 as compared to cash provided by investing activities of
$56,442 for the same period of 1995. Investing activities for the three months
ended March 31, 1996 included capital expenditures totaling $10,873,688 (the
majority of which related to the purchase and installation of a new digital
switch), an investment in marketable securities of $29,388,306. Also, the
Company acquired $15,378,599 of cash in the acquisition of Powertel during the
first quarter of 1996.
Cash provided by financing activities amounted to $276,566,396 for the
three months ended March 31, 1996. The Company issued 7,124,322 shares of
common stock in a public offering on February 7, 1996. The proceeds of that
public offering net of offering costs and the exercise of stock options during
the year were $111,445,816. The Company received $192,997,526 of net proceeds
from the sale of senior discount notes due 2006 in a public offering on
February 7, 1996. The proceeds of these offerings were used to repay the
outstanding debt of the Company of $28,101,514, with the remainder being
invested in marketable securities.
13
<PAGE> 185
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------ -------------------
<S> <C>
*2(a) -- Business Combination Agreement dated as of August 23, 1995 by and among
InterCel, Inc., Powertel PCS Partners, L.P., the partners of Powertel PCS
Partners, L.P. and the stockholders of certain of the partners of Powertel
PCS Partners, L.P. (Filed as Exhibit 2(a) to Registration Statement on Form
S-1, File No. 33-96218 ("1995 Form S-1"), and incorporated herein by
reference.)
*2(b) -- Amended and Restated Business Combination Agreement dated as of August 12,
1993 among Unity Telephone Company, InterCel, Inc., and certain stockholders
of Unity Telephone Company, with Exhibits. (Filed as Exhibit 2 to
Registration Statement on Form S-1, File No. 33-72734 ("1993 Form S-1"), and
incorporated herein by reference.)
*2(c) -- Letter Agreement dated January 31, 1994 among Bert G. Clifford, Coral B.
Clifford, and InterCel, Inc. (Filed as Exhibit 2(a) to 1993 Form S-1, and
incorporated herein by reference.)
*2(d) -- Amendment No. 1 to Business Combination Agreement dated as of October 17,
1995 between InterCel, Inc. and InterCel PCS Services, Inc. (Filed as
Exhibit 2(d) to 1995 Form S-1, and incorporated herein by reference.)
*10(a) -- Lease Agreement dated September 1, 1990 by and between Interstate Telephone
Company and Interstate Cellular, Inc. for the premises located at 910 First
Avenue, West Point, Georgia (Filed as Exhibit 10(f) to Registration
Statement on Form S-18, File No. 33-41230 ("Form S-18"), and incorporated
herein by reference.)
*10(b) -- Connection and Traffic Interexchange Agreement dated November 19, 1990
between Southern Bell Telephone and Telegraph Company and Interstate
Cellular, Inc. (Filed as Exhibit 10(h) to Form S-18, and incorporated herein
by reference.)
*10(c) -- Connection and Traffic Interchange Agreement dated September 15, 1990 by and
</TABLE>
14
<PAGE> 186
<TABLE>
<S> <C>
between Interstate Telephone Company and Interstate Cellular, Inc. (Filed as
Exhibit 10(i) to Form S-18, and incorporated herein by reference.)
*10(d) -- Building Lease dated November 1, 1991 between InterCel, Inc. and Riverside
Corporation. (Filed as Exhibit 10(q) to Annual Report on Form 10-K for the
year ended Dec. 31, 1991, File No. 33-41230, and incorporated herein by
reference.)
*10(e) -- InterCel, Inc. 1995 Employee Restricted Stock Plan (as amended on November
17, 1995). (Filed as Exhibit 10(e) to 1995 Form S-1, and incorporated herein
by reference.)
*10(f) -- InterCel, Inc. 1991 Stock Option Plan (as amended on November 17, 1995).
(Filed as Exhibit 10(f) to 1995 Form S-1, and incorporated herein by
reference.)
*10(g) -- InterCel, Inc. Amended Nonemployee Stock Option Plan. (Filed as Exhibit
10(q) to Annual Report on Form 10-K for the year ended Dec. 31, 1994, File
No. 0-23102 ("1994 Form 10-K"), and incorporated herein by reference.)
*10(h) -- Amended and Restated Option Agreement dated as of October 29, 1993 among
InterCel, Inc., Bert G. Clifford, and Coral B. Clifford. (Filed as Exhibit
10(gg) to 1993 Form S-1, and incorporated herein by reference.)
*10(i) -- Directed Employee Benefit Trust Agreement between The Charles Schwab Trust
Company and InterCel, Inc. (Filed as Exhibit 10(jjjj) to 1994 Form 10-K, and
incorporated herein by reference.)
*10(j) -- InterCel, Inc. 401(k) Profit Sharing Plan. (Filed as Exhibit 10(j) to 1995
Form S-1, and incorporated herein by reference.)
*10(k) -- Defined Benefit Pension Plan and Trust Adoption Agreement (Unity Telephone
Company) dated as of January 15, 1984. (Filed as Exhibit 10(ss) to 1993 Form
S-1, and incorporated herein by reference.)
*10(l) -- Defined Benefit Pension Plan (Unity Telephone Company). (Filed as Exhibit
10(tt) to 1993 Form S-1, and incorporated herein by reference.)
*10(m) -- Amendment to the Unity Telephone Company Pension Plan dated June 29, 1992.
(Filed as Exhibit 10(uu) to 1993 Form S-1, and incorporated herein by
reference.)
*10(n) -- Software License Agreement between InterCel, Inc. and Systematics
Telecommunications Services, Inc. dated July 24, 1992. (Filed as Exhibit
10(aa) to 1992 Form 10-KSB, and incorporated herein by reference.)
*10(o) -- Lease Agreement dated August 17, 1992 between InterCel, Inc. and Eastern
Telecom. (Filed as Exhibit 10(cc) to 1992 Form 10-KSB, and incorporated
</TABLE>
15
<PAGE> 187
<TABLE>
<CAPTION>
<S> <C>
herein by reference.)
*10(p) -- Customer Acceptance Agreement dated December 21, 1992 between InterCel, Inc.
and Interstate/Valley Telephone Company. (Filed as Exhibit 10(gg) to 1992
Form 10-KSB, and incorporated herein by reference.)
*10(q) -- Agreement dated as of October 29, 1993 among InterCel, Inc., Unity Cellular
Systems, Inc., and New York Cellular Geographic Service Area, Inc. (Filed as
Exhibit 10(hh) to 1993 Form S-1, and incorporated herein by reference.)
*10(r) -- Letter Agreement dated January 24, 1995 among InterCel, Inc., Unity Cellular
Systems, Inc. and New York Cellular Geographic Service Area, Inc. amending
Agreement dated October 29, 1993 among the same parties and filed as Exhibit
10(q). (Filed as Exhibit 10(xxx) to 1994 Form 10-K, and incorporated herein
by reference.)
*10(s) -- Directors and Officers Insurance and Company Reimbursement Policy. (Filed as
Exhibit 10(ii) to 1993 Form S-1, and incorporated herein by reference.)
*10(t) -- Form of Indemnity Agreement. (Filed as Exhibit 10(jj) to 1993 Form S-1, and
incorporated herein by reference.)
*10(u) -- Partnership Agreement dated as of June 1, 1992 between New York Cellular
Geographic Service Area, Inc. and Unity Cellular Systems, Inc. (Filed as
Exhibit 10(qq) to 1993 Form S-1, and incorporated herein by reference.)
*10(v) -- Software Product License Agreement dated May 2, 1988 between NovAtel
Communications Ltd. and Unity Cellular Systems, Inc. (Filed as Exhibit
10(rr) to 1993 Form S-1, and incorporated herein by reference.)
*10(w) -- Limited Partnership Agreement of Powertel PCS Partners, L.P. dated as of
October 26, 1994. (Filed as Exhibit 10(yyy) to 1994 Form 10-K, and
incorporated herein by reference.)
*10(x) -- First Amendment of Limited Partnership Agreement of Powertel PCS Partners,
L.P. dated as of June 7, 1995. (Filed as Exhibit 10(mm) to 1995 Form S-1,
and incorporated herein by reference.)
*10(y) -- Management Agreement dated October 28, 1994 between Powertel PCS Partners,
L.P. and InterCel PCS Services, Inc. (Filed as Exhibit 10(zzz) to 1994 Form
10-K, and incorporated herein by reference.)
*10(z) -- Agreement dated July 28, 1995 between InterCel, Inc. and GGT U.S.A./South,
Inc. d/b/a Bright House. (Filed as Exhibit 10(oo) to 1995 Form S-1, and
incorporated herein by reference.)
*10(aa) -- DMS-MTX Cellular Supply Agreement dated March 29, 1995 between InterCel,
Inc. and Northern Telecom Inc. (Filed as Exhibit 10(pp) to 1995 Form S-1,
</TABLE>
16
<PAGE> 188
<TABLE>
<CAPTION>
<S> <C>
and incorporated herein by reference.)
*10(bb) -- Amendment No. 1 to DMS-MTX Cellular Supply Agreement between InterCel, Inc.
and Northern Telecom Inc. dated August 9, 1995. (Filed as Exhibit 10(qq) to
1995 Form S-1, and incorporated herein by reference.)
*10(cc) -- DMS-MTX Cellular Supply Agreement dated August 9, 1995 between Unity
Cellular Systems, Inc. d/b/a Unicel and Northern Telecom Inc. (Filed as
Exhibit 10(rr) to 1995 Form S-1, and incorporated herein by reference.)
*10(dd) -- Lease Agreement effective as of July 1, 1995 between ITC Holding Company,
Inc., InterCel, Inc. and Telecommunications Operations Group. (Filed as
Exhibit 10(ss) to 1995 Form S-1, and incorporated herein by reference.)
*10(ee) -- Information and Network Products and Services Agreement dated May 16, 1994
between Unity Cellular Systems, Inc. d/b/a Unicel and GTE Telecommunication
Services Incorporated. (Filed as Exhibit 10(tt) to 1995 Form S-1, and
incorporated herein by reference.)
*10(ff) -- Information and Network Products and Services Agreement dated June 16, 1994
between InterCel, Inc. and GTE Telecommunication Services Incorporated.
(Filed as Exhibit 10(uu) to 1995 Form S-1, and incorporated herein by
reference.)
*10(gg) -- Site Acquisition Services Agreement entered into as of September 18, 1995,
by and between Telesite Services, L.L.C. and Powertel PCS Partners, L.P.
(Filed as Exhibit 10(vv) to 1995 Form S-1, and incorporated herein by
reference.)
*10(hh) -- Site Acquisition Services Agreement entered into as of September 15, 1995,
by and between Silvergate, L.L.C. and Powertel PCS Partners, L.P. (Filed as
Exhibit 10(ww) to 1995 Form S-1, and incorporated herein by reference.)
*10(ii) -- Site Acquisition Services Agreement entered into as of September 20, 1995,
by and between Teletronics, Inc. and Powertel PCS Partners, L.P. (Filed as
Exhibit 10(xx) to 1995 Form S-1, and incorporated herein by reference.)
*10(jj) -- Amendment No. 1 to Site Acquisition Services Agreement entered into as of
December 4, 1995 by and between Silvergate, L.L.C. and Powertel PCS
Partners, L.P. (Filed as Exhibit 10(yy) to 1995 Form S-1, and incorporated
herein by reference.)
*10(kk) -- ITC Holding Company, Inc. Employees Pension Plan and Trust (as amended on
December 15, 1994). (Filed as Exhibit 10(zz) to 1995 Form S-1, and
incorporated herein by reference.)
*10(ll) -- Memorandum of Understanding dated January 19, 1996 between InterCel, Inc.
</TABLE>
17
<PAGE> 189
<TABLE>
<CAPTION>
<S> <C>
and Ericsson Inc. (Filed as Exhibit 10(aaa) to 1995 Form S-1, and
incorporated herein by reference.)
*10(mm) -- Commitment Letter dated April 2, 1996 between NationsBank of Texas, N.A. and
Unity Cellular Systems, Inc., InterCel Licenses, Inc. and InterCel, Inc. (Filed as Exhibit 10(mm)
to Registration Statement on Form S-1, File No. 333-2748 ("1996 Form S-1"), and
incorporated herein by reference.)
*10(nn) -- Credit Agreement dated as of March 4, 1996 among InterCel PCS Services,
Inc., as Borrower, and Ericsson Inc., as Initial Lender, and Ericsson Inc.,
as Agent. (Filed as Exhibit 10(nn) to 1996 Form S-1, and incorporated herein by reference.)
*10(oo) -- Stock Purchase Agreement dated as of March 4, 1996 between InterCel, Inc.
and MPX Systems, Inc. (Filed as Exhibit 10(oo) to 1996 Form S-1, and incorporated herein by
reference.)
*10(pp) -- Stock Purchase Agreement dated as of March 4, 1996 between InterCel, Inc.
and Ericsson Inc. (Filed as Exhibit 10(pp) to 1996 Form S-1, and incorporated herein by
reference.)
*10(qq) -- Asset Purchase Agreement dated as of March 5, 1996 by and between GTE
Mobilnet Incorporated, InterCel Atlanta Licenses, Inc. and InterCel, Inc.
(Filed as Exhibit 10(qq) to 1996 Form S-1, and incorporated herein by reference.)
*10(rr) -- Acquisition Agreement dated as of March 4, 1996 between InterCel PCS
Services, Inc. and Ericsson Inc. (Filed as Exhibit 10(rr) to 1996 Form S-1, and incorporated
herein by reference.)
11 -- Statement regarding Computation of Per Share Earnings.
</TABLE>
* Previously filed.
