<PAGE> 1
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 September 30, 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 issuer as specified in its charter)
Delaware 58-1944750
-----------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1233 O. G. Skinner Drive, West Point, Georgia 31833
------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (706) 645-2000
------------------
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 September 30, 1996
---------------------------------
Common Stock at $.01 par value 26,809,040 Shares
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
INTERCEL, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
(in 000's)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents $ 195,422 $ 630
Short-term Investments 144,260 -
Accounts Receivable - Net of Allowance for Doubtful Accounts 5,579 4,233
Other Current Assets 14,558 1,415
Current Portion of Deferred Income Taxes 267 270
--------- --------
360,086 6,548
--------- --------
PROPERTY AND EQUIPMENT, AT COST: 188,080 23,274
Less: Accumulated Depreciation (7,741) (5,208)
--------- --------
180,339 18,066
--------- --------
OTHER ASSETS:
Licenses 338,660 -
Goodwill - Net of Amortization 22,825 23,283
Investment in Powertel - 19,224
Deferred Income Taxes 5,840 1,405
Deferred Charges and Other 17,492 5,803
--------- --------
384,817 49,715
--------- --------
Total Assets $ 925,242 $ 74,329
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable - Trade $ 2,983 $ 812
Accounts Payable - Related Parties 106 72
Advance Billings and Customer Deposits 904 828
Accrued Expenses and Other Current Liabilities 17,816 3,860
--------- --------
21,809 5,572
--------- --------
LONG TERM OBLIGATIONS:
12% Senior Discount Notes due February 2006 210,111
12% Senior Discount Notes due May 2006 211,073 -
Vendor Line of Credit 45,414 -
Credit Facility - 24,602
ITC Holding Company - 3,500
Other - 919
--------- --------
466,598 29,021
--------- --------
DEFERRED REVENUE 389 389
--------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARY 2,753 2,674
--------- --------
STOCKHOLDERS' EQUITY:
Common Stock 269 100
Preferred Stock 2 -
Warrants Outstanding 6,092 -
Paid-in Capital 423,935 32,438
Retained Earnings 3,986 4,846
Deferred Compensation (247) (371)
Treasury Stock (344) (340)
--------- --------
433,693 36,673
--------- --------
Total Liabilities and Stockholders' Equity $ 925,242 $ 74,329
========= ========
</TABLE>
The accompanying condensed notes to financial statements
are an integral part of these statements.
2
<PAGE> 3
FINANCIAL STATEMENTS - CONTINUED
INTERCEL, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(in 000's except per share data)
<S> <C> <C> <C> <C>
REVENUES AND SALES
Monthly Access Revenue $ 3,740 $ 3,170 $ 10,780 $ 8,917
Airtime Revenue 1,642 1,312 4,480 3,576
Roaming Revenue 1,866 1,696 4,964 4,109
Toll Revenue 667 721 1,861 1,493
Installation/Connection Revenue 50 100 192 307
Other Revenue 163 56 352 159
----------- ----------- ----------- -----------
Total Service Revenues 8,128 7,055 22,629 18,561
Equipment Sales 980 934 2,785 2,712
----------- ----------- ----------- -----------
Total Revenues and Sales 9,108 7,989 25,414 21,273
----------- ----------- ----------- -----------
OPERATING EXPENSES
Cost of Services 1,163 801 2,587 1,802
Cost of Equipment Sold 842 731 2,339 2,183
Operations 2,835 918 5,659 2,527
Selling, General and Administrative 6,787 2,165 14,714 6,177
Depreciation and Amortization 1,814 1,385 5,058 3,705
----------- ----------- ----------- -----------
Total Operating Expenses 13,441 6,000 30,357 16,394
----------- ----------- ----------- -----------
OPERATING (LOSS) INCOME (4,333) 1,989 (4,943) 4,879
----------- ----------- ----------- -----------
OTHER (INCOME) EXPENSE
Interest (Income) Expense, Net (4,460) 541 (4,040) 1,113
Loss on Equity Investments - 84 34 84
Minority Interest in Loss of Cellular (47) (33) (197) (108)
Miscellaneous (Income) Expense 50 14 426 (312)
----------- ----------- ----------- -----------
Total Other (Income) Expense (4,457) 606 (3,777) 777
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES 124 1,383 (1,166) 4,102
Income Tax Benefit (Expense) (64) (595) 306 (1,741)
----------- ----------- ----------- -----------
NET (LOSS) INCOME $ 60 $ 788 $ (860) $ 2,361
=========== =========== =========== ===========
NET INCOME PER SHARE $ 0.002 $ 0.08 $ (0.03) $ 0.23
=========== =========== =========== ===========
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 27,465,609 10,394,295 24,513,489 10,285,011
=========== =========== =========== ===========
</TABLE>
The accompanying condensed notes to financial statements
are an integral part of these statements.
3
<PAGE> 4
FINANCIAL STATEMENTS - Continued
INTERCEL, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1995
--------- --------
(In 000'S)
<S> <C> <C>
Cash Flow From Operating Activities:
Net Income $ (860) $ 2,361
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) By Operating Activities -
Minority Interest in Loss of Cellular Partnership (197) (108)
Depreciation 2,564 2,056
Amortization 2,494 1,648
Bond Accretion, Net of Amount Capitalized 16,043 -
Other 231 84
Interest from Amortization of Debt Costs 1,027 -
Deferred Compensation 124 82
Gain on Disposal of Asset - (27)
Deferred Taxes, Net (4,433) 1,073
Changes in Assets and Liabilities: - -
Increase in Accounts Receivable (1,346) (979)
Increase in Other Current Assets (13,080) (411)
Increase in Deferred Charges (9,754) (1,922)
Increase in Current Liabilities 15,825 2,451
--------- --------
Net Cash Provided By Operating Activities 8,638 6,308
--------- --------
Cash Flow From Investing Activities:
Capital Expenditures (161,240) (7,726)
Cash Acquired in Powertel Acquisition 15,379 -
Purchase of Atlanta MTA License (195,242) -
Investments in Marketable Securities (144,365) 1,805
Expenses Associated with Powertel Merger - (416)
Investment - Powertel - (16,975)
--------- --------
Net Cash Used For Investing Activities (485,468) (23,312)
--------- --------
Cash Flow From Financing Activities:
Advances from (Repayments to) Affiliated Companies, Net 34 (2,163)
Capital Investment in Partnership - Minority Partner 275 787
Proceeds from Sale of Common Stock, Net 110,166 168
Proceeds from Sale of Preferred Stock, Net 151,511 -
Deferred Expenses Associated with Stock Offering - (533)
Proceeds from Bond Issuance, Net 392,324 -
Deferred Expenses Associated with Debt Offering - (177)
Proceeds from Vendor Credit Facility 45,414 20,775
Repayments of Long-Term Obligations (28,102) (2,178)
--------- --------
Net Cash Provided By Financing Activities 671,622 16,679
--------- --------
Net Increase in Cash 194,792 (325)
Cash and Cash Equivalents at Beginning of Period 630 507
--------- --------
Cash and Cash Equivalents at End of Period $ 195,422 $ 182
========= ========
</TABLE>
The accompanying condensed notes to financial statements
are an integral part of these statements.
4
<PAGE> 5
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 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 year amounts have been reclassified to conform with the
current period presentation.
3. Pursuant to an Asset Purchase Agreement, dated as of March 5, 1996,
between InterCel Atlanta Licenses, Inc. (since renamed Powertel Atlanta
Licenses, Inc.), a wholly owned subsidiary of the Company and GTE
Mobilnet Incorporated ("GTE Mobilnet"), on June 28, 1996 the Company
purchased GTE Mobilnet's license to provide personal communications
services ("PCS") in the Atlanta (M011) PCS major trading area ("MTA") for
approximately $195 million. Also on June 28, 1996, pursuant to a Stock
Purchase Agreement dated as of March 4, 1996, between the Company and
Ericsson Inc ("Ericsson"), Ericsson purchased 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 and pursuant to
a Stock Purchase Agreement dated as of March 4, 1996, between the Company
and MPX Systems, Inc. ("MPX"), MPX purchased 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.
4. 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 PCS Partners, L.P. and the owners of Powertel
PCS Partners, L.P, such owners (other than the Company) exchanged their
ownership interests in Powertel PCS Partners, L.P 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.
5
<PAGE> 6
5. On June 28, 1996, pursuant to a stock purchase agreement dated as of
March 4, 1996, between the Company and Ericsson Inc ("Ericsson"),
Ericsson purchased 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 purchased 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").
6. 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" and
together with the February Offerings, the "Offerings") in a public
offering. The Company intends to use the net proceeds from the
Offerings and the Preferred Stock Sales primarily to partially finance
development, construction and operating costs and certain acquisition
expenses associated with the PCS system.
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
InterCel, Inc. (the "Company") holds the licenses to provide personal
communications services ("PCS") in contiguous parts of ten southeastern states
in the major trading areas ("MTAs") of Atlanta, Georgia; Jacksonville, Florida;
Memphis, Tennessee/Jackson, Mississippi; and Birmingham, Alabama (the "PCS
Markets"). These MTAs cover approximately 16 million potential customers and
provide the Company with one of the largest contiguous PCS footprints in the
southeastern United States. The Company is currently providing PCS in
Jacksonville, Florida, Tuscaloosa and Montgomery, Alabama, and Memphis,
Tennessee and is in the process of developing and constructing the PCS systems
in numerous other cities within the PCS Markets.
In addition to PCS, the Company provides cellular telecommunications
services in contiguous portions of western Georgia and eastern Alabama (the
"Southern Markets") as well as in major areas in Maine (the "Maine Markets").
Since the Company commenced cellular service in October 1990, the number of
cellular customers has grown rapidly to 44,230 at September 30, 1996 (a
penetration of approximately 5.7% 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 lower-usage customers, who utilize cellular service for personal
convenience, security or as backup for their traditional landline telephones.
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 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 from its cellular
operations.
The Company incurred an operating loss during the third quarter and
expects to continue to incur significant operating losses as it develops and
constructs its PCS system covering the PCS Markets and builds a PCS customer
base.
The majority of the interest costs incurred through the end of the
third quarter related to the Notes and the 12% Notes has been capitalized as a
cost of construction. As the Company has now begun providing PCS in several
markets, the majority of such interest costs will be recognized as a period
expense in the future. Additionally, all fixed assets and PCS licenses placed in
service during the fourth quarter and beyond will cause a significant increase
in depreciation and amortization expense. Finally, during the fourth quarter the
Company intends to change its method of accounting for costs incurred in
connection with certain promotional programs under which customers receive
discounted cellular equipment or airtime usage credits. Under its current
accounting method, all such costs are deferred and amortized over the life of
the related non-cancelable cellular telephone service agreements. Under the new
accounting method the costs will be expensed as incurred. This change in
accounting principle is expected to result in a fourth quarter charge of
approximately $1.5 million (net of income tax effect).
7
<PAGE> 8
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 (all
data is in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
% OF % OF
REVENUE/ REVENUE/
1996 SALES 1995 SALES
-------- ---- ------- ----
(IN 000'S)
<S> <C> <C> <C> <C>
SERVICE REVENUE & COST
ANALYSIS:
Service Revenue
Local Customers -
Access Revenue $ 3,740 46.0% $ 3,170 44.9%
Airtime Revenue 1,642 20.2% 1,312 18.6%
Toll Revenue 195 2.4% 188 2.7%
-------- ----- ------- -----
5,577 68.6% 4,670 66.2%
-------- ----- ------- -----
Roamers -
Access & Airtime Revenue 1,866 23.0% 1,696 24.0%
Toll Revenue 472 5.8% 533 7.6%
-------- ----- ------- -----
2,338 28.8% 2,229 31.6%
-------- ----- ------- -----
Other Service Revenue 213 2.6% 156 2.2%
-------- ----- ------- -----
Total Service Revenue 8,128 100.0% 7,055 100.0%
Cost of Services 1,163 14.3% 800 11.3%
-------- ----- ------- -----
Gross Margin $ 6,965 85.7% $ 6,255 88.7%
======== ===== ======= =====
EQUIPMENT SALES & COST
ANALYSIS:
Equipment Sales $ 980 100.0% $ 934 100.0%
Cost of Equipment Sales 842 86.0% 731 78.2%
-------- ----- ------- -----
Gross Margin $ 138 14.0% $ 203 21.8%
======== ===== ======= =====
OPERATING MARGIN
ANALYSIS:
Total Revenues $ 9,108 100.0% $ 7,989 100.0%
-------- ----- ------- -----
Operating Expense -
Cost of Services & Equipment Sales 2,005 22.1% 1,532 19.2%
Operations 2,835 31.1% 918 11.5%
Selling, General, & Administrative 6,787 74.5% 2,165 27.1%
Depreciation & Amortization 1,814 19.9% 1,385 17.3%
-------- ----- ------- -----
Total Operating Expenses 13,441 147.6% 6,000 75.1%
-------- ----- ------- -----
Operating Income (4,333) (47.6%) 1,989 24.9%
Interest Expense, net (4,460) (49.0%) 541 6.8%
Loss on Equity Investment 0 0.0% 84 1.0%
Minority Interest in Cellular Partnership (47) (0.5%) (33) (0.4%)
Miscellaneous Expense 50 0.5% 14 0.2%
-------- ----- ------- -----
Income Before Income Taxes 124 1.4% 1,383 17.3%
Income Tax Benefit (Provision) (64) (0.7%) (595) (7.4%)
-------- ----- ------- -----
Net Income $ 60 0.7% $ 788 9.9%
======== ===== ======= =====
</TABLE>
8
<PAGE> 9
Three Months Ended September 30, 1996 Compared to Three Months Ended
September 30, 1995 (all data is in thousands)
Service revenue from local customers increased $907 or 19.4% for the
three months ended September 30, 1996, as compared to the same period of 1995. A
26.0% increase in the number of customers (to 44,230 at September 30, 1996, from
35,095 at September 30, 1995) was the primary factor driving this growth. The
increase in new customers reflects the continued success of the Company's
marketing efforts.
The average monthly service revenue per customer (excluding roaming
revenue and equipment charges) decreased to $42.60 for the three months ended
September 30, 1996, from $45.20 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.
Roamer revenue (including roamer long distance) for the three months
ended September 30, 1996 increased $109 or 4.9% as 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. In addition, during
September 1995, the Company entered into an agreement with BellSouth Mobility to
provide discounted rates to BellSouth Mobility for its northern Georgia
customers roaming in the Company's Georgia and Alabama service area 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, the
agreement has now resulted in increased roaming revenue due to the effects of
its reduced pricing and the promotion of such reduced pricing by BellSouth
Mobility to its applicable customer base.
Monthly access revenue remains the largest component of service
revenue, representing 46.0% of revenue during the three months ended September
30, 1996, as compared to 44.9% of revenue for the prior year period. Roaming
revenue decreased to 28.8% of service revenue for the quarter ended September
30, 1996, as compared to 31.6% of service revenue for the same period of 1995.
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
September 30, 1996, cost of services was 14.3% of total service revenue,
compared to 11.3% for the same period in 1995. This increase is primarily
attributable to increased costs associated with cellular fraud and access costs
incurred in connection with the PCS network.
The gross margin on equipment sales was 14.0% and 21.8% for quarters
ended September 30, 1996 and 1995, respectively. The margin decreased primarily
as result of a reduction in equipment sales prices in the Maine Markets to meet
competitive pressures in that marketplace.
Operations costs, which include the costs of maintaining the cellular
system, customer service (including PCS customer service personnel recruiting
costs, salaries and training costs), inventory management, and in-house
installations, totaled $2,835 for the three months ended September 30, 1996,
which represented an increase of $1,917, or 208.8%, from the same period of
1995. As a percentage of total revenue, operations costs increased from 11.5%
for the three months ended September 30, 1995 to 31.1% for the same period of
1996. The increase in such costs in the third quarter of 1996 over the third
quarter of 1995 was primarily due to costs associated with the hiring of
operations personnel to facilitate the Company's fourth quarter 1996 launch of
PCS in several markets.
Selling, general, and administrative costs ("SG&A") were $6,787 for
three months ended September 30, 1996, an increase of $4,622 or 213.5%, as
compared to the same period of the prior year. This increase was primarily
attributable to employee-related costs associated with the hiring of employees
to facilitate the fourth quarter 1996 launch of PCS in several markets.
9
<PAGE> 10
Depreciation and amortization include principally the depreciation of
the cellular system and the amortization of the promotional credits associated
with the Company's promotional programs. Depreciation and amortization expense
totaled $1,814 for the three months ended September 30, 1996, as compared to
$1,385 for the same period in 1995. Depreciation expense increased as a result
of the installation of a new digital switch (placed in service during August
1995) and the related radio equipment in the Southern Market and the
construction of nine additional cell sites. As a percentage of revenue,
depreciation and amortization increased from 17.3% to 19.9% for the three months
ended September 30, 1995 and 1996, respectively.
Operating income before depreciation and amortization decreased to an
operating loss of 27.7% of total revenue for the three months ended September
30, 1996, as compared to income of 42.2% for the same period of the prior year.
This decrease reflects the aforementioned increase in operations and selling,
general, and administrative costs resulting from the Company's fourth quarter
1996 launch of PCS in several markets.
The Company earned net interest income of $4,460 for the three months
ended September 30, 1996, as compared to net interest expense incurred of $541
for the same period of the prior year. This change is due to earnings on the
investment of the proceeds from the debt offerings that became effective on
February 7 and April 16, 1996 (see "Liquidity and Capital Resources").
Additionally, approximately $12.5 million of interest expense was capitalized to
construction during the three months ended September 30, 1996 as the Company
completes its initial build-out of the PCS system.
The results for the three months ended September 30, 1996 and 1995
reflect an offset to expense of $47 and $33, 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.
The effective income tax rates for the three months ended September 30,
1996 and 1995 were 51.7% (tax benefit) and 43.0% (tax provision), respectively.
The 1996 tax benefit reflects the utilization of NOL carrybacks to offset prior
years' taxable income.
