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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Fiscal Year ended December 31, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NUMBER: 0-23012
INTERCEL, INC.
(Exact name of Registrant as specified in its charter)
Delaware 58-1944750
(State of incorporation) (I.R.S. Employer Identification No.)
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
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.01 Per Share
(Title of each class)
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference into Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
Registrant, based upon the closing sale price of $11.00 on March 13, 1997,
as reported on the Nasdaq Stock Market's National Market, was approximately
$128,268,426. As of March 13, 1997, the Registrant had outstanding
26,864,511 shares of Common Stock.
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INDEX OF FORM 10-K
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PART I
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Item 1. Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 2. Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
PART II
Item 5. Market for Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . 22
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . 24
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Item 9. Changes and Disagreements with Accountants in Accounting and Financial Disclosures . . . . . . . . . . . . 34
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . . . . . . . . . . . 44
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 49
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
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PART I
ITEM 1. BUSINESS
This Report contains statements which constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities Act"), and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). These statements appear in a number of places in
this Report and include all statements regarding the intent, belief or current
expectations of the Company, its directors or its officers with respect to,
among other things: (i) the Company's financing plans; (ii) trends affecting
the Company's financial condition or results of operations; (iii) the Company's
growth strategy (including the Company's anticipated network buildout) and
operating strategy; and (iv) the declaration and payment of dividends.
Investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties, and that
actual results may differ materially from those projected in the
forward-looking statements as a result of various factors discussed herein and
those factors discussed in detail in the Company's filings with the Securities
and Exchange Commission, including the "Risk Factors" section of the Company's
Registration Statement on Form S-1 (Registration Number 333-2748), as declared
effective by the Securities and Exchange Commission on April 16, 1996. Unless
otherwise indicated, all population data set forth herein is based on the 1996
Paul Kagan Associates, Inc. Cellular/PCS POP Book, and all industry data set
forth herein is based upon information compiled by the Cellular
Telecommunications Industry Association ("CTIA") and/or Paul Kagan &
Associates, Inc.
InterCel, Inc., a Delaware corporation ("InterCel" or the "Company"),
provides personal communications services ("PCS") in the southeastern United
States under the name "Powertel," cellular telephone service in contiguous
portions of western Georgia and eastern Alabama under the name "InterCel" and
cellular telephone service in the State of Maine under the name "Unicel." The
Company has agreed to sell substantially all of the assets of its cellular
operations in the State of Maine. Consummation of such disposition is expected
in the second quarter of 1997 pending the satisfaction of certain closing
conditions. See "-- The Maine Disposition."
InterCel's PCS licenses encompass a territory of approximately 246,000
contiguous square miles with a population of approximately 24.3 million people
and include licenses acquired in 1995 and 1996 to serve the Major Trading Areas
("MTAs") of Atlanta, Georgia; Jacksonville, Florida; Memphis,
Tennessee/Jackson, Mississippi; and Birmingham, Alabama (the "Current PCS
Markets") and licenses for which the Company was the winning bidder in the
recent Federal Communications Commission ("FCC") "D," "E" and "F" block
auctions (the "D/E/F Auctions") to serve 13 Basic Trading Areas ("BTAs") in
Kentucky and Tennessee.
The Company was the winning bidder in the D/E/F Auctions for both the
10 MHz "D" block and the 10 MHz "E" block licenses for the BTAs of Evansville,
Indiana; Lexington, Louisville, Bowling Green-Glasgow, Corbin, Madisonville,
Owensboro, Paducah-Murray-Mayfield and Somerset, Kentucky; Nashville and
Cookeville, Tennessee and Hopkinsville, Kentucky-Clarksville, Tennessee; and
for the 10 MHz "E" block license in the Knoxville, Tennessee BTA (collectively,
the "Kentucky/Tennessee BTAs" and, together with the Current PCS Markets, the
"PCS Markets"). These licenses encompass an area of approximately 66,000
square miles with a population of approximately 6.8 million people and, when
combined with the Company's existing licensed territory, give the Company one
of the largest contiguous PCS footprints in the southeastern United States.
The Company bid approximately $31.2 million for these licenses and expects the
final grant of these licenses to occur in the second quarter of 1997.
The Company expects its expanded PCS footprint to provide an incremental
competitive advantage in attracting new customers in its markets.
InterCel first introduced its PCS services in October 1996 in
Jacksonville, Florida and Montgomery, Alabama and, to date, has launched its
PCS services in an additional 14 cities: Brunswick, Georgia; Memphis and
Jackson, Tennessee; Florence, Anniston, Gadsden, Birmingham, Huntsville,
Tuscaloosa and Dothan, Alabama; Jackson and Tupelo, Mississippi; and Panama
City and Tallahassee, Florida. In all of these markets, the Company was the
first to offer PCS services commercially. InterCel intends to continue to
rapidly build out its PCS network and to launch its PCS services. As of
December 31, 1996, the Company had approximately 15,000 PCS subscribers.
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InterCel provides cellular telephone service in contiguous portions of
four Rural Service Areas ("RSAs") in western Georgia and eastern Alabama (the
"Southern Cellular Market") and two RSAs and one Metropolitan Statistical Area
("MSA") in major portions of Maine (the "Maine Cellular Market" and,
together with the Southern Cellular Market, the "Cellular Markets"). The
Cellular Markets encompass approximately 22,900 square miles with a population
of approximately 737,800 persons. As of December 31, 1996, the Company had
increased its cellular subscriber base in the Southern Cellular Market at a
compound annual rate of approximately 36.9% since 1991 and had achieved a
market penetration of approximately 7.5%. The Company increased revenue and
earnings before interest, taxes, depreciation and amortization in its Southern
Cellular Market at an average annual compound rate of approximately 32.8% and
215.8%, respectively, from 1991 to 1996. From 1994 to 1996, the Company
increased the subscriber base in the Maine Cellular Market at a compound annual
rate of approximately 39% and had achieved a market penetration of
approximately 5%.
The Company's principal executive offices are located at 1233 O.G.
Skinner Drive, West Point, Georgia 31833, and its telephone number is (706)
645-2000.
THE WIRELESS TELECOMMUNICATIONS INDUSTRY
Overview. Since its initial introduction in 1983, the use of
commercial cellular telephone service has grown dramatically, and cellular
telephone service now dominates the wireless telecommunications market. In
1993, the FCC allocated a portion of the radio spectrum for the provision of a
new wireless communications service, commonly known as PCS. PCS differs from
traditional cellular telephone service principally in that PCS systems operate
at a higher frequency and employ advanced digital technology. Relative to
existing cellular service, these features are expected to enable PCS system
operators to offer customers lower cost service options, lighter handsets with
longer battery lives and new and enhanced service offerings.
While PCS and cellular networks utilize similar technologies and
hardware, they operate on different frequencies and utilize different signaling
protocols. As a result, it generally will not be possible for users of one type
of system to "roam" on a different type of system outside of their service
area, or to hand off calls from one type of system to another unless their
handset is capable of operating on multiple frequencies or technology platforms
(i.e. dual-mode). This is also true for PCS subscribers seeking to roam in a
PCS service area served by operators using incompatible PCS signaling
protocols. See "-- Digital Technology." InterCel has selected and implemented
Global System for Mobile Communications ("GSM") as the digital protocol of its
PCS system. The Company expects that dual-mode handsets capable of receiving
and transmitting over both analog cellular and GSM-based PCS networks will
become available in late 1997, but that they will weigh and cost more than
single-mode handsets. Automatic delivery of calls over analog cellular systems
to a roaming digital PCS subscriber using a dual-mode phone on a GSM-based PCS
system is expected to be available in late 1997.
Wireless subscribers generally are charged separately for monthly
access, airtime, long distance calls and custom calling features (although
certain custom calling features are included in monthly access charges in the
Company's pricing plans). Wireless system operators have been required to pay
fees to local exchange carriers ("LECs") for interconnection to their networks
or toll charges based on standard or negotiated rates. However, pursuant to
the Telecommunications Act of 1996, as amended (the "1996 Telecommunications
Act"), such interconnection arrangements must now be reciprocal and cost-based,
with each party compensating the other at the same rate for the right to
interconnect with such carrier's network. See "-- Regulation of Wireless
Telecommunications Systems." The Company currently is negotiating for lower
interconnection rates with the LECs with which it primarily interconnects.
When wireless operators provide service to roamers from other systems, they
generally charge roamer airtime usage rates, which usually are higher than
standard airtime usage rates for their own subscribers, and additionally may
charge daily access fees. Special, discounted rate roaming arrangements, often
between neighboring operators who wish to stimulate usage in their respective
territories, provide for reduced roaming fees and no daily access fees.
Digital Technology. Most cellular services currently transmit voice
and data signals over analog-based systems, which use one continuous electronic
signal that varies in amplitude or frequency over a single radio channel.
Digital systems, on the other hand, convert voice or data signals into a stream
of digits that is compressed before transmission, enabling a single radio
channel to carry multiple simultaneous signal transmissions. This enhanced
capacity, along with enhancements in digital protocols, allows digital-based
wireless technologies to offer new and enhanced services, such as greater call
privacy and single number (or "find me") service, and more robust data
transmission features, such as "mobile
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office" applications (including facsimile, electronic mail and connecting
notebook computers with computer/data networks).
Digital signal transmission is accomplished through the use of
frequency management technologies, or "protocols." These protocols "manage" the
radio channel either by dividing it into distinct time slots (a method known as
Time Division Multiple Access, or "TDMA") or by assigning specific coding
instructions to each packet of digitized data that comprises a signal (a method
known as Code Division Multiple Access, or "CDMA"). While the FCC has mandated
that licensed cellular systems in the United States must utilize compatible
analog signaling protocols, at present there is no required universal digital
signaling protocol. Currently, three principal competing, incompatible
signaling protocols have been proposed by various vendors for use in PCS
systems: GSM, CDMA and IS-136. The GSM protocol is an updated, up-banded
version of the TDMA-based protocol widely used in European and other countries.
IS-136 is an up-banded version of the TDMA-based digital cellular protocol now
used by many cellular operators in the United States. Because IS-136 is based
on current TDMA-based cellular protocols, the dual-mode (analog cellular/PCS)
handset using IS-136 technology was the first dual-mode handset to become
commercially available. Because the three protocols are incompatible, a
subscriber of a system that relies on GSM technology, for example, will be
unable to use his handset when traveling in an area served only by CDMA or
IS-136-based wireless operators unless he carries a dual-mode handset that
permits him to use one of the wireless providers' systems in that area. Because
dual-mode handsets are not expected to be commercially available for GSM/analog
cellular until late 1997, the success of each protocol will depend both on its
ability to offer enhanced wireless service and on the extent to which its users
will be able to use their handsets when roaming outside their service area.
See "-- PCS Operations -- PCS System." However, there can be no assurance that
the FCC or industry organizations will not mandate a universal digital
switching protocol in the future.
PCS OPERATIONS
Overview. The Company provides PCS services in the southeastern
United States under the name "Powertel." Following the grant of the licenses
for the Kentucky/Tennessee BTAs, the Company will have licenses to provide PCS
services to the Birmingham, Alabama MTA, the Jacksonville, Florida MTA, the
Memphis, Tennessee/Jackson, Mississippi MTA, the Atlanta MTA and the
Kentucky/Tennessee BTAs. The Company believes that by expanding its presence
in the southeastern United States, it will be able to build upon its experience
and reputation in the cellular industry, benefit from the region's
positive demographics and capitalize on its relationships with other
telecommunications providers in the southeast.
PCS Markets. The Company currently provides PCS services in 16
markets in Alabama, Florida, Georgia, Mississippi and Tennessee and is nearing
completion of the initial buildout of its PCS system in these areas.
Generally, the Company's "initial buildout" of a licensed territory includes
the construction of cell sites: (i) in metropolitan areas with a population
greater than 100,000 people; (ii) in certain smaller cities that, due to
location or demographics, the Company considers to be strategically important;
and (iii) along the major highway corridors connecting such areas. The Company
expects to complete the initial buildout of its PCS system in the Current PCS
Markets (the "Current PCS System") in late 1997 (excluding Albany, Georgia and
Chattanooga, Tennessee). Upon completion of such initial buildout, the Company
expects to be able to offer service to customers in 23 metropolitan areas and
secondary cities within the Current PCS Markets (Atlanta, Augusta, Macon,
Savannah, Columbus and Athens, Georgia; Memphis and Jackson, Tennessee; Jackson
and Tupelo, Mississippi; Florence, Huntsville, Anniston, Gadsden, Birmingham,
Tuscaloosa, Montgomery and Dothan, Alabama; and Panama City, Tallahassee,
Jacksonville, St. Augustine and Gainesville, Florida), as well as offer service
along the major highway corridors connecting those areas. The Company expects
to complete the initial buildout of the Albany, Georgia and Chattanooga,
Tennessee metropolitan areas in 1998.
Upon the grant of the licenses for the Kentucky/Tennessee BTAs,
InterCel's licensed territory will encompass 246,000 contiguous square miles in
all or a part of the following 12 states: Alabama; Arkansas; Florida; Georgia;
Illinois; Indiana; Kentucky; Louisiana; Mississippi; Missouri; South Carolina
and Tennessee. Approximately 24.3 million people reside in, and over 10,250
miles of highway are located in, the Company's PCS Markets. The Company
intends to commence the initial buildout of its PCS system in the
Kentucky/Tennessee BTAs (the "Kentucky/Tennessee PCS System" and, together with
the Current PCS System, the "PCS System") as soon as practicable following the
grant of licenses by the FCC and expects to begin offering commercial service
in such BTAs in the second half of 1998. Thereafter, based on customer demand
and competitive factors, InterCel intends to continue the buildout
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of its PCS System to enhance and expand its coverage. As of December 31, 1996,
the Company had approximately 15,000 PCS subscribers in 15 cities in Alabama,
Florida, Georgia, Mississippi and Tennessee.
PCS Strategy. InterCel's PCS strategy is to: (i) continue to rapidly
build out a high-quality PCS system and be among the first to offer PCS
services in the PCS Markets; (ii) offer a broad range of services, including
enhanced services; (iii) become a low-cost provider of digital wireless
telecommunications services; (iv) expand the Company's regional market presence
by managing and affiliating with other PCS licensees, as well as potentially
acquiring additional strategic PCS licenses; and (v) provide its customers with
the ability to receive PCS service in areas outside of the Company's licensed
territory through the implementation of roaming agreements. Because the
Company believes that being among the first to offer PCS services in its PCS
Markets is a significant competitive advantage, it plans to continue to rapidly
build out the metropolitan areas, certain secondary cities and connecting
highway corridors in its PCS Markets. The Company intends to achieve
significant market penetration by aggressively marketing competitively priced
PCS services, including enhanced services not currently provided by analog or
digital cellular operators, and by providing superior customer service. The
Company intends to become a low-cost provider of PCS services by generating
economies of scale through operating in contiguous market areas and focusing on
customer acquisition and retention, as it has done in its cellular business.
The Company may pursue strategic relationships with other PCS licensees,
including roaming agreements to expand the area in which its customers may
utilize PCS services, and may consider other affiliations or the acquisition of
additional licenses to further expand the Company's licensed territory.
PCS Services. The Company's PCS service offerings consist primarily
of wireline enhancement products in which PCS supplements a customer's landline
communications. InterCel currently offers a full range of wireless
telecommunications services, including certain enhanced features and services
not currently provided by analog or digital cellular operators. These enhanced
features and services include secure communications, sophisticated call
management (incorporating services such as caller I.D. and call forwarding),
enhanced battery life and a short message service which allows subscribers to
send and receive alphanumeric and text messages on their handsets. The Company
intends to supplement its PCS services with single number service and
international roaming. In addition, the Company intends to expand its current
offerings of wireless telecommunications services to include wireline
replacement services that will serve as the customer's primary mode of
telecommunication. An example of a wireline replacement service is "enhanced
cordless" handsets, which operate as cordless landline telephones when used in
or near the customer's home and operate as wireless PCS handsets when used
elsewhere.
The Company's PCS subscribers may roam outside their "home" markets
anywhere within the Company's PCS coverage area without being assessed daily
access fees or increased airtime usage rates. The Company also has reciprocal
roaming agreements in place with other GSM operators, including Aerial
Communications, Inc., American Personal Communications, Inc., BellSouth
Mobility DCS, the PCS subsidiary of BellSouth Corporation ("BellSouth Mobility
DCS"), Microcell Telecommunications Inc., Omnipoint Communications, Inc.,
Pacific Bell Mobile Services Corp., Pocket Communications, Inc. and Western
Wireless Corporation and, after a period of technical testing, expects to offer
its customers roaming capabilities by the second quarter of 1997 in the service
areas where these providers are operational. The Company intends to provide
such roaming services outside of its service areas to its customers at rates
lower than those traditionally offered by cellular providers. In addition,
several other PCS licensees (including winning bidders in the D/E/F Auctions)
have announced that they intend to deploy GSM-based PCS systems. The Company
intends to pursue roaming arrangements with these parties in order to maximize
its customers' ability to roam throughout the United States and Canada.
Certain of these licensees own licenses in MTAs and BTAs that are contiguous to
the PCS Markets which, assuming such markets are built out and roaming
agreements are in place, will increase the size of the contiguous geographic
area where a customer of the Company can roam using his GSM handset. There can
be no assurance that any or all of these licensees will deploy GSM-based PCS
systems. The Company is also pursuing roaming agreements with international
GSM providers which will enable subscribers to roam internationally through the
use of credit card-sized Subscriber Identity Module cards. The Company's
subscribers will not be able to roam in markets where the GSM protocol is not
in use unless the subscriber has a dual-mode telephone that would permit the
use of the existing analog cellular system.
PCS System. The Company chose the GSM digital protocol because it:
(i) has been in use in European and other countries for six years; (ii) offers
enhanced features such as call encryption and short messaging; and (iii)
utilizes an open system architecture between the mobile switching center and
base
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station systems, thereby allowing the Company to purchase equipment from a
variety of vendors and improving the Company's ability to reduce equipment
costs. The system design primarily utilizes high-powered sites to provide wide
area coverage of the most dense population centers, surrounding communities and
connecting traffic corridors. Smaller, low-power sites provide enhanced
coverage and supplemental capacity in heavy usage areas.
The Company is completing the initial buildout of its PCS System in
the Jacksonville, Florida MTA, the Memphis, Tennessee/Jackson, Mississippi MTA
and the Birmingham, Alabama MTA. In the Atlanta, Georgia MTA, the Company is
currently acquiring sites and building its PCS System. The Company is
completing the system design and coverage phase of its initial buildout of the
Kentucky/Tennessee BTAs and, upon final grant of licenses from the FCC, will
begin selecting and acquiring sites for its transmitters in these markets.
Sites will be selected on the basis of their coverage of targeted customers,
cost to construct the site and frequency propagation characteristics. In
many cases, the Company may be required to obtain zoning approval. For new
sites, the Company estimates that the site acquisition process can take three
to 12 months. Once sites are acquired and the requisite governmental approvals
are obtained, preparation of each site, including grounding, ventilation and
air conditioning, equipment installation, testing and optimization generally
will require an additional two to four months. In addition to frequency
planning, system design and site acquisitions, the implementation of the
proposed Kentucky/Tennessee PCS System will require construction and equipment
procurement, installation and testing. The Company's buildout schedule may be
revised from time to time as a result of changing circumstances. The Company's
ability to proceed with the buildout of its PCS System may be subject to
successful negotiation of site acquisitions or leases, the availability of
equipment and financing, and the receipt of necessary governmental approvals.
In addition, the timing of the scheduled buildout will be subject to normal
construction and other possible delays.
In general, the frequency spectrum licensed by the FCC for PCS use was
partially occupied by private and common carrier fixed microwave users. Many
of these microwave incumbents provide services that could or would interfere
with or receive interference from the operation of the PCS System and, as a
result, have to be relocated. In an effort to balance the competing interests
of existing microwave users and newly authorized PCS licensees, the FCC adopted
a transition plan to relocate such microwave operators to other spectrum
blocks. With regard to the Company's PCS licenses in the Current PCS Markets,
this transition plan allowed most microwave users to operate in the PCS
spectrum for a two-year voluntary negotiation period and an additional one-year
mandatory negotiation period. However, the FCC has recently shortened the
voluntary negotiation period with respect to D/E/F block licenses, including
the licenses for the Kentucky/Tennessee BTAs, to one year. For public safety
entities dedicating a majority of their system communications for police, fire
or emergency medical services operations, the voluntary negotiation period is
three years. Parties unable to reach agreement within these time periods may
refer the matter to the FCC for resolution, but the incumbent microwave user is
permitted to continue its operations until final FCC resolution of the matter.
In most cases where the Company has displaced a microwave incumbent in the
Current PCS Markets, the Company has been or will be responsible for paying the
microwave incumbent's relocation expenses and for any actions necessary to put
the microwave incumbent's new facility into operation. The Company has been
successful in relocating the necessary microwave links for the initial buildout
of its Current PCS Markets (excluding Albany, Georgia and Chattanooga,
Tennessee). As of March 1, 1997, the Company had signed microwave relocation
agreements for 106 microwave links at a cost of $29.2 million and estimates
that it may be required to relocate between 40 and 50 additional microwave
links in connection with the remaining initial buildout of its Current PCS
Markets. It may be necessary for the Company to relocate additional microwave
links as it enhances and expands its coverage following the initial buildout of
its PCS System.
The FCC has a cost-sharing plan to allocate the costs of microwave
relocations among PCS licensees where a PCS licensee's relocation efforts and
expense have benefitted another. Under the approved plan, a PCS licensee would
not be required to contribute to the relocation costs of a particular microwave
link unless that link, by application of the FCC's objective interference test,
was determined to cause interference to or receive interference from the PCS
licensee's system. However, a PCS licensee's cost-sharing obligation is
generally limited to $250,000 per microwave link unless a new or modified tower
is required, in which case the cost-sharing obligation is limited to $400,000.
In addition to the microwave relocation expenses incurred by the Company as a
result of direct negotiations with incumbent microwave licensees, the Company
expects to incur a limited number of cost-sharing obligations and to also be
entitled to recoup certain of its costs due to cost-sharing obligations imposed
upon other licensees under the plan. Two non-profit clearinghouses have been
established to administer the FCC's cost-sharing plan.
The Company is increasing capacity in certain markets in its PCS
System due to the response to a special, limited-time promotional pricing plan,
known as the "Prestige Partners Promotion," whereby
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the Company offered users unlimited local airtime throughout 1997 for $50 per
month in all of its operating markets. In general, system capacity can be
expanded by installing additional transmitters at existing sites and by site
"splitting," a process whereby a single large cell is divided into two or more
smaller cells by using lower-powered transmitters and towers with lower
elevations. Additionally, the Company is currently in the process of upgrading
its switching equipment, which is manufactured by Ericsson, Inc. ("Ericsson"),
to Ericsson's recently available Release 2 Software and expects to upgrade to
Ericsson's Release 3 Software in the near future. The Company expects these
upgrades to create additional network capacity. In the future, additional
capacity typically will be added in response to anticipated demand and may be
at substantially less than the proportionate cost of the initial system. The
Company believes the cost of this additional capacity will be competitive with
the cellular industry's cost of adding capacity for additional subscribers.
PCS Customer Service. The Company recognizes that superior customer
service is vital to minimizing customer churn and to contributing to the
long-term success of its business. Accordingly, the Company has taken steps to
ensure that its PCS customers are introduced to its service offerings, that
they understand how to use the Company's equipment and its features and that
they receive prompt and reliable service from the Company's customer service
representatives. The Company currently provides PCS subscribers with toll-free
access to its customer service representatives 24 hours a day, seven days a
week. In addition, PCS subscribers can reach a customer service representative
from their handsets (with no airtime charge) by dialing *611.
PCS Sales, Marketing and Distribution. The Company markets its PCS
service offerings primarily through: (i) a direct sales force; (ii) 15
Company-operated retail stores; (iii) a network of independent agents, each of
which has a retail store presence; and (iv) mass merchandisers, such as Radio
Shack, Office Depot and Circuit City. The Company's direct and retail store
PCS sales force currently consists of 150 employees. In addition to
traditional distribution channels, the Company will consider marketing its PCS
products and services through nontraditional distribution channels, including
internet, telemarketing and direct mail. The Company supports its marketing
activities with local and regional advertising.