(B) REPORTS ON FORM 8-K.
NONE
18
<PAGE> 190
Exhibit 11
INTERCEL, INC.
EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1996 March 31, 1995
------------------ ------------------
<S> <C> <C>
Net Income $ 535,739 $ 722,926
Weighted average shares outstanding 19,898,942 9,884,669
Common stock equivalents outstanding (a) 1,159,625 288,915
----------- -----------
21,058,567 10,173,584
----------- -----------
Earnings per share $ 0.03 $ 0.07
=========== ===========
</TABLE>
(a) Common stock equivalents outstanding includes the dilutive effect of all
outstanding options and warrants calculated using the average stock price
for each period under the treasury stock method
19
<PAGE> 191
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
InterCel provides cellular telecommunications services in Georgia, Alabama and
Maine. In addition, on February 7, 1996, the Company acquired Powertel PCS
Partners, L.P. ("Powertel"), the owner of the PCS licenses for the major
trading areas ("MTAs") of Jacksonville, Florida; Memphis, Tennessee/Jackson,
Mississippi; and Birmingham, Alabama (the "Current PCS Markets"), and is in the
process of developing and constructing the PCS system in these markets. In
order to increase its PCS coverage from 9.7 million to approximately 16 million
potential customers and provide the Company with one of the largest contiguous
PCS footprints in the southeastern United States, the Company has entered into
an agreement to acquire the license to provide PCS in the Atlanta MTA from GTE
Mobilnet (the "Atlanta MTA Acquisition"). Upon consummation of the Atlanta MTA
Acquisition, the Company's PCS licenses will encompass approximately 180,000
contiguous square miles and include a population of approximately 16 million
persons in the metropolitan areas of Atlanta, Augusta, Macon, Savannah,
Columbus, Athens and Albany, Georgia and Chattanooga, Tennessee. The Company
believes that its enhanced coverage footprint, particularly the addition of
Atlanta to its coverage area, will provide an incremental competitive advantage
in attracting new customers in its PCS markets.
The cellular industry has seen average revenues per subscriber decline during
recent years. The Company believes that this downward trend reflects the
addition of new, lower-usage customers, who utilize cellular service for
personal convenience, security or as backup for their traditional landline
telephones. Although the Company also has experienced a slight decline in
average revenues per subscriber, the Company has introduced new services to
encourage higher usage from such customers in an effort to mitigate the effects
of this downward trend.
The Company expects that revenue per minute will continue to decline as
competition within the wireless telecommunications industry intensifies. The
Company believes the effect of this trend on the Company's earnings will be
mitigated by corresponding increases in the number of wireless
telecommunications subscribers and the number of minutes of usage per
subscriber.
The Company's overall financial performance has been impacted positively by its
efforts to attract and retain subscribers and to encourage more use of its
services. Unlike many other companies in the cellular industry that continue
to experience operating losses due to the substantial capital costs associated
with constructing a system and acquiring licenses, the Company has been
successful in achieving positive operating income. However, the Company
expects to incur significant operating losses beginning in 1996 as it develops
and constructs the PCS System and builds the PCS customer base. See "Liquidity
and Capital Resources."
RESULTS OF OPERATIONS
The following table reflects the composition of the Company's service revenue
and equipment sales, and related gross margins, as well as overall operating
and other costs and margins, as a percentage of total revenue. The Company's
results of operations for prior periods, particularly in view of the start-up
costs associated with the Company's entry into the PCS business, will not be
comparable with future periods.
page 15
<PAGE> 192
`
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
% OF % OF % OF
REVENUE/ REVENUE/ REVENUE/
1995 SALES 1994 SALES 1993 SALES
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SERVICE REVENUE &
COST ANALYSIS:
Service Revenue
Local Customers--
Access Revenue $12,243,924 48.2% $ 8,512,351 45.0% $ 3,325,725 40.4%
Airtime Revenue 4,938,237 19.5 3,980,895 21.1 1,588,401 19.3
Toll Revenue 626,958 2.5 360,209 1.9 77,103 1.0
- -----------------------------------------------------------------------------------------------------------------------
17,809,119 70.2 12,853,455 68.0 4,991,229 60.7
- -----------------------------------------------------------------------------------------------------------------------
Roamers--
Access & Airtime Revenue 5,540,552 21.8 4,403,671 23.3 2,599,191 31.6
Toll Revenue 1,399,101 5.5 1,122,991 5.9 421,090 5.1
- -----------------------------------------------------------------------------------------------------------------------
6,939,653 27.3 5,526,662 29.2 3,020,281 36.7
- -----------------------------------------------------------------------------------------------------------------------
Other Service Revenue 635,267 2.5 523,123 2.8 216,954 2.6
- -----------------------------------------------------------------------------------------------------------------------
Total Service Revenue 25,384,039 100.0 18,903,240 100.0 8,228,464 100.0
Cost of Services 2,394,284 9.4 1,920,631 10.2 573,919 7.0
- -----------------------------------------------------------------------------------------------------------------------
Gross Margin $22,989,755 90.6% $16,982,609 89.8% $ 7,654,545 93.0%
=======================================================================================================================
EQUIPMENT SALES &
COST ANALYSIS:
Equipment Sales $ 3,927,521 100.0% $ 2,858,588 100.0% $ 1,120,760 100.0%
Cost of Equipment Sales 3,127,398 79.6 2,391,325 83.7 1,010,465 90.2
- -----------------------------------------------------------------------------------------------------------------------
Gross Margin $ 800,123 20.4% $ 467,263 16.3% $ 110,295 9.8%
=======================================================================================================================
OPERATING MARGIN ANALYSIS:
Total Revenues $29,311,560 100.0% $21,761,828 100.0% $ 9,349,224 100.0%
- -----------------------------------------------------------------------------------------------------------------------
Operating Expense--
Cost of Services &
Equipment Sales 5,521,682 18.8 4,311,956 19.8 1,584,384 17.0
Operations 3,595,694 12.3 2,721,744 12.5 1,332,736 14.2
Selling, General, &
Administrative 8,497,640 29.0 7,055,505 32.4 2,914,551 31.2
Depreciation & Amortization 5,100,982 17.4 3,673,406 16.9 1,843,012 19.7
- -----------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 22,715,998 77.5 17,762,611 81.6 7,674,683 82.1
- -----------------------------------------------------------------------------------------------------------------------
Operating Income 6,595,562 22.5 3,999,217 18.4 1,674,541 17.9
Interest Expense, net 1,656,773 5.7 635,257 2.9 46,167 0.5
Loss on Equity Investment 132,688 0.5 0 0.0 0 0.0
Minority Interest in Cellular
Partnership (129,547) (0.4) (123,817) (0.6) 0 0.0
Miscellaneous (Income) Expense (297,987) (1.0) 75,825 0.4 47,981 0.5
- -----------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes 5,233,635 17.9 3,411,952 15.7 1,580,393 16.9
Income Tax Provision (2,229,972) (7.6) (1,534,883) (7.1) (567,846) (6.1)
- -----------------------------------------------------------------------------------------------------------------------
Net Income $ 3,003,663 10.3% $ 1,877,069 8.6% $ 1,012,547 10.8%
=======================================================================================================================
</TABLE>
page 16
<PAGE> 193
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
Service revenue from local customers increased $4,955,664, or 38.6%, for 1995,
as compared to 1994. A 34.8% increase in the number of Company subscribers (to
38,582 at December 31, 1995, from 28,624 at December 31, 1994) is the primary
factor driving this growth. The substantial increase in new customers reflects
the success of the Company's marketing efforts. Additionally, an increase
resulted from the inclusion of an additional month's Maine Market revenues for
1995 (the merger with Unicel was consummated January 31, 1994).
The average monthly service revenue per customer (excluding roaming revenue and
equipment charges) decreased to $44.91 for 1995, from $46.75 for the prior
year. This decrease was due primarily to the addition of customers who tend to
use cellular service less frequently.
Toll revenue attributable to local customers for 1995 increased $266,749, or
74.1%, compared to 1994. The increase in long distance revenues is due to the
increase in the local customer base, and the inclusion of an additional month's
Maine Market revenues for 1995. The majority of the increase was realized in
the Maine Market, where customer toll is a larger component of local customer
revenues. A slight increase in toll revenue was achieved in the
Georgia/Alabama Market, despite the Company's network being designed in such a
way that customers in the southern markets can call the Atlanta, Georgia and
Birmingham and Montgomery, Alabama Local Access and Transport Areas ("LATAs")
at local airtime rates (toll-free).
Roamer revenue (including toll revenue) for 1995 increased $1,412,991, or
25.6%, compared to 1994. This increase relates primarily to increased market
penetration levels by the cellular industry as a whole, an additional month of
revenue from the Maine Market in 1995, and the addition of eight new cell sites
during 1995. While the Company experienced an increase in total roamer
revenue, average revenue per roamer declined slightly, due primarily to
reciprocal roaming agreements with certain surrounding carriers that offer
discounted rates. During the third quarter of 1995, the Company agreed with
BellSouth Mobility to provide discounted rates to BellSouth Mobility for its
customers roaming in the Company's service area in Georgia and Alabama in
exchange for discounted rates for the Company's Georgia and Alabama customers
roaming in certain parts of BellSouth Mobility's service area. Although this
agreement initially resulted in a slight reduction in overall roaming revenue,
management believes that in the long term this agreement will result in
increased usage from the reduced pricing and enhanced local subscriber
marketing opportunities promoting the reduced BellSouth Mobility roaming rates.
For 1995, other service revenue, which primarily includes connection and
installation revenues, increased $112,144, or 21.4%. This increase was due
primarily to the inclusion of an additional month's revenue from the Maine
Market and increased connection fee revenue associated with the increased
subscriber base.
Monthly access revenue continues to be the largest component of service
revenue, representing 48.2% of such revenue during 1995, as compared to 45.0%
of revenue for 1994. Conversely, roaming revenue declined to 27.3% of service
revenue for 1995, as compared to 29.2% of service revenue for 1994. These
changes are consistent with the increased local customer base and the success
of the Company's efforts to add customers to the higher monthly access fee
plans, which include various nonbillable airtime allotments depending on the
service plan selected by the customer. Local customer airtime revenue as a
percentage of total service revenue has decreased slightly due to the Company's
success in attracting customers to premium service plans, which provide certain
free airtime minutes but include higher monthly access charges.
Cost of services includes cost of access to local exchange company facilities,
cost of roaming validation (provided by a third-party clearinghouse), cost for
long distance toll services, cost of installation when performed by outside
page 17
<PAGE> 194
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
contractors, and cost of supplementary services (such as voice mail). For
1995, cost of services declined to 9.4% of total service revenue as compared to
10.2% of total service revenue for 1994, as a result of economies of scale
realized during 1995.
Equipment sales totaled $3,927,521 for 1995, an increase of $1,068,933, or
37.4%, over the prior year. The increase between periods is attributable to
the increased number of new customers added during 1995 over 1994.
Cost of equipment sold increased $736,073 for 1995, a 30.8% increase over the
prior year. The gross margin on equipment sales was 20.4% and 16.4% for 1995
and 1994, respectively. The increase in the margin between periods relates to
the writedown of certain telephone equipment to fair market value during 1994.
Operations costs, which include the costs of maintaining the cellular system,
customer service, inventory management, and in-house installations, totaled
$3,595,694 for 1995, which represented a $873,950, or 32.1%, increase from
1994. The main components of cost in this category are employee-related costs
(salaries, payroll taxes, and employee benefits), the provision for bad debts,
and communication costs (i.e. telephone, paging, etc.). The increase in 1995
over 1994 was primarily due to increases in salaries and employee benefits
resulting from the hiring of additional technicians and customer service
representatives to meet the increased demand caused by the growing customer
base. In addition, the growing customer base contributed to an increase in the
number of non-paying customers, which caused an increase in the bad debt
provision. Also, 1995 contains an additional month's expenses compared to 1994
related to the acquisition of the Maine Market on January 31, 1994. Operations
costs as a percentage of total revenue and sales decreased slightly from 12.5%
for 1994 to 12.3% for 1995.
Selling, general, and administrative costs ("SG&A") were $8,497,640 for the
year ended December 31, 1995, an increase of $1,442,135, or 20.4%, as compared
to the prior year. The increase was attributable to several factors, including
increased commissions expense due to the increase in new customers, increases
in billing costs due to the increased subscriber base, increases in
employee-related costs due to the increase in total employees, and additional
operating costs associated with the opening of three new retail locations.
SG&A costs as a percentage of revenue decreased from 32.4% for 1994 to 29.0%
for 1995. The Company is benefitting from economies of scale with respect to
certain SG&A costs in its cellular operations, such as salaries and wages and
leased facilities costs, that do not increase in direct proportion to increases
in the cellular service revenue and from cost control efforts by management.
The Company expects its SG&A costs to increase as a percentage of total
revenues as a result of the startup of its PCS business.
Depreciation and amortization consists principally of the depreciation of the
cellular system, the amortization of the promotional credits associated with
the Company's promotion programs and the amortization of goodwill acquired in
the Company's business combination with Unity Cellular Systems, Inc. (the
"Unicel Merger"). Depreciation and amortization expense totaled $5,100,982 for
1995, as compared to $3,673,406 for 1994 (17.4% and 16.9% of revenue,
respectively). The primary cause of this increase was the increase in
depreciation expense resulting from the addition of eight new cell sites, three
new retail locations, and the conversion of the Georgia/Alabama cellular system
to dual-mode analog/digital transmission facilities during 1995. Upon
completion of the PCS System, the Company's depreciation and amortization
expense will increase substantially.