10
<PAGE> 11
The following tables reflect 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 (all
data is in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
------------------------------------------
% OF % OF
REVENUE/ REVENUE/
1996 SALES 1995 SALES
-------- ---- -------- ----
(IN 000'S)
<S> <C> <C> <C> <C>
SERVICE REVENUE & COST
ANALYSIS:
Service Revenue
Local Customers -
Access Revenue $ 10,780 47.6% $ 8,917 48.0%
Airtime Revenue 4,480 19.8% 3,576 19.3%
Toll Revenue 565 2.5% 385 2.1%
-------- ----- -------- -----
15,825 69.9% 12,878 69.4%
-------- ----- -------- -----
Roamers -
Access & Airtime Revenue 4,964 22.0% 4,109 22.1%
Toll Revenue 1,296 5.7% 1,108 6.0%
-------- ----- -------- -----
6,260 27.7% 5,217 28.1%
-------- ----- -------- -----
Other Service Revenue 544 2.4% 466 2.5%
-------- ----- -------- -----
Total Service Revenue 22,629 100.0% 18,561 100.0%
Cost of Services 2,587 11.4% 1,802 9.7%
-------- ----- -------- -----
Gross Margin $ 20,042 88.6% $ 16,759 90.3%
======== ===== ======== =====
EQUIPMENT SALES & COST
ANALYSIS:
Equipment Sales $ 2,785 100.0% $ 2,712 100.0%
Cost of Equipment Sales 2,339 84.0% 2,183 80.5%
-------- ----- -------- -----
Gross Margin $ 446 16.0% $ 529 19.5%
======== ===== ======== =====
OPERATING MARGIN
ANALYSIS:
Total Revenues $ 25,414 100.0% $ 21,273 100.0%
-------- ----- -------- -----
Operating Expense -
Cost of Services & Equipment Sales 4,926 19.4% 3,985 18.8%
Operations 5,659 22.3% 2,527 11.9%
Selling, General, & Administrative 14,714 57.9% 6,177 29.0%
Depreciation & Amortization 5,058 19.9% 3,705 17.4%
-------- ----- -------- -----
Total Operating Expenses 30,357 119.5% 16,394 77.1%
-------- ----- -------- -----
Operating Income (4,943) (19.5%) 4,879 22.9%
Interest Expense, net (4,040) (15.9%) 1,113 5.2%
Loss on Equity Investments 34 0.1% 84 0.4%
Minority Interest in Cellular Partnership (197) (0.8%) (108) (0.5%)
Miscellaneous (Income) Expense 426 1.7% (312) (1.5%)
-------- ----- -------- -----
Income Before Income Taxes (1,166) (4.6%) 4,102 19.3%
Income Tax Benefit (Provision) 306 1.2% (1,741) (8.2%)
-------- ----- -------- -----
Net Income $ (860) (3.4%) $ 2,361 11.1%
======== ===== ======== =====
</TABLE>
11
<PAGE> 12
Nine Months Ended September 30, 1996 Compared to Nine Months Ended
September 30, 1995 (all data is in thousands)
Service revenue from local customers increased $2,947 or 22.9%, for the
nine months ended September 30, 1996, as compared to the same period of 1995. A
26.0% increase in the number of customers (to 44,230 at September 30, 1996, from
35,095 at September 30, 1995) was the primary factor driving this growth. The
substantial increase in new customers reflects the continued success of the
Company's marketing efforts.
The average monthly service revenue per customer (excluding roaming
revenue and equipment charges) decreased to $42.12 for the nine months ended
September 30, 1996, from $44.38 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.
Roamer revenue (including roamer long distance) for the nine months
ended September 30, 1996 increased $1,043 or 20.0%, 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. In addition, during
September 1995, the Company entered into an agreement with BellSouth Mobility to
provide discounted rates to BellSouth Mobility for its northern Georgia
customers roaming in the Company's Georgia and Alabama service area 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, the
agreement has now resulted in increased roaming revenue due to the effects of
its reduced pricing and the promotion of such reduced pricing by BellSouth
Mobility to its applicable customer base.
Monthly access revenue remains the largest component of service
revenue, representing 47.6% of revenue during the nine months ended September
30, 1996, as compared to 48.0% of revenue for the prior year period. Roaming
revenue decreased slightly to 27.7% of service revenue for the nine months ended
September 30, 1996, as compared to 28.1% of service revenue for the same period
of 1995.
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 nine months ended September
30, 1996, cost of services was 11.4% of total service revenue, compared to 9.7%
for the same period in 1995. This increase is primarily attributable to
increased costs associated with cellular fraud and access costs incurred in
connection with the PCS network.
The gross margin on equipment sales was 16.0% and 19.5% for the nine
months ended September 30, 1996 and 1995, respectively. The decrease resulted
primarily from the reduction in equipment sales prices in the Maine Markets to
meet competitive pressures in that marketplace.
Operations costs, which include the costs of maintaining the cellular
system, customer service (including PCS customer service personnel recruiting
costs, salaries and training costs), inventory management, and in-house
installations, totaled $5,659 for nine months ended September 30, 1996, which
represented an increase of $3,132 or 123.9%, from the same period of 1995. As a
percentage of total revenue, operations costs increased from 11.9% for the nine
months ended September 30, 1995 to 22.3% for the same period of 1996. The
increase in such costs in the first nine months of 1996 over the first nine
months of 1995 was primarily due to costs associated with the hiring of
operations personnel to facilitate the Company's fourth quarter 1996 launch of
PCS in several markets.
12
<PAGE> 13
Selling, general, and administrative costs ("SG&A") were $14,714 for
nine months ended September 30, 1996, an increase of $8,537, or 138.2%, as
compared to the same period of the prior year. This increase was primarily
attributable to employee-related costs associated with the hiring of employees
to facilitate the fourth quarter 1996 launch of PCS in several markets.
Depreciation and amortization include principally the depreciation of
the cellular system and the amortization of promotional credits associated with
Company's promotional programs. Depreciation and amortization expense totaled
$5,058 for the nine months ended September 30, 1996, as compared to $3,705 for
the same period in 1995. Depreciation expense increased as a result of the
installation of a new digital switch (placed in service during August 1995) and
the related radio equipment in the Southern Market and the construction of nine
additional cell sites. As a percentage of revenue, depreciation and amortization
increased from 17.4% to 19.9% for the nine months ended September 30, 1995 and
1996, respectively.
Operating income before depreciation and amortization decreased to 0.5%
of total revenue for the nine months ended September 30, 1996, as compared to
40.4% for the same period of the prior year. This decrease reflects the
aforementioned increase in operations and selling, general, and administrative
costs resulting from the Company's fourth quarter 1996 launch of PCS in several
markets.
The Company incurred net interest income of $4,040 for the nine months
ended September 30, 1996, as compared to net interest expense of $1,113 for the
same period of the prior year. This change is due to interest costs associated
with the debt offerings that became effective on February 7 and April 16, 1996
(see "Liquidity and Capital Resources") which were more than offset by interest
earned on such proceeds during the nine months ended September 30, 1996.
Additionally, approximately $19.6 million of interest expense has been
capitalized to construction through September 30, 1996 as the Company completes
its initial build-out of the PCS system.
The results for the nine months ended September 30, 1996 and 1995
reflect an offset to expense of $197 and $108, 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.
The effective income tax rates for nine months ended September 30, 1996
and 1995 were 26.2% (tax benefit) and 42.4% (tax provision), respectively. The
1996 tax benefit reflects the utilization of NOL carrybacks to offset prior
years' taxable income.
13
<PAGE> 14
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. The
Company may also require additional financing in the event it decides to make
additional acquisitions.
On February 7, 1996, 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 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 May 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 previously outstanding borrowings. 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. (since renamed Powertel Atlanta
Licenses, Inc.), a wholly owned subsidiary of the Company (the "Atlanta License
Subsidiary") and GTE Mobilnet Incorporated ("GTE Mobilnet"), on June 28, 1996
the Company purchased GTE Mobilnet's license to provide PCS in the Atlanta
(M011) PCS MTA for approximately $195 million (the "Atlanta MTA Acquisition").
Also on June 28, 1996, pursuant to a stock purchase agreement dated as of March
4, 1996, between the Company and Ericsson Inc ("Ericsson"), Ericsson purchased
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 purchased 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").
On April 16, 1996, the Company received and concurrently escrowed
approximately $193.2 million of net proceeds from the sale of the Company's 12%
Senior Discount Notes due May 2006 (the "Notes") in a public offering (the
"Atlanta Offering"). The escrowed funds and all earnings thereon were released
to the Company on June 28, 1996 in connection with the Atlanta MTA Acquisition.
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.
The development, construction and initial start-up phase associated
with the implementation of the Company's PCS system continues to require
substantial capital. Costs associated with the PCS system buildout include
acquisition of tower sites, leasehold improvements, base station and switch
equipment, microwave relocation costs and labor expenses related to construction
of sites. Upon completion of the initial buildouts, the PCS system is expected
to cover approximately 81,000 square miles with coverage of 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).
14
<PAGE> 15
Pursuant to a Credit Agreement with Ericsson (the "Vendor Financing
Agreement"), Ericsson agreed, subject to the terms and conditions therein, to
provide the Company with up to $165 million of financing for purchases of PCS
equipment and services under an equipment purchase agreement between the Company
and Ericsson. The Company's 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 the Company's subsidiaries that hold the PCS
licenses for the PCS Markets. As of September 30, 1996, the Company had
borrowings totaling approximately $45 million under the Vendor Financing
Agreement.
The Vendor Financing Agreement requires 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 the agreement,
notwithstanding the ability of the Company to meet its debt service obligations.
An event of default under such agreement would allow the lender to accelerate
the maturity of such indebtedness. In such event, a significant portion of the
Company's other indebtedness may become due and payable. The Company was in
compliance with all such ratios as of September 30, 1996.
The Company believes that cash on hand and borrowings under the Vendor
Financing Agreement will be sufficient 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 required 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 is successful in the FCC's
D, E and F block auction ( the "DEF Auction") for 10 MHz PCS licenses, which is
currently in progress, or if the Company decides to make additional
acquisitions. As of November 11, 1996, the Company was high bidder for one or
two of the 10 MHz PCS licenses in 13 Basic Trading Areas covering approximately
6.3 million POPs. The Company's total financial commitment under such bids
totaled approximately $30.7 million. In addition to this bid commitment, the
Company may be subject to a maximum penalty of approximately $1.2 million in
penalties associated with a bid withdrawal in the DEF Auction.
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 to the Notes
and the 12% Notes (the "Indentures") or the Vendor Financing Agreement or
limitations that may be contained in any future financing arrangements. The
restrictions on additional indebtedness under 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 such notes 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.
15
<PAGE> 16
During the nine months ended September 30, 1996, the Company generated
net cash of $8,638 from operating activities, which was a increase of $2,330
from the same period of 1995. Bond accretion (which is an adjustment to
reconcile net income to net cash) of $16,043 was responsible for the increase in
operating cash flows. Operating income, before depreciation and amortization,
decreased from $8,584 for the first nine months of 1995 to $115 for the first
nine months of 1996 due primarily to the aforementioned PCS related
expenditures.
Cash used for investing activities was $485,468 for the nine months
ended September 30, 1996 as compared to $23,312 for the same period of 1995.
Investing activities for the nine months ended September 30, 1996 included
capital expenditures totaling $161,240 (the majority of which related to
buildout and development of the PCS system), investment of proceeds from the
Preferred Stock Sales and Atlanta Offering in marketable securities of $144,365
and the acquisition of the Atlanta MTA license for $195,242. Additionally, the
Company acquired $15,379 of cash in the acquisition of Powertel PCS Partners,
L.P. during the first quarter of 1996.
Cash provided by financing activities amounted to $671,622 for the nine
months ended September 30, 1996 which principally reflects the proceeds from the
Vendor Credit Facility, the Offerings, the Atlanta Offering, and the Preferred
Stock Sales.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------ -------------------
*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.)
17
<PAGE> 18
*10(c) -- Connection and Traffic Interchange Agreement dated
September 15, 1990 by and 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.)
18
<PAGE> 19
*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 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,
19
<PAGE> 20
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, 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,
20
<PAGE> 21
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. 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.)
21
<PAGE> 22
*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.)
10(ss) -- Second Amendment to InterCel, Inc. Pension Plan
10(tt) -- Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof,
of Series A Convertible Preferred Stock of InterCel,
Inc.
10(uu) -- Certificate of Designations, Powers, Preferences and
Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof,
of Series B Convertible Preferred Stock of InterCel,
Inc.
10(vv) -- License Agreement Between LHS Communications, Inc.
and Powertel, Inc. Dated August 2, 1996.
10(ww) -- Amendment No. 1 to the Credit Agreement by and among
Powertel, Inc. as Borrower, Ericsson, Inc. as Initial
Lender and Ericsson, Inc. as Agent.
10(yy) -- Third Restated Certificate Of Incorporation Of
InterCel, Inc.
11 -- Statement regarding Computation of Per Share
Earnings.
27 -- Financial Data Schedule (for SEC use only)
(B) REPORTS ON FORM 8-K.
NONE
*Previously Filed
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INTERCEL, INC.
(Registrant)
Date: November 13, 1996 By: /s/ Allen E. Smith
------------------
Allen E. Smith
President and Chief Executive Officer
Date: November 13, 1996 By: /s/ Fred G. Astor, Jr.
----------------------
Fred G. Astor, Jr.
Executive Vice President, and Chief
Financial Officer (Chief Accounting
Officer)
23
<PAGE> 1
EXHIBIT 10(ss)
<PAGE> 2
SECOND AMENDMENT TO THE
INTERCEL, INC. PENSION PLAN
(As Amended and Restated Effective April 29, 1994)
This Second Amendment is made on this 21st day of August, 1996, by InterCel,
Inc. ("Intercel") for the purpose of terminating the InterCel, Inc. Pension Plan
(the "Plan"), effective as of November 1, 1996.
NOW, THEREFORE, the Plan is hereby amended only in the following
respects:
1. A new paragraph is added to Section 10.01 of the Plan, to read as
follows:
"The Plan is terminated effective as of November 1, 1996. The Employer
reserves the right to amend the Plan after that date only for purposes
of clarification, to implement this Plan termination, to maintain the
tax-qualified status of the Plan as so terminated, to comply with
changes in applicable law, or to defer the termination date."
IN WITNESS WHEREOF, this Second Amendment, having been first duly adopted, is
executed below by a duly authorized officer of the Employer on this 21st day of
August 1996, to be effective as provided herein.
INTERCEL, INC.
By:
-------------------------------
Title: President & CEO
----------------------------
<PAGE> 1
EXHIBIT 10(tt)
<PAGE> 2
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 March 4,
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> 3
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 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 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> 4
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 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 A Preferred Stock, for any period, nor shall any shares
ranking on a parity with the
<PAGE> 5
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, 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 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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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 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 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> 13
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> 14
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> 15
14
all outstanding shares of Series A Preferred Stock not theretofore converted.
For purposes of this paragraph (1), 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> 16
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> 17
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> 18
17
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by Fred G. Astor, its
Executive Vice President and Chief Financial Officer, and attested by Lorena G.
Turner, its Assistant Secretary, this 6th day of June, 1996.
INTERCEL, INC.
By /s/ Fred G. Astor
-----------------------------------
(Corporate Seal)
Attest:
By /s/ Lorena G. Turner
------------------------------------
<PAGE> 1
EXHIBIT 10(uu)
<PAGE> 2
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 March 4,
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> 3
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> 4
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 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 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> 5
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> 6
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 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> 7
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
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 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> 8
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> 9
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 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 B Preferred Stock upon
conversion), then in each such case
<PAGE> 10
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 payable into shares of
Common Stock), there shall be taken into account convertible 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 consideration, if other than into shares of Common Stock),
the value of such cash, to be determined by the Board of Directors in
good faith or, if higher,
<PAGE> 11
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
(excluding those referred to in subparagraph (ii)(a) above) (any of
securities 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> 12
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 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> 13
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> 14
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> 15
14
all outstanding shares of Series B Preferred Stock not theretofore converted.
For purposes of this paragraph (1), 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> 16
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> 17
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> 18
17
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by Fred G. Astor, its
Executive Vice President and Chief Financial Officer, and attested by Lorena G.
Turner, its Assistant Secretary, this 6th day of June, 1996.
INTERCEL, INC.
By /s/ Fred G. Astor
------------------------------
(Corporate Seal)
Attest:
By /s/ Lorena G. Turner
--------------------
<PAGE> 1
EXHIBIT 10(vv)
<PAGE> 2
LICENSE AGREEMENT
BETWEEN
LHS COMMUNICATIONS SYSTEMS, INC
AND
POWERTEL, INC.
DATED
AUGUST 2,1996
<PAGE> 3
SOFTWARE LICENSE AGREEMENT
This Agreement (the "Agreement") is made as of this 2nd day of August,
1996, by and between LHS Communications Systems, Inc., a Delaware corporation
with its principal offices at 400 Perimeter Center Terrace, North Terraces,
Suite 575, Atlanta, Georgia 30346 ("LHS"), and Powertel, Inc., a Delaware
corporation with its principal offices located at 1233 O.G. Skinner Drive, West
Point, Georgia 31833 ("Licensee").
1. DEFINITIONS
"Acceptance Date" has the meaning in Section 4.3(a).
"Acceptance Test" has the meaning given to it in Section 4.3(b).
"Acceptance Testing Period" has the meaning given to it in Section 4.3(b)(i).
"Affiliate" means, as to a party hereto, any corporation or other entity which
directly or indirectly through one or more intermediaries, controls (i.e., the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of an entity, whether through
ownership of voting securities, by contract or otherwise), is controlled by,
or is under common control with, such party.
"Authorized User" means any Majority-Owned Subsidiary, or any employee, agent
or consultant of Licensee or any Majority-Owned Subsidiary that needs to use the
Licensed Software in connection with the performance of his duties for Licensee
or any Majority-Owned Subsidiary.
"Bankruptcy" has the meaning given to it in Section 6.2(c).
"BSCS" means that certain business support and control software known as
"BSCS/GSM."
"BSCS Kernel" means the components of BSCS Version 4.0 set forth in Schedule 2
providing the functionality and conforming to the specifications set forth in
the Documentation applicable thereto.
"Category 1 Error" means a Software Defect that prevents or would prevent
Licensee's utilization of the Data Processing System in a commercial
production environment (e.g., the entire system is inoperative).