The Company offers service for a fixed monthly charge (accompanied by
varying allotments of unbilled or "free" minutes), plus additional variable
charges per minute of use. The Company does not charge for the first minute of
incoming calls and includes voicemail, caller ID, caller ID blocking, call
waiting and numeric messaging in its monthly access fee. The Company currently
charges a $0.10 per minute toll charge for all long distance calls terminating
within the Current PCS Markets and a $0.15 per minute toll charge for all calls
terminating outside the Current PCS Markets. Optional features available at an
additional charge include special toll calling plans, custom call service, call
forwarding, enhanced voicemail, alphanumeric short messaging, fax management,
message management and handset loss protection.
The Company offers over-the-air activation whereby a customer can
initiate service by purchasing a handset from any of the Company's distributors
and pressing any key on the handset to reach Powertel customer service. During
this call, the customer service representative can obtain all necessary
customer information and conduct a credit scoring assessment. The customer's
telephone can be activated within minutes following this call. The Company
does not require its PCS customers to sign long-term service contracts. The
Company currently subsidizes a portion of all PCS handset purchases, but after
such subsidy, such handsets are generally more expensive to subscribers than
cellular handsets. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Year Ended December 31, 1996 Compared to
Year Ended December 31, 1995."
The Company's PCS services will also compete more directly with
traditional landline telephone service providers. As prices decline for PCS
service and as the Company is able to provide a broader array of bundled
services, the advantages of mobility together with customized combinations of
PCS services will make PCS services increasingly attractive for telephonic
communications and may result in penetration into the landline telephone
market. This potential for increased PCS penetration of the landline market
was enhanced by the 1996 Telecommunications Act, which requires LECs to
interconnect with other telecommunications providers such as the Company at
just and reasonable rates that are based on actual costs. The Company expects
that the PCS services offered by operators will initially serve to enhance
traditional landline telephone services and will eventually be capable of
replacing some traditional landline telephone services.
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CELLULAR OPERATIONS
Cellular Markets. Intercel provides cellular telephone service in
contiguous portions of four RSAs in western Georgia and eastern Alabama under
the name "InterCel." The Southern Cellular Market has a population of
approximately 295,600 persons and encompasses approximately 2,900 square miles.
Since the Company commenced service in late 1990, the number of Company
subscribers in the Cellular Markets has grown to 22,161 at December 31, 1996 (a
penetration of approximately 7.5% of the total population in the Southern
Cellular Market). While competition is significant, the Company believes that
the Southern Cellular Market, a unique combination of parts of four RSAs in
which no other single wireless operator presently offers service, provides a
competitive advantage by enabling the Company to serve many significant areas
desired by subscribers and travelers, including approximately 100 miles of
Interstate Highway 85 and 40 miles of Interstate Highway 185, Auburn
University, Callaway Gardens and West Point Lake. The cost of acquiring a new
customer is substantial, and the Company is continually monitoring customer
churn and taking steps to minimize it. Customer churn generally tends to
increase as the customer base grows and more competition enters the
marketplace. The Company believes that a more focused and proactive
collections program has resulted in a decreased churn rate in the Southern
Cellular Market.
On January 31, 1994, the Company acquired Unicel, the cellular
subsidiary of Unity Telephone Company ("Unity Telephone"), for an aggregate
purchase price of $36.4 million. Unicel provides cellular telephone service
for the Bangor, Maine MSA and for Maine RSA 3 and is the managing partner of
and owns a 51% interest (the "Partnership Interest") in the Northern Maine
Cellular Partnership (the "Maine Partnership"), a partnership that provides
cellular service in Maine RSA 2. The Maine Cellular Market consists of a
cluster of properties that encompass over 20,000 square miles with a population
of approximately 442,200 persons. The licensed territory contains over 200
miles of Interstate Highway 95, as well as major portions of U.S. Route 1 along
Maine's coastline. From 1994 to December 31, 1996, the Company had increased
the Unicel subscriber base at a compound annual rate of approximately 39%. The
growth rate in the Maine Cellular Market exceeded that of the Southern Cellular
Market due generally to a market penetration in the Maine Cellular Market that
was lower at the time of the Company's acquisition of Unicel than that in the
Southern Cellular Market and to the introduction of new service plans and
promotional incentives following the Company's acquisition of Unicel. As of
December 31, 1996, the Company had 25,456 subscribers in the Maine Cellular
Market (a penetration of approximately 5.0% of the total population in the
Maine Cellular Market). Pursuant to an asset purchase agreement dated December
23, 1996 (the "Unicel Agreement"), the Company has agreed to sell substantially
all of the assets of Unicel to Rural Cellular Corporation ("Rural Cellular")
for an aggregate purchase price of $77.4 million, subject to adjustment and,
with respect to the Partnership Interest, subject to a right of first refusal
in favor of the minority partner. See " -- The Maine Disposition."
Cellular Strategy. InterCel's cellular strategy is to: (i) add new
subscribers and, through an emphasis on superior customer service, retain its
existing subscriber base; (ii) maintain a competitive wireless service as new
technologies and products enter its markets; (iii) continue to upgrade its
cellular switching systems to capture roaming revenues from digital cellular
users roaming into its cellular markets and to offer digital services to its
own customers; and (iv) provide superior product features tailored to its
customers' needs at competitive prices.
Cellular Services. The Company provides a variety of cellular
services and products designed to match a range of consumer, business and
personal security needs. In addition to mobile voice and data transmission,
the Company offers ancillary services such as call forwarding, call waiting,
three party conference calling, voice message storage and retrieval, and
no-answer transfer. The Company offers cellular service for a fixed monthly
charge (accompanied by varying allotments of unbilled or "free" minutes), plus
additional variable charges per minute of use. Various pricing programs (some
of which are based on multi-year service contracts) are available. Ancillary
services are included in some service package offerings, billed separately in
others or priced on a stand-alone basis.
The Company has completed the initial upgrade of its analog cellular
system to digital in its Cellular Markets to allow its cellular customers to
obtain enhanced services similar to those provided by digital PCS operators,
including improved call security and data transmission features. Currently,
however, the quality of digital cellular voice transmissions experienced in the
Cellular Markets is inferior to that provided by analog systems. The Company
is currently marketing its digital service in a limited manner. Once improved
handset equipment is available, which is expected in 1997, and more complete
digital coverage is available outside the Cellular Markets, the Company expects
to increase the marketing of its digital services. Because its digital
switches are capable of handling both analog and digital transmissions, the
Company will be able to continue to offer analog cellular service to those
customers
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who do not transfer to digital service and will be able to capture roaming
revenues from users of both analog and digital service.
In order to make using its wireless service more convenient and, in
some instances, more affordable, the Company has negotiated automatic and
special rate roaming agreements with other cellular providers. Currently, the
Company's cellular subscribers enjoy automatic call delivery in most of the
United States through a feature known as "Follow Me Roaming Plus." The Company
has special discounted roaming arrangements with certain other cellular
carriers in areas near the Cellular Markets, which provide the Company's
subscribers with reduced rates when roaming in these surrounding areas. In
most cases, these rates approximate the local per-minute rates with no daily
charge. The Company believes that expanded, discounted rate calling areas
attract customers and promote roaming by wireless telecommunications users
traveling within Cellular Markets.
Cellular System. The main switching office for the Southern Cellular
Market is located in Huguley, Alabama. The Company's cellular system in the
Southern Cellular Market consists of 16 cell sites, the last of which was
placed in service in November 1996. The Company's cellular system in the Maine
Cellular Market includes switching offices located in Bangor and Augusta, Maine
and 33 operational cell sites.
All 16 of the Company's existing cell sites in the Southern Cellular
Market are omnidirectional for maximum coverage. Reflectors have been
installed at five of the sites in order to ensure that their signals do not
extend beyond the geographic areas in which the Company is authorized to
provide cellular service. The Company uses a Company-owned microwave
transmission system, in conjunction with leased capacity on fiber optic systems
and traditional landline facilities, to connect the cells to the main switching
offices. The Company plans to add approximately seven new cell sites in the
Southern Cellular Market during the next two years in order to accommodate
anticipated subscriber and usage growth and to equalize transmission quality
throughout the Southern Cellular Market.
The Company recently converted its cellular systems in the Cellular
Markets to state-of-the-art dual-mode analog/TDMA digital systems. By
deploying TDMA, the Company has positioned itself to provide digital services
to enable it to compete with other digital wireless telecommunications
providers as they enter the market. The Company recognizes, however, that
compatibility with other cellular providers is a significant factor influencing
subscriber growth and revenue from roamers. Accordingly, the equipment that
the Company has installed, while TDMA-ready, is also CDMA-capable with the
addition of CDMA equipment at the cell sites and a limited software upgrade to
the existing digital cellular switch. If market conditions justify the
investment of substantial additional capital for the installation of CDMA
equipment at the cell sites and the performance of a switch upgrade, the
Company can be in the position of providing cellular service to analog, TDMA
and/or CDMA digital subscribers.
In order to receive digital service, the Company's current cellular
subscribers have to exchange their analog handsets for new digital handsets.
The Company expects that its analog customers will switch to digital handsets
over time according to their personal service needs. The Company is
considering programs, such as trade-in, rental and leasing packages, to
encourage existing customers to upgrade to digital services when the Company
begins promoting such services.
The infrastructure and subscriber equipment used in the Company's
cellular system generally is available from multiple sources, and the Company
believes that such equipment will continue to be readily available in the
foreseeable future.
Cellular Customer Service. The Company believes that superior
customer service is integral to the success of its cellular operations. The
Company provides toll-free access with no airtime charges to its cellular
customer service representatives on a 24-hour basis, seven days a week. In
addition, account representatives contact cellular subscribers at regular
intervals in order to assist management in evaluating and measuring, on an
ongoing basis, the quality and competitiveness of the Company's cellular
services.
Cellular Sales, Marketing and Distribution. The Company currently
markets its cellular service in the Southern Cellular Market under the name
"InterCel" and in the Maine Cellular Market under the name "Unicel." The
Company markets its cellular service offerings primarily through: (i) its
direct sales force; (ii) retail stores and kiosks; and (iii) a network of
dealers and other agents, such as electronics stores, car dealerships and
paging service companies. The Company's direct and retail cellular sales force
currently consists of approximately 32 cellular employees (13 of which are
Unicel employees).
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The Company supports its marketing activities with local and regional
advertising. The Company also negotiates volume discounts from vendors of
cellular telephone equipment and, as a means of stimulating demand for cellular
service, passes on a substantial portion of the discount on such telephone
equipment to its subscribers and sales agents. In addition, the Company offers
pricing programs (generally based on service contracts extending up to three
years) in which subscribers receive a credit on their bill toward, at the
customer's option, the cost of a cellular telephone and auxiliary equipment, or
the customer's cellular service charges.
COMPETITION; OTHER TELECOMMUNICATIONS TECHNOLOGIES
General. The wireless telecommunications industry is experiencing
significant technological change, as evidenced by the increasing pace of
improvements in the capacity and quality of digital technology, shorter cycles
for new products and enhancements, and changes in consumer preferences and
expectations. Accordingly, the Company expects competition in the wireless
telecommunications business to be dynamic and intense as a result of the
entrance of new competitors and the development of new technologies, products
and services.
Each of the markets in which the Company competes is or will be served
by multiple other two-way wireless service providers, including cellular, PCS
and enhanced specialized mobile radio ("ESMR") operators and resellers. Many
of these competitors have been operating for a number of years, currently serve
a substantial subscriber base and have significantly greater financial and
technical resources than those available to the Company. Some competitors are
expected to market other services, such as cable television access, with their
wireless telecommunication service offerings. Several of the Company's
competitors are operating, or planning to operate, through joint ventures and
affiliation arrangements, wireless telecommunications systems that encompass
most of the United States.
The Company also will face competition from other current or
developing technologies, such as paging, ESMR, global satellite networks,
Wireless Communications Services ("WCS") and local multipoint distribution
systems ("LMDS"). As a result of advances in digital technology, ESMR operators
have begun to design and deploy digital mobile networks that increase the
frequency capacity of ESMR systems to a level that may be competitive with that
of cellular systems. A limited number of ESMR operators have recently begun
offering short messaging, data services and interconnected voice telephony
services on a widespread basis. Nextel Communications, Inc. operates digital
mobile networks in most major U.S. markets, including in the Atlanta market.
Another ESMR operator, Southern Communications Services, Inc., has begun to
offer ESMR service in Georgia, Alabama, northern Florida and southeastern
Mississippi.
PCS Markets. The Company's PCS business may directly compete with
many other PCS providers in its PCS Markets, including PrimeCo Personal
Communications, L.P. ("PrimeCo"), Sprint Spectrum, L.P. ("Sprint PCS") and AT&T
Wireless PCS, Inc. ("AT&T Wireless"). The FCC has auctioned five other PCS
licenses in each of the Company's markets, and each licensee has the ability to
sell or transfer a portion of its licenses to others. See "-- Regulation of
Wireless Telecommunications Systems -- Licensing of PCS." The Company believes
that AT&T Wireless may commence service in the Atlanta MTA prior to the
Company's commencement of service. The Company also expects that existing
cellular service providers in the PCS Markets, some of which have been
operational for a number of years and have significantly greater financial and
technical resources than those available to the Company, will continue to
upgrade their systems to provide comparable services in competition with its
PCS system. These cellular competitors include AT&T Wireless, BellSouth
Mobility, GTE Mobile Communications Corporation, Alltel Mobile Communications,
Inc. ("Alltel") and Palmer Communications, Inc. The Company may face
additional competition from winning bidders in the D/E/F Auctions. These
potential competitors include Sprint PCS, Alltel and BellSouth Wireless, Inc.
(a separate wireless subsidiary of BellSouth Corporation), each of which
obtained 10 MHz licenses in many of the same BTA's in which the Company holds
licenses.
PCS licensees choosing IS-136 technology, including AT&T Wireless, are
expected to cover territories that include the entire U.S. population because
IS-136 handsets are currently capable of operating at both cellular and PCS
frequencies. Several major PCS providers, including PrimeCo and Sprint PCS,
have announced commercial service of CDMA-based PCS systems in multiple
markets. Together, CDMA-based PCS providers are expected to cover
approximately 100% of the U.S. population. The fact that these major PCS
providers have chosen digital protocols other than GSM as their PCS technology
may adversely affect the Company's ability to establish a PCS customer base and
to successfully compete in the PCS business with those PCS operators offering
greater roaming capabilities. See "-- PCS Operations -- PCS System."
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The retail price of the Company's PCS handsets initially will not be
as low as the price of analog cellular handsets. Whereas cellular providers
often subsidize fully the sale of analog cellular handsets such that
subscribers are not required to pay for the handsets, the price of PCS handsets
to customers will be higher because the Company is offering its customers only
partial offsets of the cost of PCS handsets. While the Company believes that
its PCS handsets will be competitively priced as compared to digital cellular
handsets of comparable size, weight and features, cellular operators may also
subsidize the sale of digital handset units at prices below those with which
the Company will be able to compete.
Cellular Markets. The Company currently competes with one other
cellular licensee in each of its Cellular Markets and expects to compete with
several PCS licensees, one or more ESMR providers and resellers. Such
competition may be intense. The Company expects to compete with other wireless
providers in its markets by upgrading its cellular system to provide comparable
services and features, continuing to expand its automatic and discounted rate
roaming service areas, and competitively pricing its products and services.
Other Developments. Pursuant to recent changes in FCC regulations,
existing PCS licensees have the ability to partition their licenses (transfer
a portion of their licensed geographic territory) or disaggregate their licenses
(transfer a portion of their spectrum allocation) to other qualified entities,
thus creating the potential for additional competitors in the marketplace. The
FCC has also recently allocated an additional 30 MHz of spectrum in the 2.3 GHz
band for the provision of WCS. These licenses are scheduled to be auctioned
beginning April 15, 1997 in blocks of 5 MHz and 10 MHz in each license area.
The FCC has determined that WCS providers will be permitted to offer a broad
range of services, but has imposed certain restrictions which may make the use
of WCS spectrum for mobile applications "prohibitively expensive" and
"technologically infeasible". The FCC recently announced that it will auction
two LMDS licenses (one 1,150 MHz block and one 150 MHz block) in each BTA.
These licenses will allow licensees to provide wireless cable, telephony, video
communications, data and other services. In addition, several entities have
received and several others are seeking FCC authorization to construct and
operate global satellite networks to provide domestic and international mobile
communications services from geostationary and low earth orbit ("LEO")
satellites. While geostationary orbiting satellites are subject to
transmission delays inherent in high earth orbit satellite communications, a
mobile satellite system could reduce transmission delays with LEO satellites
and could augment or replace communications with segments of land-based
wireless systems. Based on current technologies, however, satellite
transmission services are not expected to be competitively priced relative to
wireless telecommunications services. Finally, the Omnibus Budget
Reconciliation Act of 1993 (the "Budget Act") requires, among other things, the
allocation to commercial use of a portion of 200 MHz of the spectrum currently
reserved for government use. It is possible that some portion of the spectrum
that is reallocated will be used to create new land-mobile services or to
expand existing land-mobile services.
Continuing technological advances in telecommunications and FCC
policies that encourage the development of new spectrum-based technologies make
it impossible to predict the extent of future competition. The 1996
Telecommunications Act alters regulatory and industry barriers which for years
deterred open competition within and between telecommunications markets. The
amended statute and related FCC rulemakings are expected to continue to open
new avenues for competitive offerings of wireless, wireline and hybrid
services.
The 1996 Telecommunications Act also permits regional Bell operating
companies ("RBOCs") and their affiliates to provide commercial mobile services
between a Local Access and Transport Area ("LATA") and points outside that
area. Such "interLATA" services may be offered outside of a RBOC's local
exchange service states immediately. RBOCs may offer such services inside such
states ("in-region") once certain conditions have been satisfied.
In the future, cellular and PCS service will also compete more
directly with traditional landline telephone service providers and with cable
operators who offer communications services over their cable systems. In
addition, the Company may face competition from technologies that may be
introduced in the future.
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The Company anticipates that market prices for two-way wireless
services generally will decline in the future based upon increased competition.
The Company competes for customers principally on the basis of pricing,
services and enhancements, its customer service and the size and location of
its service areas. The Company's ability to compete successfully will also
depend, in part, on its ability to anticipate and respond to various
competitive factors affecting the industry, including new services that may be
introduced, changes in consumer preferences, demographic trends, economic
conditions and discount pricing strategies by competitors, which could
adversely affect the Company's operating margins.
REGULATION OF WIRELESS TELECOMMUNICATIONS SYSTEMS
The FCC regulates the licensing, construction, operation and
acquisition of wireless telecommunications systems in the United States
pursuant to the Federal Communications Act of 1934, as amended (the
"Communications Act"), and the rules, regulations and policies promulgated by
the FCC thereunder. Additional regulatory authority over PCS providers is
granted to the FCC by the Omnibus Budget Reconciliation Act of 1993 (the
"Budget Act").
Under the Communications Act, the FCC is authorized to establish
regulations governing the interconnection of PCS and cellular systems with
wireline and other wireless carriers, allocate channels and frequencies, grant
or deny license renewals and applications for transfer of control or assignment
of PCS and cellular licenses, and impose fines and forfeitures for any
violations of FCC regulations. The 1996 Telecommunications Act and ongoing FCC
rulemakings are expected to lead to new regulations concerning interconnection
of networks. See "-- Competition; Other Telecommunications Technologies." The
1996 Telecommunications Act also permits the FCC to lift regulations where they
are no longer necessary in the public interest.
Licensing of PCS. The FCC has divided the United States and its
possessions and territories into PCS markets made up of 493 BTAs and 51 MTAs.
Each MTA consists of at least two BTAs. Numerous licensees may compete in each
PCS service area. The FCC has allocated 120 MHz of radio spectrum in the 2 GHz
band for licensed broadband PCS services. The FCC divided the 120 MHz of
spectrum into six individual blocks, each of which is allocated to serve either
MTAs or BTAs. The spectrum allocation includes two 30 MHz blocks ("A" and "B"
blocks) licensed for each of the 51 MTAs, one 30 MHz block ("C" block) licensed
for each of the 493 BTAs, and three 10 MHz blocks ("D", "E" and "F" blocks)
licensed for each of the 493 BTAs. A PCS license has been or will be awarded
for each MTA and BTA in every block, for a total of more than 2,000 licenses.
Under the FCC's rules, a broadband PCS licensee may own combinations of
licenses (e.g., one MTA (30 MHz) and one BTA (10 MHz)) with total aggregate
spectrum coverage of up to 45 MHz in a single geographic area. The FCC
recently relaxed its limitation on cellular cross-ownership of PCS licenses in
the same area, permitting existing cellular licensees to acquire up to 20 MHz
of broadband PCS spectrum in overlapping markets. Thus, no entity may hold
licenses for more than 45 MHz of commercial mobile radio service ("CMRS")
spectrum in a single geographic area, unless in the case of overlapping
cellular licenses, such overlapping licenses cover less than 10% of the
population of the PCS territory. See "-- Commercial Mobile Radio Spectrum
Limit."
The FCC recently revised its rules to allow broadband PCS licensees in
the "A," "B," "D" and "E" blocks the flexibility to divide and sell portions of
any size of their licenses at any time. Under the revised rules, any of such
licensees may divide their licenses through geographic partitioning (dividing
spectrum by geographic area) or through spectrum disaggregation (dividing a
license by amount of spectrum) to any entity that meets the FCC's requirements
(e.g. foreign ownership limits). The rules apply special restrictions to
license holders in the "C" and "F" blocks, which are restricted to
entrepreneurs and small businesses, by limiting partitioning or disaggregation
only to other qualified entities for five years.
The FCC has recently completed the auctions for licensing of the PCS
allocated spectrum. For these auctions, the FCC had comprehensive rules that
outlined the bidding process, described the bidding application and payment
process, established penalties for certain bid withdrawals, default or
disqualification, established regulatory safeguards, and reserved two of the
six frequency blocks (the "C" and "F" blocks) for "entrepreneurs" and small
businesses. The "A" and "B" block licenses were granted on June 23, 1995. The
auction for the "C" block licenses was completed on May 6, 1996, and the
winning bidders' licenses have been granted (with some grants being on a
conditional basis subject to required changes in ownership structure, for
example) on a case-by-case basis over the past several months, with the
exception of certain winning bidders who subsequently defaulted on payment
obligations. Certain of these defaulted "C" block licenses have been
subsequently re-auctioned to qualified bidders and others are still subject to
re-auction in the future at the discretion of the FCC.
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The D/E/F Auctions were completed by the FCC on January 14, 1997. The
Company was the successful bidder for the Kentucky/Tennessee BTA licenses and
placed an initial down payment on these licenses. The FCC also requires all
winning bidders to file a long-form application which is subject to FCC review
and approval. The Company has filed its long-form application and expects the
final grant of the licenses to occur in the second quarter of 1997. At such
time, the Company expects to receive final grant of the Kentucky/Tennessee BTA
licenses upon final payment of the balance due on the winning bid amounts.
All PCS licenses will be granted for a 10-year period, at the end of
which they must be renewed. Licenses may be revoked at any time for cause.
All 30 MHz broadband PCS licensees, including the Company, must construct
facilities that offer coverage to one-third of the population of their service
area within five years of their initial license grants and to two-thirds of the
population within 10 years. For the 10 MHz broadband PCS licenses (i.e. "D"
and "E" block licenses), licensees, including the Company, must have a signal
level sufficient to provide adequate service to at least one-quarter of the
population in their licensed area within five years of being licensed, or make
a showing of substantial service in their licensed area within the same time
frame. Licensees that fail to meet the coverage requirements may be subject to
forfeiture of the license. The FCC will conduct random audits to ensure that
licensees are in compliance with the FCC's holding period and attribution
rules. Rule violations could result in license revocations, forfeitures or
fines.
Licensing of Cellular Systems. The FCC grants licenses to operate
cellular systems in defined market areas. The United States and its
possessions and territories have been divided into 734 cellular markets,
consisting of 306 MSAs and 428 RSAs. Each cellular service area is served by
two licensees, a block "A" licensee and a block "B" licensee.
Following notice of completion of construction, a cellular operator
obtains initial operating authority. Cellular authorizations are issued
generally for a 10-year term beginning on the date of the grant of an initial
construction permit and are renewable upon application to the FCC for periods
of up to 10 years. The FCC may revoke a license prior to the end of its term
in extraordinary circumstances (such as when serious violations of FCC rules
have occurred).