Operating income before depreciation and amortization increased to 39.9% of
total revenue for 1995, as compared to 35.3% for the prior year. Operating
income margin increased to 22.5% for 1995, from 18.4% for 1994. These
increases principally reflect the economies of scale realized relative to SG&A
costs. Operating income before depreciation and amortization represents
earnings before interest expense, income taxes, depreciation and amortization.
Operating
page 18
<PAGE> 195
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
income margin represents operating income as a percentage of total revenues.
Operating income before depreciation and amortization and operating income
margin are provided because they are measures commonly used in the industry.
Neither operating income before depreciation and amortization nor operating
income margin is a measurement of financial performance under generally
accepted accounting principles, and neither should be considered an alternative
to net income as a measure of performance or to cash flow as a measure of
liquidity.
Net interest expense totaled $1,656,773 for 1995, an increase of $1,021,516
over 1994. Net interest expense increased primarily as a result of borrowings
of approximately $20,775,000 on its credit facility in 1995 to finance the
Company's investment in Powertel and its purchase of a switch for the
Georgia/Alabama Market. Such borrowings were repaid in full with proceeds from
the February Offerings. Although the amount of interest incurred by the
Company will increase as a result of the Unit Offering, this Offering and
borrowings under the Vendor Financing Agreement, the Company expects that a
majority of such interest will be capitalized during the construction of the
Company's PCS System.
Operating income for 1995 and 1994 includes the minority partner's share of the
loss of $129,547 and $123,817, respectively, of the Northern Maine Cellular
Partnership, as well as the Company's pro rata share of the operating loss
generated by Powertel, which totaled $132,688 for 1995.
The effective income tax rates for 1995 and 1994 were 42.6% and 45.0%,
respectively. The decrease between the periods relates to a reduction in
amortization of goodwill associated with the Unicel Merger, which is
nondeductible for income tax purposes. In connection with the Unicel Merger,
the Company has available in excess of $6.5 million of net operating loss
carryforwards for federal tax purposes that can be utilized (subject to
limitations) in future periods to offset taxable income, if any. At December
31, 1994, the Company eliminated the valuation allowance for deferred income
taxes related to these net operating losses and concurrently reduced the
goodwill associated with the Unicel Merger. This reduction in goodwill
resulted in a decrease in amortization expense for 1995 thus reducing the
effective income tax rate for the year.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Service revenue from local customers increased $7,862,226, or 157.5%, for 1994
as compared to 1993. Revenue from local customers of the Georgia/Alabama
Market increased $1,590,314, or 31.9%, for 1994 as compared to 1993. A 36.1%
increase in the number of customers served in this market (to 14,408 at
December 31, 1994, from 10,590 at December 31, 1993) was the primary factor
driving this growth. The substantial increase in new customers reflects the
success of the Company's marketing efforts and is consistent with the past
growth rates experienced by the cellular industry as a whole. The remaining
increase of $6,271,912 was attributable to the addition of the Maine Market.
The number of local customers served in the Maine Market grew from 9,572 at
December 31, 1993 to 14,216 at December 31, 1994, a 48.5% increase. The growth
rate in the Maine Market exceeds that of the Georgia/ Alabama Market due
generally to a market penetration in the Maine Market that was lower (at the
time of the Unicel Merger) than that in the Georgia/Alabama Market and to the
introduction of new service plans and promotional incentives to increase market
penetration following the Unicel Merger.
The average monthly service revenue per customer (excluding roaming revenue and
equipment charges) decreased to $46.75 for 1994, from $47.77 for 1993. This
decrease was due primarily to the addition of customers who tend to use
cellular service less frequently. However, the overall decrease was partially
offset by the Maine Market customer base, which has a higher average revenue
per subscriber than the Georgia/Alabama Market, due principally to the lower
penetration levels in that market.
page 19
<PAGE> 196
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
Toll revenue attributable to local customers for 1994 increased $283,106, or
367.2%, compared to 1993. Revenue from customers of the Georgia/Alabama Market
decreased $4,461, or 5.8%. The change in long distance revenues did not
correspond with the increase in customers due to the large toll-free calling
area that the Company offers. The Company has designed its network in such a
way that customers can call the Atlanta, Georgia and Birmingham and Montgomery,
Alabama LATAs at local airtime rates (toll-free), while still providing a
profit to the Company. The toll-free Birmingham, Alabama LATA was added in
February 1994, and the toll-free Atlanta, Georgia and Montgomery, Alabama LATAs
were added in 1992. The remaining $287,567 increase relates to revenues
realized from customers of the Maine Market.
Roamer revenue (including roamer long distance) for 1994 increased $2,506,381,
or 83.0%, compared to 1993. Revenue from roamers in the Georgia/Alabama Market
increased $771,216, or 25.5%, due primarily to increased market penetration
levels by cellular carriers in service areas adjacent to the Georgia/Alabama
Market and the addition of the Company's ninth, tenth and eleventh cell sites,
which were placed in service on September 30, 1993, March 15, 1994 and August
24, 1994, respectively. While this produced an increase in total roamer
revenue, average revenue per roamer declined slightly, due in part to
agreements with certain surrounding carriers in which the Company discounted
its rates to those carriers. The remaining increase of $1,735,165 resulted
from the addition of the Maine Market. Roaming revenue is not as large a
component of total revenue in the Maine Market as it is in the Georgia/Alabama
Market, due to the extremes in weather in Maine and its effects on travel, as
well as greater price discounting practices between carriers in Maine.
For 1994, other service revenue, which primarily includes connection and
installation revenues, increased $306,169, or 141.1%. The addition of the
Maine Market contributed $274,907 to this increase. An increase in revenue
from customers of the Georgia/Alabama Market, which totaled $31,262, or 14.4%,
accounted for the remaining increase in other service revenue. This increase
was due primarily to connection fee revenue resulting from improved sales
compared to the prior year.
Monthly access revenue has grown to be the largest component of service
revenue, representing 45.0% of revenue during 1994 as compared to 40.4% of
revenue for the prior year. Conversely, roaming revenue declined to 29.2% of
service revenue for 1994, as compared to 36.7% of service revenue for 1993.
These changes are consistent with the increased local customer base and the
success of the Company's efforts to add customers to the higher monthly access
plans, which include certain unbilled airtime allotments depending on the
service plan selected by the customer. Local customer airtime revenues as a
percentage of total service revenue has increased slightly also, due to the
increase in the local customer base.
For 1994, cost of services was 10.2% of total service revenue, compared to 7.0%
for 1993. This increase in cost as a percentage of revenue was due primarily
to the addition of the Maine Market, as cost of access in Maine is
substantially higher than in Georgia and Alabama. The cost of services for the
Georgia/Alabama Market was 6.6% and 7.0% of total service revenue for 1994 and
1993, respectively.
Equipment sales amounted to $2,858,588 for 1994, an increase of $1,737,828, or
155.1%, over 1993. Sales to customers of the Georgia/Alabama Market increased
$148,917, or 13.3%, during 1994, due primarily to an increase in the number of
customers added between periods. The remaining increase of $1,588,911 was
attributable to the addition of the Maine Market.
Cost of equipment sales increased $1,380,860 for 1994, a 136.7% increase over
1993. The gross margin on equipment sales was 16.4% and 9.9% for 1994 and
1993, respectively. The increase between periods relates to the higher margins
being received for equipment in the Maine Market. The gross margin on
equipment sales
page 20
<PAGE> 197
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
for the Georgia/Alabama Market was 9.6% and 9.8% for 1994 and 1993,
respectively.
Operations costs totaled $2,721,744 for 1994, which represented a $1,389,008,
or 104.2%, increase from 1993. The main components of cost in this category
are employee-related costs (salaries, payroll taxes and employee benefits), the
provision for bad debts and communication costs (i.e., telephone, paging,
etc.). The Georgia/ Alabama Market experienced a $144,091, or 10.8%, increase
in operations costs for 1994 compared to 1993. The increase in 1994 over 1993
was primarily due to the hiring of additional technicians and customer service
representatives to meet the increased demand caused by the growing customer
base which resulted in increases in salaries of $70,522, or 13.8%, and employee
benefits by $7,950, or 7.6%. Also an increase of $51,274 in the reserve for
obsolete inventory contributed to the increase for 1994 as compared to 1993.
Offsetting these increases was a $38,888 decrease in the provision for bad
debts. This decrease was largely a result of increased collection efforts by
the credit and collections department and efficiencies gained in this process
with the new billing system. The addition of the Maine Market created a
$1,244,917 increase in operations costs for 1994.
SG&A were $7,055,505 for 1994, an increase of $4,140,954, or 142.1%, as
compared to 1993. The Georgia/ Alabama Market experienced an increase in SG&A
of $1,415,541, or 48.6%, for 1994 compared to the prior year. This increase
was primarily attributable to several factors, including increases in billing
costs due to more customers, increases in employee-related costs due to more
employees, increases in insurance costs due to three new cell sites and a
transportable cell site added since September 1993 and the addition of two new
retail stores, higher workers' compensation premiums, higher directors and
officers insurance premiums associated with the stock offering (February 1994)
and Unicel Merger, the initiation of directors fees and additional operating
costs associated with the new retail locations. In addition, the 1994 results
include increases in professional fees and travel costs associated with the PCS
auctions, as well as additional system-related costs associated with the
conversion of the Maine Market to the InterCel accounting and billing systems.
The addition of the Maine Market added $2,725,413 to SG&A for 1994. As a
percentage of revenues, SG&A costs increased between periods, from 31.2% for
1993 to 32.4% for 1994.
Depreciation and amortization expense totaled $3,673,406 for 1994, as compared
to $1,843,012 for 1993. The increase attributable to the Georgia/Alabama
Market was $491,751, or 26.7%, for 1994 compared to the prior year. The
increase was due primarily to goodwill amortization associated with the Unicel
Merger (included in the Georgia/Alabama Market results), which totaled $612,003
for 1994. The Company recorded approximately $24.6 million of goodwill
associated with the Unicel Merger, and such goodwill is being amortized ratably
over 40 years. In addition, depreciation expense increased as a result of four
new cell sites, two new retail locations, and a new computer system. There was
a decrease of $339,338 related to the amortization of the deferred promotional
credits as a result of the original credits (which were at larger amounts)
becoming fully amortized. The Unicel Merger added an additional $1,338,643 of
depreciation and amortization for 1994. This includes the depreciation of the
cellular system in Maine and the amortization of the promotional credits issued
in that market. The Maine Market adopted a promotional program similar to that
used in the Georgia/Alabama Market effective February 1, 1994.
Operating income before depreciation and amortization declined to 35.3% of
total revenue for 1994, as compared to 37.6% for the prior year. This decline
reflects principally the higher cost of service in the Maine Market as a result
of higher access costs. The operating income margin increased to 18.4% for
1994, from 17.9% for 1993. This operating income margin increase resulted in
large part from a substantial decrease in depreciation and amortization, as a
percentage of revenue, during 1994. The decrease in depreciation and
amortization was due to the promotional costs in the Maine Market having
accumulated less than one year's additions. These costs in the Georgia/Alabama
Market have accumulated to the point that the amortization related to them is
higher
page 21
<PAGE> 198
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
than the monthly additions to these promotional credits. Operating income
before depreciation and amortization represents earnings before interest
expense, income taxes, depreciation and amortization. Operating income margin
represents operating income as a percentage of total revenues. Operating
income before depreciation and amortization and operating income margin are
provided because they are measures commonly used in the industry. Neither
operating income before depreciation and amortization nor operating income
margin is a measurement of financial performance under generally accepted
accounting principles, and neither should be considered an alternative to net
income as a measure of performance or to cash flow as a measure of liquidity.
Interest expense totaled $635,257 for 1994, an increase of $589,090 over 1993.
The increase in interest expense is related to additional borrowings associated
with the Unicel Merger.
The 1994 results reflect an offset to expense of $123,817 related to the
Northern Maine Cellular Partnership and the minority partner's share of the
loss in the partnership for 1994. The amount represents 49% of the Northern
Maine Cellular Partnership's loss for the year 1994.
The effective income tax rates for 1994 and 1993 were 45.0% and 35.9%,
respectively. The increase between periods relates to the amortization of
goodwill associated with the Unicel Merger which is nondeductible for income
tax purposes. In connection with the Unicel Merger, the Company expects to
have available in excess of $8 million of net operating loss carryforwards for
federal tax purposes that may be utilized in future periods to offset federal
taxes (subject to certain regulatory restrictions). The Company established a
valuation allowance of $4,312,421 related to the deferred tax assets created by
the net operating losses acquired in the Unicel Merger. At December 31, 1994,
the Company removed the valuation allowance and recognized the benefit of the
deferred tax asset related to the Unicel Merger by reducing the goodwill
associated with the Unicel Merger.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant amounts of capital for funding its entry into
the PCS business and for the operation of its cellular system, construction of
additional cell sites and equipment additions to expand existing cellular
capacity. The Company may also require additional financing in the event it
decides to make additional acquisitions.