"Category 2 Error" means a Software Defect which renders or would render the
Data Processing System unusable in a commercial production environment because a
major subsystem/module is not functioning in accordance with the Documentation
applicable thereto (e.g., the message processing subsystem is inoperative).
"CCBS" means a customer care and billing system for the Network.
"Data Processing System" has the meaning given to it in Section 2.1(a)(i).
"Default" has the meaning given to it in Section 6.2.
"Designated Location" means the offices of Licensee set forth on Schedule 1.
"Documentation" means the manuals and related materials LHS ordinarily
distributes to its customers with the Licensed Software, including user
manuals, help files and batch operation manuals. LHS shall deliver the
Documentation on a CD-Rom or similar electronic media.
"Escrow Agreement" has the meaning given to it in Section 10.
"Finally Determined" has the meaning given to it in Section 2.1(a)(iv)(D).
"Indemnified Claim" has the meaning given to it in Section 8.3.
"Licensed Software" means the BSCS Kernel and all other LHS software delivered
to Licensee under this Agreement, under any development and services agreement
between LHS and Licensee, or under any maintenance agreement between LHS and
Licensee.
"Maintenance Agreement" has the meaning given to it in Section 7.3.
"Majority-Owned Subsidiary" means any direct or indirect subsidiary of Licensee
which owns and operates a Network and of which Licensee holds more than fifty
percent (50%) of the outstanding voting and economic interests and as to which
Licensee exercises management control over the operations of such Network.
"Network" means the network of mobile telecommunications services described on
Schedule 3.
"Nonconformance Description" has the meaning given to it in Section 5.3(b)(ii).
"Off-Line System" has the meaning given to it in Section 2.1(a)(i).
"Products" means the Licensed Software and the Documentation provided
to Licensee by LHS pursuant to this Agreement.
"Proprietary and Confidential LHS Information" means (i) the Products and any
elements thereof, (ii) all other information relating to LHS' business or
affairs, including, but not limited to, technical or nontechnical data,
formulae, patterns, plans, compilations, programs, devices, methods,
techniques, drawings, processes, financial data, lists of actual or potential
customers or suppliers, marketing plans and business strategies, provided that,
Proprietary and Confidential LHS Information shall not include (i) information
that becomes generally available to the public other than as a result of
unauthorized disclosure by Licensee or persons to whom Licensee has made such
information available, (ii) information that was available to Licensee on a
nonconfidential basis prior to receipt from LHS or is received thereafter from
a third party lawfully entitled to such information without continuing
restrictions on use, and (iii) information that is disclosed to the public
pursuant to a requirement of a court or government agency, provided, however,
that, prior to any disclosure pursuant to this clause (iii), the disclosing
party shall have given LHS
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 4
notice of any proposed disclosure and a reasonable opportunity to interpose
an objection or obtain a protective order requiring that the Proprietary and
Confidential LHS Information to be disclosed be used only for the purposes for
which the order was issued. Subject to the foregoing sentence, the content of
this Agreement constitute Proprietary and Confidential LHS Information. LHS
shall have no obligation to identify specifically Proprietary and Confidential
LHS Information.
"Proprietary And Confidential Licensee Information" means all information
relating to Licensee's business or affairs, including, but not limited to,
technical or nontechnical data, formulae, patterns, plans, compilations,
programs, devices, methods, techniques, drawings, processes, financial data,
lists of actual or potential customers or suppliers, marketing plans and
business strategies, provided that, Proprietary and Confidential Licensee
Information shall not include (i) information that becomes generally available
to the public other than as a result of unauthorized disclosure by LHS or
persons to whom LHS has made such information available, (ii) information that
was available to LHS on a nonconfidential basis prior to receipt from Licensee
or is received thereafter from a third party lawfully entitled to such
information without continuing restrictions on use, (iii) information that is
disclosed to the public pursuant to a requirement of a court or government
agency, provided, however, that, prior to any disclosure pursuant to this
clause (iii), the disclosing party shall have given Licensee notice of any
proposed disclosure and a reasonable opportunity to interpose an objection or
obtain a protective order requiring that the Proprietary and Confidential
Licensee Information to be disclosed be used only for the purposes for which
the order was issued, (iv) information that is made available to LHS pursuant to
a confidentiality agreement with an Affiliate of Licensee, but only to the
extent such information is used and handled in compliance with such
confidentiality agreement and (v) the Products or any elements thereof.
Subject to the foregoing sentence, the content of this Agreement constitute
Proprietary and Confidential Licensee Information. Licensee shall have no
obligation to identify specifically Proprietary and Confidential Licensee
Information.
"Software Defect" has the meaning given to it in Section 7.1(a)(i).
"Subscriber" means one SIM or ESN card or similar identification device as
recorded in the database of the CCBS.
"System Environment" means the hardware, operating system software and data
base platform described on Schedule 4.
"Warranty Period" has the meaning given to it in Section 7.1(a)(i).
"Warranty Services" has the meaning given to it in Section 7.1(b).
2. GRANT OF LICENSE
2.1. Scope of License
(a) (i) LHS hereby grants Licensee, subject to the terms
and conditions of this Agreement, a non-exclusive, non-transferable perpetual
license to use, and to allow Authorized Users to use, the Products at the
Designated Location as follows: (A) one copy of the Licensed Software, in object
code form only, in connection with the data processing operations of the CCBS
performed by Licensee (the "Data Processing System"), (B) one copy of the
Licensed Software, in object code form only, for "off-line" training and
testing purposes (the "Off-Line System") and (C) the Documentation solely in
connection with the use of the Licensed Software authorized hereunder.
(ii) Prior to its use (or use by any employee, agent or
consultant employed or retained by it) of the Licensed Software, Licensee shall
cause each Majority Subsidiary to execute and deliver to LHS a written
undertaking in the form of Schedule 7, and Licensee shall provide LHS with a
copy thereof. All rights of the Authorized Users are derived from Licensee and
are not independent. Such rights shall terminate upon the termination of
Licensee's rights hereunder. At such time as any Authorized User ceases to be
an Authorized User, Licensee shall cause such person or entity to, and such
person or entity shall, (i) cease to use the Licensed Software in any manner
whatsoever, and (ii) return to Licensee all copies of the Licensed Software or
any portion thereof and all Documentation in its possession or control. Such
person or entity shall continue to be bound by all the provisions of this
Agreement which survive the termination of this Agreement, including without
limitation, the provisions of Section 2.8.
(iii) Unless and until Licensee exercises the options
provided in Section 2.2, the total number of Subscribers (as hereinafter
defined) to the Network which may be serviced by the Data Processing System
shall be limited to the number set forth in Schedule 5.
(iv) Subject to the terms and conditions set forth in
this Agreement, in the event of the occurrence of any of the following events
prior to the expiration of the Warranty Period or the termination of the
Maintenance Agreement, Licensee shall be granted a non-exclusive, perpetual
license to use, and to allow its employees (but no other persons or entities)
to use, one copy of the Source Code and Commentary (as defined in the Escrow
Agreement), including all revisions thereto delivered to the Escrow Agent (as
defined in the Escrow Agreement), solely in connection with the maintenance of
the Licensed Software in connection with the use of the Licensed Software
permitted under this Agreement:
(A) An order for relief under Chapter 7 of Title 11 of
the United States Code, or any similar or successor statute, has been entered
in a case commenced by or against LHS, and LHS (or its bankruptcy trustee) has
not: (I) assumed the License Agreement and the Maintenance Agreement as
executory contracts, or (II) assumed and assigned the License Agreement and the
Maintenance Agreement as executory contracts, or (III) undertaken to assume or
to assume and assign the License Agreement and the Maintenance Agreement as
executory contracts, within 60 days after the entry of such order for relief or
within such additional time as the bankruptcy court, for cause, within such 60
day period fixes;
(B) LHS has made a general assignment for the benefit
of its creditors; LHS has admitted in writing to Licensee the general inability
of LHS to pay its debts as
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
-2-
<PAGE> 5
they mature; or LHS has ceased operating in the normal course of its business
without an intention to resume normal operations.
(C) A trustee or receiver in liquidation of LHS, or of
all or substantially all of LHS' assets has been appointed by a court of
competent jurisdiction, and which trustee or receiver has not been discharged
or dismissed within 60 days of such appointment, or
(D) There exists a Category 1 or Category 2 Error or
Software Defect of problem severity 1 or 2 (as defined in the Maintenance
Agreement) and it has been Finally Determined (as defined below) that LHS has
materially breached its obligations under Section 7.1 of this Agreement or
paragraph (a) or (b) of Schedule 3 of the Maintenance Agreement and such breach
was irremediable or continued unremedied for a period of at least thirty (30)
days following Licensee's notice to LHS that such breach has occurred. For
purposes of this Section 2.1(a), "Finally Determined" means that an order of an
arbitral body has been issued pursuant to Section 11.19(c) hereof or Section
7.18(c) of the Maintenance Agreement with respect to any claim of Licensee of
the type described in the foregoing sentence, the time for appealing such order
shall have expired and no party shall have appealed such order, or there shall
be no such appeal right.
(b) The computer programs licensed hereunder as part of the
Products shall be used only on a single central processing unit and peripheral
devices located at the Designated Location. Use of a program shall consist of
either copying any portion of the programs from storage units or media into a
central processing unit, or the processing of data with the programs, or both.
(c) Licensee shall not distribute, license or otherwise
transfer the Products directly or through third parties. Except as permitted by
Section 2.3, Licensee has no right to use the Licensed Software to provide data
processing services to any third party on a service bureau, time-sharing or
facilities management basis or otherwise.
2.2. Option To Increase Number of Subscribers
LHS grants Licensee the option, at any time or times during the
term of this Agreement, to increase the total number of subscribers serviced by
the Data Processing System. Licensee may exercise its option hereunder by
delivery of written notice to such effect to LHS. The rights afforded to
Licensee pursuant to such options shall be effective immediately upon payment
of the applicable fees.
2.3. Data Processing Services for Third Parties
Upon written notice to LHS and upon payment to LHS of the fees
provided in Section 4.3, Licensee shall have an option to use the Licensed
Software, subject to the terms and conditions of this Agreement, in object code
form, in connection with the Data Processing System for billing the retail
customers of any person or entity who operates a Network and to sublicense the
Licensed Software, in object code form, to such person or entity for such
purpose. Such sublicense shall be reasonably acceptable in form and substance
to LHS. Unless terminated earlier, each such sublicense shall expire upon the
termination of this Agreement for any reason.
2.4. Inspection of Designated Location
LHS shall have the right, upon three (3) days prior notice, to
inspect any of Licensee's premises, including without limitation the Designated
Location, during normal business hours, to verify that the Products are being
used and protected as specified herein.
2.5. Limited Copying Right
Licensee may make two copies of the Licensed Software solely for
backup, archival or disaster recovery purposes. Licensee may copy the
Documentation for any use authorized in Section 2.1 and for any of the purposes
described in the foregoing sentence. Any copy which Licensee makes of any
Product, in whole or in part, is the property of LHS. Licensee agrees to
reproduce and include in their entirety and without alteration LHS' copyright,
trademark and other proprietary rights notices on any copy of any Product.
2.6. Reservation of Rights
The Products are the sole and exclusive property of LHS. LHS
reserves all rights not expressly granted pursuant to this Agreement, including
without limitation, all rights to derivative works (as defined under U.S.
copyright law) of the Products. This Agreement is not a sale of the Products or
any copy or part thereof, and Licensee shall have no title to or ownership in
the Products, or any copies or part thereof, regardless of the form on which
the original and any copies may exist. Licensee acknowledges that the Products
are protected by copyright law, including international treaties, and other
laws protecting intellectual property.
2.7. Prohibited Actions by Licensee
(a) Except as permitted under Section 2.3, Licensee may not
use (or cause to be used) the Licensed Software for rental, as a part of a
commercial time-sharing or service bureau operation, or for any similar purpose
which would violate any of the provisions of this Agreement, including, without
limitation, the provisions of Section 2.1. Licensee shall not (i) decompile,
disassemble, reverse-assemble, analyze or otherwise examine the Licensed
Software for reverse engineering thereof, (ii) copy or otherwise duplicate the
Licensed Software except as permitted by Section 2.5 or (iii) modify the
Licensed Software in any manner. Except as permitted by Section 2.3, any
sublicensing of the Products, or any part thereof, is prohibited.
(b) Licensee shall not disclose to third parties the results
of any benchmark tests on the Licensed Software unless LHS consents to such
disclosure in writing.
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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2.8. Licensee's Confidentiality Obligations
(a) Licensee acknowledges that the Proprietary and
Confidential LHS Information constitutes valuable assets and trade secrets of
LHS and its Affiliates, has not been published and is protected by civil and
criminal law and that the use and disclosure thereof must be carefully and
continuously controlled. Accordingly, during the term of this Agreement and at
all times thereafter, Licensee agrees that:
(i) it will hold the Proprietary and Confidential LHS
Information in strict confidence and will use its commercially reasonable best
efforts to protect the Proprietary and Confidential LHS Information from any
use, reproduction, publication, disclosure, or distribution except as
specifically authorized by this Agreement;
(ii) it will not, and will cause employees, agents or
consultants of Licensee or any Majority-Owned Subsidiary which is an Authorized
User not to, sell, lease, assign, transfer, disclose or otherwise make
available any Proprietary and Confidential LHS Information, or the benefit
thereof, to others, except as authorized by the terms and conditions of this
Agreement;
(iii) it will not remove or permit to be removed from
any item embodying Proprietary and Confidential LHS Information any notice
placed thereon indicating the confidential nature and/or the proprietary right
of LHS or other parties in such items;
(iv) it will honor, reproduce and include the copyright
notice and other proprietary notices (in the form specified by LHS) on all
copies, in any form, including partial copies and excerpts, of the Proprietary
and Confidential LHS Information;
(v) it will (A) limit access to the Proprietary and
Confidential LHS Information to employees, agents or consultants of Licensee or
any Majority-Owned Subsidiary which is an Authorized User who have a need to
use the Products in connection with their employment or engagement by Licensee
or such Majority-Owner Subsidiary, (B) prohibit access to the Proprietary and
Confidential LHS Information by any other third party without the prior written
consent of LHS and (C) require the foregoing persons (other than Majority
Subsidiaries) to execute nondisclosure agreements to the same effect as this
Section 2.8 in all material respects; and
(vi) in the event Licensee becomes aware that any
person or entity (including, but not limited to, any employee, agent or
consultant of Licensee or any other Authorized User) is taking, threatens to
take or has taken any action which would violate any of the foregoing
provisions were that person or entity a party to this Agreement, Licensee shall
promptly and fully advise LHS (with written confirmation as soon as
practicable thereafter) of all facts known to Licensee concerning such action
or threatened action. Licensee shall not in any way aid, abet or encourage any
such action or threatened action. Licensee agrees to use its best efforts to
prevent such action or threatened action, including, but not limited to,
assigning any cause of action it may have related to the violation of the
foregoing provisions to LHS, and Licensee agrees to do all reasonable things
and cooperate in all reasonable ways as may be requested by LHS to protect the
trade secret and proprietary rights of LHS, its Affiliates and other parties
in the Proprietary and LHS Confidential Information.
(b) Licensee's "commercially reasonable best efforts"
obligations as provided in this Section 2.8 shall include, but not be limited
to, employing procedures with respect to the Proprietary and Confidential LHS
Information which are no less restrictive than the strictest procedures
established or employed by Licensee to protect its own confidential
information, trade secrets or know-how.
2.9. Licensee's Responsibility For Authorized Users
Licensee shall be responsible for any failure of any employee,
agent, consultant or other Authorized User in complying with the terms and
conditions of this Agreement.
3. LHS' CONFIDENTIALITY OBLIGATIONS
(a) LHS acknowledges that the Proprietary and Confidential
Licensee Information constitutes valuable assets and trade secrets of Licensee
and its Affiliates, has not been published and is protected by civil and
criminal law and that the use and disclosure thereof must be carefully and
continuously controlled. Accordingly, during the term of this Agreement and at
all times thereafter, LHS agrees that:
(i) it will hold the Proprietary and Confidential
Licensee Information in strict confidence and will use its commercially
reasonable best efforts to protect the Proprietary and Confidential Licensee
Information from any use, reproduction, publication, disclosure, or distribution
except as specifically authorized by this Agreement;
(ii) it will not, and will cause its employees, agents,
consultants and subcontractors not to, sell, lease, assign, transfer, disclose
or otherwise make available any Proprietary and Confidential Licensee
Information, or the benefit thereof, to others, except as authorized by the
terms and conditions of this Agreement;
(iii) it will not remove or permit to be removed from
any item embodying Proprietary and Confidential Licensee Information any notice
placed thereon indicating the confidential nature and/or the proprietary right
of Licensee or other parties in such items;
(iv) it will honor, reproduce and include the copyright
notice and other proprietary notices (in the form specified by Licensee) on all
copies, in any form, including partial copies and excerpts, of the Proprietary
and Confidential Licensee Information;
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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(v) it will (A) limit access to the Proprietary and
Confidential Licensee Information to those of its employees, agents,
consultants or subcontractors who have a need to use such information in
connection with their employment or engagement by LHS, (B) prohibit access to
the Proprietary and Confidential Licensee Information by any other third party
without the prior written consent of Licensee and (C) require the foregoing
persons to execute nondisclosure agreements to the same effect as this SECTION 3
in all material respects; and
(vi) in the event LHS becomes aware that any person
or entity (including, but not limited to, any employee, agent, consultant or
subcontractor of LHS) is taking, threatens to take or has taken any action
which would violate any of the foregoing provisions were that person or entity
a party to this Agreement, LHS shall promptly and fully advise Licensee (with
written confirmation as soon as practicable thereafter) of all facts known to
LHS concerning such action or threatened action. LHS shall not in any way aid,
abet or encourage any such efforts to prevent such action or threatened action,
including, but not limited to, assigning any cause of action it may have
related to the violation of the foregoing provisions to Licensee, and LHS
agrees to do all reasonable things and cooperate in all reasonable ways as may
be requested by Licensee to protect the trade secret and proprietary rights of
Licensee, its Affiliates and other parties in the Proprietary and Licensee
Confidential Information.