Under the Communications Act, the authorized service area of a
cellular provider in each of its markets is referred to as the Cellular
Geographic Service Area or "CGSA." A cellular licensee has the exclusive right
to serve the entire area that falls within the licensee's MSA or RSA for a
period of five years after grant of the licensee's construction permit. At the
end of the five-year period, however, the licensee's CGSA rights become limited
to the area actually served by the licensee as of that time, as determined
pursuant to a formula adopted by the FCC. After the five-year period, any
entity may apply to serve portions of the MSA or RSA outside the licensee's
CGSA. The five-year fill-in period has expired for the Bangor, Maine MSA. At
the end of that five-year fill-in period, a portion of the extreme northern and
eastern parts of Penobscot County were unserved by the Company. It was
determined that because of the extreme rural characteristics of that unserved
area, the sparse population density and the virtual lack of any transportation
arteries in those areas, it would not be prudent for the Company to invest in
extending its cellular service into that area at that time. Accordingly, those
portions of Penobscot County became "Unserved Area" as defined by the
Communications Act. Several applicants filed competing applications for those
Unserved Areas, and one of such applications has been granted.
The five-year fill-in periods for Maine RSA 2 and Maine RSA 3 have
expired. The Company had made a similar determination as to the
characteristics of the remaining portions of the Maine RSA 2 market as it had
for the Unserved Area within the Bangor market. At this time, there is no
Unserved Area in the Maine RSA 3 market.
The five-year fill-in periods for Alabama RSA 5, Alabama RSA 8 and the
Company's portions of Georgia RSAs have expired. There were no Unserved Areas
remaining in Alabama RSA 5 and Alabama RSA 8 at the time their respective
fill-in periods expired. As of March 1, 1997, only a minute portion of Georgia
RSA 5 located in the extreme northwest corner of Heard County remains unserved.
The Company has determined that it would not be prudent for the Company to
invest in extending its cellular service into that area at this time.
Near the conclusion of the license term (the year 2000, in the case of
the Company's current licenses for the Southern Cellular Market and the year
1998, in the case of the Company's current licenses for the Maine Cellular
Market), licensees must file applications for renewal of licenses to obtain
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authority to operate for up to an additional 10-year term. Applications for
license renewal may be denied if the FCC determines that the grant of an
application would not serve the public interest, convenience and necessity.
In addition, at license renewal time, other parties may file competing
applications for the authorization. In the event that qualified competitors
file, the FCC may be required to hold a hearing to determine whether the
incumbent or the competitor will receive the license. The FCC will also grant
a renewal expectancy to the existing licensee upon a showing that it has
provided "substantial" service during its past license term and substantially
complied with applicable FCC rules and policies and the Communications Act.
Character and Citizenship Requirements. Applications for FCC
authority may be denied, and in extreme cases licenses may be revoked, if the
FCC finds that an entity lacks the requisite "character" qualification to be a
licensee. In making that determination, the FCC considers whether an applicant
or licensee has been the subject of adverse findings in a judicial or
administrative proceeding involving, among other things, the possession or sale
of unlawful drugs, fraud, antitrust violations or unfair competition.
Under the Communications Act, non-U.S. citizens or their
representatives, foreign governments or their representatives, or corporations
organized under the laws of a foreign country may not own, in the aggregate,
more than 20% of a common carrier licensee; or more than 25% of the parent of a
common carrier licensee if the FCC determines that the public interest would be
served by prohibiting such ownership. Failure to comply with these requirements
may result in the FCC issuing an order to the entity requiring divestiture of
alien ownership to bring the entity into compliance with the Communications
Act. In addition, fines, a denial of renewal or revocation of the license are
possible. The Company's Restated Certificate of Incorporation permits the
redemption of the Company's common stock from stockholders where necessary to
protect the Company's regulatory licenses.
Transfers and Assignments of PCS Licenses. The Communications Act
requires the FCC's prior approval of the assignment or transfer of control of a
PCS license. In addition, the FCC has established transfer disclosure
requirements that require licensees who transfer control of or assign a PCS
license within the first three years to file associated contracts for sale,
option agreements, management agreements or other documents disclosing the
total consideration that the applicant would receive in return for the transfer
or assignment of its license. Non-controlling interests in an entity that
holds a PCS license or PCS system generally may be bought or sold without prior
FCC approval.
Transfers and Assignments of Cellular Licenses. The Communications
Act requires the FCC's prior approval of the assignment or transfer of control
of a construction permit or license for a cellular system. Subject to FCC
approval, a license or permit granted to a nonwireline entity may be
transferred or assigned to a wireline entity, and vice versa. Non-controlling
interests in an entity that holds a cellular license or cellular system
generally may be bought or sold without prior FCC approval. In the case of a
sale proposed to occur before the expiration of certain holding periods, the
FCC may prohibit or impose limitations on such a sale, or require the seller to
make certain representations as a condition precedent to such a sale. For
RSAs, the minimum holding period generally expires upon completion of initial
construction. Any acquisition by the Company of cellular interests may also
require the prior approval of state or local regulatory authorities having
jurisdiction over the cellular telephone industry.
On December 27, 1996, the Company filed applications with the FCC for
approval of its sale of the assets of Unicel pursuant to the Maine Disposition.
The Company has received FCC approval for the transfer of the cellular and
microwave licenses for the Unicel properties. Once the Maine Disposition is
consummated, the Company is required to notify the FCC of such completion.
Interconnection Requirements. The 1996 Telecommunications Act imposes
an affirmative duty upon all telecommunications carriers, including the
Company, to connect their networks to each other. It also imposes a duty to
negotiate in good faith and requires interconnection at any technically
feasible point of the network on just, reasonable and nondiscriminatory terms
and in a manner equal in quality to that provided by the incumbent telephone
company to itself and any affiliate. The incumbent must also offer access to a
minimum number of unbundled elements of its network necessary for the provision
of local service, which a competitor may select in any combination. The 1996
Telecommunications Act requires the incumbent to resell its local service and
to provide for access to rights-of-way (including poles, ducts, conduits) to
carriers seeking to offer a competitive local service.
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<PAGE> 16
On August 8, 1996, the FCC issued a decision promulgating rules
relating to the interconnection requirements imposed by the 1996
Telecommunications Act (the "Interconnection Order"). The Interconnection
Order: (i) requires that interconnection compensation between CMRS providers
and LECs be mutual and reciprocal; (ii) establishes that charges for transport
and termination services be cost-based based on the LEC's forward looking total
element long-run incremental costs (with a default range of $0.002 to $0.0004
per minute for switching and end office termination and a default price ceiling
of $0.0015 per minute for tandem switching and termination for those states
that have not imposed their own pricing methodology); (iii) gives state
regulatory commissions jurisdiction over the implementation of the LEC-CMRS
interconnection agreements, with the FCC retaining certain separate and
independent jurisdiction under the 1996 Telecommunications Act; (iv) gives CMRS
carriers the opportunity to renegotiate existing non-reciprocal LEC
interconnection agreements; (v) declines to require "bill and keep" for CMRS
carriers but permits the states to impose such arrangements where traffic
between carriers is roughly balanced or where carriers voluntarily negotiate
such an agreement; (vi) explicitly states that most traffic between a CMRS
provider and the LEC is not subject to interstate access charges, except in
limited circumstances; and (vii) refrains from treating CMRS providers for most
regulatory purposes as LECs, which could have subjected CMRS providers to the
stricter regulatory requirements imposed on incumbent LECs on issues such as
interconnection, access to unbundled elements and resale. The default rates
set forth in the Interconnection Order represent a substantial reduction from
rates in place prior to the order, which rates generally ranged from $0.025 to
$0.05 per minute. In addition, such rates previously were not mutual and
reciprocal, so a CMRS provider could not charge a LEC for minutes of use
originated by the LEC's network and delivered to and terminated on the CMRS
provider's network.
The FCC's Interconnection Order is currently the subject of both
petitions for reconsideration and judicial review. On October 15, 1996, the
United States Court of Appeals for the Eighth Circuit granted a stay of parts
of the Interconnection Order pending further proceedings in that court. This
stay was appealed to the U.S. Supreme Court, which Court declined to vacate the
stay. Subsequently, in response to an emergency motion filed by AirTouch
Communications, Inc., a CMRS provider, the Eighth Circuit removed the stay of
certain portions of the FCC's rules and re-instated the following requirements:
(i) that LECs negotiate with wireless carriers for reciprocal, mutual and
cost-based compensation arrangements for transport and termination of local
telecommunications traffic terminating on either of the parties' networks;
(ii) that wireless carriers shall have the right to renegotiate any existing
interconnection arrangements which provide for non-reciprocal compensation for
local telecommunications traffic with any LEC; and (iii) that the definition of
"local telecommunications traffic" to which the above requirements apply
consists of calls that originate and terminate within the same MTA, a
geographic area which is not directly related to, but is generally much larger
than, a LEC's defined local calling area. The Eighth Circuit heard oral
arguments in this case on January 17, 1997. At this time it is not possible to
predict when or if the remaining portions of the Interconnection Order that
have been stayed by the court will go into effect.
Access Charges. The FCC is currently conducting a rulemaking which
addresses, among other issues, whether CMRS providers will be able
to participate in access charge revenue assessments related to exchange access
services. This rulemaking is in response to the 1996 Telecommunications Act
which contemplates that interstate telecommunications providers, including CMRS
providers, will "make an equitable and non-discriminatory contribution" to
support the cost of providing universal service, although the FCC can grant
exemptions in certain circumstances. In a Recommended Decision adopted by a
Federal-State Joint Board established pursuant to the 1996 Telecommunications
Act, the Joint Board rejected arguments that CMRS providers should be exempted
from universal service obligations, and concluded that, to the extent such
carriers provide interstate service, they must contribute to universal service
support mechanisms. The Joint Board also found that states could require CMRS
providers to contribute to state support mechanisms. Neither the outcome of
these proceedings nor their impact on the Company can be predicted at this
time.
Other Federal Regulations. Wireless systems are subject to certain
Federal Aviation Administration regulations respecting the location, lighting
and construction of cellular transmitter towers and antennas and may be subject
to regulation under the National Environmental Policy Act and the environmental
regulations of the FCC. The Company uses common carrier point-to-point
microwave and traditional landline facilities to connect cell sites and to link
them to their respective main switching offices. These facilities are
separately licensed by the FCC and are subject to regulation as to technical
parameters and service.
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<PAGE> 17
Wireless providers also must satisfy a variety of FCC requirements
relating to technical and reporting matters. One such requirement is the
coordination of proposed frequency usage with adjacent wireless users,
permittees and licensees in order to avoid electrical interference between
adjacent systems. In addition, the height and power of base station
transmitting facilities and the type of signals they emit must fall within
specified parameters. Under the 1996 Telecommunications Act, wireless
equipment also must be accessible to and usable by persons with disabilities.
The FCC also regulates wireless service resale practices and the terms under
which certain ancillary services may be provided through wireless facilities.
For example, all CMRS system operators are required to provide service to
"resellers." These resellers buy blocks of telephone numbers from licensees and
resell service through their own distribution network to the public. CMRS
system operators cannot unreasonably restrict the resale of their services.
Commercial Mobile Radio Spectrum Limit. The FCC has limited the
amount of PCS, cellular and specialized mobile radio spectrum that an investor
may aggregate in a given geographic area to 45 MHz. The Company's ability to
invest in wireless service providers in certain geographic areas is likely to
be limited by this restriction. In addition, the FCC may amend its rules to
include other types of mobile services in this aggregate spectrum limit.
State and Local Regulation. In 1993, Congress amended the
Communications Act to preempt state or local regulation of the entry of, or the
rates charged by, any commercial or private mobile radio service provider.
Notwithstanding such preemption, a state may petition the FCC for authority to
begin regulating or to continue regulating commercial mobile radio service
rates. Petitioners must demonstrate that existing market conditions cannot
protect consumers from unreasonable and unjust rates or that the service is a
replacement for traditional wireline telephone service for a substantial
portion of the wireline service within the state. Eight states petitioned the
FCC for authority to regulate, or continue regulating, commercial mobile radio
service rates and entry. The FCC denied seven of these petitions and one was
withdrawn. As of the date hereof, the states in which the Company currently
provides or plans to provide service (Alabama, Arkansas, Florida, Georgia,
Illinois, Indiana, Kentucky, Louisiana, Mississippi, Missouri, South Carolina
and Tennessee) either have not sought to regulate such matters or, in the case
of Louisiana, have had their petition to regulate denied by the FCC.
States are not, however, prohibited from regulating other terms and
conditions of CMRS, such as service quality, billing procedures and consumer
protection standards. In addition, the siting and construction of cellular
transmitter towers, antennas and equipment shelters are often subject to state
or local zoning, land use and other regulations. Under the 1996
Telecommunications Act, states may not restrict cell siting or modification
based upon the environmental effects of radio frequency emissions if those
emissions meet the standards which the FCC imposed in 1996. However, state and
local governmental authorities continue to impose regulations that expressly
prohibit the construction of additional tower sites, including several
governmental authorities in the Company's PCS Markets. These governmental
moratoria are the subject of a Petition for Declaratory Ruling recently filed
with the FCC by the CTIA. The Petition argues that these restrictions
effectively impede market entry of new telecommunications services and
providers and are in violation of the Communications Act. CTIA is seeking
federal preemption of state and local siting and zoning moratoria regulation.
Recent Events. The 1996 Telecommunications Act precludes the FCC from
requiring CMRS providers to hand off long distance traffic to the long distance
carrier chosen by the subscriber (i.e. the provision of "equal access"). The
1996 Telecommunications Act provides, however, that if the FCC receives
complaints that consumers are not receiving access to the long distance carrier
or carriers of their choice, then the FCC may require provision of access to
those carriers through an access code or similar mechanism.
The 1996 Telecommunications Act also eliminates, to a large extent,
restrictions on the RBOCs' provision of interLATA long distance services and,
if certain conditions are satisfied, permits the restrictions to be lifted in
their entirety. See "-- Competition; Other Telecommunications Technologies."
The Company cannot predict the outcome of FCC implementation of the 1996
Telecommunications Act or the effect of the 1996 Telecommunications Act or any
resulting regulations or policies on cellular or PCS operations, and there can
be no assurance that such regulations or policies will not adversely affect the
Company's business or financial condition.
On July 26, 1996, the FCC released a report and order which mandates
the implementation of widespread emergency 911 services available by PCS and
other CMRS providers, including "enhanced 911" ("E911") services that provide
the caller's telephone number, location, and other useful information. By
April 1998, PCS providers must be able to transmit to a Public Safety Answering
Point ("PSAP") 911
17
<PAGE> 18
calls from a PCS handset (without call validation), including those from
callers with speech or hearing disabilities, with automatic number
identification. Assuming that a cost recovery mechanism is in place, by
mid-1998 such providers must be able to relay to a PSAP both the caller's
automatic number identification and cell site identification, and by 2001 they
must be able to identify the location of a 911 caller within 125 meters in 67%
of all cases. These proceedings have also raised questions concerning the
potential liability of wireless operators providing E911 services. While most
landline telephone companies are protected by their tariffs or are covered
expressly by state or local statutes, CMRS providers generally do not file
tariffs and many states have no indemnity provisions or only limited indemnity
provisions relating the provision of E911 services by a wireless operator. The
wireless industry as a whole has been active in addressing this issue through
the introduction and support of proposed legislation in many of the states. In
addition, many states are individually addressing the issue of cost-recovery
mechanisms to support both the wireless and wireline implementation of E911
services. The FCC rules state that wireless carriers are entitled to fully
recover their costs of E911 implementation.
In August 1996, the FCC revised its rules to permit CMRS operators,
including PCS licensees, to use their licensed spectrum to provide fixed as
well as mobile services. Such fixed services include, but are not limited to,
"wireless local loop" services. The FCC has not yet determined whether such
fixed services should be subject to universal service obligations or how they
should be regulated, although it has proposed a presumption that they be
regulated as CMRS services.
EMPLOYEES AND AGENTS
As of February 15, 1997, the Company had approximately 610 employees,
including approximately 590 full-time employees. Of these, 70 employees are
employed by Unicel and, upon consummation of the Maine Disposition, will no
longer be employees of the Company. The Company anticipates that the continued
development of its PCS System will require the hiring of a substantial number
of new employees. None of the Company's employees is represented by a labor
organization, and the Company's management considers its employee relations to
be good.
THE MAINE DISPOSITION
Pursuant to the Unicel Agreement by and among Rural Cellular, Unicel,
InterCel Licenses, Inc. ("InterCel Licenses") and the Company, Rural Cellular
agreed to purchase and assume from Unicel and InterCel Licenses, and Unicel and
InterCel Licenses respectively agreed to sell and assign to Rural Cellular:
(i) substantially all of the assets and rights of Unicel, including the
Partnership Interest in the Maine Partnership which is licensed to provide
cellular service in Maine RSA 2; and (ii) the FCC licenses held by InterCel
Licenses to provide cellular and microwave service in the Bangor, Maine MSA and
Maine RSA 3 and to provide microwave service in Maine RSA 2. Unicel and
InterCel Licenses are wholly-owned subsidiaries of the Company. Upon
consummation of the Maine Disposition, the Company will no longer have cellular
telephone operations in the Maine Cellular Market.
Unless otherwise indicated, information in this Report, other than the
historical financial information, assumes consummation of the Maine
Disposition. However, consummation of the Maine Disposition is subject to
certain conditions, including: (i) financing being obtained by Rural Cellular;
(ii) receipt by Unicel of various consents from third parties, including
landlords and other parties to contracts with Unicel; and (iii) receipt of
various regulatory approvals. The Company has received FCC approval for the
transfer of the cellular and microwave licenses for the Unicel properties.
The purchase price for the assets to be sold pursuant to the Agreement
is approximately $77.4 million (the "Purchase Price"). The sale of the
Partnership Interest to Rural Cellular is subject to a right of first refusal
in favor of Cellco Partnership, a subsidiary of Bell Atlantic NYNEX Mobile
Corp. ("Cellco"), which owns the remaining 49% interest in the Partnership.
If Cellco exercises its right of first refusal, the Purchase Price paid by Rural
Cellular will be reduced by approximately $12.8 million (the portion of the
Purchase Price allocated to the Partnership Interest). The price that would
be paid by Cellco for the Partnership Interest in the event of the exercise of
its right of first refusal has not yet been determined. If Cellco and Unicel
are unable to agree upon a purchase price, the purchase price for the
Partnership Interest may, as contemplated in the agreement governing the
Partnership (the "Partnership Agreement"), be determined by appraisal.
The descriptions set forth herein of the terms and conditions of the
Unicel Agreement and the transactions contemplated thereby are qualified in
their entirety by reference to the full text of the Unicel Agreement and the
exhibits thereto, copies of which were filed as an exhibit to the Company's
Current Report on Form 8-K dated January 8, 1997. Descriptions of the Maine
Partnership and related rights and
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<PAGE> 19
obligations of the partners are qualified in their entirety by reference to the
full text of the Partnership Agreement, which was filed as an exhibit to
InterCel's Registration Statement on Form S-1 (File No. 33-72734).
THE PREFERRED STOCK SALES
The following is a summary of certain provisions of: (i) the Stock
Purchase Agreement (the "Huff Stock Purchase Agreement") dated as of March 14,
1997 between the Company and The Huff Alternative Income Fund, L.P. ("Huff"),
which sets forth the terms and conditions whereby Huff has agreed to purchase
50,000 shares of nonvoting Series C Convertible Preferred Stock from
the Company in a private placement for an aggregate purchase price of $22.5
million (the "Huff Preferred Stock Sale"); and (ii) the Stock Purchase
Agreement (the "SCANA Stock Purchase Agreement" and, together with the Huff
Stock Purchase Agreement, the "Stock Purchase Agreements") dated as of March
14, 1997 between the Company and SCANA Communications, Inc., a wholly-owned
subsidiary of SCANA Corporation ("SCANA"), which sets forth the terms and
conditions whereby SCANA has agreed to purchase 50,000 shares of nonvoting
Series D Convertible Preferred Stock from the Company in a private placement
for an aggregate purchase price of $22.5 million (the "1997 SCANA Preferred
Stock Sale" and, together with the Huff Preferred Stock Sale, the "Preferred
Stock Sales"). The purchase price for both of the Preferred Stock Sales are
being held in escrow and will be released to the Company upon the closing of a
private placement of debt by the Company. This summary does not purport to be
complete and is qualified in its entirety by reference to the Huff Stock
Purchase Agreement and the SCANA Stock Purchase Agreement, copies of which are
filed as exhibits to this Report.
Preferred Stock Terms. The holders of Series C Convertible Preferred
Stock and Series D Convertible Preferred Stock have no voting rights, except as
required by law and certain specified exceptions. Each share of Series C
Convertible Preferred Stock and Series D Convertible Preferred Stock has a
liquidation preference over the Company's common stock, par value $0.01 per
share (the "Common Stock"), and any other junior stock, of $450 per share, plus
declared and unpaid dividends, in the event of a liquidation, dissolution or
winding up of the Company. The Series C Convertible Preferred Stock and Series
D Convertible Preferred Stock rank, as to dividends, on a parity with the
Common Stock. The Series C Convertible Preferred Stock and Series D
Convertible Preferred Stock are redeemable, at the option of the Company, on
and after the fifth anniversary of closing of the Preferred Stock Sales, in
whole or in part, on a pro rata basis, at a redemption price of $450 per share
plus declared and unpaid dividends. The Series C Convertible Preferred Stock
and Series D Convertible Preferred Stock are convertible 18 months and five
years, respectively, after the closing of the Preferred Stock Sales, at the
option of the holder, into Common Stock at a conversion price of $12.75 per
share of Common Stock, subject to adjustment.
Escrow. Each of Huff and SCANA have entered into an escrow agreement
with the Company, pursuant to which they have deposited the purchase price for
the Preferred Stock Sales into escrow, to be held and disbursed by the escrow
agent to the Company upon the closing of a private placement of debt by the
Company.
Conditions to Closing. The closing of each of the Preferred Stock
Sales and of a private placement of debt by the Company are conditioned upon
the closings of the others. Accordingly, there can be no assurance that the
proceeds of Preferred Stock Sales will be released from escrow to the Company.
Registration Rights. The offer and sale of the Series C Convertible
Preferred Stock, the Series D Convertible Preferred Stock and the shares of
Common Stock into which such preferred stock is convertible have not been
registered under the Securities Act. Huff and SCANA have been granted certain
"demand" and "piggyback" registration rights with respect to the shares of
Common Stock issued and issuable upon conversion of the Series C Convertible
Preferred Stock and Series D Convertible Preferred Stock, respectively.
Representations, Warranties and Indemnification. InterCel has agreed
to indemnify Huff and SCANA, and Huff and SCANA have agreed to indemnify
InterCel, for certain losses arising out of breaches of their respective
representations and covenants contained in the Stock Purchase Agreements,
subject to certain exceptions and limitations.
Resale Restrictions. Each of Huff and SCANA have agreed, among other
things, that except for limited exceptions they will not transfer, directly or
indirectly, any shares of Series C Convertible Preferred Stock or Series D
Convertible Preferred Stock, as the case may be, or any shares of Common Stock
into which such preferred stock is convertible for one year after the closing
of the Preferred Stock Sales without the prior written consent of the Company.
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<PAGE> 20
Board Observer. The Company has agreed to allow one representative of
Huff to attend meetings of the Company's Board of Directors as an observer.
THE OFFERING
The Company intends to offer senior notes due 2007 (the "Notes")
resulting in approximately $175 million gross proceeds (the "1997 Offering").
The Notes will not be registered under the Securities Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act. There can be
no assurance that the Company will consummate the 1997 Offering. This Report
shall not constitute an offer to sell or a solicitation of an offer to buy the
Notes.
ITEM 2. PROPERTIES
The Company maintains its corporate headquarters in West Point, Georgia
and its sales and administrative offices for its Cellular Markets in Lanett,
Alabama. The Company recently constructed an approximately 28,000 square foot
corporate headquarters and network operations center in West Point, Georgia.
The lease for the Lanett space was renewed in October 1996, and the current
lease term expires in October, 2001. In its Southern Cellular Market, the
Company operates four retail stores (located in Lanett and Opelika, Alabama and
Newnan and LaGrange, Georgia), and two sales kiosks (located in shopping malls
in LaGrange, Georgia and Auburn, Alabama). All of the Company's cellular
retail sites in the Southern Cellular Market are leased. As part of its
cellular system, the Company owns a switch facility in Huguley, Alabama and
maintains 16 tower sites. The Company has long-term leases on its tower sites
located at Auburn, Lake Harding and Lafayette, Alabama and Callaway Gardens and
McCollum, Georgia. The remaining 11 sites have been purchased. The Lafayette
site is subject to a sublease for a two-way microwave radio transmitter.