On February 7, 1996, the Company consummated the following transactions: (i)
pursuant to a Business Combination Agreement dated August 23, 1995, among the
Company, Powertel and the owners of Powertel, such owners (other than the
Company) exchanged their ownership interests in Powertel for an aggregate of
9,686,410 shares of the Company's common stock in a private placement (the
"Powertel Combination"); (ii) the Company received approximately $110.1 million
of net proceeds from the sale of 7,124,322 shares of its Common Stock (which
includes 124,322 shares purchased under the underwriters' overallotment option)
in a public offering (the "Stock Offering"); and (iii) the Company received
approximately $192.2 million of net proceeds from the sale of 35,747 units,
consisting in the aggregate of $357,470,000 principal amount at maturity of the
Company's 12% Senior Discount Notes due 2006 (the "12% Notes") and 1,143,904
warrants (the "Warrants") to purchase an equal number of shares of the
Company's common stock at an exercise price of $18.15 per share, subject to
adjustment (the "Unit Offering"; and together with the Stock Offering, the
"February Offerings"). A portion of the net proceeds from the February
Offerings was used to repay all outstanding borrowings under the Credit
Facility and under the lending arrangement with ITC Holding. The balance of
the net proceeds from the February Offerings will be used to partially finance
the buildout and operating costs of the PCS system for, and certain acquisition
expenses associated with, the Birmingham, Jacksonville and Memphis/Jackson MTAs.
page 22
<PAGE> 199
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
Pursuant to an Asset Purchase Agreement, dated as of March 5, 1996, between
InterCel Atlanta Licenses, Inc., a wholly owned subsidiary of the Company (the
"Atlanta License Subsidiary") and GTE Mobilnet Incorporated ("GTE Mobilnet"),
the Atlanta License Subsidiary will purchase GTE Mobilnet's license to provide
PCS in the Atlanta (M011) PCS MTA for approximately $192 million (the "Atlanta
MTA Acquisition") plus accrued interest. Pursuant to a Stock Purchase
Agreement dated as of March 4, 1996, between the Company and Ericsson, Ericsson
has agreed to purchase 100,000 shares of nonvoting Series A Convertible
Preferred Stock from the Company in a private placement for an aggregate
purchase price of $75 million (the "Ericsson Preferred Stock Sale") and
pursuant to a Stock Purchase Agreement dated as of March 4, 1996, between the
Company and MPX Systems, Inc. ("MPX"), MPX has agreed to purchase 100,000
shares of nonvoting Series B Convertible Preferred Stock from the Company in a
private placement for an aggregate purchase price of $75 million (the "MPX
Preferred Stock Sale"; and together with the Ericsson Preferred Stock Sale, the
"Preferred Stock Sales"). The closing of each of the Preferred Stock Sales is
conditioned upon, among other things, the closing of the other, and the closing
of the Atlanta MTA Acquisition.
On April 16, 1996, the Company issued $360 million aggregate principal amount
at maturity (approximately $200.2 million gross proceeds) of the Company's 12%
Senior Discount Notes due 2006 (the "Notes") in a public offering (the "Atlanta
Offering"). The Company intends to use the net proceeds from the Atlanta
Offering and the Preferred Stock Sales primarily to partially finance
development, construction and operating costs and certain acquisition expenses
associated with the PCS System.
Two of the Company's subsidiaries have entered into a commitment letter for a
$25 million bank facility (the "Bank Facility") to be used for working capital
and other purposes, including capital expenditures. It is currently
contemplated that the Company's obligations under the Bank Facility will be
secured by all current and future cellular assets and properties of the Company
(excluding the capital stock of the Company's PCS subsidiaries) and the
Company's 51% partnership interest in the Northern Maine Cellular Partnership,
subject to obtaining the consent of the other partner thereto. The Vendor
Financing Agreement requires, and the Bank Facility is expected to require, the
Company to maintain certain financial ratios. The failure of the Company and
its subsidiaries to maintain such ratios would constitute events of default
under such agreements, notwithstanding the ability of the Company to meet its
debt service obligations. An event of default under either such agreement
would allow the lenders thereunder to accelerate the maturity of such
indebtedness. In such event, a significant portion of the Company's other
indebtedness (including the Notes and the 12% Notes) may become due and
payable.
The development, construction and initial start-up phase associated with the
implementation of the Company's PCS system will require substantial capital.
Costs associated with the PCS system buildout include tower sites, leasehold
improvements, base station and switch equipment, microwave relocation costs and
labor expenses related to construction of sites. The Company currently
estimates that capital expenditures will total approximately $214 million ($152
million in 1996 and $62 million in 1997) relating to the initial buildout of
the Current PCS Markets system and $127 million ($27.8 million in 1996 and
$99.2 million in 1997) relating to the initial buildout of the Atlanta PCS
system. Upon completion of the initial buildouts, the PCS system is expected
to cover approximately 81,000 square miles with approximately 60% of the
population within the Company's PCS markets. The initial coverage will extend
across each of the 22 major metropolitan areas within the Company's PCS
markets, as well as the major highway corridors connecting those areas. The
Company thereafter expects to continue to build the PCS system in less populous
areas of its PCS markets, based on customer needs and competitive factors (in
the same way that most of the country's cellular systems have been built).
The Company believes that the net proceeds from the Atlanta Offering, together
with the net proceeds from the
page 23
<PAGE> 200
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
Preferred Stock Sales, cash on hand and borrowings under a $125 million credit
agreement with Ericsson Inc. (the "Vendor Financing Agreement") and the Bank
Facility, will be sufficient to consummate the Atlanta MTA Acquisition and to
finance the development, construction and operating costs associated with the
initial buildout of the Company's PCS system through 1997.
Pursuant to the Vendor Financing Agreement, Ericsson has agreed, subject to the
terms and conditions therein, to provide the Company with up to $125 million of
financing for purchases of PCS equipment and services under the Equipment
Purchase Agreement. Under certain circumstances, the amount of vendor
financing available under the Vendor Financing Agreement may be increased to
$165 million. The Company's obligations under the Vendor Financing Agreement
will be secured by all tangible assets purchased with the proceeds therefrom
and by a pledge of the capital stock of the Company's subsidiaries that hold
the PCS licenses for the Current PCS Markets. In the event the amount
available vendor financing is increased, the Company's obligations will also be
secured by a pledge of the capital stock of the Company's subsidiary that holds
the PCS license for the Atlanta MTA.
Although the Company is currently unable to predict the amount of expenditures
that may be made after 1997, the Company expects that it may require additional
capital for the buildout of the PCS System after 1997. Sources of additional
capital may include vendor financing, cash flow from cellular operations,
public and private equity and debt financings by the Company and proceeds
received from any exercises of the Warrants. The Company may also require
additional financing in the event it decides to make additional acquisitions.
The extent of additional financing required will depend on the success of the
Company's businesses. The Company currently has no other sources of income or
cash flows other than its cellular operations and the interest income earned
from investing the net proceeds of the February Offerings and the Atlanta
Offering. There can be no assurance that additional financing will be
available to the Company, or if available, that it can be obtained on terms
acceptable to the Company and within the limitations contained in the
Indentures, the Bank Facility or the Vendor Financing Agreement or that may be
contained in any future financing arrangements. The restrictions on additional
indebtedness under the indentures to the Notes and the 12% Notes (the
"Indentures") require the Company to satisfy specified leverage ratios in order
to incur indebtedness; however, they permit the Company and its subsidiaries to
incur an unlimited amount of additional indebtedness to finance the acquisition
of inventory or equipment.
The Company expects to incur significant operating losses and to generate
negative cash flow from operating activities during the next several years,
while it develops and constructs its PCS system and builds a PCS customer base.
Cash interest will not be payable on the Notes or the 12% Notes prior to 2001.
However, the accretion of original issue discount on the 12% Notes and the
Notes will cause an increase in the Company's indebtedness under the Indentures
of $323.4 million ($163.6 million by February 1, 2006, with respect to the 12%
Notes and $159.8 million by May 1, 2001, with respect to the Notes. The Notes
and the 12% Notes will require semi-annual cash interest payments beginning in
2001. Management believes that cash flow from operations may be insufficient
to repay the Notes and the 12% Notes in full at maturity and that they may need
to be refinanced at maturity. There can be no assurance that any such
refinancing could be effected successfully or on terms acceptable to the
Company.
During 1995, the Company generated net cash of $5,640,230 from operating
activities, which was an increase of $1,398,404 over 1994. Operating income,
before depreciation and amortization, increased from $7,672,623 in 1994 to
$11,696,544 for 1995. During 1994, the Company generated net cash of
$4,241,826 from operating activities, which was an increase of $1,489,589 over
the prior year. Operating income before depreciation and amortization
increased from $3,517,553 in 1993 to $7,672,623 in 1994. Operating income
before depreciation and amortization is not a measurement of financial
performance under generally accepted accounting principles and should not be
considered an alternative to net income as a measure of performance or to cash
flow as
page 24
<PAGE> 201
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
a measure of liquidity. During the years ended December 31, 1993 and 1994, the
Company incurred and expensed $372,173 in costs related to the evaluation and
information of strategies to obtain PCS licenses and expenditures related to
participation in the FCC auction. During 1995, $3,689,180 of additional PCS
expenses were incurred. Powertel reimbursed the Company for these expenses
monthly.
Cash used for investing activities was $22,835,142 for 1995 as compared to cash
used of $9,328,771 for the same period of 1994. Investing activities for 1995
included capital expenditures totaling $7,661,253 (the majority of which
related to the purchase and installation of a new digital switch) and an
investment in Powertel of $16,974,829 (to fund InterCel's portion of the
acquired PCS licenses and working capital). The Company received $1,840,592 in
refund of certain noninterest-bearing subordinated capital certificates from
the Rural Telephone Finance Cooperative related to a borrowing agreement
entered into by Unicel prior to the Unicel Merger. Cash used for investing
activities was $9,328,771 for fiscal year 1994 as compared to $1,631,619 for
1993. Investing activities for 1994 included capital expenditures totaling
$2,866,000 (the majority of which related to the construction of new cell
sites), $4,062,092 of expenditures in connection with the Unicel Merger (net of
cash acquired of $288,245) and the Company's $2,382,315 initial capital
contribution to Powertel.
Cash provided by financing activities amounted to $17,317,798 for 1995. During
1995, the Company repaid $1,500,000 on the ITC Note and incurred $20,774,828 of
Valley Indebtedness. Cash provided by financing activities was $5,223,604 for
fiscal year 1994. The Company issued 1,840,000 shares of common stock in a
public offering on February 8, 1994. The proceeds of that public offering net
of offering costs and the exercise of stock options during the year were
$14,292,904. These proceeds were used primarily to repay outstanding debt
assumed or incurred in connection with the Unicel Merger. The net repayments
of such debt was $8,800,000 for 1994. During 1995, the Company completed the
conversion of its analog transmission facilities to dual-mode analog/digital
transmission facilities in the Georgia/Alabama Market at a cost of
approximately $4 million. The Company also has completed six new cell sites in
the Maine Market and two additional cell sites in the Georgia/Alabama Market
during 1995. The conversion of the Maine Market to dual-mode analog/digital
service is not expected to be completed until 1996. Total capital expenditures
for the cellular operations through 1996 are expected to be $9.4 million. The
Company intends to finance these capital expenditures from cash flow and the
proceeds of the February Offerings.
During the fourth quarter of 1994, the Company's 1990-1993 federal income tax
returns were examined by the Internal Revenue Service ("IRS") in connection
with the general examination of ITC Holding's federal returns for the same
periods. As result of this examination, adjustments have been proposed by the
IRS to capitalize and amortize certain commission and promotional expenses
(based on the premise that such costs were incurred to acquire an asset that
benefits future periods [i.e., subscribers]) which have been deducted by the
Company as incurred. The Company is appealing the adjustment but has reserved
$274,250 at December 31, 1995 for potential interest charges that may be
imposed by the IRS. As of the date hereof, the IRS has not imposed or proposed
any penalties on the Company.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("FAS 121") "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," which becomes effective for fiscal years beginning after December
15, 1995. FAS 121 established standards for determining when impairment losses
on long-lived assets have occurred and how
page 25
<PAGE> 202
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTERCEL, INC. AND SUBSIDIARIES
impairment losses should be measured. The Company intends to adopt FAS 121 in
1996. The financial statement impact of adopting FAS 121 is not expected to be
material.