(b) LHS's "commercially reasonable best efforts"
obligations as provided in this SECTION 3 shall include, but not be limited to,
employing procedures with respect to the Proprietary and Confidential Licensee
Information which are no less restrictive than the strictest procedures
established or employed by LHS to protect its own confidential information,
trade secrets or know-how.
(c) LHS shall be responsible for any failure of any of LHS'
employees, agents, consultants or subcontractors in complying with the terms of
this SECTION 3.
4. PAYMENTS
4.1. SOFTWARE LICENSE
In consideration for the license of the Licensed Software,
Licensee shall pay LHS a license fee as set forth in item 1 on Schedule 6.
4.2. OPTION FEES
Upon exercise by Licensee of the option granted to it
under SECTION 2.2. in consideration of the rights granted to Licensee in
respect thereof, Licensee shall pay LHS the fees set forth on Schedule 6.
4.3. FEES FOR ADDITIONAL LICENSES UNDER SECTION
For each sublicense granted by Licensee under SECTION 2.3
Licensee shall pay LHS a fee equal to eighty-percent (80%) of LHS' then-current
published list price applicable to the number of Subscribers covered by the
corresponding sublicense granted by Licensee. Such fee shall be payable upon
the execution of the corresponding sublicense.
4.4. SHIPPING FEES
All shipments are FOB Atlanta and all shipping fees shall be
prepaid by LHS and billed to Licensee.
4.5. TAXES
Licensee shall be responsible for payment of all sales, use,
property, value-added, or other federal, state or local taxes based on the
license granted hereunder or otherwise related to Licensee's, any Authorized
User's or any permitted sublicensee's use of the Products, except for taxes
based solely on LHS' net income. If LHS is required to pay any such taxes
based on the license granted hereunder or on Licensee's use of the Products,
then such taxes shall be billed to and paid by Licensee. If Licensee is
required by law to withhold from and amount owed to LHS, then the amount
payable to LHS shall be increased to the extent necessary to ensure that, after
such withholding, LHS receives the net amount that it otherwise would have
received in the absence of such withholding. Licensee shall withhold any
amount required to be withheld and shall pay such amount to the applicable tax
authority when due and provide LHS with an original receipt from the such tax
authority for the amount so withheld and paid.
4.6. INTEREST CHARGE
Any payments due under this Agreement which are not made when
due will be subject to an interest charge equal to the prime rate on corporate
loans published by The Wall Street Journal in effect from time to time plus
three percent (3%), or the maximum rate allowed by applicable law, whichever is
less.
5. INSTALLATION AND DELIVERY/
ACCEPTANCE
5.1. LICENSED SOFTWARE
LHS shall deliver and install the BSCS Kernel at the Designated
Location on or prior to the date set forth in Schedule 1, subject to Licensee's
satisfaction of the conditions set forth in SECTION 5.2.
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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5.2. PROVISION OF SYSTEM ENVIRONMENT
Prior to the installation of the BSCS Kernel, Licensee shall
install at the Designated Location the System Environment and all other
hardware and software components necessary to run the Licensed Software. Such
installation shall be in accordance with the operational configuration and
other environmental conditions mutually agreeable to LHS and Licensee.
5.3. ACCEPTANCE OF BSCS KERNEL
(a) The BSCS Kernel shall be deemed to have been accepted
by Licensee upon the earlier of (i) any commercial use thereof, in whole or in
part, by Licensee or (ii) the completion of acceptance tests in accordance with
the provisions of SECTION 5.3(B) (the "ACCEPTANCE DATE").
(b) An acceptance test of the BSCS Kernel (the "ACCEPTANCE
TEST") shall be conducted on the following terms:
(i) During the period commencing on the date on
which the BSCS kernel is installed and ending on October 1, 1996 (the
"ACCEPTANCE TESTING PERIOD"), software contains no Category 1 or Category 2
Errors. The Acceptance Test shall be conducted in a manner which is mutually
acceptable to LHS and Licensee.
(ii) During the Acceptance Testing Period, Licensee
shall deliver to LHS a written description of any Category 1 or Category 2
Error promptly following its discovery thereof (a "NONCONFORMANCE
DESCRIPTION"). Upon receipt of a Nonconformance Description, LHS shall
determine whether any of the defects described therein are reproducible, and,
if so, shall proceed promptly to remedy the same, whereupon LHS shall notify
Licensee that it has completed its remedial work and the formal test procedure
may be run again. Licensee shall provide reasonable assistance to LHS,
including making available error reports and additional computer runs in order
to reproduce the conditions existing at the same time the defect appeared. To
enable LHS to perform its obligations hereunder, Licensee shall grant LHS
access to data files, console logs, listings and similar items, and make
competent personnel available to assist LHS.
(iii) Upon the expiration of the Acceptance Testing
Period, Licensee shall either certify to LHS that such software contains no
Category 1 or Category 2 Errors or deliver a Nonconformance Description
describing all Category 1 or Category 2 Errors previously reported to LHS which
remain unremedied and any new Category 1 or Category 2 Errors discovered by
Licensee. If Licensee delivers a Nonconformance Description, LHS shall proceed
promptly to remedy the defects described therein, and Licensee shall assist
LHS, as described in SECTION 5.3(B)(II). Certification by Licensee that such
software contains no Category 1 or Category 2 Errors or, in the absence of such
certification, the failure of Licensee to provide LHS, on or prior to the
expiration of the Acceptance Testing Period, or within two (2) weeks of the
notice by LHS of its completion of any remedial work, of a Nonconformance
Description, shall constitute completion of the Acceptance Test.
(iv) In the event that such software is deemed to be
accepted prior to the completion of the Acceptance Test as a result of use of
such software under the circumstances described in clause (i) of SECTION
5.3(A), the parties' respective rights and obligations to correct any errors in
such software shall be governed by the provisions of SECTION 7.1 and any
maintenance agreement between them.
(v) Licensee's sole remedy for failure of
Acceptance Testing to be completed shall be the repair or replacement of such
software containing Category 1 or Category 2 Errors, provided that, if such
repair or replacement cannot be completed within sixty (60) days following the
expiration of the Acceptance Testing Period, Licensee may terminate this
Agreement immediately and shall promptly return the Products to LHS, and LHS
shall refund to Licensee within thirty (30) days all monies paid to LHS under
this Agreement except for any of LHS' expenses reimbursed by Licensee
hereunder. In such event, Licensee shall have no liability to LHS for further
payments and LHS shall have no further liability under this Agreement provided
that LHS complies with any obligations which survive such termination.
6. TERM AND TERMINATION
6.1. TERM
This Agreement shall remain in effect unless terminated as
provided therein.
6.2. TERMINATION EVENTS; OTHER REMEDIES
This Agreement may be terminated at any time by mutual consent
or by either party upon written notice of termination for Default by the other
party. A party shall be deemed to be in "DEFAULT" of this Agreement if:
(a) such party has breached or otherwise failed to
observe a material obligation imposed upon such party by this Agreement, and
such breach is irremediable or has continued unremedied for a period of at
least thirty (30) days following the other party's written notice to such party
that such breach or failure occurred;
(b) if a written notice has been provided pursuant
to clause (a) above, in the event the party commits within the 12-month period
following such notice a material breach of the same term or condition for which
such notice had been given, and such breach is irremediable or has continued
unremedied for a period of at least ten (10) days following the nondefaulting
party's written notice to such party that such breach or failure has recurred;
or
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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(c) such party shall commit an act of "BANKRUPTCY",
which for the purposes of this SECTION 6.2(C) shall mean, (i) the entry of a
decree or order for relief of such party by a court of competent jurisdiction
in any involuntary case involving such party under any bankruptcy, insolvency,
or other similar law now or hereafter in effect; (ii) the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator, or other
similar agent for such party or for any substantial part of such party's assets
or property; (iii) the filing with respect to such party of a petition in any
such involuntary bankruptcy case, which petition remains undismissed for a
period of ninety (90) days or which is dismissed or suspended pursuant to
Section 305 of the Federal Bankruptcy Code (or any corresponding provision of
any future United States bankruptcy law or any applicable non-U.S. bankruptcy
law); (iv) the commencement by such party of a voluntary case under any
bankruptcy, insolvency, or other similar law now or hereafter in effect; (v)
the making by such party of any general assignment for the benefit of
creditors; or (vi) the failure by such party generally to pay its debts as such
debts become due.
In addition, (i) Licensee shall have the right to terminate
this Agreement as provided in SECTION 5.3(B)(V) and SECTION 8.1 and (ii) LHS
shall have the right to terminate this Agreement if Licensee shall fail to pay
when due any payment or other amount due hereunder within twenty (20) days of
the due date thereof.
(d) Except as set forth in this Agreement, each
party's right to termination shall be in addition to any and all rights and
remedies as shall be available to it at law or in equity.
6.3 OBLIGATIONS UPON TERMINATION
(a) Upon termination of this Agreement for any reason,
Licensee shall discontinue use, and shall cause each Authorized User to
discontinue use, of the Products, and any portion thereof, and return all such
Products and any and all other Proprietary and Confidential LHS Information in
its possession or the possession of any Authorized User to LHS, or, at LHS'
option, destroy all such Products and such other Proprietary and Confidential
LHS Information, including all copies or partial copies thereof. Termination
of this Agreement does not free Licensee from any of its obligations under this
Agreement that call for performance after the termination date.
(b) Upon termination of this Agreement for any reason, LHS
shall return any and all Proprietary and Confidential Licensee Information in
its possession or the possession of any agent, consultant or subcontractor to
Licensee, or, at Licensee's option, destroy all such Proprietary and
Confidential Licensee Information, including all copies or partial copies
thereof. Termination of this Agreement does not free LHS from any of its
obligations under this Agreement that call for performance after the
termination date.
7. WARRANTIES/MAINTENANCE
7.1 WARRANTY OF PERFORMANCE
(a) (i) LHS warrants that, for one hundred eighty (180)
days following the Acceptance Date (the "WARRANTY PERIOD"), the BSCS Kernel,
under normal use and service on the System Environment shall conform, as to
substantial operational features and in all other material respects, to the
Documentation, (the failure of such conformance being a "SOFTWARE DEFECT")
provided, however, that LHS will not be obligated to remedy any Software Defect
caused by Licensee's modification or misuse of the Licensed Software or any
nonreproducible reported error and provided, further, that LHS will not be
obligated to remedy any Software Defect in the Off-Line System.
(ii) LHS does not warrant that the operation of the
Products will be uninterrupted or error-free, or that all non-material
programming errors will be corrected.
(b) During the Warranty Period, LHS shall, at its sole
expense except as otherwise provided in subparagraph (ii), provide the
following services in complete satisfaction of LHS' obligations arising from
any Software Defect (the "WARRANTY SERVICES"):
(i) LHS shall use its reasonable efforts,
consistent with industry standards, as reasonably applied to the circumstances,
to respond to and investigate suspected Software Defects, provided Licensee
complies with its obligations described in subparagraphs (c)(ii) and (iii)
below and provided that LHS can successfully reproduce the suspected Software
Defect. Suspected Software Defects will be investigated and corrected by LHS'
personnel at LHS' offices. Resolution may take the form of a written response,
supplementary documentation, work-around, coding change, product patch,
postponement to the next release (in the case of a Category 1 or 2 Error, such
postponement will be permitted only if acceptable to Licensee) or other
correctional aids. LHS will use commercially reasonable best efforts to
respond to a request for assistance within a reasonable time following the
initial contact from Licensee; provided that LHS' response times shall be within
LHS' normal support hours (9 a.m. to 6 p.m. Eastern Time, Monday through
Friday). A request for assistance received overnight, on a weekend or on a
holiday during which LHS' offices are closed will be considered received at 9
a.m. on the next business day. Error reports may be submitted by telephone or
telecopy.
(ii) If LHS, in its reasonable judgment, determines
that the suspected Software Defect was attributable to a cause other than a
programming error by LHS or if LHS performs Warranty Services outside LHS'
normal business hours or outside LHS' offices at Licensee's request, then
Licensee shall pay LHS for the correction of such Software Defect, or such
Warranty Services, as the case may be, on a time and materials basis at LHS'
then prevailing rates and shall reimburse LHS for all reasonable travel, meals
and lodging expenses.
(c) LHS' obligations to provide Warranty Services is
subject to the following:
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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(i) Licensee shall appoint one person to receive
telephone and E-mail assistance from LHS. Licensee may change the appointed
support contact person no more frequently than every thirty (30) days by
providing written notice to LHS of such change.
(ii) Licensee shall provide LHS at no charge with
access to and use of the Designated Location, as well as all utilities and data
communications sources, as reasonably necessary for LHS to provide the Warranty
Services. Licensee further agrees to allow LHS to use upon its request at no
charge (to the extent not prohibited by Licensee's agreements with third
parties) all required diagnostic programs and all documentation available which
pertain to the data processing systems on which the Products are installed.
(iii) When reporting an error, Licensee shall use
commercially reasonable best efforts to: (A) ensure that the use of the
Licensed Software is in accordance with its Documentation, (B) use reasonable
efforts to eliminate any hardware, operating system software and third party
application software deficiencies, (C) capture all relevant data and
documentation on all operating conditions and other operating information and
fully supply LHS' maintenance and support service representatives with
requested diagnostic information necessary to reproduce the error, and (D)
implement recommended remedial, corrective or work-around procedure(s) and
fully describe any limitations imposed by such corrections or work-arounds.
7.2 DISCLAIMERS OF WARRANTIES
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, THE
PRODUCTS AND THE SERVICES PROVIDED BY LHS HEREUNDER ARE LICENSED AND PROVIDED
"AS IS" WITHOUT ANY WARRANTY AS TO THEIR PERFORMANCE, ACCURACY, OR FREEDOM FROM
ERROR, OR AS TO ANY RESULTS GENERATED THROUGH THEIR USE, INCLUDING, WITHOUT
LIMITATION, ANY IMPLIED WARRANTIES OR MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
7.3 MAINTENANCE
Simultaneously herewith the parties have entered into a
maintenance agreement with respect to the Licensed Software (the "Maintenance
Agreement").
8. INDEMNIFICATION
8.1 BY LHS
LHS agrees to indemnify and hold harmless Licensee from and
against any fine, penalty, loss, liability or expense (including reasonable
attorneys' fees and court costs) incurred by Licensee as a result of any claim,
demand or action against Licensee based on, related to or arising out of any
claim that any Product infringes any patent, copyright, trade secret, or
similar proprietary right of a third party; provided, however, that LHS shall
have no liability pursuant to this SECTION 8.1 or otherwise for any claim of
infringement to the extent such a claim is proximately caused by (i) the misuse
or unapproved modification of the Licensed Software by Licensee, (ii) the
failure by Licensee to use corrections or enhancements made available to
Licensee by LHS at no cost to Licensee or pursuant to a maintenance,
development services or other agreement between LHS and Licensee or (iii) the
use of the Products in combination with programs or data not provided by LHS.
If such claim has occurred, or in LHS' judgment is likely to occur, LHS may, at
its option and expense, or if a nonappealable final judgment against Licensee
with respect to such a claim is entered or in connection with such a claim a
temporary restraining order or injunction is issued against Licensee's use of
any Product, LHS shall, at its expense (i) procure the right for Licensee to
continue copying and using such Product in accordance with this Agreement, or
(ii) replace or modify it in a functionally equivalent manner so that it
becomes non-infringing. In the event that the above remedies are not available
within ninety (90) days of the date any judgment described in the foregoing
sentence becomes final and nonappealable or of the date of the issuance of any
temporary restraining order or injunction described in the foregoing sentence,
Licensee shall have the option to terminate this Agreement upon thirty (30)
days' notice to LHS, in which event LHS shall refund to Licensee an amount
equal to the depreciated license fee paid by Licensee (calculated on a straight
line basis over a five-year life). Such refund shall be Licensee's sole remedy
in connection with such termination.
8.2 BY LICENSEE
Licensee agrees to indemnify and hold harmless LHS from and
against any fine, penalty, loss, liability and expense (including reasonable
attorneys' fees and court costs) incurred by LHS as a result of any claim,
demand or action against LHS based on, related to or arising out of (i) any
claim that any modification or development of any Product (other than a
modification or development made solely by LHS) infringes any patent,
copyright, trade secret or similar proprietary right of a third party of (ii)
any breach by Licensee of SECTION 11.10.
8.3 CONDITIONS TO INDEMNIFICATION
The foregoing indemnities shall be contingent upon (i) the
indemnified party giving prompt written notice to the other party of any
claim, demand or action for which indemnity is sought (an "INDEMNIFIED CLAIM");
and (ii) the indemnified party fully cooperating in the defense or settlement
of any Indemnified Claim at the expense of the indemnifying party. The
indemnifying party shall have sole control over the defense of any Indemnified
Claim, provided that the indemnifying party shall obtain the prior written
consent indemnified party to any settlement thereof.
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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9. LIMITATIONS OF LIABILITY/LIQUIDATED DAMAGES
9.1 EXCLUDED DAMAGES
EXCEPT FOR MATTERS SUBJECT TO INDEMNIFICATION UNDER SECTION 8.
CLAIMS OF LHS OR ITS AFFILIATES ARISING UNDER SECTION 2 OR 9.2 AND CLAIMS OF
LICENSEE OR ANY OF ITS AFFILIATES ARISING UNDER SECTION 3, NEITHER PARTY SHALL
HAVE ANY LIABILITY TO THE OTHER FOR INDIRECT, CONSEQUENTIAL, SPECIAL OR
EXEMPLARY DAMAGES (EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES), SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED
PROFITS, OR LOST BUSINESS. EXCEPT FOR MATTERS SUBJECT TO INDEMNIFICATION
UNDER SECTION 8, LHS' TOTAL LIABILITY TO LICENSEE AND ANY THIRD PARTIES
(INCLUDING WITHOUT LIMITATION LICENSEE'S CUSTOMERS) FOR BREACH OF CONTRACT AND
FOR ALL OTHER CLAIMS (INCLUDING TORT CLAIMS) ARISING IN CONNECTION WITH THIS
AGREEMENT, OR THE PRODUCTS, SHALL NOT EXCEED THE TOTAL AMOUNT OF ALL PAYMENTS
MADE BY LICENSEE TO LHS PLUS ANY ATTORNEYS' FEES IMPOSED UPON LHS HEREUNDER.