In the Maine Cellular Market, the Company operates six retail stores
in Bangor, Augusta, Rockland, Belfast, Lincoln and Dexter, Maine. All of the
Company's retail sites, except the Augusta, Maine store, are leased. As part
of its Maine cellular system, the Company owns the land, towers and buildings
at its Bangor, Augusta, Argyle, Boothbay and Palmyra, Maine cell sites. The
Company also leases antenna sites in Lincoln, Dixmont, Vassalboro, Rockland,
Searsport, Old Town, Northport, Liberty, Millinocket, Gardiner, Union,
Winthrop, Newcastle, Camden and Clinton, Maine. The Maine Partnership leases
five retail stores in Houlton, Skowkegan, Presque Isle, Madawaska and Caribou,
Maine. The Maine Partnership owns the land, towers and buildings at the
Stockholm, Brownville, Guilford, Patten and Masardis, Maine cell sites and
leases antenna sites at Greenville, Smyrna, Presque Isle, Number Nine Mountain,
Athens, Skowkegan, Charleston and Wallagrass, Maine.
In connection with its PCS System, the Company leases space for MTA
headquarters and switch facilities which are located in the following cities:
Birmingham, Alabama for the Birmingham MTA; Memphis, Tennessee for the Memphis
MTA; Jacksonville, Florida for the Jacksonville MTA; and Atlanta, Georgia for
the Atlanta MTA. The Company leases two separate switching facilities for the
Atlanta MTA, each of which is located in the city of Atlanta. The Company also
leases space in Atlanta, Georgia for its billing and information technology
systems which will support all of the PCS Markets. The Company leases
additional space in Jackson, Mississippi to accommodate its sales and
operations personnel. The Company leases warehouse space in the Birmingham,
Memphis and Jacksonville MTAs for network equipment and cell site equipment
related to the buildout of the PCS System in each respective MTA. The Atlanta
MTA and Kentucky/Tennessee BTAs will lease similar warehouse space as the
Company builds out those areas of its PCS System.
The Company also currently leases retail space for seven Powertel
retail stores in the Birmingham MTA, five in the Memphis MTA and three in the
Jacksonville MTA. By the end of 1997, the Company anticipates increasing the
number of Powertel retail stores to approximately 27 with the majority of
the Powertel retail store additions being within the Atlanta MTA. The Company
expects to lease or purchase additional office and retail space, base station
towers and installation and service shops in connection with its initial
buildout of the PCS Markets.
The Company believes that all of its properties are well maintained.
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ITEM 3. LEGAL PROCEEDINGS
As of March 14, 1997, there were no material pending legal proceedings
to which the Company or any subsidiary was a party or to which any property of
the Company or any subsidiary was subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The 1996 annual meeting of the stockholders of the Company was held on
June 5, 1996 to: (i) consider and vote upon the proposed issuance and
terms of the Company's Series A Convertible Preferred Stock (the "Series A
Preferred Stock") and the proposed issuance and terms of the Company's Series B
Convertible Preferred Stock (the "Series B Preferred Stock"); (ii) consider
and vote upon a proposed amendment to the InterCel Restated Certificate of
Incorporation to increase the Company's authorized capital stock by increasing
the number of authorized shares of Common Stock; (iii) elect three directors to
serve on the Company's Board of Directors, each for a three-year term; and (iv)
ratify the appointment of Arthur Andersen LLP as independent public accountants
of the Company for the year ending December 31, 1996.
The Series A and Series B Preferred Stock. The stockholders were
asked to consider and vote upon the proposed issuance and terms of the Series
A and Series B Preferred Stock. The Company had entered into stock purchase
agreements with each of Ericsson and SCANA, pursuant to which Ericsson and
SCANA agreed to invest $75 million each in the Company in exchange for 100,000
shares of Series A Preferred Stock at a price of $750 per share to Ericsson and
100,000 shares of Series B Preferred Stock at a price of $750 per share to
SCANA, subject to stockholder approval. Votes cast for and against the measure
were 17,743,930 and 84,000, respectively. Broker non-votes and abstentions
were 1,505,224 and 11,269, respectively.
Amendment of Certificate of Incorporation. The stockholders were
asked to consider and vote upon the proposed amendment of the InterCel Restated
Certificate of Incorporation to increase the number of authorized shares of
Common Stock that the Company would have authority to issue from 39,000,000
shares of Common Stock to 55,000,000 shares of Common Stock. Votes cast for
and against the measure were 19,138,354 and 85,250, respectively. Broker
non-votes and abstentions were 111,100 and 9,719, respectively.
Election of Directors. The stockholders were asked to elect Donald W.
Burton, Bert G. Clifford and Maurice P. O'Connor to the Company's Board of
Directors, each for a three year term. Votes cast for and against the election
of Messrs. Burton, Clifford and O'Connor were 19,217,473 and 0, respectively.
Broker non-votes and abstentions were 126,950 and 0, respectively.
Accountants. The stockholders were asked to ratify the appointment by
the Board of Directors of the firm of Arthur Andersen LLP as independent public
accountants of the Company for the year ending December 31, 1996. Votes cast
for and against the measure were 19,336,153 and 1,851, respectively. Broker
non-votes and abstentions were 0 and 6,419, respectively.
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Price Range of Common Stock. The Company's Common Stock is currently
traded on the Nasdaq Stock Market's National Market (the "Nasdaq National
Market") under the symbol "ICEL." As of March 13, 1997, there were
approximately 478 holders of record of the Company's Common Stock.
Prior to February 7, 1994, no established public trading market for
the Company's Common Stock existed. To the best of the Company's knowledge,
prior to the Common Stock being traded on the Nasdaq National Market, the
prices paid for the Common Stock ranged from a low of $6.50 per share (in the
fourth quarter of 1991) to a high of $8.75 per share (in the first quarter of
1992 and the fourth quarter of 1993). The high and low sales prices for each
full quarterly period since the Company's stock began trading on the Nasdaq
National Market (February 7, 1994) are as follows:
<TABLE>
<CAPTION>
1995 HIGH LOW
---- ---- ---
<S> <C> <C>
First Quarter . . . . . . . . . . . . . . . . . . . . . . $14.25 $10.75
Second Quarter . . . . . . . . . . . . . . . . . . . . . 15.75 12.75
Third Quarter . . . . . . . . . . . . . . . . . . . . . . 21.50 14.50
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . 20.75 15.375
1996 HIGH LOW
---- ---- ---
First Quarter . . . . . . . . . . . . . . . . . . . . . . $23.25 $15.00
Second Quarter . . . . . . . . . . . . . . . . . . . . . 26.25 19.50
Third Quarter . . . . . . . . . . . . . . . . . . . . . . 22.25 15.50
Fourth Quarter . . . . . . . . . . . . . . . . . . . . . 21.75 11.75
</TABLE>
Dividend Policy. The Company has never declared or paid any cash
dividends on its capital stock and does not anticipate paying cash dividends in
the foreseeable future. It is the present policy of the Company's Board of
Directors to retain earnings to finance the expansion of the Company's
operations. Moreover, the Company will effectively be prohibited from paying
cash dividends for the foreseeable future pursuant to restrictions contained in
the indenture relating to the February 1996 Notes (as defined herein) (the
"February 1996 Indenture"), the indenture relating to the April 1996 Notes
(as defined herein) (the "April 1996 Indenture" and, together with the February
1996 Indenture, the "Indentures"), any future indenture to which the Company
might be a party and the Vendor Financing Agreement (as defined herein).
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ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth certain selected financial information
for the Company as of and for each of the years in the five-year period ended
December 31, 1996. The financial information as of and for each of the years
in the five-year period ended December 31, 1996 is derived from the
consolidated financial statements and notes thereto of the Company, which have
been audited by Arthur Andersen LLP, independent public accountants. Operating
results shown in the following table will not be indicative of future
performance due to the capital requirements associated with the buildout of the
Company's PCS System.
The selected historical financial information should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Company's consolidated financial statements
and notes thereto and other financial and operating information included
elsewhere in this Report.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- ---------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues . . . . . . . . . . . . . $ 31,875 $ 25,384 $ 18,903 $ 8,228 $ 6,235
Equipment sales . . . . . . . . . . . . . 7,250 3,928 2,859 1,121 925
---------- ---------- ---------- ---------- ----------
Total revenues and sales . . . . . . . 39,125 29,312 21,762 9,349 7,160
---------- ---------- ---------- ---------- ----------
Cost of services . . . . . . . . . . . . . 5,811 2,394 1,921 574 442
Cost of equipment sales . . . . . . . . . 11,653 3,127 2,391 1,010 828
Operations expenses . . . . . . . . . . . 9,927 3,596 2,722 1,333 1,214
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . 30,264 8,498 7,056 2,915 2,566
Depreciation and amortization . . . . . . 10,101 5,101 3,673 1,843 1,567
---------- ---------- ---------- ---------- ----------
Total operating expenses . . . . . . . 67,756 22,716 17,763 7,675 6,617
---------- ---------- ---------- ---------- ----------
Operating income (loss) . . . . . . . . (28,631) 6,596 3,999 1,674 543
Interest (income) expense . . . . . . . . (3,175)(a) 1,657 635 46 131
Miscellaneous (income) expense . . . . . . 1,226 (295) (48) 48 260
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes . . . (26,682) 5,234 3,412 1,580 152
Income tax (benefit) expense . . . . . . . (1,654) 2,230 1,535 567 52
---------- ---------- ---------- ---------- ----------
Net income (loss) before cumulative
effect . . . . . . . . . . . . . . . . . (25,028) 3,004 1,877 1,013 100
Cumulative effect of change in
accounting principle, net of tax(b). . . (2,583) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss) . . . . . . . . . . . $ (27,611) $ 3,004 $ 1,877 $ 1,013 $ 100
========== ========== ========== ========== ==========
Earnings per share:
Net income (loss) before cumulative
effect of change in accounting
principle. . . . . . . . . . . . . . $ (1.00) $ 0.29 $ 0.19 $ 0.16 $ 0.02
Cumulative effect of change in
accounting principle(b) . . . . . . . . (0.10) -- -- -- --
---------- ---------- ---------- ---------- ----------
Net income (loss) per share . . . . . . $ (1.10) $ 0.29 $ 0.19 $ 0.16 $ 0.02
========== ========== ========== ========== ==========
Average common and common equivalent
shares outstanding . . . . . . . . . . . 25,086,753 10,280,616 9,764,840 6,316,608 6,288,849
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(c) . . . . . . . . . . . . . . . . $ (2,466) $ 11,992 $ 7,720 $ 3,469 $ 1,850
Ratio of earnings to fixed charges(d) . . -- 3.9x 5.5x 27.3x 2.1x
Capital expenditures . . . . . . . . . . . $ 233,551 $ 7,661 $ 2,866 $ 1,105 $ 921
Cellular subscribers at end of period(e) . 47,617 38,582 28,624 10,590 7,447
Net cellular population equivalents(f) . . 737,800 732,900 728,200 281,800 277,400
PCS Subscribers at end of period . . . . . 14,892 -- -- -- --
Net PCS population equivalents(f) . . . . 17,460,000 -- -- -- --
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital . . . . . . . . . . . . . $ 256,349 $ 977 $ 2,710 $ 547 $ 908
Property and equipment, net . . . . . . . 251,269 18,066 13,262 5,545 5,394
Licenses, goodwill and other intangibles,
net. . . . . . . . . . . . . . . . . . . 402,321 24,904 23,903 -- --
Total assets . . . . . . . . . . . . . . . 947,117 74,330 50,812 10,517 8,721
Long-term obligations . . . . . . . . . . 504,065 29,411 11,030 2,019 2,194
Retained earnings (deficit) . . . . . . . (22,766) 4,845 1,841 (36) (1,048)
Stockholders' equity . . . . . . . . . . . 407,007 36,674 33,374 5,983 4,960
- ----------------------
</TABLE>
(a) For the year ended December 31, 1996 interest income was $17.3
million. The Company had no interest income for the years ended
December 31, 1992, 1993, 1994 and 1995. Excludes capitalized interest
of $29.0 million for the year ended December 31, 1996. During the
construction of the PCS System, the cost of the PCS licenses and the
costs related to construction expenditures are considered to be assets
qualifying for interest capitalization under FASB Statement No. 34
"Capitalization of Interest Cost."
23
<PAGE> 24
Accordingly, management expects that a majority of the interest
on the February 1996 Notes, the April 1996 Notes, the Vendor Financing
Agreement and any future financing of the Company will be
capitalized during the construction of the PCS System.
(b) During the fourth quarter of 1996, the Company changed 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 previous accounting method, all
such costs were deferred and amortized over the life of the related
non-cancelable cellular telephone service agreement. Under the new
accounting method, the costs are expensed as incurred.
(c) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. EBITDA is provided because it is a
measure commonly used in the industry. EBITDA is not a measurement of
financial performance under generally accepted accounting principles
and should not be considered an alternative to net income as a measure
of performance or to cash flow as a measure of liquidity.
(d) For the year ended December 31, 1996, earnings were insufficient to
cover fixed charges by $56.2 million. Earnings consist of income
before income taxes, plus fixed charges, except where capitalized.
Fixed charges consist of interest charges and amortization of debt
issuance costs, in each case whether expensed or capitalized, and the
portion of rent expense under operating leases representing interest.
(e) Cellular subscribers at end of period include 14,216, 20,288 and
25,456 subscribers of Unicel in the State of Maine for the periods
ended December 31, 1994, 1995 and 1996, respectively. See "Business
-- The Maine Disposition."
(f) Net Population Equivalents means the estimated population of the
license market area multiplied by the percentage ownership of the
license. The estimated population is based on the 1996 Paul Kagan
Associates, Inc. Cellular/PCS POP Book. The Company owns 100% of
each of its PCS licenses and 100% of each of its cellular licenses
(excluding the license for Maine RSA 2, in which Unicel owns the
Partnership Interest through the Maine Partnership and which is being
sold in the Maine Disposition). For the periods ended December 31,
1994, 1995 and 1996, Net Cellular Population Equivalents include
441,900, 442,000 and 442,200 population equivalents, respectively,
from Unicel's license market areas (including Maine RSA 2). See
"Business -- The Maine Disposition."
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
InterCel provides PCS services in the southeastern United States
under the name "Powertel" and cellular telephone service in contiguous
portions of western Georgia and eastern Alabama under the name "InterCel" and
in the State of Maine under the name "Unicel." On December 23, 1996, the
Company entered into an agreement to sell substantially all the assets related
to its cellular operations in the State of Maine for approximately $77.4
million, subject to adjustment and, with respect to the Partnership Interest,
subject to a right of first refusal in favor of the minority partner. The
closing of the Maine Disposition, which is subject to various conditions, is
expected to occur in the second quarter of 1997. See "Business -- The Maine
Disposition."
InterCel's PCS licenses, including licenses for which the Company was
the winning bidder in the D/E/F Auctions, encompass a territory of
approximately 246,000 contiguous square miles with a population of
approximately 24.3 million people in the MTAs of Atlanta, Georgia;
Jacksonville, Florida; Memphis, Tennessee/Jackson, Mississippi; and Birmingham,
Alabama; and in 13 BTAs in Kentucky and Tennessee. InterCel first introduced
its PCS services in October 1996 in Jacksonville, Florida and Montgomery,
Alabama and, to date, has launched its PCS services in an additional 14 markets
in Alabama, Florida, Georgia, Mississippi and Tennessee. In all of these
markets, the Company was the first to offer PCS services commercially.
InterCel intends to continue to rapidly build out its PCS network and to launch
its PCS services. As of December 31, 1996, the Company had approximately 15,000
PCS subscribers.
The Company was the winning bidder in the D/E/F Auctions for both the
10 MHz "D" block and the 10 MHz "E" block licenses in each of the BTAs of
Evansville, Indiana; Lexington, Louisville, Bowling Green-Glasgow, Corbin,
Madisonville, Owensboro, Paducah-Murray-Mayfield and Somerset, Kentucky;
Nashville and Cookeville, Tennessee; and Hopkinsville, Kentucky-Clarksville,
Tennessee; and the 10 MHz "E" block license in the Knoxville, Tennessee BTA.
These licenses encompass an area of
24
<PAGE> 25
approximately 66,000 square miles with a population of approximately 6.8
million people and, when combined with the Company's existing licensed
territory, give the Company one of the largest contiguous PCS footprints in the
southeastern United States. The Company will pay approximately $31.2 million
for these licenses (of which the Company has already paid $9.2 million) and
expects the final grant of these licenses to occur in the second quarter of
1997. The Company expects its expanded PCS footprint to provide a
competitive advantage in attracting new customers in its markets.
Average revenues per subscriber in the wireless industry have declined
during recent years and are expected to continue to decline in the future. The
Company believes that this downward trend is the result of the addition
of lower usage customers who utilize cellular service for personal convenience,
security or as backup for their traditional landline telephones. In addition,
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 subscribers and the
number of minutes of usage per subscriber.
The Company's overall historical 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.
As a result of: (i) the significant costs required to build out and
maintain the PCS System, hire and manage the required personnel to operate the
PCS business, and market its services; (ii) the significant subsidization of
PCS handsets; and (iii) the depreciation of PCS equipment and amortization of
the PCS licenses, the Company incurred an operating loss of $28.6 million for
the year ended 1996. The Company expects to continue subsidizing the cost of
PCS handsets to customers for the foreseeable future and expects that negative
PCS equipment margins will continue to contribute significantly to future
operating results. The Company expects to incur significant operating losses
during 1997 and thereafter as it continues to build out its PCS System and
build its PCS customer base.
Minimizing customer attrition, or "churn," becomes a greater challenge
as the subscriber base grows and the marketplace becomes more competitive. The
Company achieved a combined average monthly churn rate of 1.6% for both its
cellular and PCS lines of business in 1996. The 1996 cellular churn rate of
1.6% is a slight increase over the 1995 rate which was 1.5%. The Southern
Cellular Market's churn rate decreased to 1.9% from 2.1% in 1995 while the
churn rate for the Maine Cellular Market increased from 0.9% to 1.2% during the
same period. The Company believes that its improved 1996 churn rate in the
Southern Cellular Market is due to continued efforts to ensure consistently
high levels of customer satisfaction coupled with a proactive customer
retention program.
The Company offers its PCS customers a choice of multiple pricing
plans, with varying amounts of unbilled or "free" minutes included in the
monthly access charge. From November 29, 1996 to January 18, 1997, the Company
offered its customers (with the exception of certain subscribers in the Memphis
area who were unable to obtain the PCS handset model of their choice due to a
handset shortage in that market and for whom the promotional pricing extends
through April 30, 1998) a special, limited-time promotional pricing plan, the
Prestige Partners Promotion, in all of its operational markets. This special
limited-time promotional pricing plan offered unlimited local airtime through
December 31, 1997 for a $50 per month access charge (excluding toll and roaming
charges, taxes and other optional fees). As of December 31, 1996,
substantially all of the Company's PCS subscribers were participants in this
promotion.
The majority of the interest costs incurred during 1996 related to:
(i) the sale of 35,747 units, consisting in the aggregate of $357.4 million
principal amount at maturity of 12% Senior Discount Notes due February 2006
(the "February 1996 Notes") and 1,143,904 warrants (the "Warrants") to purchase
an equal number of shares of Common Stock at an exercise price of $18.15 per
share, subject to adjustment (the "Unit Offering"); (ii) the sale of $360.0
million principal amount at maturity of 12% Senior Discount Notes due May 2006
(the "April 1996 Notes") in a public offering (the "Debt Offering" and,
together with the Unit Offering and the sale of 7,124,322 shares of Common
Stock in a public offering (the "Stock Offering"), the "1996 Offerings"); and
(iii) amounts borrowed under the Vendor Financing Agreement has been
capitalized as a cost of construction of the PCS System. As the Company has
now begun providing PCS services in several markets, the interest costs related
to the construction of the PCS systems in such markets will be amortized over
the life of the related assets from the time such
25
<PAGE> 26
systems were placed in service. Additionally, the Company's depreciation and
amortization expense will significantly increase as a result of the fixed
assets and PCS licenses related to PCS systems placed in service during 1996
and as a result of systems to be placed in service in 1997 and thereafter.
During 1996, the Company changed its method of accounting for costs
incurred in connection with certain promotional programs under which the
Company's cellular customers receive discounted cellular equipment or airtime
usage credits. Under its previous accounting method, all such costs were
deferred and amortized over the life of the related non-cancelable cellular
telephone service agreements. Under the new accounting method, the costs are
expensed as incurred. This change in accounting principle resulted in a total
nonrecurring charge for the cumulative effect of this accounting change, net of
taxes, of approximately $2.6 million. Additionally, such costs are not
deferred in conjunction with the acquisition of PCS customers.
26
<PAGE> 27
RESULTS OF OPERATIONS
The following table reflects the composition of the Company's cellular
and PCS service revenue and equipment sales, and related gross margins, as well
as overall operating and other costs and margins, as a percentage of total
revenue. The Company's historical results of operations, particularly in view
of the Maine Disposition and the start-up costs associated with the Company's
PCS business, will not be comparable with future periods.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1996 1995 1994
--------------------------------------------- ------------------ ----------------
% OF COMBINED % OF
CELLULAR PCS COMBINED % OF % OF
REVENUE AND REVENUE/ REVENUE/ REVENUE
CELLULAR SALES PCS(A) CELLULAR SALES CELLULAR SALES CELLULAR SALES
-------- ----- ------ -------- ----- -------- ------ -------- -----
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE REVENUE & COST ANALYSIS:
Service revenue
Local customers--
Access revenue . . . . . . $ 14,653 47.5 % $ 402 $ 15,055 47.2 % $12,244 48.2 % $ 8,512 45.0 %
Airtime revenue . . . . . . 6,109 19.8 88 6,197 19.4 4,938 19.5 3,981 21.1
Toll revenue . . . . . . . 803 2.6 51 854 2.7 627 2.5 360 1.9
-------- ----- ------- -------- ------- ------- ------- ------- -----
21,565 69.9 541 22,106 69.3 17,809 70.2 12,853 68.0
-------- ----- ------- -------- ------- ------- ------- ------- -----
Roamers--
Access & airtime revenue . 6,680 21.7 -- 6,680 21.0 5,541 21.8 4,404 23.3
Toll revenue . . . . . . . 1,821 5.9 -- 1,821 5.7 1,399 5.5 1,123 5.9
-------- ----- ------- -------- ------- ------- ------- ------- -----
8,501 27.6 -- 8,501 26.7 6,940 27.3 5,527 29.2
-------- ----- ------- -------- ------- ------- ------- ------- -----
Other service revenue . . . . 783 2.5 485 1,268 4.0 635 2.5 523 2.8
-------- ----- ------- -------- ------- ------- ------- ------- -----
Total service revenue . . . 30,849 100.0 1,026 31,875 100.0 25,384 100.0 18,903 100.0
Cost of services . . . . . . . 3,535 11.5 2,276 5,811 18.2 2,394 9.4 1,921 10.2
-------- ----- ------- -------- ------- ------- ------- ------ -----
Gross margin . . . . . . . $ 27,314 88.5 % $(1,250) $ 26,064 81.8 % $22,990 90.6 % $16,982 89.8 %
======== ===== ======= ======== ======= ======= ======= ======= =====
EQUIPMENT SALES & COST ANALYSIS:
Equipment sales . . . . . . . . $ 3,803 100.0 % $ 3,447 $ 7,250 100.0 % $ 3,928 100.0 % $ 2,859 100.0 %
Cost of equipment sales . . . . 2,890 76.0 8,763 11,653 160.7 3,127 79.6 2,391 83.6
-------- ---- ------- -------- -------- ------- ------- ------- -----
Gross margin . . . . . . . $ 913 24.0 % $(5,316) $ (4,403) (60.7)% $ 801 20.4 % $ 468 16.4 %
======== ===== ======== ======== ======== ======= ======= ======= =====
OPERATING MARGIN ANALYSIS:
Total revenues . . . . . . . . $ 34,652 100.0 % $ 4,473 $ 39,125 100.0 % $29,312 100.0 % $21,762 100.0
--------- ----- ------- -------- ------- ------- ------- ------- -----
Operating expense--
Cost of services & equipment
sales . . . . . . . . . . . 6,425 18.5 11,039 17,464 44.6 5,521 18.8 4,312 19.8
Operations . . . . . . . . . 4,189 12.1 5,738 9,927 25.4 3,596 12.3 2,722 12.5
Selling, general &
administrative . . . . . . 7,577 21.9 22,687 30,264 77.4 8,498 29.0 7,056 32.4
Depreciation & amortization . 6,102 17.6 3,999 10,101 25.8 5,101 17.4 3,673 16.9
-------- ----- -------- -------- -------- ------- ------- ------- -----
Total operating expenses . 24,293 70.1 43,463 67,756 173.2 22,716 77.5 17,763 81.6
-------- ----- -------- -------- -------- ------- ------- ------- -----
Operating income (loss) . . . . $ 10,359 29.9 % $(38,990) (28,631) (73.2) 6,596 22.5 3,999 18.4
Interest expense (income), ======== ===== ========
net . . . . . . . . . . . . . (3,175) (8.1) 1,657 5.7 635 2.9
Miscellaneous (income)
expense . . . . . . . . . . . 1,226 3.1 (295) (1.0) (48) (0.2)
-------- ------- ------- ------- ------- -----
Income before income taxes . . (26,682) (68.2) 5,234 17.8 3,412 15.7
Income tax (provision)
benefit . . . . . . . . . . . (1,654) (4.2) (2,230) (7.6) (1,535) (7.1)
-------- -------- ------- ------- ------- -----
Income (Loss) before
cumulative effect . . . . . . (25,028) (64.0) 3,004 10.2 1,877 8.6
Cumulative effect of change
in accounting principle, net
of tax . . . . . . . . . . . (2,583) (6.6) -- -- -- --
-------- -------- ------- ------- ------- -----
Net income (loss) . . . . . $(27,611) (70.6)% $ 3,004 10.2 % $ 1,877 8.6 %
======== ======= ======= ======= ======= =====
- --------------------
</TABLE>
(a) The Company did not commence PCS operations until 1996.