In October 1995, the FASB issued Statements of Financial Accounting Standards
No. 123 ("FAS 123") "Accounting for Stock-Based Compensation," which become
effective for fiscal years beginning after December 15, 1995. FAS 123
established new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation costs for
stock-based compensation under FAS 123 or APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Entities electing to remain with the accounting in
APB Opinion No. 25 will be required to make pro forma disclosures of net income
and earnings per share as if the provisions of FAS 123 had been applied. The
Company adopted FAS 123 on January 1, 1996. The financial statement impact of
adopting FAS 123 will not be material.
page 26
<PAGE> 203
CONSOLIDATED BALANCE SHEETS
INTERCEL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
DECEMBER 31,
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 629,739 $ 506,853
Accounts Receivable--Trade 4,482,593 3,371,016
Allowance for Doubtful Accounts (249,454) (271,003)
Accounts Receivable--Affiliates (Note 9) 19,572 40,845
Inventories (Note 2) 830,616 643,437
Prepaid Expenses and Other 565,531 184,462
Income Tax Refunds Receivable (Note 7) 0 176,164
Investments (Note 2) 0 1,840,592
Current Portion of Deferred Income Taxes (Note 7) 269,817 167,294
- -------------------------------------------------------------------------------------------------------------------
6,548,414 6,659,660
- -------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, AT COST:
Land 1,001,323 889,899
Building and Towers 5,994,765 4,901,905
Equipment 15,578,907 11,340,939
Furniture and Fixtures 617,929 514,364
Assets Under Construction (Note 2) 81,390 62,206
- -------------------------------------------------------------------------------------------------------------------
23,274,314 17,709,313
Less Accumulated Depreciation (5,208,269) (4,563,577)
- -------------------------------------------------------------------------------------------------------------------
18,066,045 13,145,736
- -------------------------------------------------------------------------------------------------------------------
OTHER ASSETS:
Investment in Powertel (Note 1) 19,224,456 2,382,315
Deferred Income Taxes (Note 7) 1,404,507 2,112,453
Deferred Offering Costs (Note 2) 1,620,723 0
Deferred Charges and Other, net of accumulated amortization
of $4,660,511 in 1995 and $2,921,060 in 1994 (Note 2) 4,182,538 2,608,757
Goodwill, net of accumulated amortization of $1,445,484 in
1995 and $824,897 in 1994 23,282,911 23,903,498
- -------------------------------------------------------------------------------------------------------------------
49,715,135 31,007,023
- -------------------------------------------------------------------------------------------------------------------
$74,329,594 $50,812,419
===================================================================================================================
</TABLE>
page 27
<PAGE> 204
CONSOLIDATED BALANCE SHEETS
INTERCEL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable--Trade $ 811,486 $ 1,091,467
Accounts Payable--Related Parties (Note 9) 72,382 53,879
Advance Billings and Customer Deposits 828,220 741,650
Accrued Compensation 895,651 632,009
Accrued Income Taxes 183,795 0
Accrued Other 2,752,062 1,403,871
Current Portion of Long-Term Obligations (Note 5) 29,105 26,742
- -------------------------------------------------------------------------------------------------------------------
5,572,701 3,949,618
- -------------------------------------------------------------------------------------------------------------------
LONG-TERM OBLIGATIONS (Note 5):
Credit Facility 24,601,514 5,982,715
Note Payable--ITC Holding Company 3,500,000 5,000,000
Note Payable to Powertel 901,037 --
Other Long-Term Obligations 18,152 47,258
- -------------------------------------------------------------------------------------------------------------------
29,020,703 11,029,973
- -------------------------------------------------------------------------------------------------------------------
DEFERRED REVENUE (Note 2) 389,515 342,690
- -------------------------------------------------------------------------------------------------------------------
DEFERRED INCOME TAXES (Note 7) 0 0
- -------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Note 10)
MINORITY INTEREST IN SUBSIDIARY (Note 4) 2,674,159 2,116,174
- -------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY (Note 6):
Preferred Stock, $.01 Par Value; Authorized 1,000,000 Shares,
No Shares Issued and Outstanding 0 0
Common Stock, $.01 Par Value; Authorized 39,000,000 Shares,
Issued and Outstanding 10,011,603 and 9,936,952 in 1995 and
1994, respectively 100,116 99,369
Paid-In Capital 32,437,733 31,772,810
Retained Earnings 4,845,288 1,841,625
Deferred Compensation (370,781) 0
Treasury Stock at cost--52,283 shares (339,840) (339,840)
- -------------------------------------------------------------------------------------------------------------------
36,672,516 33,373,964
- -------------------------------------------------------------------------------------------------------------------
$74,329,594 $50,812,419
===================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
page 28
<PAGE> 205
CONSOLIDATED STATEMENTS OF INCOME
INTERCEL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES AND SALES (Note 2):
Monthly Access Revenue $12,243,924 $ 8,512,351 $3,325,725
Airtime Revenue 4,938,237 3,980,895 1,588,401
Roaming Revenue 5,540,552 4,403,671 2,599,191
Toll Revenue 2,026,059 1,483,200 498,193
Installation and Connection Revenue 393,747 394,555 126,839
Other Revenue 241,520 128,568 90,115
- ---------------------------------------------------------------------------------------------------------------------
Total Service Revenue 25,384,039 18,903,240 8,228,464
Equipment Sales 3,927,521 2,858,588 1,120,760
- ---------------------------------------------------------------------------------------------------------------------
Total Revenues and Sales 29,311,560 21,761,828 9,349,224
- ---------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Cost of Services 2,394,284 1,920,631 573,919
Cost of Equipment Sales 3,127,398 2,391,325 1,010,465
Operations 3,595,694 2,721,744 1,332,736
Selling, General and Administrative 8,497,640 7,055,505 2,914,551
Depreciation and Amortization 5,100,982 3,673,406 1,843,012
- ---------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 22,715,998 17,762,611 7,674,683
- ---------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 6,595,562 3,999,217 1,674,541
- ---------------------------------------------------------------------------------------------------------------------
OTHER (INCOME) EXPENSES:
Interest Expense 1,656,773 635,257 46,167
Loss on Equity Investment 132,688 0 0
Minority Interest in Loss of Subsidiary (129,547) (123,817) 0
Miscellaneous (Income) Expense (297,987) 75,825 47,981
- ---------------------------------------------------------------------------------------------------------------------
Total Other Expenses 1,361,927 587,265 94,148
- ---------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 5,233,635 3,411,952 1,580,393
INCOME TAX PROVISION (2,229,972) (1,534,883) (567,846)
- ---------------------------------------------------------------------------------------------------------------------
NET INCOME $ 3,003,663 $ 1,877,069 $1,012,547
=====================================================================================================================
NET INCOME PER COMMON SHARE $ 0.29 $ 0.19 $ 0.16
=====================================================================================================================
AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 10,280,616 9,764,840 6,316,608
=====================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
page 29
<PAGE> 206
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
INTERCEL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
- ----------------------------------------------------------------------------------------------------------------------------
COMMON
STOCK TOTAL
$.01 PAR PAID-IN RETAINED DEFERRED TREASURY STOCKHOLDERS'
VALUE CAPITAL EARNINGS COMPENSATION STOCK EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1992 $ 61,868 $ 5,946,433 $(1,047,991) $ -- $ -- $ 4,960,310
Issuance of common stock
under stock options 30 9,960 -- -- -- 9,990
Net income -- -- 1,012,547 -- -- 1,012,547
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1993 61,898 5,956,393 (35,444) -- -- 5,982,847
Issuance of common
stock under stock options 127 51,177 -- -- -- 51,304
Issuance of common stock
connected with Unicel Merger
(Note 3) 18,944 12,294,889 -- -- -- 12,313,833
Purchase of 52,283 shares of
common stock -- -- -- -- (339,840) (339,840)
Issuance of common stock, net of
issuance expenses (Note 6) 18,400 13,470,351 -- -- -- 13,488,751
Net income -- -- 1,877,069 -- -- 1,877,069
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1994 99,369 31,772,810 1,841,625 -- (339,840) 33,373,964
Issuance of common stock under
stock options 397 170,898 -- -- -- 171,295
Issuance of common stock under
restricted stock agreement 350 494,025 -- (494,375) -- 0
Amortization of deferred
compensation -- -- -- 123,594 -- 123,594
Net income -- -- 3,003,663 -- -- 3,003,663
- ----------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1995 $100,116 $32,437,733 $ 4,845,288 $ (370,781) $(339,840) $36,672,516
============================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
page 30
<PAGE> 207
CONSOLIDATED STATEMENTS OF CASH FLOWS
INTERCEL, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
YEARS ENDED DECEMBER 31,
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,003,663 $ 1,877,069 $1,012,547
Adjustments to Reconcile Net Income to Net Cash
Provided (Used) From Operating Activities--
Minority Interest in Loss of Subsidiary (129,547) (123,817) 0
Loss on Equity Investment 132,688 0 0
Depreciation 2,740,944 2,130,504 953,249
Amortization of Deferred Charges and Goodwill 2,360,038 1,542,902 889,767
Deferred Compensation--Restricted Stock 123,594 0 0
Deferred Taxes, Net 605,423 1,421,496 (124,112)
Changes in Assets and Liabilities:
Increase in Accounts Receivable (1,133,126) (424,997) (435,619)
Increase in Inventories (187,179) (185,109) (72,205)
Increase in Other Current Assets (381,069) (20,763) (29,578)
Increase in Deferred Charges (3,273,580) (1,974,316) (499,505)
Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities 1,691,811 (184,061) 944,882
Increase in Advance Billings and Customer Deposits 86,570 182,918 112,811
- --------------------------------------------------------------------------------------------------------------------
Net Cash Provided From Operating Activities 5,640,230 4,241,826 2,752,237
- --------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES:
Capital Expenditures (7,661,253) (2,866,000) (1,105,067)
Cash paid for purchase of subsidiary, net of cash
acquired of $288,245 (Note 3) 0 (4,062,092) 0
Investment in Powertel (16,974,829) (2,382,315) 0
Investment in RTFC subordinated capital certificates 1,840,592 0 (500,000)
Other Investments (39,652) (18,364) (26,552)
- --------------------------------------------------------------------------------------------------------------------
Net Cash Used For Investing Activities (22,835,142) (9,328,771) (1,631,619)
- --------------------------------------------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES:
Advances from (Repayments to) Affiliated Companies, Net (1,460,224) 5,050,606 7,977
Proceeds from Sale of Stock 171,295 14,292,904 9,990
Capital Investment in Partnership--Minority Partner 687,532 163,834 0
Deferred Expenses Associated with Public Offerings (1,620,723) (444,838) (809,262)
Proceeds from Loan Agreement 21,722,690 28,432,315 1,300,000
Repayments of Loan Agreement (2,182,772) (42,271,217) (1,472,575)
- --------------------------------------------------------------------------------------------------------------------
Net Cash (Used) Provided For Financing Activities 17,317,798 5,223,604 (963,870)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH 122,886 136,659 156,748
CASH AT BEGINNING OF YEAR 506,853 370,194 213,446
- --------------------------------------------------------------------------------------------------------------------
CASH AT END OF YEAR $ 629,739 $ 506,853 $ 370,194
====================================================================================================================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for interest $ 1,295,942 $ 573,920 $ 83,304
====================================================================================================================
Cash paid during the year for income taxes $ 1,557,138 $ 711,500 $ 597,000
====================================================================================================================
Noncash investing and financing activities:
Fair value of common stock issued in Unicel Merger $ 0 $12,313,833 $ 0
====================================================================================================================
Fair value of common stock purchased $ 0 $ (339,840) $ 0
====================================================================================================================
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
DECEMBER 31, 1995, 1994, AND 1993
page 31
<PAGE> 208
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
1. ORGANIZATION AND NATURE OF BUSINESS
InterCel, Inc. (the "Company"), a 50.2% owned subsidiary of Interstate
Cellular, Inc. at December 31, 1995, was incorporated in Delaware in April
1991. The Company operates a cellular telephone system in contiguous portions
of four rural service areas ("RSAs") in eastern Alabama and western Georgia, as
well as the Bangor, Maine metropolitan service area ("MSA") and Maine RSA's 2
and 3 (the "Company Service Area"). The Company Service Area has a population
of approximately 770,000 people (according to the 1990 U.S. Census) and covers
approximately 100 miles of Interstate Highway 85 and 40 miles of Interstate
Highway 185 in the Alabama/Georgia market as well as over 200 miles of
Interstate Highway 95 and major portions of U.S. Route 1 along the coastline in
the Maine market.
On January 31, 1994, the Company consummated a merger (the "Unicel Merger")
with Unity Cellular Systems, Inc. ("Unicel") (Note 3). Unicel is the wireline
provider of cellular telephone service for the Bangor, Maine MSA and for Maine
RSA 3 (which includes Augusta, the state capital), and is the managing partner
of (with a 51% interest in) the Maine RSA 2 Cellular Partnership (the "Northern
Maine Partnership" or the "Partnership"), a partnership which is the wireline
provider of cellular service in Maine RSA 2. The Bangor MSA and Maine RSA's 2
and 3 constitute a "cluster" of contiguous properties that have a population of
approximately 518,000 people (according to industry publications).
In addition to the existing cellular properties, the Company has a 13.396%
ownership interest in Powertel PCS Partners, L.P. ("Powertel"), a partnership
formed to pursue licenses in the Federal Communication Commission's personal
communications services ("PCS") auction. On March 13, 1995, Powertel submitted
winning bids for the Memphis Tennessee/Jackson Mississippi (M028); Birmingham,
Alabama (M029); and Jacksonville, Florida (M037) Major Trading Areas "MTAs".
The winning bids for these licenses totaled $124,447,000 with the Company's
portion of the price amounting to approximately $16,671,000. The Company's
investment in Powertel is accounted for using the equity method of accounting.
On June 23, 1995, the Company announced that it had agreed in principle to
enter into a business combination with Powertel, whereby each partner of
Powertel (except for a wholly owned subsidiary of the Company) will contribute
their partnership interest or, in certain cases, the stockholders of certain
partners will contribute the stock of such partners, in each case to the
Company in exchange for their ratable portion (based on partnership interests)
of 9,686,410 shares of the Company's Common Stock. The Company's investment in
Powertel at December 31, 1995 was $19,224,456. The business combination was
consummated on February 7, 1996. (Note 11).
2. SUMMARY OF ACCOUNTING POLICIES
REVENUE RECOGNITION
The Company earns revenues by providing cellular service to both local
subscribers and subscribers of other cellular carriers traveling ("roaming")
through the Company Service Area as well as from sales of cellular equipment.
Service revenue from local subscribers consists of the base monthly service fee
and airtime revenue. Generally, base monthly service fees are billed one month
in advance but are recognized when earned. The Maine Market has approximately
13% of its monthly access fees being billed in arrears, after it is earned.
Airtime revenues are recognized when service is provided. Roamer revenues
consist of the daily fee charged to certain nonsubscribers for roaming in the
service area as well as related airtime revenue for use of the cellular
network. Roamer rev-
page 32
<PAGE> 209
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
enues are recognized when the service is rendered.
Long-distance revenues ("toll revenues") are charged to both local and roamer
users and are recognized when service is provided. Equipment sales are
recognized upon delivery of the equipment to the customer. Other revenues
consist of equipment installation charges and connection fees and are
recognized when earned.