9.2. LIQUIDATED DAMAGES
(a) Licensee understands and acknowledges that if it
breaches its obligations under SECTION 2, LHS and its Affiliates will suffer
serious damages that are difficult to value with precision. Licensee hereby
agrees that in the event any unaffiliated third party obtains a copy of any
Product or part thereof where the copy was obtained as a result of the breach
by Licensee of its obligations under SECTION 2, Licensee shall pay LHS
immediately on demand, as liquidated damages and not as a penalty, an amount
equal to the license fee for a permanent site license for such Product
(according to LHS' then current fee schedule) multiplied by the number of sites
at which the Product or part thereof has been used or has been made available
for use, in any way, whatsoever. The above remedy shall be in addition to
LHS' other remedies at law and in equity or under this Agreement, including
those specified in SECTION 6.
(b) Licensee further agrees that if a copy of any Product
or part thereof is used or is made available for use, in any way whatsoever, by
Licensee or any of its Affiliates, at a site other than the Designated Location
without authorization from LHS, Licensee shall pay LHS immediately on demand,
as liquidated damages and not as a penalty, an amount equal to the license fee
for a permanent site license for such Product (according to LHS' fee schedule
then in effect) multiplied by the number of unauthorized sites at which the
Product or part thereof has been so used or has been so made available for use.
The above remedy is in addition to LHS' other remedies at law and equity or
under this Agreement, including those specified in SECTION 6.
9.3 LIMITATION ON ACTIONS
Notwithstanding any statute of limitations that would otherwise
be applicable, no action, regardless of form, arising out of this Agreement may
be brought by either party hereto more than the later of (i) one (1) year after
the cause of action arose or (ii) one (1) year after the cause of action could
have been discovered with the exercise of reasonable care.
10. SOURCE CODE ESCROW
Within thirty (30) days from the date hereof, LHS and Licensee
shall enter into a Source Code Escrow Agreement substantially in the form
attached as Schedule 8 (the "Escrow Agreement").
11. MISCELLANEOUS
11.1 AMENDMENT
No amendment, modification or discharge of this Agreement, and
no waiver hereunder, shall be valid or binding unless set forth in writing and
duly executed by the party against whom enforcement of the amendment,
modification, discharge or waiver is sought.
11.2 ASSIGNMENT; SUBCONTRACTING
(a) This Agreement shall not be assignable by either party
without the prior written consent of the other party hereto, except that LHS
may assign this Agreement to any Affiliate, Licensee may assign this Agreement
to any Majority-Owned Subsidiary and either party may assign this Agreement to
a successor-in-interest in the event of a change in control, a merger or
consolidation to which such party is a party or a sale of all or substantially
all of the assets of such party, provided, however, that, in the case of
Licensee, no such assignment shall be made to any person or entity, including
without limitation, a Majority-Owned Subsidiary or successor-in-interest,
without LHS' prior consent (which may be withheld in LHS' sole discretion) if
the proposed transferee (i) is a competitor of LHS, (ii) has violated any
obligations under any agreements with LHS, or, with respect to the use of any
of LHS' products, any agreements with any other party or (iii) based on the
experience of LHS or any of its customers, is not qualified to use the Licensed
Software because of technical or management deficiencies, poor credit rating or
similar deficiencies.
(b) LHS may subcontract the performance of any of its
obligations hereunder, provided that, LHS shall be responsible (i) for all of
LHS' duties and obligations hereunder performed by its subcontractors as if
such duties and obligations were performed by LHS and (ii) for any payment to
any subcontractor for the performance of services hereunder.
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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<PAGE> 12
11.3. ATTORNEYS' FEES
In the event any party (i) obtains from a court of competent
jurisdiction injunctive relief of any nature with respect to any matter arising
under this Agreement or (ii) seeks judicial intervention to obtain enforcement
of any arbitral award relating to any matter arising under this Agreement, such
party shall be entitled to recover from the other party its reasonable
attorneys' fees and costs (as determined by a court of competent jurisdiction).
11.4. BINDING EFFECT
Subject to any provisions hereof restricting assignment, this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
11.5. CONSENTS AND APPROVALS
Except as expressly provided otherwise in this Agreement, if
either party requires the consent or approval of the other party for the
taking of any action under this Agreement, such consent or approval shall not
be unreasonably withheld or delayed.
11.6. CONSTRUCTION
Each party hereto hereby acknowledges that all parties hereto
participated equally in the negotiation and drafting of this Agreement and
that, accordingly, no court construing this Agreement shall construe it more
stringently against one party than against the other.
11.7. COUNTERPARTS
For the convenience of the parties, this Agreement may be
executed in as many counterparts as may be required. It shall not be necessary
that the signature of or on behalf of each party appears on each counterpart,
but it shall be sufficient that the signature of or on behalf of each party
appears on one or more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not be necessary in any
proof of this Agreement to produce or account for more than a number of
counterparts containing the respective signatures of or on behalf of all of the
parties.
11.8. ENTIRE AGREEMENT
This Agreement (including the Schedules hereto) constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof, and it supersedes all prior oral or written agreements, commitments or
understandings with respect to the matters provided for herein.
11.9. EXPENSES
Except for costs and expenses specifically assumed by a party
under this Agreement or imposed upon a party pursuant to SECTION 11.3 or
SECTION 11.19, each party hereto shall pay its own expenses incident to this
Agreement and the transactions contemplated hereunder, including all legal and
accounting fees and disbursements.
11.10. EXPORT OF PRODUCTS
Licensee agrees that it will not, directly or indirectly,
export or re-export, or knowingly permit the export or re-export of, the
Products, or any technical information about the Products, to any country for
which the United States Export Administration Act, any regulation thereunder,
or any similar United States law or regulation, requires an export license or
other United States Government approval, unless the appropriate export license
or approval has been obtained.
11.11. FORCE MAJEURE
Each party is excused from performance of this Agreement and
shall not be liable for any delay in whole or in part caused by the occurrence
of any contingency beyond the reasonable control of such party. These
contingencies include, without limitation, war, sabotage, insurrection, riot or
other act of civil disobedience, act of public enemy, failure or delay in
transportation, act of government or any agency or subdivision thereof affecting
the terms of this Agreement or otherwise, judicial action, labor dispute,
accident, fire, explosion, flood, severe weather or other act of God, shortage
of labor, or hardware failure. Notwithstanding the foregoing, Licensee shall
not be relieved of its payment obligations to LHS in the event of a force
majeure occurrence.
11.12. GOVERNING LAW AND FORUM SELECTION
This Agreement, the rights and obligations of the parties
hereto, and any claims or disputes relating thereto, shall be governed by and
construed in accordance with the laws of the State of Georgia (but not
including the choice of law rules thereof). Each party hereby consents to the
jurisdiction of any federal or state court in the State of Georgia with
respect to any action by the other party seeking injunctive relief.
11.13. HEADINGS
All headings contained in this Agreement are inserted for
convenience of reference only, shall not be deemed to be a part of this
Agreement for any purpose, and shall not in any way define or affect the
meaning, construction or scope of any of the provisions hereof.
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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<PAGE> 13
11.14. INDEPENDENT CONTRACTORS
The relationship between LHS and Licensee under this Agreement
is that of independent contractors only. Nothing in this Agreement shall be
construed so as to constitute LHS and Licensee as partners or joint venturers,
or either party hereto as the employee or agent of the other party hereto, or in
any other manner other than as independent contractors. Neither party shall
have any power or authority to bind the other party in any transaction with a
third party.
11.15. NOTICES
All notices, demands, requests, or other communications which
may be or are required to be given, served, or sent by any party to any other
party pursuant to this Agreement shall be in writing and shall be mailed by
first-class, registered or certified mail, return receipt requested, postage
prepaid, or transmitted by hand delivery (including delivery by courier),
telegram or facsimile, addressed as follows:
(i) If to LHS:
LHS Communications Systems, Inc.
400 Perimeter Center Terrace
North Terraces, Suite 575
Atlanta, Georgia 30346
Attention: William J. Bobb, II, President
Fax: 770/671-9791
with a copy (which shall not constitute notice)
to
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: Lorraine Sostowski, Esq.
Fax: 202/637-5910
(ii) If to Licensee, as set forth in
Schedule 1.
Each party may designate by notice in writing a new address to
which any notice, demand, request or communication may thereafter be so given,
served or sent. Each notice, demand, request, or communication which shall be
mailed, delivered or transmitted in the manner described above shall be deemed
sufficiently given, served, sent and received for all purposes at such time as
it is delivered to the addressee (with the return receipt, the delivery
receipt, the affidavit of messenger, or, with respect to a facsimile, the
answerback, being deemed conclusive (but not exclusive) evidence of such
delivery) or at such time as delivery is refused by the addressee upon
presentation.
11.16. SEVERABILITY
If any part of any provision of this Agreement or any other
agreement, document or writing given pursuant to or in connection with this
Agreement shall be invalid or unenforceable under applicable law, said part
shall be ineffective to the extent of such invalidity or unenforceability only,
without in any way affecting the remaining parts of said provision or the
remaining provisions of said agreement.
11.17. SURVIVAL
The provisions of SECTIONS 2.6, 2.7, 2.8, 2.9, 3, 6.2(d), 6.3,
8, 9, 11.3, 11.9, 11.12, 11.19 and 11.20 of this Agreement shall survive the
termination of the Agreement, regardless of the reason for termination.
11.18. WAIVER
Neither the waiver by any of the parties hereto of a breach of
or a default under any of the provisions of this Agreement, nor the failure of
any of the parties, on one or more occasions, to enforce any of the provisions
of the Agreement or to exercise any right or privilege hereunder shall
thereafter be construed as a waiver of any subsequent breach or default of a
similar nature, or as a waiver of any of such provisions, rights or privileges
hereunder.
11.19. ARBITRATION
(a) Other than with respect to any party's rights to seek
injunctive relief and subject to the provisions of SECTIONS 11.19(b) and (c)
and with respect to the type of dispute described in SECTION 11.19(c), disputes
under this Agreement that cannot be mutually settled shall be submitted, upon
notices by any party to the other party, to binding arbitration to be held in
Atlanta, Georgia pursuant to the Commercial Arbitration Rules of the American
Arbitration Association by three arbitrators appointed in accordance with such
rules, at least one of whom shall have experience with software license and
development matters. English shall be the language of the arbitration. Costs
of the arbitration shall be shared equally by the parties and each party shall
pay its own attorneys' fees and other expenses, except that the arbitrators
may impose all or part of the defending party's costs, fees and expenses
against the party bringing a claim if the arbitrators determine that there was
no reasonable basis for pursuing such a claim. All testimony shall be
transcribed, any award shall be accompanied by written findings of fact and a
written statement of reasons for the decision and such findings and a written
materials shall be deemed to be Proprietary and Confidential LHS and Licensee
Information, except as otherwise may be necessary for a party to enforce its
rights under the following sentence. Judgment upon any award made in such
arbitration may be entered and enforced in and by any court of competent
jurisdiction.
(b) Within thirty (30) days after the commencement of the
Acceptance Testing Period or thirty (30) days after any arbitrator appointed
pursuant to this SECTION 11.19(b) notifies the parties that he is no longer
willing or able to serve herunder, the parties shall by agreement appoint an
arbitrator to
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 14
resolve any disagreements with respect to any dispute described in SECTION
11.19(C). If the parties fail to agree upon the appointment of an arbitrator
within thirty (30) days after execution of this Agreement of thirty (30) days
after any arbitrator appointed pursuant to this SECTION 11.19(b) notifies the
parties that he is no longer willing or able to serve hereunder, then the
parties shall promptly request that the American Arbitration Association
immediately appoint an arbitrator pursuant to its Commercial Arbitration
Rules, except for any rule regarding the time allowed for appointing same and
any requirement of an existing dispute. Any arbitrator appointed by the
American Arbitration Association shall be an independent third-party technical
expert with at least three years' experience with customer care and billing
software.
(c) If Licensee has given LHS notice of a breach of this
Agreement of the type described in SECTION 2.1(a)(iv)(D) and the parties cannot
agree upon a resolution of the alleged breach within three (3) business days
following the expiration of thirty (30) days from the date of such notice, the
parties shall immediately submit their dispute to arbitration. Such submission
shall be limited to a written explanation (not to exceed three (3) pages) by
each party of such party's position. The parties shall require the arbitrator
to render his decision, in form which complies with SECTION 11.19(a), within
five (5) business days thereafter.
11.20. BENEFIT OF THIS AGREEMENT
It is the explicit intention of the parties hereto that no
person or entity other than the parties hereto is or shall be entitled to
bring any action to enforce any provision of this Agreement against either of
the parties hereto, and that the covenants, undertakings, and agreements set
forth in this Agreement shall be solely for the benefit of, and shall be
enforceable only by, the parties hereto or their respective successors and
assigns as permitted hereunder, except that it is the intent of the parties
that (i) the provisions set forth in SECTION 2 shall be for the benefit of, and
shall be enforceable by, LHS' Affiliates and (ii) the provisions set forth in
SECTION 3 shall be for the benefit of, and shall be enforceable by, Licensee's
Affiliates.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement, or have duly caused this Agreement to be duly executed on their
behalf, as of the date first written above.
LHS COMMUNICATIONS SYSTEMS, INC.
By: /s/ WILLIAM J. BOBB, II
------------------------------------
Name: WILLIAM J.BOBB, II
----------------------------------
Title: PRESIDENT
---------------------------------
POWERTEL, INC.
By: /S/ TIMOTHY C. MOSS
-----------------------------------
Name: TIMOTHY C. MOSS
----------------------------------
Title: VICE PRESIDENT OF
--------------------------------
INFORMATION TECHNOLOGY
--------------------------------
PROPRIETARY AND CONFIDENTIAL
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
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<PAGE> 15
Schedule 1
______________
Designated Location/Licensee Address for Notice/Delivery and
Installation Date for BSCS Kernel
1. Designated Location
1233 O.G. Skinner Drive
West Point, Georgia 31833
2. Licensee Address for Notice:
Powertel, Inc.
1233 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Timothy C. Moss
Fax: (706) 645-9523
with a copy (which shall not constitute notice) to:
Powertel, Inc.
1233 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Jill F. Dorsey, Esq.
Fax: (706) 645-9523
3. Delivery and Installation Date for BSCS Kernel - July 1, 1996
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<PAGE> 16
SCHEDULE 2
____________
COMPONENTS OF BSCS VERSION 4.0 COMPRISING THE BSCS KERNEL
_________________________________________________________
The following is a list of server processes:
ABBREVIATION DESCRIPTION
ACM ACM Handler
AIH Assemble Input Handler
BCH Bill Cycle Handler
CAS Customer Administration Service
CIH Card Input Handler
DEH Data Exchange Handler
DUH Debit Card Unit Handler
DIH Device Input Handler
DOH Device Output Handler
DWH Dunning and Welcome Handler
ERH Error Report Handler
FDH Fraud Detection Handler
GMD Generic Mediation Device
HCH HLR Conversion Handler
IDH Interest Deposit Handler
MLD Message Logger & Dispatcher
PBCH Pre Bill Cycle Handler
PCS PC Server
PPH Prepaid Card Payment Input Handler
PMH Profile Maintenance Handler
RIH Rate Input Handler
RLH Rate Load Handler
SPR Supervisory Process
SAH Switch Audit Handler
TEH Table Extraction Handler
CSH Credit Scoring Handler
BMH Batch Mode Handling
AVH Address Validation Handler
CCH Credit Card Authorization Handler
The following is a list of client processes:
ABBREVIATION DESCRIPTION
MP Services and Tariffs
RA Resource Administration
SY System Administration
ES External Interfaces
TP Tariff Planer
VV Sales Administration
DB Accounts Receivable
HB General Ledger
IR International Roaming
SP Reference Data
KV Customer Administration
EC External Carrier
TR Translation Administration
RM Report Manager
ER Local EIR Administration
REQMON Request Monitor
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 17
Schedule 3
__________
Description of Network
A network of wireless telephone services based on PCS 1900 standards.
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 18
Schedule 4
__________
System Environment
Hardware: HPT T500
Operating System Software: HP UX 10.1.0
Data Base Software: Oracle Database Server Software Version 7.3.2.
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 19
Schedule 5
__________
Number of Subscribers
The total numbers of Subscribers to be serviced by the Data Processing System
shall not exceed 100,000.
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 20
Schedule 6
__________
License Fee
1. Licensee shall pay LHS the sum of $1,050,000 as follows: (i) $525,000 upon
execution of this Agreement; (ii) $262,500 upon delivery and installation of
the BSCS Kernel and (iii) $265,500 on the Acceptance Date.
2. Upon notice to LHS of the exercise of its option under Section 2.2 at any
time during the thirty-six (36) month period commencing on the date hereof,
Licensee shall pay LHS an amount equal to the difference between (i) the
license fee set forth below applicable to the number Subscribers for which
Licensee has exercised its option and (ii) the total of all Licensee fees paid
by licensee to LHS pursuant to Sections 4.1 and 4.2 prior to the exercise of
such option.
Number of Subscribers License Fee
--------------------- -----------
100,001 - 300,000 $1,650,000
300,001 - 500,000 $2,250,000
500,001 - 800,000 $3,000,000
800,001 - 1,200,000 $3,900,000
1,200,001 - 2,000,000 $5,500,000
2,000,001 and over $5,500,000 plus $2 per each Subscriber
over 2,000,000
Following the expiration of the thirty-six (36) month period commencing on the
date hereof, upon exercise of the option granted to it under Section 2.2,
Licensee shall pay LHS fees in accordance with LHS' standard fees for runtime
licenses then in effect.
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LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 21
Schedule 7
__________
Form of Undertaking Pursuant to Section 2.1
LHS Communications Systems, Inc.