27
<PAGE> 28
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The following discussion reflects the Company's results of operations
for its PCS and cellular lines of business. All general corporate costs have
been allocated to those lines of business based on management's estimates of
actual expenses incurred related to such lines of business. The Company has
entered into an agreement to sell substantially all of the assets related to
its Maine Cellular Market. See "Business -- The Maine Disposition."
In October 1996, the Company began providing PCS services in
Jacksonville, Florida and Montgomery, Alabama. Throughout the remainder of
1996, the Company launched PCS services in 13 additional markets within the
Current PCS Markets and, as of December 31, 1996, had approximately 15,000 PCS
subscribers.
Service revenue from local customers increased $4.3 million, or 24.1%,
for 1996 as compared to 1995. Cellular service revenue from local customers
increased $3.8 million, or 21.1%, primarily as a result of a 23.4% increase in
the number of cellular subscribers (to 47,617 at December 31, 1996, from 38,582
at December 31, 1995). This increase in subscribers is attributable to the
success of the Company's marketing efforts as well as the overall increase in
nationwide cellular penetration rates. The Company generated $0.5 million in
service revenue from its PCS subscribers.
The average monthly revenue per local cellular subscriber (excluding
roaming revenue and equipment sales) decreased to $41.70 in 1996 from $43.95 in
1995. This decrease reflects the addition of customers who tend to use
cellular service less frequently and a decrease in cellular pricing. From
November 29, 1996 to January 18, 1997, the Company offered the Prestige Partners
Promotion in all operational markets. Substantially all of the Company's PCS
subscribers as of December 31, 1996 were participants in this promotion.
For the cellular business unit, local service revenue as a percentage
of total service revenue remained relatively constant in 1996 (69.9% in 1996 as
compared to 70.2% in 1995). Roamer revenue (including toll revenue) for 1996,
which was generated solely from the Company's cellular business, increased $1.6
million, or 22.5%, in 1996 as compared to 1995. See "Business -- Cellular
Operations." This increase relates primarily to continued market penetration
by the cellular industry as a whole. Additionally, during the third quarter of
1995, the Company entered into an agreement with BellSouth Mobility, which
operates cellular systems in markets contiguous to the Southern Cellular
Market, for lower roaming rates. The Company believes that the increased
roaming traffic in its Southern Cellular Market was partially a result of this
agreement. Effective January 16, 1997, the Company entered into an amended
agreement with BellSouth Mobility under which the parties agreed to a further
per minute reduction to the rate charged to BellSouth Mobility customers
roaming in the Southern Cellular Market. This agreement may result in
decreased roaming revenue in future periods.
Cost of services includes the cost of: (i) interconnection with LEC
facilities; (ii) roaming validation (provided by a third-party clearinghouse);
(iii) long distance toll services; (iv) cloning and subscriber fraud; and (v)
supplementary services (such as voice mail). For 1996, cost of services
increased $3.4 million, or 142.7%, as compared to 1995, including a $1.1
million, or 47.7%, increase in cost of cellular services. This increase was
due to the costs associated with the increased roaming traffic discussed above,
including increased toll costs and an increase in costs associated with
cellular cloning in the Cellular Markets. The Company, like other participants
in the cellular industry, has recently experienced a dramatic increase in costs
associated with both cloning and subscription fraud. The Company's total costs
associated with fraud increased from $0.1 million in 1995 to $0.3 million in
1996. PCS cost of services totaled $2.3 million for the year and was comprised
primarily of cost of interconnection with LEC facilities required for the PCS
System.
To date, wireless telecommunications operators have been required to
pay fees to the LECs for interconnection to their networks and toll charges
based on standard negotiated rates for certain long distance services.
However, pursuant to the 1996 Telecommunications Act, such interconnection
arrangements must now be reciprocal and cost-based, with each party
compensating the other at the same rate for the right to interconnect with each
other's network. The Company is currently in negotiations
28
<PAGE> 29
for substantially lower interconnection rates with its primary LEC, BellSouth
Telecommunications Corporation, the local exchange subsidiary of BellSouth
Corporation.
The Company generated a cellular equipment margin of 24.0% on $3.8
million of sales in 1996 as compared to a 20.4% margin on $3.9 million of sales
in 1995. This increase in margin is attributable to a decrease in the cost of
cellular handsets during 1996. During 1996, the Company changed its method of
accounting for certain promotional costs (primarily equipment credits), which
will result in the recognition of negative equipment margins in 1997. For its
PCS operations, the Company generated a negative equipment margin of 154.2% on
$3.4 million in sales in 1996, as the result of the Company's subsidization of
the cost of PCS handsets. The Company expects to continue subsidizing the cost
of PCS handsets to consumers for the foreseeable future.
Operations costs, which include the costs of maintaining the cellular
and PCS systems, customer service, inventory management and in-house cellular
installations, totaled $9.9 million for 1996. Cellular operations costs
totaled $4.2 million in 1996, which represented a 16.5%, increase from 1995.
The increase was primarily attributable to the increased variable costs
associated with the increase in cellular subscribers. Cellular operations
costs as a percentage of total revenue improved slightly to 12.1% in 1996 as
compared to 12.3% in 1995. PCS operations costs totaled $5.7 million for the
year and were comprised primarily of credit and collection costs and salaries
and benefits.
Selling, general, and administrative costs ("SG&A") totaled $30.3
million for 1996. Cellular SG&A totaled $7.6 million for the year, a decrease
of $0.9 million, or 10.8%, as compared to the prior year. Likewise, cellular
SG&A as a percentage of total revenue improved to 21.9% in 1996 from 29.0% in
1995. This improvement reflects the continued realization of economies of
scale in the cellular operations from certain costs such as salaries and wages
and leased facilities costs that do not increase in direct proportion to
increases in cellular service revenue. Additionally, certain costs (primarily
salaries and benefit costs) that were included in the cellular business unit in
1995 were allocated to the PCS business unit during 1996. SG&A for the PCS
business unit totaled $22.7 million for 1996 and were comprised primarily of
costs (excluding depreciation) associated with the corporate office and all
direct and indirect sales channels.
Depreciation and amortization for 1996 totaled $10.1 million and
consisted principally of the depreciation of the cellular system and the
amortization of goodwill acquired in the 1994 acquisition of Unicel. Because
the majority of the Current PCS System and the related PCS licenses were either
not placed in service until late in the fourth quarter of 1996 or were under
construction and thus not yet depreciable, PCS depreciation and amortization
totaled only $4.0 million for 1996. These costs will be substantially higher
in future periods as additional portions of the PCS Systems are placed in
service.
Net consolidated interest income totaled $3.2 million for 1996 as
opposed to net interest expense of $1.7 million in 1995. Net interest income
increased primarily as a result of investment of the proceeds from the 1996
Offerings. Additionally, $29.0 million of the interest costs related to the
February 1996 Notes, the April 1996 Notes and borrowings under the Vendor
Financing Agreement were capitalized in 1996 during the construction of the
Current PCS System.
The effective income tax rates for 1996 and 1995 were 6.2% (benefit)
and 42.6% (provision), respectively. The decrease between the periods is
primarily attributable to the deferred tax asset valuation allowance required
as of December 31, 1996 ($11.2 million). The Company has recognized a $1.7
million income tax benefit equal to available carry backs of operating losses
to the 1994 and 1995 tax years (during which time income taxes totaling
approximately $1.7 million were paid). Management believes that it is more
likely than not that this tax benefit will be realized. The Company generated
a $25.0 million loss from continuing operations during 1996 and expects to
continue to incur significant operating losses during 1997. The tax benefit of
these operating losses will not be recognized until it is more likely than not
that such benefit is realizable.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Service revenue from local cellular customers increased $5.0 million,
or 38.6%, for 1995, as compared to 1994. A 34.8% increase in the number of
Company subscribers (to 38,582 at December 31, 1995 from 28,624 at December 31,
1994) was the primary factor responsible for this growth. The substantial
increase in new customers reflects the success of the Company's marketing
efforts.
29
<PAGE> 30
Additionally, a portion of this increase resulted from the inclusion of an
additional month of revenues from the Maine Cellular Market for 1995 (the
Company's acquisition of Unicel was consummated January 31, 1994).
The average monthly service revenue per customer (excluding roaming
revenue and equipment charges) decreased to $43.95 for 1995 from $46.85 for
1994. This decrease was due primarily to the addition of customers who tend to
use cellular service less frequently.
Toll revenue attributable to local customers for 1995 increased $0.3
million, or 74.2%, compared to 1994. The increase in long distance revenues is
due to the increase in the local customer base and the inclusion of an
additional month of revenues from the Maine Cellular Market for 1995. The
majority of the increase was realized in the Maine Cellular Market, where
customer toll is a larger component of local customer revenues. A slight
increase in toll revenue was achieved in the Southern Cellular Market, despite
the Company's network being designed in such a way that customers in the
Southern Cellular Market can call the Atlanta, Georgia and Birmingham and
Montgomery, Alabama LATAs at local airtime rates (toll free).
Roamer revenue (including toll revenue) for 1995 increased $1.4
million, or 25.6%, compared to 1994. This increase relates primarily to
increased market penetration levels by the cellular industry as a whole, an
additional month of revenue from the Maine Cellular Market in 1995 and the
addition of eight new cell sites during 1995. While the Company experienced an
increase in total roamer revenue, average revenue per roamer declined slightly,
due primarily to reciprocal roaming agreements with certain surrounding
carriers that offer discounted rates. During the third quarter of 1995, the
Company agreed with BellSouth Mobility to provide discounted rates to BellSouth
Mobility for its customers roaming in the Southern Cellular Market in exchange
for discounted rates for the Company's Georgia and Alabama customers roaming in
certain parts of BellSouth Mobility's service area.
For 1995, other service revenue, which primarily includes connection
and installation revenues, increased $0.1 million, or 21.4%. This increase was
due primarily to the inclusion of an additional month of revenue from the Maine
Cellular Market and increased connection fee revenue associated with the
increased subscriber base.
Monthly access revenue represented 48.2% of service revenue during
1995, as compared to 45.0% of revenue for 1994. Conversely, roaming revenue
declined to 27.3% of service revenue for 1995, as compared to 29.2% of service
revenue for 1994. These changes were consistent with the increased local
customer base and the success of the Company's efforts to add customers to the
higher monthly access fee plans, which include various nonbillable airtime
allotments depending on the service plan selected by the customer. Local
customer airtime revenue as a percentage of total service revenue decreased
slightly due to the Company's success in attracting customers to premium
service plans, which provide certain free airtime minutes but include higher
monthly access charges.
Cost of services includes cost of: (i) interconnection with LEC
facilities; (ii) roaming validation (provided by a third party clearinghouse);
(iii) long distance toll services; (iv) installation when performed by outside
contractors; and (v) supplementary services (such as voice mail). For 1995,
cost of services declined to 9.4% of total service revenue as compared to 10.2%
of total service revenue for 1994, as a result of economies of scale realized
during 1995.
Equipment sales totaled $3.9 million for 1995, an increase of $1.1
million, or 37.4%, over 1994. The increase between periods is attributable to
the increased number of new customers added during 1995 over 1994.
Cost of equipment sold increased $0.7 million for 1995, a 30.8%
increase over the prior year. The gross margin on equipment sales was 20.4%
and 16.4% for 1995 and 1994, respectively. The increase in the margin between
periods relates to the writedown of certain telephone equipment to fair market
value during 1994.
Operations costs, which include the costs of maintaining the cellular
system, customer service, inventory management and in-house installations,
totaled $3.6 million for 1995, which represented a $0.9 million, or 32.1%,
increase from 1994. The main components of cost in this category are employee
related costs (salaries, payroll taxes and employee benefits), the provision
for bad debts and communication costs (i.e. telephone, paging, etc.). The
increase in 1995 over 1994 was primarily due to increases in salaries and
employee benefits resulting from the hiring of additional technicians and
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customer service representatives to meet the increased demand caused by the
growing customer base. In addition, the growing customer base contributed to
an increase in the number of nonpaying customers, which caused an increase in
the bad debt provision. Also, 1995 contains an additional month of expenses
compared to 1994 related to the Company's acquisition of Unicel. Operations
costs as a percentage of total revenue and sales decreased slightly from 12.5%
for 1994 to 12.3% for 1995.
SG&A were $8.5 million for the year ended December 31, 1995, an
increase of $1.4 million, or 20.4%, as compared to 1994. The increase was
attributable to several factors, including increased commissions expense due to
the increase in new customers, increases in billing costs due to the increased
subscriber base, increases in employee related costs due to the increase in
total employees and additional operating costs associated with the opening of
three new retail locations. SG&A as a percentage of revenue decreased from
32.4% for 1994 to 29.0% for 1995. During 1995, the Company benefitted from
economies of scale with respect to certain SG&A in its cellular operations,
such as salaries and wages and leased facilities costs, that do not increase in
direct proportion to increases in the cellular service revenue and from cost
control efforts by management.
Depreciation and amortization consisted principally of the
depreciation of the cellular system, the amortization of the promotional
credits associated with the Company's promotion programs and the amortization
of goodwill acquired in the Company's acquisition of Unicel. Depreciation and
amortization expense totaled $5.1 million for 1995, as compared to $3.7 million
for 1994 (17.4% and 16.9% of revenue, respectively). The primary cause of this
increase was the increase in depreciation expense resulting from the addition
of eight new cell sites, three new retail locations and the conversion of the
cellular system in the Southern Cellular Market to dual-mode analog/digital
transmission facilities during 1995.
Net interest expense totaled $1.7 million for 1995, an increase of
$1.0 million over 1994. Net interest expense increased primarily as a result
of borrowings of approximately $20.8 million on its credit facility in 1995 to
finance the Company's investment in Powertel PCS Partners, L.P. and its
purchase of a switch for the Southern Cellular Market. Such borrowings were
repaid in full with proceeds from the 1996 Offerings.
The effective income tax rates for 1995 and 1994 were 42.6% and 45.0%,
respectively. The decrease between the periods relates to a reduction in
amortization of goodwill associated with the Company's acquisition of Unicel,
which is nondeductible for income tax purposes. In connection with the
acquisition of Unicel, the Company has available in excess of $6.5 million of
net operating loss carryforwards for federal tax purposes that can be utilized
(subject to limitations) in future periods to offset taxable income, if any.
At December 31, 1994, the Company eliminated the valuation allowance for
deferred income taxes related to these net operating losses and concurrently
reduced the goodwill associated with the Unicel acquisition. This reduction in
goodwill resulted in a decrease in amortization expense for 1995 thus reducing
the effective income tax rate for the year.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires significant amounts of capital for funding the
operations and expansion of its PCS business. The Company may also require
additional financing in the event it decides to make additional acquisitions.
Total capital expenditures, including capital expenditures for
information technology and the support of the PCS business, are
stimated to be approximately $320.0 million for 1997. Costs associated with
the PCS System buildout include tower sites, leasehold improvements, base
station and switch equipment, microwave relocation costs and labor expenses
related to construction of sites. The Company currently estimates that capital
expenditures will total approximately $200.0 million in 1997 to complete the
initial buildout of the Current PCS System (excluding Albany, Georgia and
Chattanooga, Tennessee) and the digital upgrade of the Company's cellular
system, and $150.0 million ($100.0 million in 1997 and $50.0 million in 1998)
relating to the initial buildout of the Kentucky/Tennessee PCS System. Upon
completion of the initial buildouts, the Company expects to be able to offer
PCS services in markets containing approximately 60% of the population within
the PCS Markets. The initial coverage will extend across most metropolitan
areas, certain secondary cities and major connecting highway corridors within
the PCS Markets. Thereafter, based on customer demand and competitive factors,
the Company intends to continue to build out its PCS System to enhance and
expand its coverage.
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During the first quarter of 1996, the Company issued 7,124,322 shares
of its Common Stock in the Stock Offering resulting in net proceeds of $110.0
million. The Company also sold 35,747 units, consisting in the aggregate of
$357.5 million principal amount at maturity of the February 1996 Notes and
1,143,904 Warrants, in the Unit Offering. A portion of the net proceeds was
used to repay all previously outstanding borrowings.
Pursuant to an Asset Purchase Agreement dated as of March 5, 1996
between Powertel Atlanta Licenses, Inc. and GTE Mobilnet Incorporated ("GTE
Mobilnet"), the Company purchased GTE Mobilnet's PCS license for the Atlanta
MTA on June 28, 1996 for approximately $195.2 million (the "Atlanta MTA
Acquisition"). On June 28, 1996, pursuant to a stock purchase agreement dated
as of March 4, 1996 between the Company and Ericsson, Ericsson purchased
100,000 shares of non-voting Series A Convertible Preferred Stock from the
Company for an aggregate purchase price of $75.7 million (the "Ericsson
Preferred Stock Sale") and pursuant to a Stock Purchase Agreement dated as of
March 4, 1996 between the Company and SCANA, SCANA purchased 100,000 shares of
non-voting Series B Convertible Preferred Stock from the Company for an
aggregate purchase price of $75.7 million (the "SCANA Preferred Stock Sale"
and, together with the Ericsson Preferred Stock Sale, the "1996 Preferred Stock
Sales").
During the second quarter of 1996, the Company received $193.2 million
of net proceeds from the sale of the April 1996 Notes in the Debt Offering.
The Company used a portion of net proceeds from the 1996 Offerings and the 1996
Preferred Stock Sales to consummate the Atlanta MTA Acquisition and to
partially finance the development, construction and operating costs and certain
acquisition expenses associated with the Current PCS System.
Pursuant to a credit agreement (the "Vendor Financing Agreement"),
Ericsson has agreed, subject to the terms and conditions therein, to provide
the Company with up to $165.0 million of financing for purchases of PCS
equipment and services under an equipment purchase agreement. 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 licenses for the Current PCS
System. As of December 31, 1996, approximately $69.5 million was outstanding
under the Vendor Financing Agreement. The Vendor Financing Agreement requires
the Company to meet certain performance measures and to maintain certain
financial ratios. Failure of the Company and its subsidiaries to meet such
performance measures and/or maintain such ratios would constitute events of
default under the Vendor Financing Agreement, notwithstanding the ability of
the Company to meet its debt service obligations. An event of default under
the 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 December 31, 1996.
The Company believes that PCS equipment vendors will make additional
financing available under terms similar to the terms of the existing Vendor
Financing Agreement for PCS equipment purchases related to the initial buildout
of the Kentucky/Tennessee BTAs. The Company intends to obtain financing for
its equipment purchases for the Kentucky/Tennessee BTAs concurrent with signing
an equipment purchase agreement for the Kentucky/Tennessee BTAs. However,
there can be no assurance that additional vendor 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 or the
Vendor Financing Agreement.
In December 1996, the Company entered into an agreement with Rural
Cellular to sell substantially all of the assets of Unicel for an aggregate
purchase price of $77.4 million, subject to adjustment and, with respect to the
Partnership Interest, subject to a right of first refusal in favor of the
minority partner. The Company expects to close the Maine Disposition
in the second quarter of 1997. See "Business -- The Maine Disposition."
The Company believes that the net proceeds from the Maine Disposition
and the Preferred Stock Sales, cash on hand, borrowings under the Vendor
Financing Agreement and additional vendor financing, which the Company expects
to be available, and the 1997 Offering will be sufficient to finance the
development, construction and operating costs associated with the initial
buildout of the PCS Markets and the completion of the digital upgrade of the
Company's cellular system. There can be no assurance that the Company will
consummate either the 1997 Offering or the Preferred Stock Sales. Although the
Company is currently unable to predict with certainty the amount of
expenditures that may be made subsequent to the initial buildout of the PCS
System, the Company expects that it may require additional
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capital. Sources of additional capital may include vendor financing,
cash flow from operations, public and private equity and debt financings and
asset dispositions by the Company. The Company may also require additional
financing in the event it decides to make additional acquisitions. The extent
of additional financing required will partially 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 and newly launched PCS operations and the
interest income earned from investing its cash and the proceeds of the 1996
Offerings. There can be no assurance that additional financing will be
available to the Company, or if available, that it can be obtained on terms
acceptable to the Company and within the limitations contained in the
Indentures, the Vendor Financing Agreement or 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 significant 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 April 1996 Notes
or the February 1996 Notes prior to 2001. Management believes that cash flow
from operations may be insufficient to repay the April 1996 Notes, the February
1996 Notes or any additional financing that the Company may obtain in full at
maturity and that they may need to be refinanced. There can be no assurance
that any such refinancing could be effected successfully or on terms acceptable
to the Company.
During 1996, the Company used net cash of $15.3 million from operating
activities, which was a decrease of $20.9 million from 1995. Included
in net cash used in operating activities for 1996 was $27.6 million of net
loss, $12.1 million of non-cash interest expense on the bonds, $10.1 million of
depreciation and amortization and $11.7 million related to changes in assets
and liabilities. During 1995, the Company generated net cash of $5.6 million
from operating activities, which was an increase of $1.4 million over the prior
year. Included in net cash provided from operating activities of 1995 was $3.0
million of net income, $5.1 million of depreciation and amortization and ($3.2)
million related to changes in assets and liabilities. During 1994, the Company
expensed $0.4 million related to the evaluation and formation of strategies to
obtain PCS licenses. These costs were reimbursed by Powertel PCS Partners,
L.P. ("Powertel PCS Partners") during 1995. See "Certain Relationships and
Related Transactions - The Powertel Combination." Additionally, the Company
incurred $3.7 million of such expenses during 1995 which were reimbursed by
Powertel on a monthly basis.
Cash used for investing activities was $489.1 million for 1996 as
compared to cash used of $22.8 million for 1995. Investing activities
for 1996 included capital expenditures totaling $233.6 million (primarily
related to the buildout of the PCS System and support systems, including
information technology systems, for the PCS business), short term investments
of $75.7 million, the acquisition of the PCS license for the Atlanta MTA for
$195.2 million and other license costs (primarily microwave relocation
expenditures) of $15.2 million. In addition, the Company received $15.4 million
in cash in 1996 related to the acquisition of Powertel PCS Partners. Cash used
for investing activities was $22.8 for fiscal year 1995 as compared to $9.3
million for 1994. Investing activities for 1995 included capital expenditures
totaling $7.6 million (the majority of which related to the purchase and
installation of new digital switches for the Cellular Markets) and an
investment in Powertel PCS Partners of $17.0 million (to fund InterCel's
portion of the acquired PCS licenses and working capital). During 1995, the
Company received $1.8 million in refunds of certain non-interest bearing
subordinated capital certificates from the Rural Telephone Finance Cooperative
related to a borrowing agreement entered into by Unicel prior to the Company's
acquisition of Unicel.