PROPERTY AND DEPRECIATION
Property and equipment are recorded at cost, including certain engineering
costs. The Company records depreciation using the straight-line method over
the estimated useful lives of the assets, which are 15 to 20 years for towers,
buildings, and land improvements; 10 to 20 years for equipment; and 5 to 7
years for furniture and fixtures. The Company's policy is to remove the cost
and accumulated depreciation of retirements from the accounts and recognize the
related gain or loss upon the disposition of assets. Such gains and losses
were not material for any period presented.
GOODWILL
Goodwill is stated at cost less accumulated amortization and is amortized using
the straight-line method over 40 years. The Company periodically reviews the
value assigned to goodwill to determine if it has been other than temporarily
impaired by adverse conditions affecting the Company. Management is of the
opinion that there has been no diminution in the value assigned to goodwill.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
all majority-owned subsidiaries. All significant intercompany accounts and
transactions are eliminated in consolidation.
NET INCOME PER SHARE
Net income per share for 1995, 1994, and 1993 was computed using the weighted
average number of shares outstanding, adjusted for common stock equivalents.
INVENTORIES
The Company maintains inventories for resale of cellular telephones and
accessory parts (i.e. antennae, batteries, cable, etc.). Inventory is valued
at the lower of average cost (which approximates first-in, first-out) or
market.
DEFERRED OFFERING COSTS
Through December 31, 1995, the Company has deferred $1,620,723 of expenses
associated with the offering of its common stock and the concurrent offering of
units consisting of high-yield notes and warrants (the "February Offerings")
(Note 11). Upon completion of the February Offerings, costs related to the
stock offering were netted against the proceeds from such offering. Costs
related to the unit offering will remain in other noncurrent assets and will be
amortized over the life of the related notes (ten years).
DEFERRED CHARGES
The Company offers certain promotional programs under which a customer could
receive either a free cellular telephone, a substantial discount toward a
cellular telephone, or a credit toward future monthly service in return for
signing a noncancelable cellular telephone service agreement for a term of one
to three years. Under these promotional programs, the Company defers the cost
associated with these programs and amortizes such cost over the specific
contract term. Through December 31, 1995 and 1994, costs totaling $4,819,858
and $2,330,407, respectively, have been deferred related to these promotional
programs. Should a customer cancel service prior to expiration of its service
agreement or be disconnected for nonpayment, the customer becomes
page 33
<PAGE> 210
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
liable to the Company for the full original credit issued under this program.
It is the Company's policy to establish a full reserve for receivables that
arise as a result of such cancellations.
Origination costs of $279,855 and $266,009 associated with securing the
company's existing credit facility have been deferred at December 31, 1995 and
1994, respectively, and are now being amortized over the ten-year term of the
credit agreement (Note 5). Such costs were written off upon consummation of
the Powertel business combination (Note 11).
Lease acquisition costs of $55,000 associated with purchasing kiosks in two
mall locations to be used as retail facilities have been deferred as of
December 31, 1995 and 1994 and are being amortized over the eight-year life of
the lease agreements.
The Company has deferred software license costs of $350,129 and $195,751 at
December 31, 1995 and 1994, respectively. These costs are for software license
fees associated with the Company's billing and information management system.
These costs are being amortized over the five-year term of the license
agreement.
Amortization of all deferred charges totaled $1,739,451, $1,542,902, and
$889,767 for 1995, 1994, and 1993, respectively, and is included in
depreciation and amortization in the accompanying statements of operations.
ASSETS UNDER CONSTRUCTION
Expenditures to construct the Company's cellular network are recorded as assets
under construction until the assets are placed in service. When the assets are
placed in service, they are transferred to the appropriate property and
equipment categories and depreciated.
DEFERRED REVENUE
Deferred revenue consists of Rural Telephone Finance Cooperative ("RTFC")
patronage capital certificates ("PCCs") issued in connection with certain debt
financing (Note 5) which will be paid in the future at the discretion of the
RTFC's board of directors. They will be recognized as income when cash is
received.
INVESTMENTS
As of December 31, 1994, current investments consisted of $1,840,592 in
noninterest-bearing subordinated capital certificates ("SCCs") issued by the
RTFC. These SCCs were repaid to the Company on March 1, 1995.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements.
Estimates also affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 ("FAS 121") "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of," which becomes effective for fiscal years beginning after December
15, 1995. FAS 121 establishes standards for determining when impairment losses
on long-lived assets have occurred and how impairment losses should be
measured. The Company intends to adopt FAS 121 in 1996. The financial state-
page 34
<PAGE> 211
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
ment impact of adopting FAS 121 is not expected to be material.
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123 ("FAS 123") "Accounting for Stock-Based Compensation," which becomes
effective for fiscal years beginning after December 15, 1995. FAS 123
establishes new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under FAS 123 or APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Entities electing to remain with the accounting in
APB Opinion No. 25 will be required to make pro forma disclosures of net
income and earnings per share as if the provisions of FAS 123 had been applied.
The Company adopted FAS 123 on January 1, 1996. The financial statement impact
of adopting FAS 123 will not be material.
PRESENTATION
Certain prior year amounts have been reclassified to conform to the current
year presentation.
3. UNICEL MERGER
On January 31, 1994, the Company consummated the Unicel Merger. As
consideration for the merger, the Company refinanced approximately $17.9
million of outstanding liabilities and long-term debt of Unicel, paid
approximately $4.8 million in cash (including approximately $500,000 in
acquisition expenses of the Company and excluding $500,000 previously paid in
connection with the Company's purchase of certain Unicel warrants), and issued
approximately 1.8 million shares of Company common stock to previous holders of
equity in Unity Telephone and Unicel, subject to adjustment for a three year
period as defined in the merger agreement. In addition, as a part of the
Unicel Merger, the Company has available in excess of $8 million of net
operating loss carryforwards for federal tax purposes that can be utilized in
future periods to offset federal taxes (subject to certain regulatory
restrictions).The Unicel Merger was accounted for as a purchase. As of
December 31, 1994, the total purchase price of $36,382,655 including
acquisition costs totaling $1,142,635, was allocated as follows:
<TABLE>
<S> <C>
Current Assets $ 1,609,233
Property and equipment 6,965,582
Goodwill 24,555,778
Other Assets 2,578,788
Current liabilities (1,134,456)
Long-term obligations (2,504,691)
Deferred Taxes 4,312,421
- -----------------------------------------------------------------------------
Purchase Price $36,382,655
=============================================================================
</TABLE>
page 35
<PAGE> 212
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
The deferred tax assets and liabilities acquired in the Unicel Merger are
summarized as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Depreciation $ 569,688
State deferred taxes, net 84,736
Other 463
- -------------------------------------------------------------------------
654,887
- -------------------------------------------------------------------------
Deferred tax assets:
Net operating loss 4,921,340
Allowance for doubtful accounts 18,100
Other 27,868
- -------------------------------------------------------------------------
4,967,308
- -------------------------------------------------------------------------
Net deferred tax asset $ 4,312,421
=========================================================================
</TABLE>
Amounts recorded related to the purchase as of January 31, 1994 were adjusted
to reflect an adjustment in the purchase price, as specified in the merger
agreement, resulting in a reduction in the purchase price, and goodwill of
$339,840. In addition, due to taxable income realized in the year ended
December 31, 1994, and a revision of management's estimate of the realizability
of remaining net operating loss carryforwards acquired in the merger a
valuation allowance of $4,312,421 established at the acquisition date was
reversed in the fourth quarter of 1994, with a corresponding reduction in
goodwill.
The following unaudited pro forma condensed statements of operations include
the pro forma effects of the offering and sale of 1,840,000 shares of Common
Stock (Note 6) and the merger with Unity Telephone Company. These unaudited
pro forma condensed statements of operations include results of operations of
InterCel, Inc. and Unity Cellular Systems, Inc. for the years ended December
31, 1994 and 1993. Such unaudited pro forma condensed financial statements
assume that the merger occurred on January 1, 1994 and January 1, 1993
respectively. In the opinion of management, all adjustments necessary to
present fairly such unaudited pro forma condensed statements of operations have
been made.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1994 1993
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues $22,627,056 $15,984,870
Operating Income 4,063,325 1,178,417
Income Before Income Taxes 3,504,646 649,849
- -------------------------------------------------------------------------------------------------------------------
Net Income $ 1,937,697 $ 649,849
===================================================================================================================
Net Income Per Share $ 0.20 $ 0.07
===================================================================================================================
Average Common And Common Equivalent Shares Outstanding 9,930,326 9,922,798
===================================================================================================================
</TABLE>
4. CELLULAR PARTNERSHIP
In June 1992, Unicel entered into a partnership with New York Cellular
Geographic Service Area, Inc. ("NYCGSA"), a wholly owned subsidiary of NYNEX
Mobile Communications, Inc. The Partnership owns and operates a cellular system
in Maine RSA 2 in Aroostook, Somerset, and Piscataquis Counties.
Under the terms of the partnership agreement, Unicel contributed $2,325,600 to
construct and begin operating the system in return for a 51% ownership and
NYCGSA contributed the system construction permit, valued at $2,234,400, for
its 49% ownership. Subsequent capital requirements are to be met based on the
partners'
page 36
<PAGE> 213
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
respective ownership percentages.
As of December 31, 1995, Unicel has contributed $3,791,534 (consisting of cash,
equipment, and services) and NYCGSA has contributed $3,548,034 (consisting of
the construction permit and cash). NYCGSA also has an outstanding payable to
the Partnership of $38,692 in order to maintain the agreed-upon ownership
percentages.
NYCGSA's 49% interest in the Partnership is reflected as minority interest in
the accompanying financial statements.
5. LONG-TERM OBLIGATIONS
Long-Term Obligations consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1995 1994
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Note payable to software vendor in monthly installments
through July, 1997 including interest at 8.5% $ 47,257 $ 74,000
Note payable to ITC Holding Company 3,500,000 5,000,000
Note payable to Powertel at 8% 901,037 0
Note payable to bank in monthly installments from February,
1996 through February, 2004 including interest at a variable rate 24,601,514 5,982,715
- -------------------------------------------------------------------------------------------------------------------
29,049,808 11,056,715
Less current portion 29,105 26,742
- -------------------------------------------------------------------------------------------------------------------
Long-term obligations $29,020,703 $11,029,973
===================================================================================================================
</TABLE>
In connection with the Unicel Merger, in January 1994, the Company entered into
a new $30 million revolving credit facility (the "Credit Facility" or the
"Facility") with the National Bank for Cooperatives ("CoBank") to replace the
Company's and Unicel's previous debt facilities. The Credit Facility was used
to replace the Company's and Unicel's previous debt facilities. All amounts
borrowed under this facility were the obligation of the Company. Under the
terms of the Credit Facility, the maximum amount available was reduced by $2
million on the first anniversary of the closing date of the Facility. On the
second anniversary of the closing date of the Facility (the "Termination
Date"), the Facility was to convert to an eight-year secured term loan ($26.5
million maximum) that would mature on the eighth anniversary of the Termination
Date. However, in connection with the Powertel business combination (Note 11),
all borrowings under the Facility were repaid with proceeds from the February
Offerings. The interest rate on the Facility was based on the consolidated
Total Leverage Ratio (which was the ratio of indebtedness to operating cash
flow as defined under the Facility) of the Company and its subsidiaries, and
had variable and fixed rate options. The interest rate was tied to one of
three measures (which the Company had the option to select) with a margin
dependent upon whether the consolidated Total Leverage Ratio was greater than
or less than 4.0 to 1.0. These three measures were CoBank's National Variable
Rate ("Variable Rate"), the U.S. Treasury Rate ("Treasury Rate"), and the
London Interbank Offering Rate ("LIBOR").
The Facility was secured by substantially all of the assets of the Company.
The agreement contained certain restrictive covenants including, but not
limited to, restrictions related to the indebtedness, working capital, and
equity ratios. As of December 31, 1995, the Company was in compliance with the
restrictive covenants.
As of December 31, 1995 and 1994, borrowings outstanding under the Credit
Facility totaled $24,601,514 and $5,982,715, respectively. In addition to
interest charges, the Company also paid an annual facility fee equal to
page 37
<PAGE> 214
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
.250% of the available unused portion of the line and .125% of the unavailable
unused portion of the line (as defined under the Facility). On July 21, 1994,
the Company requested and CoBank reduced the available portion of the Credit
Facility to $15,000,000 from the $30,000,000 original amount available. Upon
written request of the Company, CoBank could, in its sole discretion, reinstate
as available all or any portion of the unavailable commitment (as define in the
Facility) at such terms and conditions as CoBank may determine appropriate. On
May 1, 1995, the Company requested and CoBank agreed to reinstate $13 million
of the $15 million unavailable commitment, increasing the total amount
available under the Credit Facility to $28,000,000.
On March 10, 1994, the Company entered into a revolving lending arrangement
with its parent, ITC Holding, under which ITC Holding may lend to the Company
from time to time amounts representing ITC Holding's excess available cash,
pursuant to which $9,403,000 (the outstanding balance at December 31, 1995 and
1994 was $3,500,000 and $5,000,000, respectively) of outstanding borrowings
under the Company's Credit Facility were repaid by ITC Holding and loaned back
to the Company. The loan from ITC Holding, which was unsecured and prepayable
(without penalty) at any time, bore interest at the same rates that the Company
would have been paying had the amounts remained outstanding under the Credit
Facility. All borrowings under this lending arrangement were repaid in
connection with the Powertel business combination with proceeds from the
February Offerings (Note 11).
6. STOCKHOLDERS' EQUITY
On February 8, 1994, the Company issued 1,840,000 shares of common stock in a
public offering at $8.25 per share. The net proceeds of the offering after
underwriting discount and offering expenses were approximately $13.8 million.
The Company used the proceeds of the offering to repay a portion of the
outstanding debt under the Credit Facility (Note 5).