400 W. Perimeter Center Terrace
North Terraces, Suite 575
Atlanta, Georgia 30304
Attention: William J. Bobb, II, President
Software License and Services Agreement
dated as of August 2, 1996
between Powertel, Inc. ("Licensee") and
LHS Communications Systems, Inc. ("LHS")
(the "License Agreement")
Dear Sir:
In consideration of the undersigned's rights as an Authorized User to
use the Licensed Software as set forth in the License Agreement, the
undersigned hereby acknowledges the terms of the License Agreement and agrees
that (i) for as long as it is an Authorized User, it shall be bound by the
restrictions and obligations upon Licensee or any Authorized User set forth
therein, including without limitation, the provisions of Section 2 thereof, and
shall be liable to LHS for any breach thereof and (ii) after it is no longer an
Authorized User, it shall be bound by the provisions of Section 2.1(a)(ii) of
the License Agreement and of all other provisions of the License Agreement
which survive the termination of the License Agreement and shall be liable to
LHS for any breach thereof. The undersigned further agrees that the
undersigned shall indemnify, protect and defend and hold harmless LHS, its
Affiliates and their respective directors, shareholders, agents and employees
from and against any fine, penalty, loss, cost, damage, injury, claim, expense,
including without limitation, court costs and reasonable attorney fees, or
liability incurred by any of the foregoing as a result of any claim for which
Licensee is obligated to indemnify LHS under the License Agreement.
The undersigned acknowledges that any and all rights it has under the
License Agreement are derived from Licensee and that such rights shall
terminate upon the termination of Licensee's rights thereunder.
Capitalized terms not defined herein have the meaning given to them in
the License Agreement.
Executed this ________ day of ____________, 199_.
[NAME OF COMPANY]
By:___________________________
Accepted:
LHS COMMUNICATIONS SYSTEMS, INC.
By:_____________________________
Date:___________________________
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 22
Schedule 8
__________
SOURCE CODE ESCROW AGREEMENT
This Escrow Agreement is entered into and effective as of the ____ day
of _______________, 1996 by and among LHS Communications Systems, Inc., a
Delaware corporation with its principal offices at 400 Perimeter Center
Terrace, North Terraces, Suite 575, Atlanta, Georgia 30346 ("LHS") and
Powertel, Inc., a Delaware corporation with its principal offices located at
1233 O.G. Skinner Drive, West Point, Georgia 31833 ("Licensee") and
____________________, a ________________________ with its principal offices at
_________________________________ ("Escrow Agent").
WHEREAS, LHS has granted a license to Licensee to use certain computer
software pursuant to the terms and conditions of a Software License Agreement
(the "License Agreement"), annexed hereto as Exhibit A; and
WHEREAS, LHS and Licensee have entered into a maintenance agreement
(the "Maintenance Agreement"); and
WHEREAS, the uninterrupted availability of all forms of the Licensed
Software (as defined in the License Agreement) is critical to Licensee in the
conduct of its business; and
WHEREAS, LHS has agreed to deposit in escrow a copy of the source code
form of the Licensed Software, including without limitation for all
corrections, new releases and versions obtained pursuant to the Maintenance
Agreement, to be held by the Escrow Agent in accordance with the terms and
conditions of this Escrow Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties agree as follows:
1. CERTAIN DEFINED TERMS
Capitalized terms not otherwise defined herein shall have the meaning
given to them in the License Agreement.
2. DEPOSIT
LHS has concurrently herewith deposited with the Escrow Agent a copy of
the source code form of the BSCS Kernel (the "Source Code"), including all
relevant commentary, explanations, and other documentation relating to the
Source Code (collectively, "Commentary"). LHS shall also deposit with the
Escrow Agent, on December 31st and June 30th of each year, commencing on
December 31, 1996, a copy of all revisions to the Source Code or Commentary
encompassing all corrections, new releases and versions to the object code form
of all software delivered by LHS to Licensee pursuant to the Maintenance
Agreement. Promptly after any such corrections, new releases and versions are
deposited with the Escrow Agent, both LHS and the Escrow Agent shall give
written notice thereof to Licensee.
3. TERM
This Agreement shall remain in effect during the pendency of the
Warranty Period and for so long as the Maintenance Agreement shall remain in
effect, unless terminated in accordance with the terms hereof. Termination is
automatic upon (i) delivery of the deposited Source Code and Commentary to
Licensee in accordance with the provisions hereof; (ii) the failure of Licensee
to pay the fees of the Escrow Agent pursuant to Section 8 hereof, in which case
the Escrow Agent shall give notice of such failure to LHS and Licensee and
shall return all deposited Source Code and Commentary to LHS; or (iii) joint
notification by LHS and Licensee to the Escrow Agent stating that both the
Warranty Period has expired and the Maintenance Agreement has been terminated,
whereupon the Escrow Agent shall return all deposited Source Code and
Commentary to LHS.
4. DEFAULT
A default by LHS shall be deemed to have occurred under this Escrow
Agreement if prior to the expiration of the Warranty Period or the termination
of the Maintenance Agreement:
(i) An order for relief under Chapter 7 of Title 11 of the United
States Code, or any similar or successor statute, has been entered in a case
commenced by or against LHS, and LHS (or its bankruptcy trustee) has not: (a)
assumed the License Agreement and the Maintenance Agreement as executory
contracts, or (b) assumed and assigned the License Agreement and the
Maintenance Agreement as executory
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HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 23
contracts, or (c) undertaken to assume or to assume and assign the License
Agreement and the Maintenance Agreement as executory contracts, within 60 days
after the entry of such order for relief or within such additional time as the
bankruptcy court, for cause, within such 60 day period fixes;
(ii) LHS has made a general assignment for the benefit of its
creditors; LHS has admitted in writing to Licensee the general inability of LHS
to pay its debts as they mature; or LHS has ceased operating in the normal
course of its business without an intention to resume normal operations;
(iii) A trustee or receiver in liquidation of LHS, or of all or
substantially all of LHS' assets has been appointed by a court of competent
jurisdiction, and which trustee or receiver has not been discharged or dismissed
within 60 days of such appointment; or
(iv) There exists a Category 1 or Category 2 Error or Software Defect
of problem severity 1 or 2 (as defined in the Maintenance Agreement) and it has
been Finally Determined that LHS has materially breached its obligations under
Section 7.1 of the License Agreement or paragraph (a) or (b) of Schedule 3 of
the Maintenance Agreement and such breach was irremediable or continued
unremedied for a period of at least thirty (30) days following Licensee's notice
to LHS that such breach has occurred.
5. NOTICE OF DEFAULT AND RELEASE OF
SOURCE CODE AND COMMENTARY
Licensee shall give written notice (the "Default Notice") to the Escrow
Agent and LHS of the occurrence of a default hereunder. The Default Notice
shall be in the form of Exhibit C hereto. The Escrow Agent shall thereupon
deliver to Licensee in accordance with Licensee's instructions the Source Code
and Commentary then being held by the Escrow Agent.
6. ARBITRATION
Other than with respect to any party's rights to seek injunctive
relief, disputes under this Agreement that cannot be mutually settled shall be
submitted, upon notice by any party to the other parties, to binding
arbitration to be held in Atlanta, Georgia pursuant to the Commercial
Arbitration Rules of the American Arbitration Association by three arbitrators
appointed in accordance with such rules, at least one of whom shall have
experience with software license and development matters. English shall be the
language of the arbitration. Costs of the arbitration shall be shared equally
by the parties and each party shall pay its own attorneys' fees and other
expenses, except that the arbitrators may impose all or part of the defending
party's costs, fees and expenses against the party bringing a claim if the
arbitrators determine that there was no reasonable basis for pursuing such a
claim. All testimony shall be transcribed, any award shall be accompanied by
written findings of fact and a written statement of reasons for the decision
and such findings and written materials shall be deemed to be Proprietary and
Confidential LHS and Licensee Information, except as otherwise may be necessary
for a party to enforce its rights under the following sentence. Judgment upon
any award made in such arbitration may be entered and enforced in and by any
court of competent jurisdiction.
7. CONFIDENTIALITY AND USE LIMITATIONS
RELATING TO RELEASED INFORMATION
In the event the Source Code and Commentary are released to Licensee
pursuant to this Agreement, the Source Code and Commentary shall remain the
sole and exclusive property of LHS and any such release shall not be deemed to
be a grant or transfer of any proprietary interests relating thereto to
Licensee.
Licensee agrees to use any Source Code and Commentary released pursuant
to this Agreement solely for the purposes of the maintenance of the Licensed
Software and subject to all the limitations on the use thereof set forth in the
License Agreement. Licensee agrees to use the object codes translated from the
Source Code only as authorized pursuant to the License Agreement.
Licensee acknowledges and agrees that the Source Code and Commentary
constitute Proprietary and Confidential LHS Information and shall be afforded
all protection relating thereto set forth in the License Agreement.
8. COMPENSATION
As compensation for the services to be performed by the Escrow Agent
hereunder, Licensee shall pay to the Escrow Agent, in advance, fees at the
standard rate prescribed from time to time by the Escrow Agent for performance
of services hereunder.
-21-
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 24
9. LIABILITY
The Escrow Agent shall not, by reason of its execution of its
Agreement, assume any responsibility or liability for any transaction between
LHS and Licensee, other than the performance of its obligations as the Escrow
Agent, with respect to the Source Code and Commentary held by it in accordance
with this Agreement.
10. CONFIDENTIALITY
Except as provided in this Agreement, the Escrow Agent agrees that it
shall not divulge or disclose or otherwise make available to any third person
whatsoever, or make any use whatsoever, of the Source Code or Commentary,
without the express prior written consent of LHS.
11. NOTICES
All notices or other communications required or contemplated herein
shall be in writing, sent by certified mail, return receipt requested,
addressed to another party at the address indicated below or as same may be
changed from time to time by notice similarly given:
If to LHS:
LHS Communications Systems, Inc.
115 W. Perimeter Center Place
Suite 1040
Atlanta, Georgia 30346
Attention: William J. Bobb, II, President
Fax: 770/671-9791
with a copy (which shall not constitute notice) to:
Hogan & Hartson, L.L.P.
Columbia Square
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attention: Lorraine Sostowski, Esq.
If to Licensee:
Powertel, Inc.
1233 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Timothy C. Moss
with a copy (which shall not constitute notice) to:
Powertel, Inc.
1233 O.G. Skinner Drive
West Point, Georgia 31833
Attention: Jill F. Dorsey, Esq.
-22-
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 25
If to Escrow Agent:
___________________________________
___________________________________
___________________________________
12. ASSIGNMENT
Neither this Escrow Agreement, nor any rights, liabilities or
obligations hereunder, may be assigned by (i) the Escrow Agent without the
prior written consent of Licensee and LHS, (ii) Licensee, without the prior
written consent of LHS or (iii) LHS, without the prior written consent of
Licensee; provided, however, that each of Licensee and LHS shall be entitled
to assign all of its respective rights, obligations and liabilities hereunder
in connection with a permitted assignment of is respective rights, obligations
and liabilities under the License Agreement.
13. GOVERNING LAW AND FORUM SELECTION
This Agreement, the rights and obligations of the parties hereto, and
any claims or disputes relating thereto, shall be governed by and construed in
accordance with the laws of the State of Georgia (but not including the choice
of law rules thereof). Each party hereby consents to the jurisdiction of any
federal or state court in the State of Georgia with respect to any action by
any other party seeking injunctive relief.
14. COUNTERPARTS
For the convenience of the parties, this Agreement may be executed in
as many counterparts as may be required. It shall not be necessary that the
signature of or on behalf of each party appears on each counterpart, but it
shall be sufficient that the signature of or on behalf of each party appears on
one or more of the counterparts. All counterparts shall collectively
constitute a single agreement. It shall not be necessary in any proof of this
Agreement to produce or account for more than a number of counterparts
containing the respective signatures of or on behalf of all the parties.
-23-
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 26
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
day and year first set forth above.
[ESCROW AGENT] POWERTEL, INC.
By:________________________ By:________________________________
Name:______________________ Name:______________________________
Title:_____________________ Title:_____________________________
LHS COMMUNICATIONS SYSTEMS, INC.
By:________________________________
Name:______________________________
Title:_____________________________
-24-
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 27
EXHIBIT C
DEFAULT NOTICE
POWERTEL, INC.
(OFFICER'S CERTIFICATE)
THE UNDERSIGNED DOES HEREBY CERTIFY, that he is the duly elected,
qualified and acting ______________ of POWERTEL, INC., a Delaware corporation
(the "Company"), and DOES FURTHER CERTIFY on behalf of the Company and in
connection with the Source Code Escrow Agreement (the "Agreement"), dated as of
____________, between and among the Company, LHS Communications Systems, Inc.
and [Escrow Agent] (the "Escrow Agent"):
1. A default pursuant to Section __ of the Agreement has occurred.
Specifically, [provide details regarding the default event];
2. The Company therefore requests that the Escrow Agent release the
Source Code and Commentary (as such terms are defined in the Agreement) to the
Company pursuant to Section 5 of the Agreement; and
3. The Company acknowledges and agrees to abide by the provisions set
forth in Section 7 of the Agreement with respect to confidentiality and use
limitations relating to the Source Code and Commentary released by the Escrow
Agent pursuant to the Agreement.
IN WITNESS WHEREOF, the undersigned has hereunto set his hands and
affixed the seal of the Company this _________ day of, 19__.
______________________________
(name)
(title)
[CORPORATE SEAL]
PROPRIETARY AND CONFIDENTIAL
LHS/LICENSEE INFORMATION SOLELY FOR AUTHORIZED PERSONS
HAVING A NEED TO KNOW OR USE PURSUANT TO LHS OR LICENSEE INSTRUCTIONS
<PAGE> 1
AMENDMENT NO. 1 TO THE
CREDIT AGREEMENT
Dated as of October 31, 1996
AMENDMENT NO. 1 TO THE CREDIT AGREEMENT (this "Amendment") among
Powertel, Inc. (formerly known as InterCel PCS Services, Inc.), a Delaware
corporation (the "Borrower"), and Ericsson Inc. ("Ericsson") as the Initial
Lender, and Ericsson, as agent (the "Agent") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lenders and the Agent have entered
into a Credit Agreement dated as of March 4, 1996 (the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment have the same
meanings as specified in the Credit Agreement.
(2) The Borrower has requested that Ericsson increase the
amount of the total Commitments under the Credit Agreement to $165,000,000.
(3) In order to induce Ericsson to increase the total amount
of the Commitments under the Credit Agreement to $165,000,000, the Borrower has
agreed to use Ericsson as the exclusive provider of PCS 1900 Equipment for a
term of three years in the Atlanta MTA.
(4) Ericsson is, on the terms and conditions stated
below, willing to grant the request of the Borrower and the Borrower and
Ericsson have agreed to amend the Credit Agreement as hereinafter set forth.
SECTION 1. Amendments to the Credit Agreement. The Credit
Agreement is, effective as of the date hereof and subject to the satisfaction
of the conditions precedent set forth in Section 2 hereof, hereby amended as
follows:
(a) References in the Credit Agreement and the exhibits
thereto to "InterCel PCS Services. Inc." shall be replaced with
"Powertel, Inc."
<PAGE> 2
2
(b) The definition of "License Subsidiaries" is deleted in
its entirety and replaced with the following:
""License Subsidiaries" means each of Powertel
Jacksonville Licenses, Inc., Powertel Memphis Licenses,
Inc., Powertel Birmingham Licenses, Inc. and Powertel
Atlanta Licenses, Inc."
(c) The definition of "Operating Subsidiaries" is deleted
in its entirety and replaced with the following:
""Operating Subsidiaries" means each of
Powertel/Jacksonville, Inc., Powertel/Memphis, Inc.,
Powertel/Birmingham, Inc. and Powertel/Atlanta, Inc.".
(d) The following definitions are added to Section 1.01:
""Subscriber" means, at any time, those subscribers to
the wireless personal communications services ("PCS") of
the Borrower and the Operating Subsidiaries for the
MTA's of Jacksonville, Florida; Memphis,
Tennessee/Jackson, Mississippi; Birmingham, Alabama and
Atlanta, Georgia (a) who have activated a PCS telephone
number for use on the Borrower's or an Operating
Subsidiary's PCS network for such services, (b) who are
not ninety days or more past due with respect to any
amounts owed to the Borrower or such Operating
Subsidiaries and (c) who have not given any notice of
termination.
""Revenue" means, for any period, the operating revenue
for the personal communications services of InterCel and
its Subsidiaries consisting of operating revenue derived
from (a) monthly access charges for such services, (b)
the air time charges for such services, (c) so-called
"roaming revenue", (d) toll revenue, (e) operator
services revenues, (f) the installation and connection
of equipment and (g) the sale of personal communication
services equipment and (h) all other revenues generated
from the PCS network of the Borrower and the Operating
Subsidiaries and infrastructure related thereto."
(e) Clauses (a), (b) and (c) of Section 3.03 are replaced
with the following:
"the Agent shall have received the items set forth in
clause (xii) and (A) through (F) in clause (vii) of
Section 3.01(f) from Powertel/Atlanta, Inc."
<PAGE> 3
3
(f) Section 5.01 is hereby amended by adding the following
to the end thereof:
"(m) Leases. In connection with (i) any leases entered
into by the Borrower relating to any property on which
any Collateral with a purchase price in access of
$500,000 shall be located or stored, the Borrower shall
obtain provisions in such leases or shall obtain
consents from landlords containing such provision
substantially similar to those provisions set forth in
Annex A-1 or as shall otherwise be reasonably
satisfactory to the Agent and (ii) any leases entered
into by the Borrower after October 28, 1996 relating to
any property on which any other Collateral shall be
located or stored, the Borrower shall use reasonable
efforts to obtain provisions in such leases
substantially similar to those provisions set forth in
Annex A-2."
(g) Section 6.01(m) is hereby amended by deleting from the
word "or" on the fifth line thereof through the word "Alabama" on the
twelfth line thereof, inserting the word "or" at the beginning of the
third line thereof and adding "as amended" at the end of clause (ii) of
such subsection.
(h) Section 6.01(o) is deleted in its entirety and replaced
with the following:
"(o) InterCel and its Subsidiaries shall fail to have
earned for each fiscal quarter of InterCel, Consolidated
Revenue of not less than the applicable amount set forth
on Schedule 6.01(o) for such fiscal quarter."
(i) Section 6.01 is amended by adding at the end of clause
(r) thereof the word "or" together with the following:
"(s) The Borrower shall permit the aggregate number of
Subscribers at any time during any period set forth on
Schedule 6.01(s) to be less than the number set forth
for such period."