Cash provided by financing activities amounted to $689.2 million for
1996 compared to $17.3 million for 1995. Cash provided by financing activities
during 1996 included $110.0 million from the Stock Offering, $151.5 million
from the 1996 Preferred Stock Sales, $385.3 million of net proceeds from the
Unit Offering and the Debt Offering and $69.5 million from borrowings under the
Vendor Financing Agreement. Cash used by financing activities during 1996
included $28.1 million for repayment of amounts outstanding under the credit
facility through Valley Finance, Inc., a direct wholly owned subsidiary of ITC
Holding Company, Inc. ("ITC Holding"), with National Bank for Cooperatives.
During 1995, the Company repaid $1.5 million on a note outstanding to ITC
Holding and borrowed $20.8 million under the credit facility. Cash provided by
financing activities was $5.2 million for fiscal year 1994.
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RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 121 ("FAS 121")
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of," which becomes effective for fiscal years beginning after
December 15, 1995. FAS 121 established standards for determining when
impairment losses on long-lived assets have occurred and how impairment losses
should be measured. The Company adopted FAS 121 in 1996. The adoption of FAS
121 did not have a material impact on the Company's financial statements.
In October 1995, the FASB issued Statements of Financial Accounting
Standards No. 123 ("FAS 123") "Accounting for Stock-Based Compensation," which
became effective for fiscal years beginning after December 15, 1995. FAS 123
established new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under FAS 123 or APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Entities electing to remain with the accounting in
APB Opinion No. 25 will be required to make pro forma disclosures of net income
and earnings per share as if the provisions of FAS 123 had been applied. The
Company adopted FAS 123 on January 1, 1996 and elected to continue to measure
compensation cost for stock-based compensation under APB Opinion No. 25.
Accordingly, the adoption of FAS 123 did not impact the 1996 statement of
operations. See Note 6 to the consolidated financial statements included
elsewhere in this Report for a pro forma disclosure as if the provisions of FAS
123 had been applied.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of the Company, including the Company's
consolidated balance sheet, as of December 31, 1996 and 1995, consolidated
statements of income for the years ended December 31, 1996, 1995 and 1994,
consolidated statements of cash flows for the years ended December 31, 1996,
1995 and 1994 and consolidated statements of changes in stockholders' equity
for the years ended December 31, 1996, 1995 and 1994, together with the report
thereto of Arthur Andersen L.L.P. dated February 3, 1997 (except with respect
to the matters discussed in Note 14, as to which the date is March 13, 1997),
and the schedule containing certain supporting information are attached hereto
as pages F-1 through F-22.
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS IN ACCOUNTING AND FINANCIAL
DISCLOSURES
The Company had no disagreements on accounting or financial disclosure
matters with its accountants, nor did it change accountants, during the two
fiscal years ended December 31, 1996.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are set forth
below. The Company's Board of Directors consists of ten directors divided into
three classes of directors, serving staggered three-year terms. Directors and
executive officers of the Company are elected to serve until they resign or are
removed, or are otherwise disqualified to serve, or until their successors are
elected and qualified. Directors of the Company are elected at the annual
meeting of stockholders. Officers of the Company are appointed at the Board's
first meeting after each annual meeting of stockholders. The ages of the
persons set forth below are as of March 1, 1997.
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION(S) WITH COMPANY EXPIRES
- ---- --- ------------------------ -------
<S> <C> <C> <C>
Campbell B. Lanier, III . . . . . 46 Chairman of the Board of Directors 1998
Allen E. Smith . . . . . . . . . 47 President, Chief Executive Officer and Director 1998
Fred G. Astor, Jr. . . . . . . . 45 Executive Vice President and Chief Financial --
Officer
Edward C. Horner. . . . . . . . . 45 Executive Vice President and Chief Operating --
Officer
George R. Johnson . . . . . . . . 55 Executive Vice President -- PCS --
Walter R. Pettiss . . . . . . . . 63 Executive Vice President -- PCS --
Nicholas J. Jebbia . . . . . . . 49 Executive Vice President -- PCS --
Rodney D. Dir . . . . . . . . . . 39 Executive Vice President -- PCS --
Maurice P. O'Connor . . . . . . . 46 Vice President and Director 1999
Donald W. Burton . . . . . . . . 51 Director 1999
Bert G. Clifford . . . . . . . . 77 Director 1999
O. Gene Gabbard . . . . . . . . . 56 Director 1997
Lawrence M. Gressette, Jr. . . . 65 Director 1998
William H. Scott, III . . . . . . 49 Director and Secretary 1997
William B. Timmerman . . . . . . 50 Director 1997
Donald W. Weber . . . . . . . . . 60 Director 1997
</TABLE>
Certain of the officers and directors listed above hold or have held
positions in several corporations related to the Company, including ITC Holding,
SCANA and various subsidiaries of ITC Holding. In addition, certain
officers and directors also have ownership interests in ITC Holding and SCANA.
The Company has adopted a policy requiring that any material transactions
between the Company and persons or entities affiliated with officers, directors
or principal stockholders of the Company be on terms no less favorable to the
Company than reasonably could have been obtained in arm's length transactions
with independent third parties. Any other matters involving potential conflicts
of interests are to be resolved on a case-by-case basis. See "Certain
Relationships and Related Transactions."
CAMPBELL B. LANIER, III has served as Chairman of the Board of
Directors of the Company since its inception in April 1991 and was Chief
Executive Officer of the Company from its inception until September 1993. Mr.
Lanier serves as Chairman of the Board and Chief Executive Officer of ITC
Holding and has served as a director of ITC Holding since its inception in 1985
through a predecessor company. In addition, Mr. Lanier served as a director
and President of Interstate Cellular, Inc. since its inception in 1989 until
its dissolution in June 1995, and he also is an officer and director of several
ITC Holding subsidiaries. Since 1995, he has been a director of K&G Mens
Centers, Inc., an operator of retail mens clothing stores. Since 1994, he has
been a director of MindSpring Enterprises, Inc. ("MindSpring"), an Internet
access provider. Since 1990, he has been a director of National Vision
Associates, Ltd., a full service optical retailer, and Vice Chairman of the
Board of AvData Systems, Inc. ("AvData"), a company providing satellite data
transmission services. He served as Chairman of the Board of AvData from 1988
to 1990. From 1984 to 1989, Mr. Lanier served as Chairman of the Board of
Async Corporation ("Async"), a company providing voice message services. Mr.
Lanier also served as Vice President -- Industry Relations of Telecom*USA,
Inc. ("Telecom") from 1984 to 1988 and as Senior Vice President Industry
Relations from January 1989 until Telecom's merger with MCI Communications
Corporation ("MCI") in August 1990. From 1984 to 1985, he served as Chief
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<PAGE> 36
Executive Officer of SouthernNet, Inc. ("SouthernNet"), a long distance
telecommunications company which was the predecessor to Telecom, and from 1985
to 1986 he was Vice Chairman of the Board of SouthernNet. Mr. Lanier has also
been a special limited partner in the South Atlantic Venture Fund II, Limited
Partnership and South Atlantic Venture Fund III, Limited Partnership since 1988.
ALLEN E. SMITH has been Chief Executive Officer of the Company since
September 1993, has been the President and a Director of the Company since
January 1991, and was Chief Operating Officer of the Company from January 1991
to September 1993, when he became Chief Executive Officer. Mr. Smith has been
a Vice President of ITC Holding since January 1991. From 1988 to 1990, Mr.
Smith held several executive positions with Telecom, including Senior Vice
President -- Customer Services, Senior Vice President -- Administration and
Senior Vice President -- Human Resources and Administration. During 1988, Mr.
Smith was Vice President -- Telemarketing and Training at SouthernNet. From
1987 to 1988, Mr. Smith was the Vice President of Marketing of Southland
Communications Corporation ("Southland"), a telecommunications company. During
1986, Mr. Smith was the Executive Vice President and General Manager of
Southland Cellular, Inc., a subsidiary of Southland, where he managed the
Pensacola, Florida MSA, as well as voice and digital paging services.
FRED G. ASTOR, JR. has been Chief Financial Officer of the Company
since May 1991, served as Treasurer of the Company from May 1991 until May
1995, and was Vice President of the Company from May 1991 until May 1995, when
he was named Executive Vice President. Mr. Astor worked for Contel Corporation
("Contel"), a telecommunications company which merged with GTE Corporation in
March 1991, from 1976 to 1989 in various financial capacities. From 1983 to
1987, he served as the Assistant Corporate Controller in charge of financial
reporting, and from 1987 until late 1989, he served as Vice President --
Finance for Contel Credit Corporation, a finance subsidiary which was acquired
by General Electric Capital Corporation. In January 1990, he joined Telecom as
its Vice President -- Finance/Southern Division, and he served in that capacity
until Telecom's merger with MCI was consummated. In November 1990, Mr. Astor
accepted a position with ProAir Services, L.P. as Vice President -- Finance.
He served as that company's Chief Financial Officer until accepting his current
position with the Company.
EDWARD C. HORNER joined the Company as Executive Vice President and
Chief Operating Officer in May 1996. Prior to joining InterCel, he served as
Assistant Vice President Marketing and Distribution for GTE Mobilnet
Incorporated ("GTE Mobilnet"). He became a director of GTE Telephone
Operations in 1991. He was previously with Contel in a number of positions,
culminating as Assistant Vice President Network Marketing at the time Contel
merged with GTE Corporation.
GEORGE R. JOHNSON joined the Company as a Vice President -- PCS in May
1995 and was named Executive Vice President and General Manager for the
Birmingham, Alabama MTA in August 1995. From 1990 to 1995, he served as a
Product Manager for BellSouth Telecommunications, Inc. From 1989 to 1990, he
was National Sales Manager for BellSouth Products, Inc., a consumer telephone
products company.
WALTER R. PETTISS joined the Company as a Vice President -- PCS in
April 1995 and was named Executive Vice President and General Manager
for the Jacksonville, Florida MTA in August 1995. From 1992 to 1994, Mr.
Pettiss served as Chief Operating Officer of WJB-TV, L.P., a provider of
wireless cable television service, and its successor corporation, Wireless
Broadcasting System of America, Inc. Since 1991, he has served as a director
of Electronic Power Technology, Inc. ("EPT"). In 1995, he became Chairman of
the Board of Directors of EPT. In December 1995, EPT filed for protection of
its assets under Chapter 7 of the U.S. Bankruptcy Code. From 1990 to 1992, he
served as Chief Operating Officer of WJB-Video, L.P., a Blockbuster Video
franchisee. From 1987 through 1989, he was a Senior Vice President of
SouthernNet.
NICHOLAS J. JEBBIA joined the Company in January 1996 as Executive
Vice President and General Manager for the Memphis, Tennessee/Jackson,
Mississippi MTA. From 1990 to 1995, Mr. Jebbia served as Vice President and
General Manager of New Ventures for National Data Corporation. From 1983 to
1990, he was Vice President of Service with United Telecommunications. Prior
to 1983, he served in various management positions with Ohio Bell Telephone.
RODNEY D. DIR joined the Company in August 1996 as Executive Vice
President and General Manager for the Atlanta MTA. From 1995 to 1996, Mr. Dir
served as Area General Manager for GTE Mobilnet in California. He joined GTE
Telephone Operations in 1984 serving in various finance, accounting and
regulatory positions. In 1989, he joined GTE Mobilnet's cellular division.
Before joining
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GTE Telephone Operations, Mr. Dir worked with Kiesling and Associates, a
certified public accounting firm, providing accounting and management services
to telecommunications clients.
MAURICE P. O'CONNOR was appointed a Director and Vice President of the
Company, with general responsibility for the Unicel operations, on March 28,
1994, concurrent with the Company's acquisition of Unicel. He also serves as a
director of Unitel, Inc., a LEC in the State of Maine. Mr. O'Connor served as
General Manager of Unicel from 1991 until the Unicel acquisition and had been
employed by Unicel in other management capacities since 1989. From 1984 until
joining Unicel in 1989, Mr. O'Connor was President and General Manager of New
England Landscape & Irrigation Company in Palmer, Massachusetts. From 1977 to
1984, he was the President of Cypress Landscaping & Construction in Houston,
Texas. Mr. O'Connor is the son-in-law of Bert and Coral Clifford. Mr.
O'Connor will continue to serve as a Director of the Company after the Maine
Disposition.
DONALD W. BURTON was appointed a Director of the Company in 1995. He
has served as the Managing General Partner of the South Atlantic Venture Funds
since 1983. He has served as the General Partner of The Burton Partnership,
Limited Partnership since 1979. Mr. Burton serves as a Director of MTL Inc., a
bulk transportation service company, the Heritage Group of Mutual Funds and
several private companies.
BERT G. CLIFFORD was appointed Vice Chairman of the Board of Directors
of the Company on March 28, 1994 concurrent with the Company's acquisition of
Unicel. Mr. Clifford has been the Chairman of the Board and President of Unity
Telephone Company since 1963. In connection with the acquisition of Unicel,
Mr. Clifford retired from his positions as the Chairman of the Board of
Directors, President and Chief Executive Officer of Unicel, which positions he
had held since Unicel's inception in 1987. Mr. Clifford is the father-in-law
of Maurice P. O'Connor.
O. GENE GABBARD has been a Director of the Company since February
1992. He has worked independently as an entrepreneur and consultant since
February 1993. Mr. Gabbard currently serves as a director of ITC Holding,
MindSpring, Masada Security, Inc., a security monitoring services company, and
two telecommunications technology companies, Dynatech Corporation and Adtran,
Inc. From August 1990 through January 1993, he served as Executive Vice
President and Chief Financial Officer of MCI. He served in various senior
executive capacities, including Chairman of the Board, President and Chief
Executive Officer of Telecom from December 1988 until Telecom's merger with MCI
in August 1990. From July 1984 to December 1988, he was Chairman and/or
President of SouthernNet.
LAWRENCE M. GRESSETTE, JR. was appointed a Director of the Company in
1995. Since 1990, he has served as Chairman, President and Chief Executive
Officer of SCANA, a diversified utility company, from which positions he has
recently announced his retirement. Beginning April 1997, Mr. Gressette will
serve as a director and as Chairman of the Executive Committee of the Board of
Directors of SCANA. He also is a director of Wachovia Corporation, a bank
holding company, The Liberty Corporation, a holding company of Liberty Life
Insurance Co. and Cosmos Broadcasting Corp.
WILLIAM H. SCOTT, III served as Vice Chairman of the Board of
Directors of the Company from its inception in April 1991 until February 7,
1996 and was reappointed as a Director on March 21, 1996. Mr. Scott has served
as President of ITC Holding since December 1991 and has been a director of ITC
Holding since May 1989. He served as a director and Executive Vice President
of Interstate Cellular from May 1989 until its dissolution in June 1995, and he
also is an officer and director of several other ITC Holding subsidiaries. Mr.
Scott has served on the AvData Board of Directors since 1988 and on the
MindSpring Board of Directors since 1994. From 1985 to 1989, Mr. Scott was an
officer and director of Async. Between 1984 and 1988, Mr. Scott held several
offices with SouthernNet, including Chief Operating Officer, Chief Financial
Officer and Vice President -- Administration. He was a director of that
company from 1984 to 1987.
WILLIAM B. TIMMERMAN was appointed a Director of the Company in 1995.
Since 1978, he has served in a variety of management positions at SCANA,
including President, Senior Vice President, Executive Vice President and Chief
Financial Officer. Subsequent to the retirement of Lawrence M. Gressette, Jr.,
Mr. Timmerman will serve as Chairman, Chief Executive Officer and President of
SCANA and as Chairman and Chief Executive Officer of each of SCANA's
subsidiaries.
DONALD W. WEBER has been a Director of the Company since December
1991. Mr. Weber also is a director of ITC Holding, InterServ Services
Corporation, InterCall, Inc. and DPS Depot Inc. and Chairman of the Board and
Chief Executive Officer of ViewStar Entertainment Services, Inc., a company
37
<PAGE> 38
providing DBS satellite systems hardware and programming. He is also a
director of Healthdyne Information Enterprise and Pegasus Communications
Corporation, both of which are public companies. From 1981 until his
retirement in October 1991, Mr. Weber held various executive positions,
including President and Chief Executive Officer, at Contel. Mr. Weber was a
director of Contel from 1985 until 1991 and was a director of Contel Cellular,
Inc., a cellular telephone company, from 1981 until 1991.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's executive
officers and directors and persons who beneficially own more than 10% of a
registered class of the Company's equity securities to file reports of
securities ownership and changes in such ownership with the Securities and
Exchange Commission (the "SEC") and the Nasdaq National Market. Officers,
directors and greater than 10% beneficial owners also are required by rules
promulgated by the SEC to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports
were required, the Company believes that, during fiscal 1996, its executive
officers, directors and greater than 10% beneficial owners complied with all
applicable Section 16(a) filing requirements, except that reports covering
transactions on Form 3 were filed late by Rodney D. Dir, Edward C. Horner and
Nicholas J. Jebbia and reports covering transactions on Form 4 were filed late
by Fred G. Astor, Jr., Edward C. Horner, Nicholas J. Jebbia and Walter R.
Pettiss. All such transactions have been reported by each of the foregoing.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the cash
and non-cash compensation during the fiscal years 1996, 1995 and 1994 earned by
or awarded to the Chief Executive Officer and to the other most highly
compensated executive officers of the Company whose combined salary and bonus
exceeded $100,000 during the fiscal year ended December 31, 1996 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
-------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
------------------- STOCK UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITIONS Year Salary Bonus AWARDS OPTIONS COMPENSATION
- ---------------------------- ---- ------- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Allen E. Smith . . . . . . . . 1996 $188,519 $92,790 $ -- 35,310 $ 82,505(a)
President and Chief Executive 1995 132,714 93,759 211,725(b) 41,174 5,424(c)
Officer 1994 97,423 96,974 -- 20,750
Fred G. Astor . . . . . . . . . 1996 132,080 57,889 -- 15,916 81,865(d)
Executive Vice President and 1995 104,269 57,430 211,725(b) 34,030 --
Chief Financial Officer 1994 85,715 57,811 12,550 --
Walter R. Pettiss . . . . . . . 1996 132,080 57,889 -- 13,986 14,738(e)
Executive Vice President--PCS 1995 76,675 (f) 45,336 -- 20,000 1,186(c)
Nicholas J. Jebbia . . . . . . 1996 128,148 56,557 -- -- 22,016(g)
Executive Vice President--PCS 1995 -- (h) -- -- 20,000 --
George R. Johnson . . . . . . . 1996 125,449 56,015 -- 11,976 12,893(i)
Executive Vice President--PCS 1995 62,118 (j) -- 20,000 1,062(c)
</TABLE>
_________________________
(a) Represents: (i) tax gross-ups for 1995 restricted stock awards; (ii)
auto allowance; (iii) country club dues; (iv) imputed income for life
insurance benefits; and (v) matching contributions made by the Company
to the InterCel 401(k) Plan.
(b) On April 24, 1995, the Compensation/Stock Option Committee (as defined
herein) awarded Messrs. Smith and Astor 15,000 shares each of
restricted Common Stock, respectively, in accordance with the
provisions of the 1995 Employee Restricted Stock Plan. The market
value of the Company's Common Stock on the date of award was $14.125
per share.
(c) Represents matching contributions made by the Company to the InterCel
401(k) Plan (as defined herein) on behalf of each of the Named
Executive Officers.
38
<PAGE> 39
(d) Represents: (i) tax gross-ups for 1995 restricted stock
awards; (ii) auto allowance; (iii) imputed income for life
insurance benefits; and (iv) matching contributions made by
the Company to the InterCel 401(k) Plan.
(e) Represents: (i) auto allowance; (ii) imputed income for life
insurance benefits; and (iii) matching contributions made by
the Company to the InterCel 401(k) Plan.
(f) Mr. Pettiss joined the Company in April 1995 and became an
executive officer in August 1995.
(g) Represents: (i) moving expenses; (ii) auto allowance;
(iii) imputed income for life insurance benefits; and (iv)
matching contributions made by the Company to the InterCel
401(k) Plan.
(h) Mr. Jebbia joined the Company in January 1996 as an
executive officer; however, his employment options were
granted in December 1995.
(i) Represents: (i) auto allowance; (ii) imputed income for life
insurance benefits; and (iii) matching contributions made by
the Company to the InterCel 401(k) Plan.
(j) Mr. Johnson joined the Company in May 1995 and became an
executive officer in August 1995.
OPTION GRANTS
The following table sets forth information with respect to grants of
stock options to each of the Named Executive Officers during the year ended
December 31, 1996.
OPTION GRANTS DURING 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(A)
-------------------------------------------------------------
POTENTIAL REALIZED
VALUE
PERCENT AT ASSUMED ANNUAL
NUMBER OF TOTAL RATES
SECURITIES OPTIONS OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION FOR OPTION TERM(B)
NAME GRANTED FISCAL YEAR PRICE GRANT DATE DATE 5% 10%
- ---- ---------- ----------- -------- ------------- ------------ ---------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Allen Smith . . . . . . . . . 35,310 4.5% $ 16.50 2/16/96 2/16/06 $ 366,403 $928,538
Fred G. Astor . . . . . . . . 15,916 2.0 16.50 2/16/96 2/16/06 165,517 418,539
Walter R. Pettiss . . . . . . 13,986 1.8 16.50 2/16/96 2/16/06 145,129 367,786
Nicholas J. Jebbia . . . . . -- -- -- -- -- -- --
George R. Johnson . . . . . . 11,976 1.5 16.50 2/16/96 2/16/06 124,272 314,930
- -------------------------
</TABLE>
(a) All option grants were made at 100% of the fair market value of the
Common Stock on the date of grant. Options will become exercisable as
follows: (i) 50% of the options will become exercisable on the second
anniversary of the date of grant; (ii) an additional 25% of the
options will become exercisable on the third anniversary of the date
of grant; and (iii) the remaining 25% of the options will become
exercisable on the fourth anniversary of the date of grant.
(b) Based on exercise price.
OPTION EXERCISES AND HOLDINGS
During the year ended December 31, 1996, no stock options were
exercised by the Named Executive Officers. The following table sets forth
information with respect to each of the Named Executive Officers concerning the
value of all unexercised options held by such individuals at December 31, 1996.
39
<PAGE> 40
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT FISCAL AT
YEAR-END FISCAL YEAR-END
NAME EXERCISABLE/UNEXERCISAB EXERCISABLE/UNEXERCISABL
------------------------ -------------------------
<S> <C> <C>
Allen E. Smith . . . . . . . . . . . . . . . . . . . . 167,234 $ 631,481
Fred G. Astor, Jr. . . . . . . . . . . . . . . . . . . 113,496 453,723
Walter R. Pettiss . . . . . . . . . . . . . . . . . . . 33,986 --
Nicholas J. Jebbia . . . . . . . . . . . . . . . . . 20,000 --
George R. Johnson . . . . . . . . . . . . . . . . . . . 31,976 --
- -------------------------
</TABLE>
(a) Represents the difference between the exercise price per share and the
market value of the Common Stock at December 31, 1996.
BENEFIT PLANS
Restricted Stock Plan. Under the Company's 1995 Employee Restricted
Stock Plan adopted by the Board of Directors on April 24, 1995 and approved by
stockholders on December 20, 1995 (the "Restricted Stock Plan"), 200,000 shares
of authorized but unissued Common Stock (approximately 0.7% of the outstanding
shares of Common Stock at December 31, 1996) are reserved for issuance, 35,000
shares of which were issued and outstanding as of December 31, 1996. The
Restricted Stock Plan is administered by the Compensation/Stock Option
Committee of the Board of Directors (the "Compensation/Stock Option
Committee"). The purpose of the Restricted Stock Plan is to further the growth
and success of the Company by enabling selected employees of the Company to
acquire shares of Common Stock of the Company, thereby increasing their
personal interest in such growth and success and to provide a means of
rewarding outstanding performance by such persons. Recipients of restricted
stock awards generally have the rights and privileges of a stockholder of the
Company, including the right to vote and receive dividends, except that the
recipient may not sell, transfer or otherwise dispose of shares covered by the
award until a specified time period, set by the Compensation/Stock Option
Committee, has lapsed. Restricted stock awards vest in three equal
installments on the first, second and third anniversaries of the date of grant.
On April 24, 1995, the Compensation/Stock Option Committee awarded each of
Messrs. Smith and Astor 15,000 shares of restricted Common Stock.