The Company's certificate of incorporation empowers the Board of Directors of
the Company to redeem any of the Company's outstanding capital stock at the
lesser of fair market value or such holder's purchase price (if the stock was
purchased within a year of such redemption) to the extent necessary to prevent
the loss or secure the reinstatement of any license or franchise from any
governmental agency.
The Company's certificate of incorporation authorizes the Board of Directors to
issue, from time to time and without further stockholder action, one or more
series of preferred stock and to fix the relative rights and preferences of the
shares, inducing voting powers, dividend rights, liquidation preferences,
redemption rights, and conversion privileges.
NONEMPLOYEE STOCK OPTION PLAN
Under the Company's Nonemployee Stock Option Plan (the "Nonemployee Plan"),
400,000 shares of common stock are authorized for issuance upon exercise of
options. All nonemployee directors of the Company, and all employees of
affiliates of the Company, are eligible to receive options under the
Nonemployee Plan. Options are granted to each nonemployee director upon his or
her election as a director, and are exercisable at the fair market value of the
common stock (as determined by the Board of Directors) on the date of grant.
On March 23, 1994 , the Nonemployee Plan was amended to provide that the
options to purchase 10,000 shares of common stock (at an exercise price equal
to the fair market value of the common stock on the date of grant) would be
granted pursuant thereto to nonemployee directors upon their initial election
or appointment to the board of directors. The Nonemployee Plan, as so amended,
does not provide for discretionary option grants. Options generally become
exercisable as to 50% two years after the date of grant, as to an additional
25% three years after the date of grant, and as to the remaining 25% four years
after the date of grant.
page 38
<PAGE> 215
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
EMPLOYEE STOCK OPTION PLAN
Under the InterCel, Inc. 1991 Stock Option Plan (the "Stock Plan"), 2,000,000
shares of common stock are reserved for issuance upon exercise of options.
Substantially all of the employees of the Company are eligible to receive
options under the Plan. Management recommends to the stock option committee
the number of options to grant based on management's analysis of the employee's
performance and level of responsibility.
The Stock Option Committee determines the periods within which options may be
exercised, but no option may be exercised more than ten years after the date of
grant. Options granted generally become exercisable 50% two years after the
date of grant, 25% three years after the date of grant, and 25% four years
after the date of grant. Options generally remain exercisable for a period of
five years following the date of grant. The Board of Directors also may
include in each option granted under the Stock Plan certain additional
limitations on the recipient's right to exercise the option. Options under the
Plan may be either "incentive stock options," as defined under Section 422 of
the Internal Revenue Code, or nonqualified options. Stock options exercisable
at December 31, 1995 and 1994 were 280,120 and 243,875, respectively.
Options generally are exercisable at a price established by the Stock Option
Committee equal to at least 100% of the fair market value of the common stock
on the options' grant date, except that the exercise price with respect to
options granted to an individual who owns more than 10% of the combined voting
power of all classes of stock of the Company must be at least 110% of the fair
market value of the common stock on the date of grant. The full exercise price
for shares being purchased must be paid at the time of exercise in cash or, if
permitted by the particular option agreement, in whole or in part by delivery
of shares of common stock having a fair market value (on the delivery date) of
not less than the exercise price. The following schedule summarizes stock
option transactions under both the Employee and Nonemployee Stock Plans.
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at December 31, 1992 350,850
Granted 60,150 $ 6.50
Forfeited (6,200) $ 3.33 - $ 6.00
Exercised (3,000) $ 3.33
- --------------------------------------------------------------------------------
Outstanding at December 31, 1993 401,800
Granted 280,185 $ 8.25 - $11.75
Forfeited (29,945) $ 3.33 - $ 9.25
Exercised (12,675) $ 3.33 - $ 6.00
- --------------------------------------------------------------------------------
Outstanding at December 31, 1994 639,365
Granted 440,200 $11.50 - $17.63
Forfeited (45,124) $ 5.25 - $17.00
Exercised (39,671) $ 3.33 - $ 6.50
- --------------------------------------------------------------------------------
Outstanding at December 31, 1995 994,770
================================================================================
</TABLE>
RESTRICTED STOCK PLAN
Under the Company's 1995 Employee Restricted Stock Plan adopted by the Board of
Directors on April 24, 1995 and approved by stockholders on December 20, 1995
(the "Restricted Stock Plan"), 200,000 shares of authorized but unissued common
stock, are reserved for issuance, 35,000 shares of which were issued on
page 39
<PAGE> 216
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
April 24, 1995 (with a $.01 exercise price) and outstanding as of December 31,
1995. These restricted stock awards vest in three equal installments on the
first, second and third anniversaries of the date of grant. The compensation
associated with the restricted grants (i.e., the difference between the market
price of the Company's common stock on the date of grant and the exercise
price) is being amortized ratably over the three year vesting period. Such
compensation expense totaled $123,594 for the year ended December 31, 1995.
Any unamortized, deferred compensation is reflected as a reduction to
stockholders' equity in the accompanying balance sheets. The Restricted Stock
Plan is administered by the Compensation Committee of the Board of Directors.
7. INCOME TAXES
As a result of the stock issued in connection with the Unicel Merger, the
ownership percentage held by ITC Holding was reduced below the 80% level
required in order for the Company to be included in ITC Holding's consolidated
income tax return. Accordingly, in 1994 and subsequent years, the Company will
file a separate Federal income tax return, and utilization of all credits and
net operating loss and other tax carryforwards will be evaluated on a
stand-alone basis.
The income tax provision (benefit) reflected in the accompanying financial
statements consisted of the following:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- ---------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal $1,374,692 $ (41,721) $ 682,020
State 249,857 155,108 9,938
- ---------------------------------------------------------------------------------------------------------------------
1,624,549 113,387 691,958
- ---------------------------------------------------------------------------------------------------------------------
Deferred:
Federal 490,133 1,305,010 (192,166)
State 115,290 116,486 68,054
- ---------------------------------------------------------------------------------------------------------------------
605,423 1,421,496 (124,112)
- ---------------------------------------------------------------------------------------------------------------------
Total income tax provision $2,229,972 $1,534,883 $ 567,846
=====================================================================================================================
</TABLE>
page 40
<PAGE> 217
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
The following is a summary of the items which caused recorded income taxes to
differ from taxes computed using the statutory federal income tax rate:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- --------------------------------------------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax provision $1,779,436 $1,160,065 $ 537,334
Increase (decrease) in tax provision resulting from--
Goodwill amortization 197,988 208,081 --
Change in valuation allowance -- -- (13,900)
State taxes, net of Federal benefit 240,997 218,857 65,375
Other, net 11,551 (52,120) (20,963)
- --------------------------------------------------------------------------------------------------------------------
Actual income tax provision $2,229,972 $1,534,883 $ 567,846
====================================================================================================================
Effective tax rate 42.6% 45.0% 35.9%
====================================================================================================================
</TABLE>
The sources of differences between financial accounting and tax basis
of assets and liabilities which gave rise to the net deferred tax asset are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
- --------------------------------------------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Deferred liabilities
Noncurrent:
Depreciation $(1,584,590) $ (1,289,044)
Deferred charges (336,252) (642,882)
Other (67,914) (65,616)
====================================================================================================================
Total (1,988,756) (1,997,542)
- --------------------------------------------------------------------------------------------------------------------
Deferred assets
Noncurrent:
Net operating loss carryforwards 3,141,871 3,944,335
Other 251,392 165,660
Current 269,817 167,294
- --------------------------------------------------------------------------------------------------------------------
Total 3,663,080 4,277,289
- --------------------------------------------------------------------------------------------------------------------
Net deferred tax asset $ 1,674,324 $ 2,279,747
====================================================================================================================
</TABLE>
In connection with the Unicel Merger, the Company established a valuation
allowance of $4,312,421 related to the deferred tax assets created by the net
operating losses acquired in this transaction. Upon examination of the
valuation allowance at December 31, 1994, the Company determined, based upon
the evidence available, that it was more likely than not that the deferred tax
assets would be realized. Accordingly, at December 31, 1994, the Company
removed the valuation allowance and recognized the benefit of the deferred tax
asset related to the merger by reducing the goodwill associated with the
merger. The Company estimates that it will utilize approximately $800,000 of
the loss carryforwards in its 1995 tax returns.
The net operating loss carryforwards will be used to reduce taxable income
generated in future years, subject to the applicable limitations and their
expiration in 2004 through 2009. The Tax Reform Act of 1986 provided for
certain limitations on the utilization of net operating loss carryforwards if
certain events occur, such as a 50% change in ownership. Also, the net
operating loss carryforwards used to affect any taxes calculated as alternative
minimum tax could be significantly less than the regular tax net operating loss
carryforwards. In the opinion of
page 41
<PAGE> 218
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
management, all net operating loss carryforwards will be utilized prior to
their expiration.
During the fourth quarter of 1994, the Company's 1990-1993 federal income tax
returns were examined by the Internal Revenue Service ("IRS") in connection
with the general examination of ITC Holding's federal returns for the same
periods. As a result of this examination, adjustments have been proposed by
the IRS to capitalize and amortize certain commission and promotional expenses
(based on the premise that such costs were incurred to acquire an asset that
benefits future periods (i.e., subscribers)) which have been deducted by the
Company as incurred. The Company plans to appeal the adjustments and in the
opinion of management, the ultimate resolution of the examination will not have
a material adverse impact on the accompanying financial statements.
8. EMPLOYEE BENEFIT PLANS
Prior to 1995, as a subsidiary of ITC Holding, the Company included its
employees as participants in ITC Holding's pension plan. The plan provided
retirement, disability, and survivor benefits to eligible employees. The plan
covered all eligible employees of ITC Holding and its majority-owned
subsidiaries, including the Company. The Company's policy was to fund pension
cost in accordance with applicable regulations. Total pension cost charged to
expense in 1995 and 1994 was $297,412 and $166,366, respectively. As of
December 31, 1995 the plan's net assets available for benefits and projected
benefit obligation were $119,575 and $208,686, respectively, as computed under
Statement of Financial Accounting Standards No. 87.
Effective February 1, 1995, the Company elected to freeze its defined benefit
pension plan and offer a defined contribution 401(k) plan in its place. The
plan covers all employees who have one year of service and are 18 years of age.
The Company makes an annual discretionary contribution to the plan ($167,392 in
1995) based on each employee's earnings and matches employee contributions at a
rate of 50% of each 1% of employee contributions (up to 2% of employee
contributions) subject to applicable regulations.
The employees of Unicel were included in the Unitel (the parent company of
Unity Telephone Company) pension plan prior to the Unicel Merger. This plan
covered all eligible employees of Unitel and its subsidiaries including Unicel.
The Unitel pension plan was curtailed with respect to the Unicel employees with
benefit accruals frozen as of April 29, 1994. In connection with the Unicel
Merger, the assets and liabilities of this pension plan were separated by
company and the assets and liabilities of Unity Telephone Company and Unity
Cable Television, Inc. were spun off, leaving only Unicel's portion. Any
unrecognized gains and losses were recognized, and a liability established for
the unfunded pension cost.
As of December 31, 1995 and 1994, the plan's net assets available for benefits
were $145,425 and $121,761, respectively, and the projected benefit obligations
were $126,314 and $125,415, respectively, as computed under Statement of
Financial Accounting Standards No. 87.
9. TRANSACTIONS WITH AFFILIATES
ITC Holding, through certain of its other subsidiaries and related parties,
provides the Company with various services, primarily staff and administrative
functions and similar services. The Company also leases certain dedicated and
trunk telephone access lines from Interstate Telephone Company.
The cost of these leases, services, and certain other expenses are directly
charged to the Company or are allocated to the Company using a cost-based
methodology consistently applied to each of ITC Holding's subsidiaries and ITC
Holding. The total expense recorded by the Company for these services was
approximately $568,252,
page 42
<PAGE> 219
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
$553,873 and $328,039 for 1995, 1994 and 1993, respectively.
The Company sells cellular telephones and provides cellular services to certain
of its affiliates and their employees. Revenues recorded by the Company for
these sales and services were approximately $248,176, $258,411 and $278,272 in
1995, 1994 and 1993, respectively.
At December 31, 1995, and 1994, the Company owed approximately $72,382 and
$53,879, respectively, to ITC Holding and its subsidiaries for amounts due
under the agreements discussed above.
On October 28, 1994, Powertel executed a management agreement with InterCel PCS
Services, a wholly owned subsidiary of the Company (the "Manager"). The
agreement called for the Manager to provide general management and operating
services in connection with the business and administration of Powertel for a
term of the lesser of 10 years or termination by Powertel or the Manager. In
exchange for services, the Manager was to receive a partnership interest equal
to 10% of the excess partnership value, if any, as defined, over the amount of
capital contributions made to Powertel through the termination date. In
addition, the agreement provided for the Manager to be reimbursed for all
direct and indirect expenses incurred in connection with the above services.
Such expenses totaled $3,689,180 and $324,711 for the years ended December 31,
1995 and 1994, respectively. Concurrent with the Powertel business combination
(Note 11), the management agreement was terminated without any additional
partnership value being allocated to the Company.
10. COMMITMENTS AND CONTINGENCIES
LEASES
Lease expenses relate to the lease of office and warehouse space, dedicated
lines and trunk access facilities, computer equipment, and billboards and
include leases with affiliates (Note 9). Rents charged to expense were
approximately $455,207, $385,867 and $87,876 for the years ended December 31,
1995, 1994 and 1993.