(j) Section 8.13 is hereby deleted in its entirety and
replaced with the following:
"Prior to January 31, 1998, the Borrower and Lenders
shall negotiate in good faith financial tests consisting
of (a) a ratio of EBITDA to debt service of InterCel and
its Subsidiaries, (b) a ratio of Debt to EBITDA of
InterCel and its Subsidiaries and (c) a level of maximum
capital
<PAGE> 4
4
expenditure, in each case, based upon the business plan
for 1998 delivered by the Borrower to the Lenders in
accordance with Section 5.03(d). ".
(k) Schedule I is amended by replacing "$125,000,000" set
opposite "Ericsson Inc." with "$165,000,000".
(l) Schedule 4.01(a) is deleted in its entirety and
replaced with Annex B attached hereto.
(m) Schedule 4.01(b) is deleted in its entirety and replaced
with Annex C attached hereto.
(n) Schedule 6.01(o) is deleted in its entirety and replaced
with Annex D attached hereto.
(o) Schedule 6.01(p) is deleted in its entirety and replaced
with Annex E attached hereto.
(p) Schedule 6.01(q) is deleted in its entirety and replaced
with Annex F attached hereto.
(q) Schedule 6.01(r) is deleted in its entirety and replaced
with Annex G attached hereto.
(r) Schedule 6.01(s) is added to the Credit Agreement.
(s) Exhibit A is deleted in its entirety and replaced with
Annex H attached hereto.
SECTION 2. Conditions of Effectiveness. This Amendment shall
become effective as of the date first above written when, and only when, the
Agent shall have received counterparts of this Amendment executed by the
Borrower and Ericsson. The effectiveness of this Amendment is conditioned upon
the accuracy of the factual matters described herein. This Amendment is
subject to the provisions of Section 8.01 of the Credit Agreement. The parties
hereto further agree to use their best efforts to enter into an amendment to
the Equipment Purchase Agreement to make changes to the Equipment Purchase
Agreement in order (a) to clarify that (i) the Borrower has agreed to use
Ericsson as the exclusive provider of PCS 1900 Equipment for a term of three
years in the Atlanta MTA, (ii) Ericsson shall sell Equipment to the Borrower
for use in the Atlanta MTA on the terms and conditions, to the extent
applicable, as the Equipment currently being sold under the Equipment Purchase
Agreement and (b) to make such other amendments that are
<PAGE> 5
5
consistent with the amendments made hereby to the Credit Agreement, as soon as
practicable upon the effectiveness of this Amendment.
SECTION 3. Representations and Warranties of the Borrower.
(a) The execution, delivery and performance by the Borrower
of this Amendment and the Loan Documents, as amended hereby, to which it
is a party are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not (i) contravene
the Borrower's charter or by-laws, (ii) violate any law, rule or
regulation (including, without limitation, Regulation X of the Board of
Governors of the Federal Reserve System), or any order, writ, judgment,
injunction, decree, determination or award, binding on or affecting the
Borrower or any of its Subsidiaries or any of their properties the effect
of which would not have a Material Adverse Effect, or (iii) conflict with
or result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting the Borrower, any of its Subsidiaries
or any of their properties except where such conflict would not
have a Material Adverse Effect.
(b) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery or
performance by the Borrower of this Amendment or any of the Loan
Documents, as amended hereby, to which it is a party.
(c) This Amendment has been duly executed and delivered by
the Borrower. This Amendment and each of the other Loan Documents, as
amended hereby, to which the Borrower is a party are legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in
accordance with their respective terms.
SECTION 4. Reference to and Effect on the Loan Documents. (a) On and after
the effectiveness of this Amendment, each reference in the Credit Agreement to
"this Agreement", "hereunder", "hereof" or words of like import referring to
the Credit Agreement, and each reference in the Notes and each of the other
Loan Documents to "the Credit Agreement", "thereunder", "thereof" or words of
like import referring to the Credit Agreement, shall mean and be a reference
to the Credit Agreement, as amended by this Amendment.
(b) The Credit Agreement, as specifically amended by this
Amendment, is and shall continue to be in full force and effect and is hereby
in all respects ratified and confirmed.
<PAGE> 6
6
(c) The execution, delivery and effectiveness of this
Amendment shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any Lender or the Agent under the Credit
Agreement, nor constitute a waiver of any provision of the Credit Agreement.
SECTION 5. Costs, Expenses. The Borrower agrees to pay on
demand all costs and expenses of the Agent in connection with the preparation,
execution, delivery and administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for
the Agent) as previously agreed between the Borrower and the Lenders.
SECTION 6. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Amendment by telecopier shall be effective as delivery of a manually executed
counterpart of this Amendment.
SECTION 7. Waiver. At the request of the Borrower, the Lenders
hereby waive (a) the requirement of Section 5.01(m) with respect to the
landlord lien waiver letters for the Equipment located on the properties
subject to (i) the Standard Commercial Lease dated April 1, 1996 between
Eastpointe Realty Limited Partnership and InterCel, Inc., (ii) The Lease dated
December 8, 1995 between Powertel PCS Partners, L.P. and (iii) the Lease
Agreement dated March 6, 1996 between Sherlon Investments Corp. and InterCel
Jacksonville MTA, Inc. and (b) the requirement that Powertel Memphis Licenses,
Inc., Powertel/Birmingham, Inc. and Powertel Birmingham Licenses, Inc. are
foreign corporations in good standing in the state of Alabama, in each case,
for a period of thirty days from the effective date of this Amendment.
SECTION 8. Governing Law. This Amendment shall be governed by,
and construed in accordance with, the laws of the State of New York.
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers theretunto duly
authorized, as of the date first above written.
POWERTEL, INC.
By /s/
---------------------------
Title: President
ERICSSON INC.,
as Agent and as Lender
By
---------------------------
Title:
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto duly
authorized, as of the date first above written.
POWERTEL, INC.
By
--------------------------------------
Title: President
ERICSSON INC.,
as Agent and as Lender
By /s/
--------------------------------------
Title: DIRECTOR OF FINANCE/CONTROLLER
RADIO SYSTEMS GROUP.
<PAGE> 9
ANNEX A-1
The security interest granted by Tenant to Ericsson Inc., or its successors or
assigns, ("Ericsson"), as Agent for the Lenders (as defined below) under that
certain Credit Agreement dated as March 4, 1996, as the same may be amended
from time to time (the "Credit Agreement") among Powertel, Inc. (formerly known
as InterCel PCS Services, Inc.), Ericsson Inc., as Agent, and the Lenders party
thereto (the "Lenders"), in certain telecommunications equipment (the
"Eguipment") purchased with the Advances (as such term is defined in the Credit
Agreement), whether now or hereafter existing or now owned or hereafter
acquired and located on or about the Premises (such Equipment being referred to
herein as the "Collateral") shall have priority to the extent of all
obligations of Tenant to Ericsson, Inc. and the Lenders secured thereby over
any security interest or lien, whether acquired by statute, agreement, or
otherwise, of Landlord in or affecting the same Personal Property.
If a termination, disaffirmance or rejection of the Lease pursuant to any laws
(including any bankruptcy or insolvency laws) by Tenant shall occur, or Landlord
shall terminate this Lease, Landlord will give to the Agent (as such term is
defined in the Credit Agreement) of which it has received notice the right,
within 60 days after such event and provided that all curable defaults under
this Lease have been cured, to enter into a new lease of the Premises, in the
name of a designee to be named by the Agent at such time, for the remainder of
the term of this Lease and upon all of the terms and conditions, and subject to
all of the restrictions, contained herein. If the Agent shall elect not to
exercise such right, Landlord will give the Agent the right to enter upon the
Property during such 60-day period for the purpose of removing any Personal
Property.
Landlord consents to any assignment or transfer of Tenant's interest in the
Lease, either to a Secured Party (as such term is defined in the Credit
Agreement) or to any other person or entity, arising by reason of a default
under any document relating to the Credit Agreement or any refinancing thereof
and a foreclosure or transfer in lieu of foreclosure of the security provided in
connection therewith.
Landlord and Tenant acknowledge that each Secured Party shall be a third-party
beneficiary of this Lease. Promptly after any person or entity shall become
Secured Party, Tenant will give prompt notice thereof to Landlord, but Tenant's
failure to give such notice shall not prejudice any rights of a Secured Party
hereunder.
in connection with the security interest granted by the Tenant in the Collateral
to the Secured Party, Landlord agrees to allow the recording of any document,
certificate or financing statement in connection with the evidencing or
perfection of the Secured Party's lien.
<PAGE> 10
ANNEX A-2
Lessee may, upon notice to Lessor, grant a security interest in the Antenna
Facilities/Tower Facilities (as such terms are currently defined in leases of
the Borrower), to any Person (hereinafter collectively referred to as "Secured
Parties"). Lessor agrees to notify Lessee and any Secured Parties
simultaneously of any default by Lessee and to give the Secured Parties the
same right to cure any default as Lessee except that the cure period for any
Secured Party shall not be less than 10 days after receipt of the default
notice.
Lessor hereby waives any and all lien rights it may have, statutory or
otherwise, in and to the Tower Facilities/Antenna Facilities or any portion
thereof, regardless of whether or not same is deemed real or personal property
under applicable laws.
If a termination, disaffirmance or rejection of the Lease pursuant to any laws
(including any bankruptcy or insolvency laws) by Tenant shall occur, or
Landlord shall terminate this Lease, Landlord will give to the Secured Parties
prompt notice thereof and Landlord will give the Secured Parties the right to
enter upon the Property during a 30-day period for commencing upon the Agent's
receipt of such notice for the purpose of removing any Equipment. Landlord
acknowledges that the Secured Parties shall be a third-party beneficiary of
this Lease.
<PAGE> 11
ANNEX B
SCHEDULE 4.01(a)
STOCK OWNERSHIP OF LICENSE SUBSIDIARIES
Powertel/Birmingham, Inc. owns 100% of the 60,384.47 shares of common stock
outstanding of Powertel Birmingham Licenses, Inc.
Powertel/Memphis, Inc. owns 100% of the 100 shares of common stock outstanding
of Powertel Memphis Licenses, Inc.
Powertel/Jacksonville, Inc. owns 100% of the 100 shares of common stock
outstanding of Powertel Jacksonville Licenses, Inc.
Powertel/Atlanta, Inc. owns 100% of the 100 shares of common stock outstanding
of Powertel Atlanta Licenses, Inc.
<PAGE> 12
ANNEX C
SCHEDULE 4.01(b)
SUBSIDIARIES OF INTERCEL
<TABLE>
<CAPTION>
No. of Shares Covered
% of by all Outstanding
Outstanding Options,
Shares Owned Warrants, Rights of
No. of No. of (Directly or Conversion or
State of Shares Shares Indirectly) by Purchase and
Company Incorporation Authorized Outstanding InterCel Similar Rights
------- ------------- ---------- ----------- -------- --------------
<S> <C> <C> <C> <C> <C>
Powertel, Inc. Delaware 1,000 100 100% 0
InterCel Licenses, Inc. Delaware 100 100 100% 0
Unity Cellular Systems, Inc. Maine 100,000 100 100% 0
Northern Maine Cellular Maine 51 % Partnership
Partnership Interest
Powertel/Birmingham, Inc. Missouri 3,000,000 850,000 100% 0
Powertel Birmingham Licenses, Colorado 100,000 60,384.47 100% 0
Inc.
Powertel/Jacksonville, Inc. Delaware 1,000 100 100% 0
Powertel Jacksonville Licenses, Delaware 1,000 100 100% 0
Inc.
Powertel/Memphis, Inc. Delaware 3,500,000 3,226,190 100% 0
Powertel Memphis Licenses, Inc. Delaware 1,000 100 100% 0
Powertel/Atlanta, Inc. Delaware 1,000 100 100% 0
Powertel Atlanta Licenses, Inc. Delaware 1,000 100 100% 0
</TABLE>
<PAGE> 13
ANNEX D
SCHEDULE 6.01(o)
<TABLE>
<CAPTION>
REVENUES
Fiscal Quarter Minimum PCS
Ended Revenues
- ----- -----------
<S> <C>
December 31, 1996 2,000,000
March 31, 1997 6,500,000
June 30, 1997 9,200,000
September 30, 1997 11,800,000
December 31, 1997 17,000,000
March 31, 1998 20,000,000
June 30, 1998 27,000,000
September 30, 1998 36,000,000
December 31, 1998 46,000,000
March 31, 1999 44,000,000
June 30, 1999 55,000,000
September 30, 1999 61,000,000
December 31, 1999 68,000,000
March 31, 2000 66,000,000
June 30, 2000 78,000,000
September 30, 2000 83,000,000
December 31, 2000 91,000,000
March 31, 2001 88,000,000
June 30, 2001 92,000,000
September 30, 2001 98,000,000
December 31, 2001 107,000,000
March 31, 2002 103,000,000
June 30, 2002 104,000,000
September 30, 2002 111,000,000
December 31, 2002 121,000,000
March 31, 2003 114,000,000
June 30, 2003 117,000,000
September 30, 2003 124,000,000
December 31, 2003 136,000,000
March 31, 2004 125,000,000
June 30, 2004 128,000,000
September 30, 2004 137,000,000
December 31, 2004 149,000,000
March 31, 2005 137,000,000
June 30, 2005 138,000,000
September 30, 2005 147,000,000
December 31, 2005 160,000,000
Each Quarter Thereafter 160,000,000
</TABLE>
<PAGE> 14
ANNEX E
SCHEDULE 6.01(q)
<TABLE>
<CAPTION>
NET WORTH
Minimum PCS
Fiscal Quarter Ended Revenues
- -------------------- -----------
<S> <C>
December 31, 1996 347,000,000
March 31, 1997 325,000,000
June 30, 1997 303,000,000
September 30, 1997 280,000,000
December 31, 1997 238,000,000
March 31, 1998 205,000,000
June 30, 1998 173,000,000
September 30, 1998 140,000,000
December 31, 1998 107,000,000
March 31, 1999 87,000,000
June 30, 1999 67,000,000
September 30, 1999 47,000,000
December 31, 1999 27,000,000
March 31, 2000 21,000,000
June 30, 2000 15,000,000
September 30, 2000 9,000,000
December 31, 2000 2,000,000
March 31, 2001 4,000,000
June 30, 2001 5,000,000
September 30, 2001 6,000,000
December 31, 2001 7,000,000
March 31, 2002 21,000,000
June 30, 2002 35,000,000
September 30, 2002 49,000,000
December 31, 2002 63,000,000
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
Net Worth
Fiscal Quarter Ended Minimum
- -------------------- -----------
<S> <C>
March 31, 2003 86,000,000
June 30, 2003 110,000,000
September 30, 2003 133,000,000
December 31, 2003 156,000,000
March 31, 2004 190,000,000
June 30, 2004 223,000,000
September 30, 2004 257,000,000
December 31, 2004 290,000,000
March 31, 2005 319,000,000
June 30, 2005 347,000,000
September 30, 2005 376,000,000
December 31, 2005 404,000,000
Each Quarter Thereafter 404,000,000
</TABLE>
<PAGE> 16
ANNEX F
SCHEDULE 6.01(r)
<TABLE>
<CAPTION>
LEVERAGE RATIO
Minimum Ratio of
Total Liabilities to
Fiscal Ouarter Ended Total Assets
- -------------------- --------------------
<S> <C>
December 31, 1996 1.00:1.00
March 31, 1997 1.00:1.00
June 30, 1997 1.00:1.00
September 30, 1997 1.00:1.00
December 3 1, 1997 1.00:1.00
March 31, 1998 1.00:1.00
June 30, 1998 1.00:1.00
September 30, 1998 1.00:1.00
December 31, 1998 1.00:1.00
March 31, 1999 1.10:1.00
June 30, 1999 1.10:1.00
September 30, 1999 1.10:1.00
December 31, 1999 1.10:1.00
March 31, 2000 1.10:1.00
June 30, 2000 1.10:1.00
September 30, 2000 1.10:1.00
December 31, 2000 1.10:1.00
March 31, 2001 1.10:1.00
June 30, 2001 1.10:1.00
September 30, 2001 1.10:1.00
December 31, 2001 1.10:1.00
March 1, 2002 1.10:1.00
June 30, 2002 1.10:1.00
September 30, 2002 1.10:1.00
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
Minimum Ratio of
Total Liabilities to
Fiscal Ouarter Ended Total Assets
-------------------- --------------------
<S> <C>
December 31, 2002 1.10:1.00
March 31, 2003 1.10:1.00
June 30, 2003 1.10:1.00
September 30, 2003 1.10:1.00
December 31, 2003 1.00:1.00
March 31, 2004 1.00:1.00
June 30, 2004 1.00:1.00
September 30, 2004 1.00:1.00
December 31, 2004 0.80:1.00
March 31, 2005 0.80:1.00
June 30, 2005 0.80:1.00
September 30, 2005 0.80:1.00
0.80:1.00
Each Quarter Thereafter 0.70:1.00
</TABLE>
<PAGE> 18
ANNEX G
SCHEDULE 6.01(s)
<TABLE>
<CAPTION>
SUBSCRIBERS
Fiscal Quarter Ended Subscribers
- -------------------- -----------
<S> <C>
December 31, 1996 5,000
March 31, 1997 15,000
June 30, 1997 25,000
September 30, 1997 40,000
December 31, 1997 60,000
March 31, 1998 80,000
June 30, 1998 100,000
September 30, 1998 150,000
December 31, 1998 200,000
March 31, 1999 225,000
June 30, 1999 250,000
September 30, 1999 300,000
December 31, 1999 350,000
March 31, 2000 400,000
June 30, 2000 450,000
September 30, 2000 500,000
December 31, 2000 550,000
March 31, 2001 575,000
June 30, 2001 600,000
September 30, 2001 650,000
December 31, 2001 700,000
March 31, 2002 700,000
June 30, 2002 700,000
September 30, 2002 750,000
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Number of
Fiscal Quarter Ended Subscribers
- -------------------- -----------
<S> <C>
December 31, 2002 750,000
March 31, 2003 800,000
June 30, 2003 800,000
September 30, 2003 850,000
December 31, 2003 850,000
March 31, 2004 850,000
June 30, 2004 850,000
September 30, 2004 850,000
December 31, 2004 850,000
March 31, 2005 900,000
June 30, 2005 900,000
September 30, 2005 900,000
December 31, 2005 900,000
Each Quarter Thereafter 1,000,000
</TABLE>
<PAGE> 20
ANNEX H
EXHIBIT A
PROMISSORY NOTE
$165,000,000 Dated: October 31, 1996
FOR VALUE RECEIVED, the undersigned, Powertel, Inc., a Delaware
corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of Ericsson
Inc. (the "Lender") for the account of its Lending Office (as defined in the
Credit Agreement referred to below) the aggregate principal amount of the
Advances (as defined below) owing to the Lender by the Borrower pursuant to the
Credit Agreement dated as of March 4, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"; terms defined
therein being used herein as therein defined) among the Borrower, the Lender
and certain other lender parties party thereto, and Ericsson Inc. as Agent for
the Lender and such other lender parties, on the dates and in the amounts
specified in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Ericsson Inc., as Agent, at 740 East Campbell Road,
Richardson Texas 75081, in same day funds. Each Advance owing to the Lender by
the Borrower and the maturity thereof, and all payments made on account of
principal thereof, shall be recorded by the Lender and, prior to any transfer
hereof, endorsed on the grid attached hereto, which is part of this Promissory
Note.