Employee Stock Option Plan. Under the Company's 1991 Employee Stock
Option Plan (the "Employee Plan"), 2,000,000 shares of Common Stock have been
authorized for issuance upon exercise of options. On January 29, 1997, the
Board of Directors approved the authorization of an additional 1,000,000 shares
of Common Stock for issuance upon exercise of options, subject to stockholder
approval. All employees of the Company and its subsidiaries are eligible to
receive options under the Employee Plan. The Employee Plan is administered by
the Compensation/Stock Option Committee. The purpose of the Employee Plan is
to further the growth and success of the Company by enabling selected employees
of the Company to acquire shares of Common Stock of the Company, thereby
increasing their personal interest in such growth and success and to provide a
means of rewarding outstanding performance by such persons. Options granted
under the Employee Plan are intended to qualify as "incentive stock options"
under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"). Options generally become exercisable as to 50% two years after the
date of grant, as to an additional 25% three years after the date of grant, and
as to the remaining 25% four years after the date
40
<PAGE> 41
of grant. As of December 31, 1996, 1,492,953 options granted pursuant to the
Employee Plan were outstanding.
401(k) Plan. On February 1, 1995, the Company established a savings
plan (the "InterCel 401(k) Plan") qualified under Section 401(k) of the Code
for the benefit of all full-time employees. A participant in the InterCel
401(k) Plan may contribute up to 10% of his or her compensation on a pre-tax
basis under the InterCel 401(k) Plan. Also, under the InterCel 401(k) Plan,
the Company makes matching contributions for each participant equal to one-half
of the first 2% of annual compensation contributed by each participant. In
addition, the Company may make in its discretion, certain additional
contributions that generally will be allocated to participants in proportion to
compensation. The Company made $395,989 in contributions to the InterCel
401(k) Plan during 1996.
Contributions made by, or on behalf of, a participant, and interest,
earnings, gains or losses on such amounts, are credited to accounts maintained
for the participant under the InterCel 401(k) Plan. A participant under the
InterCel 401(k) Plan is fully vested in his or her pre-tax, matching and
rollover contributions accounts. Vesting in a participant's discretionary
profit sharing contribution account is based upon his or her years of service
with the Company. A participant is initially 20% vested after the completion
of one year of service with the Company. The participant's vested percentage
increases by 20% for each subsequent year of service with the Company, so that
the participant is 100% vested after the completion of five years of service.
In addition, a participant becomes fully vested in his or her accounts upon
retirement due to permanent disability, attainment of age 65 or death.
Finally, the InterCel 401(k) Plan provides that the Board of Directors may at
any time declare the InterCel 401(k) Plan partially or completely terminated,
in which event, the accounts of each participant with respect to whom the
InterCel 401(k) Plan is terminated will become fully vested. In the event of a
termination, partial termination or a complete discontinuance of contributions,
the accounts of each affected participant will become fully vested.
Pension Plans. Prior to February 1, 1995, the Company, as a
subsidiary of ITC Holding, included its employees as participants in the ITC
Holding Company Pension Plan (the "ITC Plan"). The ITC Plan provided all
eligible employees of ITC Holding and its majority-owned subsidiaries with
retirement, disability and survivor benefits. Benefits that employees had
accrued under the terms of the ITC Plan were frozen as of February 1, 1995. In
addition, following consummation of the Company's acquisition of Unicel on
January 31, 1994, benefits that employees of Unicel had accrued under the terms
of the plan sponsored by Unity Telephone (the "Unity Plan") were frozen as of
April 29, 1994. Messrs. Smith and Astor each had three years of credited
service under the ITC Plan and no credited service under the Unity Plan as of
the respective dates benefits under such plans were frozen. Effective June 1,
1996 the two plans were combined when the ITC Plan transferred the assets and
liabilities attributable to the retirement benefits of InterCel employees under
such Plan to the Unity Cellular Systems, Inc. Pension Plan. To reflect the
fact that both groups of employees are included in one pension plan, the Unity
Cellular Systems, Inc. Plan was renamed the InterCel, Inc. Pension Plan (the
"InterCel Plan") effective June 1, 1996. The Company has initiated the process
of terminating the InterCel Plan, notified employees of its intent to terminate
the InterCel Plan and submitted the necessary filing documents to the IRS and
the Pension Benefit Guaranty Corporation. The annual benefits payable from the
InterCel Plan upon retirement at normal retirement age for Messrs. Smith and
Astor are $10,583 and $8,314, respectively.
41
<PAGE> 42
COMPENSATION OF THE COMPANY'S DIRECTORS
Director Fees and Related Matters. Prior to January 17, 1994,
directors of the Company (other than those who were considered
employees of the Company and received salaries for their services as such) did
not receive cash compensation for their services on the Board of Directors.
Pursuant to a policy instituted by the Company on January 17, 1994, the Company
now compensates nonemployee directors $750 for each Board meeting attended in
person, $200 for each Board meeting attended by telephone conference and $200
for each Board committee meeting attended (whether in person or by telephone
conference). In addition, the Company reimburses nonemployee directors for
out-of-pocket travel expenditures relating to their service on the Board. The
Company provides to each of its directors (and to all of its employees) a free
telephone and a monthly airtime allowance; the users are responsible for
payment of all additional airtime charges and long distance and roaming charges
they incur.
For the year ended December 31, 1996, Messrs. Clifford, Lanier and
Scott received additional compensation in consideration of their performance of
certain advisory and administrative services for the Company in the amount of
approximately $30,000, $40,000 and $30,000, respectively. Additionally,
Messrs. Lanier and Scott participate in the InterCel 401(k) Plan under which
they received profit sharing and matching contributions totaling approximately
$1,600 and $1,200, respectively, in 1996. Such individuals will be paid
similar compensation for the year ending December 31, 1997 in consideration of
their performance of such services for the Company.
Nonemployee Stock Option Plan. Under the Company's Nonemployee Stock
Option Plan (the "Nonemployee Plan"), 400,000 shares of Common Stock are
authorized for issuance upon exercise of options. All nonemployee directors of
the Company, and all employees of affiliates of the Company, are eligible to
receive options under the Nonemployee Plan. Options were granted to each
nonemployee director upon his or her election or appointment as a director, and
are exercisable at the fair market value of the Common Stock (as determined by
the Board) on the date of grant. On January 17, 1994, the Company granted
additional options to purchase 10,000 shares of Common Stock to each of Messrs.
Gabbard and Weber.
On March 28, 1994, the Nonemployee Plan was amended to provide that
options to purchase 10,000 shares of Common Stock (at an exercise price equal
to the fair market value of the Common Stock on the date of grant) would be
granted pursuant thereto to nonemployee directors upon their initial election
or appointment to the Board. The Nonemployee Plan, as so amended, does not
provide for discretionary option grants. Options generally become exercisable
as to 50% two years after the date of grant, as to an additional 25% three
years after the date of grant, and as to the remaining 25% four years after the
date of grant.
On February 16, 1996, the Company granted options to purchase 10,000
shares of Common Stock to each of Messrs. Burton, Gressette and Timmerman.
Messrs. Gressette and Timmerman declined such options, and the Company
subsequently reissued options to purchase 20,000 shares of Common Stock to
SCANA on behalf of Messrs. Gressette and Timmerman's service on the Company's
Board of Directors. As of December 31, 1995, 193,200 options granted pursuant
to the Nonemployee Plan were outstanding.
42
<PAGE> 43
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In February 1996, the Company combined its Compensation Committee and
Stock Option Committee. During 1996, O. Gene Gabbard, Lawrence M. Gressette,
Jr. and Donald Weber constituted the Compensation/Stock Option Committee.
Messrs. Gabbard and Weber are directors of ITC Holding, which as of February
28, 1997 held approximately 27% of the outstanding Common Stock of the Company.
See "Certain Relationships and Related Transactions -- ITC Holding." Mr.
Gressette is a director and executive officer of SCANA, which as of February
28, 1997 held approximately 17% of the outstanding Common Stock of the Company.
See "Certain Relationships and Related Transactions -- Other Transactions."
43
<PAGE> 44
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table provides information, as of February 28, 1997
concerning beneficial ownership of Common Stock by: (i) each person or entity
known by the Company to beneficially own more than 5% of the outstanding Common
Stock; (ii) each director of the Company; (iii) each Named Executive Officer;
and (iv) all directors and executive officers of the Company as a group. The
information in the table is based on information from the named persons
regarding ownership of Common Stock. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
shown as beneficially owned by them.
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF COMMON
BENEFICIAL STOCK
NAME AND ADDRESS(A) OF BENEFICIAL OWNER OWNERSHIP(B) OUTSTANDING
- --------------------------------------- -------------- ------------
<S> <C> <C>
ITC Holding Company, Inc.(c) . . . . . . . . . . . . . . . . . . . . . . . 7,337,711 27.3%
SCANA Communications, Inc.(d) . . . . . . . . . . . . . . . . . . . . . . . 4,494,892 16.7
W.R. Huff(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,015,450 7.5
The Huff Alternative Income Fund, L.P.(f) . . . . . . . . . . . . . . . . . 2,009,200 7.5
Fred G. Astor, Jr.(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,227 *
Donald W. Burton(h) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,583,727 5.9
Bert G. Clifford(g)(i) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,189,361 4.4
O. Gene Gabbard(g)(j) . . . . . . . . . . . . . . . . . . . . . . . . . . . 193,691 *
Lawrence M. Gressette, Jr. . . . . . . . . . . . . . . . . . . . . . . . . -- --
Nicholas J. Jebbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 *
George R. Johnson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Campbell B. Lanier, III(g)(j)(k) . . . . . . . . . . . . . . . . . . . . . 233,991 *
Maurice P. O'Connor(g)(l) . . . . . . . . . . . . . . . . . . . . . . . . . 31,529 *
Walter R. Pettiss(m) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,128 *
William H. Scott, III(g)(n) . . . . . . . . . . . . . . . . . . . . . . . . 59,800 *
Allen E. Smith(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,749 *
William B. Timmerman . . . . . . . . . . . . . . . . . . . . . . . . . . . -- --
Donald W. Weber(g) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,500 *
All executive officers and directors as a group (12 persons)(g)-(n) . . . . 3,371,242 12.5%
- --------------------
</TABLE>
* Less than one percent.
(a) The addresses of the beneficial owners of more than 5% of the Common Stock
are as follows: ITC Holding -- 1239 O.G. Skinner Drive, West Point,
Georgia 31833; SCANA Communications, Inc. (a wholly owned subsidiary of
SCANA) -- 440 Knox Abbott Drive, Suite 240, Cayce, South Carolina 29033;
Mr. Huff and The Huff Alternative Income Fund, L.P. -- 67 Park Place,
Morristown, New Jersey 07960; and Mr. Burton -- 614 West Bay Street, Suite
200, Tampa, Florida 33606.
(b) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
Common Stock if such person has or shares voting power or investment power
with respect to such security, or has the right to acquire beneficial
ownership at any time within 60 days from February 28, 1997. As used
herein, "voting
44
<PAGE> 45
power" is the power to vote or direct the voting of shares and "investment
power" is the power to dispose or direct the disposition of shares.
(c) ITC Holding has pledged all of its stock in the Company to certain lenders
in connection with a credit facility.
(d) Does not include: (i) 4,545,450 shares of Common Stock issuable upon
conversion of the Series B Convertible Preferred Stock; and (ii) 1,764,706
shares of Common Stock issuable upon conversion of the Series D
Convertible Preferred Stock.
(e) Includes 2,009,200 shares held by The Huff Alternative Income Fund, L.P.
and 6,250 shares held by Mr. Huff in his personal account. Mr. Huff is
president of Paladin Court Co., Inc., the general manager of WRH Partners,
LLC, which is the general partner of The Huff Alternative Income Fund,
L.P. Mr. Huff disclaims beneficial ownership of the shares held by the
Fund, L.P.
(f) Does not include 1,764,706 shares of Common Stock issuable upon conversion
of the Series C Convertible Preferred Stock.
(g) Includes the following shares that the named individuals have the right to
purchase within 60 days from February 28, 1997 pursuant to options:
<TABLE>
<S> <C> <C>
Fred G. Astor, Jr. . . . . . . . . . . . . . . . . . . . . 77,427
Bert G. Clifford . . . . . . . . . . . . . . . . . . . . . 8,325
O. Gene Gabbard . . . . . . . . . . . . . . . . . . . . . . 17,500
Campbell B. Lanier, III . . . . . . . . . . . . . . . . . . 7,500
Maurice P. O'Connor . . . . . . . . . . . . . . . . . . . . 25,554
William H. Scott, III . . . . . . . . . . . . . . . . . . . 37,500
Allen E. Smith . . . . . . . . . . . . . . . . . . . . . . 106,149
Donald W. Weber . . . . . . . . . . . . . . . . . . . . . . 17,500
-------------
Total . . . . . . . . . . . . . . . . . . . . . . . . . 297,455
=============
</TABLE>
(h) Includes 464,417 shares held of record by The Burton Partnership, Limited
Partnership, of which Mr. Burton is the sole general partner; 654,893
shares held of record by South Atlantic Venture Fund II, Limited
Partnership, of which South Atlantic Venture Partners II, Limited
Partnership is the sole general partner, of which Mr. Burton is the
managing general partner; and 464,417 shares held of record by South
Atlantic Venture Fund III, Limited Partnership, of which South Atlantic
Venture Partners III, Limited Partnership is the sole general partner, of
which Mr. Burton is the managing general partner.
(i) Includes 116,012 shares held in escrow by the First National Bank of West
Point in connection with the Company's acquisition of Unicel. Also
includes 542,176 shares (108,288 shares of which are currently held in
escrow) held of record by Coral B. Clifford, Mr. Clifford's wife.
(j) Includes 176,191 shares held of record by The Charitable Remainder
Education Trust III, of which Messrs. Gabbard and Lanier are trustees.
Messrs. Gabbard and Lanier disclaim beneficial ownership of these shares.
(k) Includes 2,200 shares held of record by Jane Lanier, Mr. Lanier's wife,
and 500 shares held by Mr. Lanier as custodian for his son. Mr. Lanier
disclaims beneficial ownership of such shares.
(l) Includes 151 shares held in escrow by the First National Bank of West
Point in connection with the Company's acquisition of Unicel, 105 shares
held by Mr. O'Connor as trustee for his son and 100 shares held by Mr.
O'Connor's wife as trustee for his daughter.
(m) Includes warrants to purchase 128 shares which are exercisable
immediately.
(n) Includes 500 shares held of record by Martha Scott, Mr. Scott's wife,
individually, 3,600 shares held by Martha Scott as trustee, and 100 shares
held of record by Mr. Scott's minor daughter. Mr. Scott disclaims
beneficial ownership of such shares.
45
<PAGE> 46
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has adopted a policy requiring that any material
transactions between the Company and persons or entities affiliated with
officers, directors or principal stockholders of the Company be on terms no
less favorable to the Company than reasonably could have been obtained in arm's
length transactions with independent third parties. The following is a summary
of certain transactions and relationships among the Company and its associated
entities, and among the directors, executive officers and stockholders of the
Company and its associated entities.
ITC HOLDING
As of February 28, 1997, ITC Holding owned approximately 27% of the
outstanding Common Stock of the Company. ITC Holding, through certain of its
subsidiaries, from time to time provides the Company with various services,
consisting principally of administrative and staff services, technical services
and access services (switch technicians and maintenance) and facilities for the
Company's cellular switching office in Lanett, Alabama. The amounts paid by
the Company to ITC Holding during the fiscal years ended December 31, 1994,
1995 and 1996 for such services were $553,873, $568,252 and $841,230,
respectively. The Company will periodically have outstanding affiliated
receivables and payables related to timing of payments for such administrative
services.
The Company has previously participated in a $5.0 million credit
facility through Valley Finance, Inc., an indirect wholly-owned subsidiary of
ITC Holding ("Valley Finance"). Repayment of this prior credit facility was
guaranteed by ITC Holding, and ITC Holding agreed with the Company that, among
other things, ITC Holding would obtain or provide alternative financing for the
Company substantially equivalent to the credit facility in the event that
actions taken by ITC Holding or any of its affiliates (other than the Company)
were to result in termination of the credit facility. In connection with the
Company's acquisition of Unicel, Valley Finance entered into a credit facility
with National Bank for Cooperatives. All amounts drawn under such credit
facility by Valley Finance were loaned by Valley Finance to InterCel and were
repaid in full with a portion of the proceeds from the Stock Offering and the
Unit Offering.
On January 1, 1995, the Company, ITC Holding, InterServ Services
Corporation, a subsidiary of ITC Holding, and other parties entered into a
Georgia general partnership, pursuant to which the partners own and operate a
multi-engine plane. The Company owns a 0.175% interest in this partnership.
The Company paid $76,055 to this partnership during the fiscal year ended
December 31, 1996.
On March 10, 1994, the Company entered into a lending arrangement with
ITC Holding pursuant to which the Company borrowed $9.4 million from ITC
Holding to repay previously outstanding borrowings under the credit facility
with National Bank for Cooperatives. The loan from ITC Holding, which was
unsecured and prepayable (without penalty) at any time, bore interest at the
same rates that the Company would have been paying had the amounts remained
outstanding under such credit facility. Amounts due under the loan were payable
at various times through March 1997, but all amounts may be made immediately
due and payable on demand (with advance written notice) by ITC Holding. The
Company repaid the loan from ITC Holding with a portion of the net proceeds of
the Stock Offering and the Unit Offering. ITC Holding paid all costs
associated with establishing this loan.
The Company utilizes fiber optic facilities of Interstate FiberNet,
Inc., an ITC Holding subsidiary ("IFN"), for backhaul and transport of
its PCS and cellular service operations. The Company paid $898,415 to IFN
during the fiscal year ended December 31, 1996. In addition, the Company has
recently entered into a co-location agreement with IFN for the lease of certain
space to allow the Company to co-locate certain of its network equipment with
facilities of IFN.
46
<PAGE> 47
The Company has also entered into an agreement with InterQuest, Inc., a
subsidiary of IFN ("InterQuest"), for the provision of operator and
directory assistance services branded with the "Powertel" name. The Company
paid $4,293 to InterQuest during the fiscal year ended December 31, 1996.
The Company has entered into an 18-month agreement, effective November
1, 1996, with DeltaCom, Inc., another subsidiary of ITC Holding ("DeltaCom"),
for the provision of long-distance services, which the Company then re-sells to
its customers. The Company paid $249,528 to DeltaCom during the fiscal year
ended December 31, 1996.
Certain officers and directors of the Company hold or have held
positions in ITC Holding and various subsidiaries of ITC Holding. See
"Management -- Directors and Executive Officers." In addition, certain Company
officers and directors have ownership interests in ITC Holding.
THE POWERTEL COMBINATION
Powertel, Inc., formerly Intercel PCS Services, Inc. and a wholly
owned subsidiary of the Company ("Powertel"), and Powertel PCS Partners
entered into a management agreement, dated as of October 28, 1994, pursuant to
which Powertel agreed to manage Powertel PCS Partners' acquisition of PCS
licenses and the subsequent development, construction and operation of its PCS
system in exchange for a carried partnership interest in Powertel PCS Partners
valued at 10% of the excess of the fair value of Powertel PCS Partners (on the
valuation date) over the capital contributions of the partners (subject to
certain restrictions).
On February 7, 1996, pursuant to a Business Combination Agreement
dated as of August 23, 1995, the Company, Powertel PCS Partners and the owners
of Powertel PCS Partners (other than the Company) exchanged their ownership
interest in Powertel PCS Partners for an aggregate of 9,686,410 shares of
Common Stock (the "Powertel Combination"). As of December 31, 1995 (prior to
consummation of the transaction), ITC Holding owned approximately 50.2% of the
outstanding Common Stock of the Company. Prior to the Powertel Combination,
ITC Holding was a partner in Powertel PCS Partners, holding (through a wholly
owned subsidiary) a 20.910% interest as of December 31, 1995. In addition,
certain other former partners of Powertel PCS Partners and/or their affiliates
directly or indirectly owned interests in ITC Holding, including SCANA (which,
as of December 31, 1995, owned approximately 9.9% of ITC Holding's outstanding
stock), and certain affiliates of NEIPCS Inc. (which, as of December 31, 1995,
owned approximately 11.2% of ITC Holding's outstanding stock) and certain
affiliates of South Atlantic PCS Corporation (which, as of December 31, 1995,
owned approximately 2.4% of ITC Holding's outstanding stock). Mr. Timmerman
and Robert A. Dolson, President of NEIPCS Inc., serve on the Board of Directors
of ITC Holding. ITC Holding and certain directors and officers of ITC Holding
and the Company have substantial investments in affiliates of South Atlantic PCS
Corporation.
Loan from Powertel. Powertel PCS Partners loaned approximately
$900,000 to the Company, at an annual interest rate of 8% (the "Powertel
Loan"), to pay expenses associated with the Company's combination with Powertel
PCS Partners and the Stock Offering and the Unit Offering. The Powertel Loan
was eliminated on February 7, 1996 in connection with the Company's combination
with Powertel PCS Partners.
47
<PAGE> 48
OTHER TRANSACTIONS
As of February 28, 1997, SCANA owned approximately 17% (without taking
into consideration the Series B Convertible Preferred Stock or Series D
Convertible Preferred Stock) of the outstanding Common Stock of the Company.
In addition, Messrs. Gressette and Timmerman are directors of the Company and
are directors and executive officers of SCANA. Pursuant to the SCANA Stock
Purchase Agreement, SCANA has agreed to purchase 50,000 shares of Series D
Convertible Preferred Stock for $22.5 million. In addition, the Company
purchased certain generating equipment from SCANA for approximately $3.5
million in 1996. See "Business -- The Preferred Stock Sales."
As of February 28, 1997, Huff owned approximately 7.5% (without taking
into consideration the Series C Convertible Preferred Stock) of the
outstanding Common Stock of the Company. Pursuant to the Huff Stock Purchase
Agreement, Huff has agreed to purchase 50,000 shares of Series C Convertible
Preferred Stock for $22.5 million. See "Business -- The Preferred Stock Sales."
The Company purchases certain equipment and services related to the
buildout of its PCS System from Ericsson and certain of Ericsson's
subsidiaries. Ericsson owns all of the Series A Preferred Stock of the
Company. The Company's total purchases for equipment and services were $71.0
million in 1996. In addition, Ericsson provides the Company with financing for
such purchases under the Vendor Financing Agreement.
The Company sells cellular telephones and provides cellular services
to certain of its affiliates and their employees. Revenues recorded by the
Company for these sales and services were approximately $258,411, $248,176 and
$233,956 in 1994, 1995 and 1996, respectively.
The Company is currently negotiating a master site lease agreement and
construction management agreement with TowerCom, Inc. ("TowerCom"), a company
that is 45% owned by South Atlantic Venture Fund III, Limited Partnership of
which Mr. Burton is the managing general partner. Under the proposed terms of
these agreements, TowerCom would fund the construction of certain new tower
facilities where the Company would perform construction management services
for such construction projects. Subsequent to construction, the Company would
lease tower space at such facilities for equipment cell sites. The Company
anticipates that approximately five sites will be built and leased pursuant to
these agreements.
Beginning in November 1991 the Company has been leasing a building
located in Lanett, Alabama, from Riverside Corporation, in which the mother and
sisters of William H. Scott, III have the majority ownership interest. The
lease runs for a period of five years, with options to renew for three
successive five-year periods. ITC Holding subleased the building from the
Company during the period from November 1991 to April 1992. The total amount
payable during the term of this lease (not including any renewal thereof) is
$141,000 (approximately $2.94 per square foot per year).
48
<PAGE> 49
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K
<TABLE>
<S> <C>
(a)(1) Financial Statements.
The following financial statements of InterCel, Inc. are
filed as a part of this report and are attached hereto as
pages F-1 through F-22.
Report of Independent Public Accountants on Financial
Statements
Consolidated Balance Sheet as of December 31, 1996 and 1995
Consolidated Statements of Income for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1996, 1995 and 1994
Notes to Financial Statements
(a)(2) Financial Statement Schedules.
The following financial statement schedules of InterCel, Inc.
are filed as a part of this report and are attached hereto
as pages S-1 and S-2.
Report of Independent Public Accountants on Schedules
Schedule II - Valuation and Qualifying Accounts for the
years ended December 31, 1996, 1995 and 1994
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable, and therefore have been
omitted.
</TABLE>
49
<PAGE> 50
(a)(3) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------ -------------------
<S> <C> <C>
* 2(a) Business Combination Agreement dated as of August 23, 1995 by and among InterCel, Inc., Powertel PCS
Partners, L.P., the partners of Powertel PCS Partners, L.P. and the stockholders of certain of the
partners of Powertel PCS Partners, L.P. (Filed as Exhibit 2(a) to Registration Statement on Form S-1,
File No. 33-96218 ("February 1996 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 February 1996 Form S-1 and incorporated
herein by reference.)