At December 31, 1995, future minimum lease payments under noncancelable
operating leases are as follows:
<TABLE>
<S> <C>
1996 $ 409,993
1997 388,746
1998 320,823
1999 214,169
2000 131,129
Subsequent years 530,296
- -----------------------------------------------------------------------------
$1,995,156
=============================================================================
</TABLE>
The lease commitments above include approximately $16,800 payable to affiliates
(Note 9).
NEW SWITCHING EQUIPMENT
In connection with the purchase and installation of new dual-mode
analog/digital switching and transmission equipment in the Georgia/Alabama
cellular market during 1995, the Company committed to purchase similar
switching and transmission equipment for the Maine cellular market at a cost of
approximately $3.7 million. The equipment is expected to be purchased and
installed during the second quarter of 1996.
LITIGATION
The Company is subject to litigation related to matters arising in the normal
course of business. As of
page 43
<PAGE> 220
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
December 31, 1995, management is not aware of any asserted or pending material
litigation or claims against the Company.
11. SUBSEQUENT EVENTS
On February 7, 1996, the Company consummated the following transactions: (i)
pursuant to a Business Combination Agreement dated August 23, 1995, among the
Company, Powertel and the owners of Powertel, such owners (other than the
Company) exchanged their ownership interests in Powertel for an aggregate of
9,686,410 shares of the Company's common stock in a private placement (the
"Powertel Combination"); (ii) the Company received approximately $110.1 million
of net proceeds from the sale of 7,124,322 shares of its Common Stock (which
includes 124,322 shares purchased under the underwriters' overallotment option)
in a public offering (the "Stock Offering"); and (iii) the Company received
approximately $192.2 million of net proceeds from the sale of 35,747 units,
consisting in the aggregate of $357,470,000 principal amount at maturity of the
Company's 12% Senior Discount Notes due 2006 (the "12% Notes") and 1,143,904
warrants (the "Warrants") to purchase an equal number of shares of the
Company's common stock at an exercise price of $18.15 per share, subject to
adjustment (the "Unit Offering"; and together with the Stock Offering, the
"February Offerings"). A portion of the net proceeds from the February
Offerings was used to repay all outstanding borrowings under the Credit
Facility and under the lending arrangement with ITC Holding. The balance of
the net proceeds from the February Offerings will be used to partially finance
the buildout and operating costs of the PCS system for, and certain acquisition
expenses associated with, the Birmingham, Jacksonville and Memphis/Jackson MTAs.
In addition, on January 4, 1996, two of the Company's subsidiaries entered into
a commitment letter for a $20 million revolving credit facility (which may be
increased due to the Atlanta MTA acquisition discussed below) to be used for
working capital and other purposes, including capital expenditures. On March
4, 1996, the Company entered into an acquisition agreement and a credit
agreement with Ericsson Inc. ("Ericsson") regarding the purchase of, and vendor
financing for, PCS equipment and services.
Pursuant to an Asset Purchase Agreement, dated as of March 5, 1996, between
InterCel Atlanta Licenses, Inc., a wholly owned subsidiary of the Company (the
"Atlanta License Subsidiary") and GTE Mobilnet Incorporated ("GTE Mobilnet"),
the Atlanta License Subsidiary has agreed to purchase GTE Mobilnet's license to
provide PCS in the Atlanta (M011) PCS MTA for approximately $192 million (the
"Atlanta MTA Acquisition") plus accrued interest. Pursuant to a Stock Purchase
Agreement dated as of March 4, 1996, between the Company and Ericsson, Ericsson
agreed to purchase 100,000 shares of nonvoting Series A Convertible Preferred
Stock from the Company in a private placement for an aggregate purchase price
of $75 million (the "Ericsson Preferred Stock Sale") and pursuant to a Stock
Purchase Agreement dated as of March 4, 1996, between the Company and MPX
Systems, Inc. ("MPX"), MPX agreed to purchase 100,000 shares of nonvoting
Series B Convertible Preferred Stock from the Company in a private placement
for an aggregate purchase price of $75 million (the "MPX Preferred Stock Sale";
and together with the Ericsson Preferred Stock Sale, the "Preferred Stock
Sales"). The closing of each of the Preferred Stock Sales is conditioned upon,
among other things, the closing of the other, stockholder approval of the sales
and upon the closing of the Atlanta MTA Acquisition. The closing of the
Preferred Stock Sales and the Atlanta MTA Acquisition are each also conditioned
upon the receipt of all required regulatory approvals. The Company intends to
issue notes (resulting in approximately $200 million gross proceeds) in a
public offering (the "Atlanta Offering"). The Company intends to use the net
proceeds from the Atlanta Offering and the Preferred Stock Sales to partially
finance the Atlanta MTA Acquisition and the buildout and operating costs of the
PCS system for, and certain acquisition expenses
page 44
<PAGE> 221
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
associated with, the Atlanta MTA.
While there are numerous cellular telephone systems operating in the United
States and other countries, the wireless telecommunications industry has only
limited operating history. Achieving profitable PCS operations will require
successfully competing with other PCS providers in all of its markets, as well
as with both existing and other future wireless providers. In addition,
successful PCS operations will require the development of products which are at
least as commercially effective as its wireless competitors. Any failure to
anticipate and respond to changes in technology or customers' wants could have
an adverse effect on the Company's PCS business.
Management anticipates incurring significantly greater expenses in future
periods as a result of the entry into the emerging PCS business. As a result
of these start-up costs, management expects to incur significant operating
losses in the future during the development of the PCS system and the PCS
customer base.
The following unaudited pro forma condensed balance sheet and statement of
operations include the pro forma effects of the February Offerings, the
Powertel business combination, the Atlanta MTA Acquisition, the Preferred Stock
Sales and the Atlanta Offering. These unaudited pro forma condensed financial
statements include results of operations of InterCel, Inc. and Powertel PCS
Partners, L.P. for the year ended December 31, 1995.
<TABLE>
<S> <C>
BALANCE SHEET
Current Assets $ 393,529
Property and Equipment 18,822
Licenses 327,277
Other Assets 42,538
- ----------------------------------------------------------------------------------------------------------------
Total Assets $ 782,166
================================================================================================================
Liabilities:
Current Liabilities $ 4,309
Long-Term Obligations 343,923
Other Noncurrent Liabilities 3,064
Stockholders' Equity
Preferred Stock 149,900
Common Stock 267
Paid-in capital 276,691
Retained Earnings 4,723
Other (711)
- ----------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 782,166
================================================================================================================
INCOME STATEMENT
Revenues $ 29,312
Operating Income 4,728
Income Before Income Taxes 3,691
Net Income $ 2,063
- ---------------------------------------------------------------------------------------------------------------
Net Income Per Share $ .06
- ---------------------------------------------------------------------------------------------------------------
Average Common and Common Equivalent Shares Outstanding 36,057,926
================================================================================================================
</TABLE>
page 45
<PAGE> 222
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
INTERCEL, INC. AND SUBSIDIARIES
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1995 QUARTERS
Revenues and sales $6,278,439 $7,088,344 $7,989,405 $7,955,372
Operating income 1,143,291 1,746,848 1,989,363 1,716,060
Net income 722,926 850,070 788,250 642,417
Net income per share 0.07 0.08 0.08 0.06
1994 QUARTERS
Revenues and sales $3,994,990 $5,267,424 $6,131,411 $6,368,003
Operating income 669,906 826,164 1,544,650 958,497
Net income 310,818 342,499 752,412 471,343
Net income per share 0.04 0.03 0.07 0.05
1993 QUARTERS
Revenues and sales $2,045,698 $2,206,050 $2,343,110 $2,754,366
Operating income 301,099 395,976 461,127 516,339
Net income 171,170 233,615 287,397 320,365
Net income per share 0.03 0.04 0.04 0.05
</TABLE>
page 46
<PAGE> 223
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
INTERCEL, INC. AND SUBSIDIARIES
To the Stockholders of
InterCel, Inc.:
We have audited the accompanying consolidated balance sheets of InterCel, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1995 and 1994 and
the related consolidated statements of income, changes in stockholders' equity,
and cash flows for the years ended December 31, 1995, 1994 and 1993. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of InterCel, Inc. and
subsidiaries as of December 31, 1995 and 1994 and the results of their
operations and their cash flows for the years ended December 31, 1995, 1994,
and 1993 in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 9, 1996
(except with respect to the matters discussed in Note 11, as to which the date
is March 22, 1996)
page 47
<PAGE> 224
DIRECTORS
Campbell B. Lanier, III
Chairman of the Board
Chairman and Chief Executive Officer
ITC Holding Company, Inc.
(a telecommunications company)
Donald W. Burton
Managing General Partner - South Atlantic
Venture Funds
(venture investment funds)
Bert G. Clifford
Chairman - Unity Telephone Company
(a telecommunications company)
O. Gene Gabbard
Former Chairman and Chief Executive Officer
Telecom*USA, Inc.
Former Chief Financial Officer
MCI Communications
(a telecommunications company)
Lawrence M. Gressette, Jr.
Chairman and Chief Executive Officer
SCANA Corp.
(an energy-based holding company)
Maurice P. O'Connor
Vice President and General Manager
of the Company
William H. Scott, III
President
ITC Holding Company, Inc.
(a telecommunications company)
Secretary of the Company
Allen E. Smith
President and Chief Executive Officer
of the Company
William B. Timmerman
President
SCANA Corp.
(an energy-based holding company)
Donald W. Weber
Former President and Chief Executive Officer
Contel Corporation
(a telecommunications company)
EXECUTIVE OFFICERS
Campbell B. Lanier, III
Chairman
Allen E. Smith
President and Chief Executive Officer
Fred G. Astor, Jr.
Executive Vice President and Chief Financial Officer
Nicholas J. Jebbia
Executive Vice President, PCS - Memphis
George R. Johnson
Executive Vice President, PCS - Birmingham
Walter R. Pettiss
Executive Vice President, PCS - Jacksonville
page 48
<PAGE> 225
CORPORATE DATA
CORPORATE OFFICES
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, GA 31833
(706) 645-9520
STOCK INFORMATION
The common stock of InterCel, Inc. is traded on The Nasdaq Stock Market
under the symbol ICEL.
REGISTRAR AND TRANSFER AGENT
Chemical Mellon Shareholder Services, L.L.C.
450 West 33rd
New York, NY 10001
Inquiries regarding stock transfers, lost certificates or address changes
should be directed to the registrar and transfer agent.
INDEPENDENT AUDITORS
Arthur Andersen LLP
Atlanta, Georgia
STOCKHOLDER INQUIRIES AND AVAILABILITY OF 10-K REPORT
The Company has filed Form 10-K with the Securities and Exchange Commission
for the year ended December 31, 1995. A copy of the report is available to
stockholders free of charge from the following:
Fred G. Astor, Jr.
Chief Financial Officer
1239 O.G. Skinner Drive
West Point, GA 31833
(706) 645-9520
INTERNET WEB SITE
http://www.ICEL.com
<PAGE> 226
[INTERCEL LOGO]
InterCel, Inc. 1233 O.G. Skinner Drive / West Point, GA 31833 / (706) 645-2000
<PAGE> 227
APPENDIX D
INTERCEL, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of InterCel, Inc. ("InterCel" or the "Company")
hereby appoints Fred G. Astor, Jr. and Allen E. Smith, or either of them, with
full power of substitution in each, as proxies to cast all votes which the
undersigned stockholder is entitled to cast at the annual meeting of
stockholders to be held at 10:00 a.m. on Wednesday, June 5, 1996, at The Cotton
Duck, 6101 20th Avenue, Valley, Alabama 36854, and at any adjournments thereof,
upon the following matters. The undersigned stockholder hereby revokes any proxy
or proxies heretofore given.
This proxy will be voted as directed by the undersigned stockholder. UNLESS
CONTRARY DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSALS ONE, TWO,
THREE AND FOUR (AS DESCRIBED IN THE ACCOMPANYING PROXY STATEMENT) AND IN
ACCORDANCE WITH THE DETERMINATION OF A MAJORITY OF THE BOARD OF DIRECTORS AS TO
OTHER MATTERS. The undersigned stockholder may revoke this proxy at any time
before it is voted by delivering to the Secretary of the Company either a
written revocation of the proxy or a duly executed proxy bearing a later date,
or by appearing at the Annual Meeting and voting in person. The undersigned
stockholder hereby acknowledges receipt of the Notice of the Annual Meeting and
Proxy Statement.
PROPOSAL ONE: Issuance and terms of the Company's Series A Convertible
Preferred Stock and Series B Convertible Preferred Stock.
/ / FOR / / AGAINST / / ABSTAIN
- --------------------------------------------------------------------------------
PROPOSAL TWO: Amendment of the Restated Certificate of Incorporation to
increase the Company's authorized capital stock by increasing the number of
authorized shares of Common Stock from 39 million shares of Common Stock to 55
million shares of Common Stock.
/ / FOR / / AGAINST / / ABSTAIN
- --------------------------------------------------------------------------------
PROPOSAL THREE: Election of Directors:
Donald W. Burton, Bert G. Clifford and Maurice P. O'Connor.
<TABLE>
<S> <C>
/ / FOR the nominees listed above / / WITHHOLD AUTHORITY to vote for
all nominees listed above
</TABLE>
INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.
- --------------------------------------------------------------------------------
PROPOSAL FOUR: Ratification of the appointment of Arthur Andersen LLP as
Independent Public Accountants to the Company.
/ / FOR / / AGAINST / / ABSTAIN
------------------------------
Signature Date
------------------------------
Print Name
Date
------------------------------
Please date and sign exactly
as your name appears on your
stock certificate. Each
executor, administrator,
trustee, guardian,
attorney-in-fact and other
fiduciary should sign and
indicate his or her full
title. When stock has been
issued in the name or two or
more persons, all should sign.