This Promissory Note is one of the Notes referred to in, and is
entitled to the benefits of, the Credit Agreement. The Credit Agreement, among
other things, (i) provides for the making of advances (the "Advances") by the
Lender to the Borrower from time to time in an aggregate amount not to exceed
at any time outstanding the U.S. dollar amount first above mentioned, the
indebtedness of the Borrower resulting from each Advance being evidenced by
this Promissory Note, and (ii) contains provisions for acceleration of the
maturity hereof ,of upon the happening of certain stated events and also for
prepayments on account of principal hereof prior to the maturity hereof upon
the terms and conditions therein
<PAGE> 21
specified. The obligations of the Borrower under this Promissory Note, and the
obligations of the other Loan Parties under the Loan Documents, are secured by
the Collateral as provided in the Loan Documents.
POWERTEL, INC.
By
----------------------------------
Title:
<PAGE> 22
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
===============================================================================
AMOUNT OF UNPAID
AMOUNT OF PRINCIPAL PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
===============================================================================
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
===============================================================================
</TABLE>
<PAGE> 1
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
INTERCEL, INC.
InterCel, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
1. InterCel, Inc. (the "Corporation") was originally
incorporated on April 3, 1991, and its original Certificate of Incorporation
was filed with the Secretary of the State of Delaware on the same date. A
Restated Certificate of Incorporation was filed with the Secretary of the State
of Delaware on June 3, 1992. A Second Restated Certificate of Incorporation
was filed with the Secretary of the State of Delaware on January 11, 1996.
2. The Board of Directors of the Corporation, at a
meeting duly called and held in accordance with the By-laws of the Corporation
and Section 141 of the Delaware General Corporation Law, duly adopted
resolutions proposing and declaring advisable the adoption of the Third
Restated Certificate of Incorporation of the Corporation in the form attached
hereto.
3. Holders of at least a majority of the outstanding
shares of common stock of the Corporation, constituting the only outstanding
voting securities of the Corporation, at an annual meeting duly called and held
in accordance with the By-laws of the Corporation and Section 211 of the
Delaware General Corporation Law, duly approved the Third Restated Certificate
of Incorporation in the form attached hereto.
4. Having been duly adopted pursuant to Sections 242 and
245 of the General Corporation Law of the State of Delaware, this Amended and
Restated Certificate of Incorporation restates and integrates and further
amends the provisions previously filed with the Secretary of the State of
Delaware on April 3, 1991, on June 3, 1992 and on January 11, 1996.
5. The text of the Certificate of Incorporation of
InterCel, Inc. hereby is amended and restated to read in its entirety as
follows:
ARTICLES
NAME
The name of the corporation is InterCel, Inc. (the
"Corporation").
REGISTERED OFFICE AND AGENT
The registered office of the Corporation shall be located at
1013 Centre Road, Wilmington, Delaware 19805. The registered agent of the
Corporation at such address shall be Corporation Service Company.
<PAGE> 2
DURATION
The Corporation shall have perpetual existence.
PURPOSE AND POWERS
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law. The Corporation shall have all power necessary or helpful to
engage in such acts and activities.
CAPITAL STOCK
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").
Preferred Stock
The Board of Directors is authorized, subject to limitations
prescribed by the Delaware General Corporation Law and the provisions of this
ARTICLE 5, to provide, by resolution and filing a certificate pursuant to the
applicable provision of the Delaware General Corporation Law, for the issuance
of the shares of Preferred Stock in series, to establish from time to time the
number of shares to be included in each such series, and to fix the
designation, powers, preferences and such rights of the shares of each such
series and the qualifications, limitations and restrictions thereof. The
authority of the Board of Directors with respect to each series shall include,
but not be limited to, determination of the following:
(A) The number of shares constituting that series and the
distinctive designation of that series;
(B) The dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on shares
of that series;
(C) Whether that series shall have voting rights, in
addition to the voting rights provided by law, and, if so, the terms of such
voting rights;
(D) Whether that series shall have conversion privileges,
and, if so, the
<PAGE> 3
terms and conditions of such conversion, including provision for adjustment of
the conversion rate in such events as the Board of Directors shall determine;
(E) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such redemption, including
the dates upon or after which they shall be redeemable, and the amount per
share payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(F) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(G) The rights of the shares of that series in the event
of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(H) Any other relative rights, preferences and
limitations of that series.
COMMON STOCK
The Common Stock shall be subject to all of the rights,
privileges, preferences and priorities of the Preferred Stock as set forth in
the certificate filed to establish the respective series of Preferred Stock.
Each share of Common Stock shall have the same relative rights as and be
identical in all respects to all the other shares of Common Stock.
(A) Whenever there shall have been paid, or declared and
set aside for payment, to the holders of shares of any class of stock having
preference over the Common Stock as to the payment of dividends, the full
amount of dividends and of sinking fund or retirement payments, if any, to
which such holders are respectively entitled in preference to the Common Stock,
then dividends may be paid on the Common Stock and on any class or series of
stock entitled to participate therewith as to dividends, out of any assets
legally available for the payment of dividends thereon, but only when and as
declared by the Board of Directors of the Corporation.
(B) In the event of any dissolution, liquidation or
winding up of the Corporation, whether voluntary or involuntary, after there
shall have been paid, or set aside for payment, to the holders of shares of any
class having preference over the Common Stock in the event of dissolution,
liquidation or winding up, the full preferential amounts to which they are
respectively entitled, then the holders of shares of Common Stock shall
participate equally with the holders of shares of any other class or series of
stock entitled to participate with the Common Stock in the event of
dissolution, liquidation or winding up in the distribution of any remaining
assets of the Corporation.
(C) Each holder of shares of Common Stock shall be
entitled to attend all special and annual meetings of the stockholders of the
corporation and, share for
<PAGE> 4
share and without regard to class, together with the holders of all other
classes of stock entitled to attend such meetings and to vote (except any class
or series of stock having special voting rights), to cast one vote for each
outstanding share of Common Stock so held upon any matter or thing (including,
without limitation, the election of one or more directors) properly considered
and acted upon by the stockholders.
REDEMPTION
Notwithstanding any other provision of this Certificate of
Incorporation to the contrary, outstanding shares of stock of the Corporation
shall always be subject to redemption by the Corporation, by action of the
Board of Directors, if in the judgment of the Board of Directors such action
should be taken, pursuant to Section 151(b) of the Delaware General Corporation
Law or any other applicable provision of law, to the extent necessary to
prevent the loss or secure the reinstatement of any license or franchise from
any governmental agency held by the Corporation or any of its subsidiaries to
conduct any portion of the business of the Corporation or any of its
subsidiaries, which license or franchise is conditioned upon some or all of the
holders of the Corporation's stock possessing prescribed qualifications. The
terms and conditions of such redemption shall be as follows:
(A) The redemption price of the shares to be redeemed
pursuant to this SECTION 5.4 shall be determined by the Board of Directors and
shall be at least equal to the lesser of (i) the Fair Market Value (as defined
herein) or (ii) if such stock was purchased by a Disqualified Holder (as
defined herein) within one year of the Redemption Date (as defined herein),
such Disqualified Holder's purchase price for such shares;
(B) The redemption price of such shares may be paid in
cash, Redemption Securities (as defined herein) or any combination thereof;
(C) If fewer than all shares held by Disqualified Holders
are to be redeemed, the shares to be redeemed shall be selected in such manner
as shall be determined by the Board of Directors, which may include selection
first of the most recently purchased shares thereof, selection by lot or
selection in any other manner determined by the Board of Directors;
(D) At least 30 days' written notice of the Redemption
Date shall be given to the record holders of the shares selected to be redeemed
(unless waived in writing by any such holder), provided that the Redemption
Date may be the date on which written notice shall be given to record holders
if the cash or Redemption Securities necessary to effect the redemption shall
have been deposited in trust for the benefit of such record holders and subject
to immediate withdrawal by them upon surrender of the stock certificates for
their shares to be redeemed;
(E) From and after the Redemption Date, any and all
rights of whatever nature that may be held by the owners of shares selected for
redemption (including without limitation any rights to vote or participate in
dividends declared on stock of the
<PAGE> 5
same class or series as such shares) shall cease and terminate, and such owners
shall thenceforth be entitled only to receive, with respect to such shares, the
cash or Redemption Securities payable upon redemption; and
(F) Such other terms and conditions as the Board of
Directors shall determine.
For purposes of this SECTION 5.4:
(i) "Disqualified Holder" shall mean any holder of shares
of stock of the Corporation whose holding of such
stock, either individually or when taken together
with the holding of shares of stock of the
Corporation by any other holders, may result, in the
judgment of the Board of Directors, in the loss of,
or the failure to secure the reinstatement of, any
license or franchise from any governmental agency
held by the Corporation or any of its subsidiaries to
conduct any portion of the business of the
Corporation or any of its subsidiaries.
(ii) "Fair Market Value" of a share of the Corporation's
stock of any class or series shall mean the average
Closing Price (as defined herein) for such a share
for each of the 45 most recent days on which shares
of stock of such class or series shall have been
traded preceding the day on which notice of
redemption shall be given pursuant to paragraph (D)
of this SECTION 5.4; provided, however, that if
shares of stock of such class or series are not
traded on any securities exchange or in the
over-the-counter market, "Fair Market Value" shall be
determined by the Board of Directors in good faith.
"Closing Price" on any day means the reported closing
sales price or, in case no such sale takes place, the
average of the reported closing bid and asked prices
on the principal United States securities exchange
registered under the Securities Exchange Act of 1934
on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing
sales price or bid quotation for such stock on the
National Association of Securities Dealers, Inc.
Automated Quotations System or any system then in
use, or if no such prices or quotations are
available, the fair market value on the day in
question as determined by the Board of Directors in
good faith.
(iii) "Redemption Date" shall mean the date fixed by the
Board of Directors for the redemption of any shares
of stock of the Corporation pursuant to this SECTION
5.4.
(iv) "Redemption Securities" shall mean any debt or equity
securities of the Corporation, any of its
subsidiaries or any other corporations, or any
combination thereof, having such terms and conditions
as shall
<PAGE> 6
be approved by the Board of Directors and which,
together with any cash to be paid as part of the
redemption price, in the opinion of any investment
banking firm selected by the Board of Directors
(which may be a firm which provides other investment
banking, brokerage or other services to the
Corporation), has a value, at the time notice of
redemption is given pursuant to paragraph (D) of this
SECTION 5.4, at least equal to the price required to
be paid pursuant to paragraph (A) of this SECTION 5.4
(assuming, in the case of Redemption Securities to be
publicly traded, such Redemption Securities were
fully distributed and subject only to normal trading
activity).
ACTION BY STOCKHOLDERS
Any action required or permitted to be taken at a
stockholders' meeting may be taken without a meeting if the action is taken by
a unanimous vote of persons who would be entitled to vote with respect to the
action at a meeting. The action must be evidenced by one or more written
consents describing the action taken, signed by all of the stockholders who
would be entitled to vote with respect to the action at a meeting, and
delivered to the Corporation for inclusion in the minutes or filing with the
corporate records.
BOARD OF DIRECTORS
ELECTION
The number of directors which shall constitute the entire
Board of Directors shall not be fewer than three nor more than fifteen. Within
the limits above specified, the number of directors shall be determined by
resolution of the Board of Directors. The Board of Directors shall nominate
candidates to stand for election as directors; in addition, other candidates
may be nominated by any Corporation stockholder, provided such other
nomination(s) are submitted in writing to the secretary of the Corporation 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 the Corporation's stock owned, directly or indirectly, by the
nominator. Directors need not be stockholders.
Effective as of the annual meeting of stockholders in 1992,
the Board of Directors shall be divided into three classes (designated as Class
I, Class II, and Class III), as nearly equal in number as possible. The
initial term of office of Class 1 directors shall expire at the annual meeting
of stockholders in 1993, that of Class II directors shall expire at the annual
meeting in 1994, and that of Class III directors shall expire at the annual
meeting in 1995, and in all cases as to each director until his or her
successor shall be elected and shall qualify, or until his or her earlier
resignation, removal from office, death or incapacity.
<PAGE> 7
Subject to the foregoing, at each annual meeting of
stockholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting and until their successors shall be elected and
qualified.
If the number of directors is changed by resolution of the
Board of Directors pursuant to this ARTICLE 6, any increase or decrease shall
be apportioned among the classes so as to maintain the number of directors in
each class as nearly equal as possible, but in no case shall a decrease in the
number of directors shorten the term of any incumbent director.
The directors remaining in office acting by a majority vote,
or a sole remaining director, although less than a quorum, may fill any
vacancies in the Board of Directors, however occurring, whether by an increase
in the number of directors, death, resignation, retirement, disqualification,
removal from office or otherwise. Any director so chosen shall hold office
until the next election of the class for which such director shall have been
chosen and until his or her successor shall have been elected and qualified, or
until his or her earlier resignation, removal from office, death or incapacity.
AMENDMENT OF BY-LAWS
In furtherance and not in limitation of the powers conferred
by the Delaware General Corporation Law, the Board of Directors of the
Corporation is expressly authorized and empowered to adopt, amend and repeal
the By-laws of the Corporation.
ELIMINATION OF LIABILITY
No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that this provision shall not eliminate or limit
the liability of a director:
(A) for any breach of the director's duty of loyalty to
the Corporation or its stockholders;
(B) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law;
(C) for the types of liability set forth in Section 174
of the Delaware General Corporation Law; or
(D) for any transaction from which the director received
any improper personal benefit.
INDEMNIFICATION
Unless expressly prohibited by law, the Corporation shall
fully indemnify
<PAGE> 8
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (whether civil,
criminal, administrative or investigative) by reason of the fact that such
person is or was a director or officer of the Corporation, or is or was serving
at the request of the Corporation as a director or officer of another
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the Corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful, and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the Corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper. The Corporation shall advance necessary funds for such
indemnification as requested by the director or officer being indemnified as
allowed by law.
ARRANGEMENT WITH CREDITORS
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the state of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers
appointed for this Corporation under the provisions of section 279 of Title 8
of the Delaware Code order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the same reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right, at any time and from time
to time, to amend, alter, change, or repeal any provision contained in this
Certificate of
<PAGE> 9
Incorporation, and other provisions may be added or inserted, in the manner now
or hereafter prescribed by law, except that SECTIONS 5.5, 6.1, 6.3, 6.4 and
this ARTICLE 8 may not be altered, amended or repealed except by the
affirmative vote of at least two-thirds of the shares entitled to vote thereon
and the affirmative vote of a majority of the members of the entire Board of
Directors; and all rights, preferences, and privileges of whatsoever nature
conferred upon stockholders, directors, or any other persons whomsoever by and
pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the rights herein reserved.
* * *
IN WITNESS WHEREOF, InterCel, Inc. has caused this Third
Restated Certificate of Incorporation to be signed and attested by its duly
authorized officers, this 6th day of June, 1996.
INTERCEL, INC.
By /x/Robert K. Mills
-------------------------------
Name: Robert K. Mills
Title: Vice-President, Treasurer
ATTEST:
/x/Lorena G. Turner
- --------------------------
Name: Lorena G. Turner
Title: Assistant Secretary
<PAGE> 1
EXHIBIT 11
INTERCEL, INC.
EARNINGS PER SHARE CALCULATION
PRIMARY & FULLY DILUTED EARNINGS PER SHARE:
<TABLE>
<CAPTION>
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
----------------------- -----------------------
( IN 000'S, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net (Loss) Income $ 60 $ 788
Weighted average shares outstanding 26,808,898 9,956,099
Common stock equivalents outstanding (a) 656,711 438,196
----------- -----------
27,465,609 10,394,295
----------- -----------
Earnings per share $ .002 $ 0.08
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
----------------------- ----------------------
( IN 000'S, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net (Loss) Income $ (860) 2,361
Weighted average shares outstanding 24,513,489 9,922,880
Common stock equivalents outstanding (a) (b) 362,131
------------ ----------
24,513,489 10,285,011
------------ ----------
Earnings per share $ (0.04) 0.23
============ ==========
</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
(b) Excludes 989,544 common stock equivalents (as calculated under the
treasury stock method) for the nine months ended September 30, 1996 as
inclusion of such equivalents would have an anti-dilutive effect on
earnings per share for that period.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERCEL, INC. FOR THE PERIOD ENDED SEPTEMBER 30, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 195,422
<SECURITIES> 144,260
<RECEIVABLES> 5,820
<ALLOWANCES> 241
<INVENTORY> 1,802
<CURRENT-ASSETS> 360,086
<PP&E> 188,080
<DEPRECIATION> 7,741
<TOTAL-ASSETS> 925,242
<CURRENT-LIABILITIES> 21,809
<BONDS> 466,598
0
2
<COMMON> 269
<OTHER-SE> 433,422
<TOTAL-LIABILITY-AND-EQUITY> 925,242
<SALES> 2,785
<TOTAL-REVENUES> 25,414
<CGS> 2,339
<TOTAL-COSTS> 30,357
<OTHER-EXPENSES> (3,777)
<LOSS-PROVISION> 758
<INTEREST-EXPENSE> (4,040)
<INCOME-PRETAX> (1,166)
<INCOME-TAX> (306)
<INCOME-CONTINUING> (860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (860)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