* 3(a) Restated Certificate of Incorporation dated June 3, 1992 of InterCel, Inc. (Filed as Exhibit 3(a) to
1993 Form S-1 and incorporated herein by reference.)
* 3(b) Second Restated Certificate of Incorporation of InterCel, Inc. (Filed as Exhibit 3(b) to February
1996 Form S-1 and incorporated herein by reference.)
* 3(c) Restated By-laws of InterCel, Inc. (Filed as Exhibit 3(b) to 1993 Form S-1 and incorporated herein by
reference.)
* 4(a) Indenture dated as of February 7, 1996 between InterCel, Inc. and Bankers Trust Company, as Trustee,
relating to the 12% Senior Discount Notes Due 2006 of InterCel, Inc. (Filed as Exhibit 4(a) to
February 1996 Form S-1 and incorporated herein by reference.)
* 4(b) Warrant Agreement dated as of February 7, 1996 between InterCel, Inc. and Bankers Trust Company, as
Warrant Agent. (Filed as Exhibit 4(b) to February 1996 Form S-1 and incorporated herein by
reference.)
* 4(c) Form of Indenture (including form of Note) between InterCel, Inc. and Bankers Trust Company, as
Trustee, relating to the 12% Senior Discount Notes Due 2006 of InterCel, Inc. (Filed as Exhibit 4(c)
to Registration Statement on Form S-1, File No. 333-2748 (the "April 1996 Form S-1") and incorporated
herein by reference.)
* 4(d) 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. (Filed as Exhibit 10(tt) to the Form 10-Q for the quarter ended September 30, 1996
(the "1996 Third Quarter 10-Q"), and incorporated herein by reference.)
* 4(e) 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. (Filed as Exhibit 10(uu) to the 1996 Third Quarter 10-Q and incorporated herein by
reference.)
4(f) Certificate of Designations, Powers, Preferences and Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of Series C Convertible Preferred Stock of
InterCel, Inc.
4(g) Certificate of Designations, Powers, Preferences and Relative, Participating or Other Rights, and the
Qualifications, Limitations or Restrictions Thereof, of Series D Convertible Preferred Stock of
InterCel, Inc.
* 10(a) 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 December 31, 1991, File No. 33-41230
and incorporated herein by reference.)
* 10(b) InterCel, Inc. 1995 Employee Restricted Stock Plan (as amended on November 17, 1995). (Filed as
Exhibit 10(e) to February 1996 Form S-1 and incorporated herein by reference.)
</TABLE>
50
<PAGE> 51
<TABLE>
<S> <C> <C>
* 10(c) InterCel, Inc. 1991 Stock Option Plan (as amended on November 17, 1995). (Filed as Exhibit 10(f) to
February 1996 Form S-1 and incorporated herein by reference.)
* 10(d) InterCel, Inc. Amended Nonemployee Stock Option Plan. (Filed as Exhibit 10(q) to Annual Report on
Form 10-K for the year ended December 31, 1994, File No. 0-23102 ("1994 Form 10-K"), and incorporated
herein by reference.)
* 10(e) 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(f) Directed Employee Benefit Trust Agreement between The Charles Schwab Trust Company and InterCel, Inc.
(Filed as Exhibit 10(jjj) to 1994 Form 10-K and incorporated herein by reference.)
* 10(g) InterCel, Inc. 401(k) Profit Sharing Plan. (Filed as Exhibit 10(j) to February 1996 Form S-1 and
incorporated herein by reference.)
* 10(h) 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(i) Defined Benefit Pension Plan (Unity Telephone Company). (Filed as Exhibit 10(tt) to 1993 Form S-1
and incorporated herein by reference.)
* 10(j) Amendment to Unity Telephone Company Pension Plan dated June 29, 1992. (Filed as Exhibit 10(uu) to
1993 Form S-1 and incorporated herein by reference.)
* 10(k) 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(l) 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(m) 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(n) 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(o) 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 filed as Exhibit 10(q). (Filed as Exhibit 10(xxx) to 1994 Form 10-K and incorporated herein
by reference.)
* 10(p) Directors and Officers Insurance and Company Reimbursement Policy. (Filed as Exhibit 10(ii) to 1993
Form S-1 and incorporated herein by reference.)
* 10(q) Form of Indemnity Agreement. (Filed as Exhibit 10(jj) to 1993 Form S-1 and incorporated herein by
reference.)
* 10(r) 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(s) 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(t) 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 February 1996 Form S-1 and incorporated herein by reference.)
* 10(u) DMS-MTX Cellular Supply Agreement dated March 29, 1995 between InterCel, Inc. and Northern Telecom
Inc. (Filed as Exhibit 10(pp) to February 1996 Form S-1 and incorporated herein by reference.)
* 10(v) 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 February 1996 Form S-1 and incorporated herein by
reference.)
* 10(w) 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 February 1996 Form S-1 and incorporated
herein by reference.)
* 10(x) 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 February 1996 Form S-1 and incorporated herein by reference.)
* 10(y) Information and Network Products and Services Agreement dated June 16, 1994 between InterCel, Inc.
and GTE Telecommunications Service Incorporated. (Filed as Exhibit 10(uu) to February 1996 Form S-1
and incorporated herein by reference.)
* 10(z) 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 February 1996 Form S-1
and incorporated herein by reference.)
* 10(aa) Site Acquisition Services Agreement entered into as of September 15, 1995, by and between Silvergate,
L.L.C. and Powertel PCS Partners, L.P. (Filed as Exhibit 10(ww) to February 1996 Form S-1 and
incorporated herein by reference.)
* 10(bb) 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 February 1996 Form S-1
and incorporated herein by reference.)
* 10(cc) 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 February 1996
Form S-1 and incorporated herein by reference.)
* 10(dd) ITC Holding Company, Inc. Employees Pension Plan and Trust (as amended on December 15, 1994). (Filed
as Exhibit 10(zz) to February 1996 Form S-1 and incorporated herein by reference.)
* 10(ee) Memorandum of Understanding dated January 19, 1996 between InterCel, Inc. and Ericsson, Inc. (Filed
as Exhibit 10(aaa) to February 1996 Form S-1 and incorporated herein by reference.)
* 10(ff) 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 April 1996
Form S-1 and incorporated herein by reference.)
* 10(gg) Stock Purchase Agreement dated as of March 4, 1996 between InterCel, Inc. and MPX Systems, Inc.
(Filed as Exhibit 10(oo) to April 1996 Form S-1 and incorporated herein by reference.)
* 10(hh) Stock Purchase Agreement dated as of March 4, 1996 between InterCel, Inc. and Ericsson Inc. (Filed
as Exhibit 10(pp) to April 1996 Form S-1 and incorporated herein by reference.)
* 10(ii) 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 April 1996 Form S-1 and
incorporated herein by reference.)
* 10(jj) Acquisition Agreement dated as of March 4, 1996 between InterCel PCS Services, Inc. and Ericsson,
Inc. (Filed as Exhibit 10(rr) to April 1996 Form S-1 and incorporated herein by reference.)
</TABLE>
51
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<TABLE>
<S> <C> <C>
* 10(kk) Second Amendment to InterCel, Inc. Pension Plan dated as of August 21, 1996. (Filed as Exhibit
10(ss) to the 1996 Third Quarter 10-Q and incorporated herein by reference).
* 10(ll) License Agreement between LHS Communications, Inc. and Powertel, Inc. dated August 2, 1996. (Filed
as Exhibit 10(vv) to the 1996 Third Quarter 10-Q and incorporated herein by reference.)
* 10(mm) Amendment No. 1 to the Credit Agreement by and among Powertel, Inc. as Borrower, Ericsson, Inc., as
Initial Lender, and Ericsson, Inc., as Agent, dated as of October 31, 1996. (Filed as Exhibit 10(ww)
to the 1996 Third Quarter 10-Q and incorporated herein by reference.)
* 10(nn) Third Restated Certificate of Incorporation of InterCel, Inc. (Filed as Exhibit 10(yy) to the 1996
Third Quarter 10-Q and incorporated herein by reference.)
* 10(oo) Asset Purchase Agreement dated December 23, 1996 by and among Rural Cellular Corporation, Unity
Cellular Systems, Inc., InterCel Licenses, Inc. and InterCel, Inc. (Filed as Exhibit 99.1 to the
Form 8-K dated January 8, 1997 and incorporated herein by reference.)
10(pp) Stock Purchase Agreement dated as of March 14, 1997 between InterCel, Inc. and SCANA Communications,
Inc.
10(qq) Escrow Agreement dated as of March 14, 1997 by and among InterCel, Inc., SCANA Communications, Inc.
and Bankers Trust Company, as Escrow Agent.
10(rr) Stock Purchase Agreement dated as of March 14, 1997 between InterCel, Inc. and The Huff Alternative
Income Fund, L.P.
10(ss) Escrow Agreement dated as of March 14, 1997 by and among InterCel, Inc., The Huff Alternative Income
Fund, L.P. and Bankers Trust Company, as Escrow Agent.
11 Statement regarding Computation of Per Share Earnings.
12 Statement regarding Computation of Ratio of Earnings to Fixed Charges.
18 Letter from Arthur Andersen LLP regarding Change in Accounting Principle.
21 Subsidiaries of InterCel, Inc.
23 Consent of Arthur Andersen LLP.
24 Powers of Attorney for the following individuals: Campbell B. Lanier, III, O. Gene Gabbard, Lawrence
M. Gressette, Jr., William H. Scott, III, William B. Timmerman, Donald W. Weber, Donald W. Burton,
Bert G. Clifford and Maurice P. O'Connor (included on signature page hereto).
27 Financial Data Schedule (for SEC use only).
99 Press release dated March 17, 1997 regarding offerings of Senior Notes and Preferred Stock.
--------------------------------
* Previously filed.
</TABLE>
52
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed
on its behalf by the undersigned, thereto duly authorized.
INTERCEL, INC.
March 19, 1997 By: /s/ Allen E. Smith
- -------------- -------------------------------------
Date Allen E. Smith
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW BY ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints jointly and severally, Allen
E. Smith and Fred G. Astor, Jr., and each one of them, his attorneys-in-fact,
each with the power of substitution, for him in any and all capacities, to sign
any and all amendments to this Annual Report (Form 10-K) and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each said attorneys-in-fact, or his substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchanges Act of 1934,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Campbell B. Lanier, III Chairman of the Board of Directors March 19, 1997
- --------------------------------------------
Campbell B. Lanier, III
/s/ Allen E. Smith Chief Executive Officer, President and March 19, 1997
- -------------------------------------------- Director (principal executive officer)
Allen E. Smith
/s/ Fred G. Astor, Jr. Chief Financial Officer, Executive Vice March 19, 1997
- -------------------------------------------- President and (principal financial and
accounting officer)
Fred G. Astor, Jr.
/s/ O. Gene Gabbard Director March 19, 1997
- --------------------------------------------
O. Gene Gabbard
/s/ Lawrence M. Gressette, Jr. Director March 19, 1997
- --------------------------------------------
Lawrence M. Gressette, Jr.
/s/ William H. Scott, III Director March 19, 1997
- --------------------------------------------
William H. Scott, III
/s/ William B. Timmerman Director March 19, 1997
- --------------------------------------------
William B. Timmerman
</TABLE>
53
<PAGE> 54
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ---------- ----- ----
<S> <C> <C>
/s/ Donald W. Weber Director March 19, 1997
- --------------------------------------------
Donald W. Weber
/s/ Donald W. Burton Director March 19, 1997
- --------------------------------------------
Donald W. Burton
/s/ Bert G. Clifford Director March 19, 1997
- --------------------------------------------
Bert G. Clifford
/s/ Maurice P. O'Connor Director March 19, 1997
- --------------------------------------------
Maurice P. O'Connor
</TABLE>
54
<PAGE> 55
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... F-2
Consolidated Balance Sheets as of December 31, 1996 and
1995...................................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1996,
1995 and 1994............................................. F-4
Consolidated Statements of Changes in Stockholders' Equity
for the Years Ended
December 31, 1996, 1995 and 1994.......................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1996,
1995 and 1994............................................. F-6
Notes to Consolidated Financial Statements.................. F-7
</TABLE>
F-1
<PAGE> 56
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
InterCel, Inc.:
We have audited the accompanying consolidated balance sheets of INTERCEL,
INC. and subsidiaries (a Delaware corporation) as of December 31, 1996 and 1995
and the related consolidated statements of operations, changes in stockholders'
equity, and cash flows for the years ended December 31, 1996, 1995 and 1994.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of InterCel, Inc. and its
subsidiaries as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for the years ended December 31, 1996, 1995 and
1994 in conformity with generally accepted accounting principles.
As more fully discussed in Note 2 of Notes to Consolidated Financial
Statements, effective January 1, 1996, the Company changed its method of
accounting for promotional costs.
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 3, 1997 (except for Note 14, as to
which the date is March 13, 1997)
F-2
<PAGE> 57
INTERCEL, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1995
-------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents................................. $185,525 $ 630
Short-term Investments.................................... 75,659 0
Accounts Receivable, net of allowance for doubtful
accounts of $217 and $249 at
December 31, 1996 and 1995, respectively................ 8,228 4,253
Inventories (Note 2)...................................... 7,805 831
Prepaid Expenses and Other................................ 12,642 564
Current Portion of Deferred Income Taxes (Note 7)......... 0 270
-------- -------
289,859 6,548
-------- -------
PROPERTY AND EQUIPMENT, AT COST (Note 2):
Land...................................................... 1,222 1,001
Building and Towers....................................... 81,901 5,995
Equipment................................................. 74,419 15,579
Furniture and Fixtures.................................... 4,572 618
Assets Under Construction................................. 99,137 81
-------- -------
261,251 23,274
Less Accumulated Depreciation............................. (9,982) (5,208)
-------- -------
251,269 18,066
-------- -------
OTHER ASSETS:
Licenses, net of accumulated amortization of $813 at
December 31, 1996....................................... 365,964 0
Goodwill, net of accumulated amortization of $2,058 and
$1,445 at December 31,
1996 and 1995, respectively............................. 22,670 23,283
Investment in Powertel.................................... 0 19,224
Deferred Offering Costs, net of accumulated amortization
of $1,251 and $0 at December 31,
1996 and 1995, respectively............................. 13,687 1,621
Deferred Income Taxes (Note 7)............................ 2,190 1,405
Deferred Charges and Other, net of accumulated
amortization of $318 and $4,661 at
December 31, 1996 and 1995, respectively (Note 2)....... 1,478 4,183
-------- -------
405,989 49,716
-------- -------
$947,117 $74,330
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable-Trade.................................... $ 7,723 $ 883
Advance Billings and Customer Deposits.................... 1,352 828
Accrued Construction Costs................................ 15,214 0
Accrued Taxes Other Than Income........................... 3,609 322
Accrued Compensation...................................... 2,003 896
Accrued Other............................................. 3,491 2,613
Current Portion of Long-Term Obligations (Note 4)......... 118 29
-------- -------
33,510 5,571
-------- -------
LONG-TERM OBLIGATIONS (Note 4):
12% Senior Discount Notes due February 2006............... 216,465 0
12% Senior Discount Notes due May 2006.................... 217,345 0
Vendor Financing Agreement................................ 69,514 0
Credit Facility........................................... 0 24,602
Note Payable to ITC Holding Company....................... 0 3,500
Note Payable to Powertel.................................. 0 901
Other..................................................... 741 408
-------- -------
504,065 29,411
-------- -------
COMMITMENTS AND CONTINGENCIES (Notes 9 & 14)
MINORITY INTEREST IN SUBSIDIARY (Note 2).................... 2,535 2,674
-------- -------
STOCKHOLDERS' EQUITY (Note 5):
Series A Convertible Preferred Stock, $.01 Par Value;
100,000 Shares Authorized,
100,000 and 0 Shares Issued and Outstanding at December
31, 1996 and 1995, respectively......................... 1 0
Series B Convertible Preferred Stock; $.01 Par Value;
100,000 Shares Authorized,
100,000 and 0 Shares Issued and Outstanding at December
31, 1996 and 1995, respectively......................... 1 0
Common Stock, $.01 Par Value; 55,000,000 Shares
Authorized, 26,863,643 and 10,011,603
Shares Issued and Outstanding at December 31, 1996 and
1995, respectively...................................... 269 100
Paid-In Capital........................................... 430,053 32,440
(Accumulated Deficit) Retained Earnings................... (22,766) 4,845
Deferred Compensation..................................... (206) (371)
Treasury Stock at cost -- 52,483 and 52,283 shares at
December 31, 1996 and 1995, respectively................ (345) (340)
-------- -------
407,007 36,674
-------- -------
$947,117 $74,330
======== =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-3
<PAGE> 58
INTERCEL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1996 1995 1994
-------- ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
REVENUES AND SALES (Note 2):
Monthly Access Revenue.................................... $ 15,055 $12,244 $ 8,512
Airtime Revenue........................................... 6,197 4,938 3,981
Roaming Revenue........................................... 6,680 5,541 4,404
Toll Revenue.............................................. 2,675 2,026 1,483
Installation and Connection Revenue....................... 683 394 395
Other Revenue............................................. 585 241 128
-------- ------- -------
Total Service Revenues............................ 31,875 25,384 18,903
Equipment Sales........................................... 7,250 3,928 2,859
-------- ------- -------
Total Revenues and Sales.......................... 39,125 29,312 21,762
-------- ------- -------
OPERATING EXPENSES:
Cost of Services.......................................... 5,811 2,394 1,921
Cost of Equipment Sold.................................... 11,653 3,127 2,391
Operations................................................ 9,927 3,596 2,722
Selling, General and Administrative....................... 30,264 8,498 7,056
Depreciation and Amortization............................. 10,101 5,101 3,673
-------- ------- -------
Total Operating Expenses.......................... 67,756 22,716 17,763
-------- ------- -------
OPERATING (LOSS) INCOME..................................... (28,631) 6,596 3,999
-------- ------- -------
OTHER (INCOME) EXPENSE:
Interest (Income) Expense................................. (3,175) 1,657 635
Loss on Equity Investments................................ 34 133 0
Minority Interest in Cellular Partnership................. (474) (130) (124)
Miscellaneous Expense (Income)............................ 1,666 (298) 76
-------- ------- -------
Total Other (Income) Expense...................... (1,949) 1,362 587
-------- ------- -------
(LOSS) INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............................ (26,682) 5,234 3,412
INCOME TAX (BENEFIT) PROVISION.............................. (1,654) 2,230 1,535
-------- ------- -------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE...................................... (25,028) 3,004 1,877
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......... (2,583) 0 0
-------- ------- -------
NET (LOSS) INCOME................................. $(27,611) $ 3,004 $ 1,877
======== ======= =======
PER SHARE DATA:
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE...................................... ($ 1.00) $ 0.29 $ 0.19
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......... ($ 0.10) $ 0.00 $ 0.00
-------- ------- -------
NET (LOSS) INCOME PER COMMON SHARE.......................... ($ 1.10) $ 0.29 $ 0.19
======== ======= =======
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING..... 25,087 10,281 9,765
======== ======= =======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-4
<PAGE> 59
INTERCEL, INC
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
COMMON CONVERTIBLE
STOCK PREFERRED TOTAL
$.01 PAR STOCK $.01 PAID-IN RETAINED DEFERRED TREASURY STOCKHOLDERS'
VALUE PAR VALUE CAPITAL EARNINGS COMPENSATION STOCK EQUITY
-------- ----------- -------- -------- ------------ -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993......... $ 62 $0 $ 5,957 $ (36) $ 0 $ 0 $ 5,983
Issuance of Common Stock Under
Stock Options.................... 0 0 51 0 0 0 51
Issuance of Common Stock Connected
with Unicel Acquisition.......... 19 0 12,295 0 0 0 12,314
Purchase of 52,283 Shares of Common
Stock............................ 0 0 0 0 0 (340) (340)
Issuance of Common Stock, Net of
Issuance Expenses................ 18 0 13,471 0 0 0 13,489
Net Income......................... 0 0 0 1,877 0 0 1,877
---- -- -------- -------- ----- ----- --------
BALANCE, DECEMBER 31, 1994......... 99 0 31,774 1,841 0 (340) 33,374
Issuance of Common Stock Under
Stock Options.................... 1 0 171 0 0 0 172
Issuance of Common Stock Under
Restricted Stock Agreement....... 0 0 495 0 (495) 0 0
Amortization of Deferred
Compensation..................... 0 0 0 0 124 0 124
Net Income......................... 0 0 0 3,004 0 0 3,004
---- -- -------- -------- ----- ----- --------
BALANCE, DECEMBER 31, 1995......... 100 0 32,440 4,845 (371) (340) 36,674
Issuance of Common Stock Under
Stock Options.................... 1 0 181 0 0 0 182
Issuance of Common Stock, in
Connection with Powertel Business
Combination (Note 3)............. 97 0 129,943 0 0 0 130,040
Issuance of Common Stock, Net of
Issuance Expenses (Note 5)....... 71 0 109,919 0 0 0 109,990
Issuance of Warrants (Note 4)...... 0 0 6,092 0 0 0 6,092
Issuance of Series A Convertible
Preferred Stock, Net of Issuance
Expenses (Note 5)................ 0 1 75,739 0 0 0 75,740
Issuance of Series B Convertible
Preferred Stock, Net of Issuance
Expenses (Note 5)................ 0 1 75,739 0 0 0 75,740
Purchase of Treasury Shares........ 0 0 0 0 0 (5) (5)
Amortization of Deferred
Compensation..................... 0 0 0 0 165 0 165
Net Loss........................... 0 0 0 (27,611) 0 0 (27,611)
---- -- -------- -------- ----- ----- --------
BALANCE, DECEMBER 31, 1996......... $269 $2 $430,053 $(22,766) $(206) $(345) $407,007
==== == ======== ======== ===== ===== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-5
<PAGE> 60
INTERCEL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1996 1995 1994
--------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS (USED IN) PROVIDED FROM OPERATING ACTIVITIES:
Net (Loss) Income........................................... $ (27,611) $ 3,004 $ 1,877
Adjustments to Reconcile Net (Loss) Income to Net Cash
(Used in) Provided From Operating Activities --
Minority Interest in Loss of Subsidiary................... (474) (130) (124)
Cumulative Effect of Change in Accounting Principle....... 2,583 0 0
Loss on Equity Investment................................. 34 133 0
Bond Accretion............................................ 12,089 0 0
Amortization of Offering Costs of Notes................... 1,251 0 0
Depreciation and Amortization............................. 10,101 5,101 3,673
Deferred Compensation -- Restricted Stock................. 165 124 0
Deferred Taxes, Net....................................... (1,654) 605 1,423
Changes in Assets and Liabilities:
Increase in Accounts Receivable......................... (3,975) (1,133) (425)
Increase in Inventories................................. (6,974) (187) (185)
Increase in Other Assets................................ (12,423) (3,655) (1,995)
Increase (Decrease) in Accounts Payable, Accrued
Expenses and Other Current Liabilities................ 11,633 1,778 (1)
--------- -------- --------
Net Cash (Used in) Provided From Operating Activities..... (15,255) 5,640 4,243
--------- -------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital Expenditures........................................ (233,551) (7,661) (2,866)
Increase in Accrued Construction Costs...................... 15,214 0 0
Short-Term Investments...................................... (75,659) 0 0
Cash Acquired in Powertel Business Combination.............. 15,353 0 0
Acquisition of Atlanta License.............................. (195,242) 0 0
Other License Costs......................................... (15,199) 0 0
Cash Paid for Unicel Acquisition, Net of Cash Acquired...... 0 0 (4,062)
Investment in Powertel...................................... 0 (16,975) (2,382)
Investment in RTFC Subordinated Capital Certificates........ 0 1,841 0
--------- -------- --------
Net Cash Used In Investing Activities..................... (489,084) (22,795) (9,310)
--------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds From Sale of Common Stock, Net of Offering
Expenses.................................................. 109,990 0 13,540
Proceeds From Sale of Preferred Stock, Net of Offering
Expenses.................................................. 151,480 0 0
Proceeds From Issuance of Bonds and Warrants -- February
Offering, Net............................................. 192,150 0 0
Proceeds From Issuance of Bonds -- April Offering, Net...... 193,152 0 0
Borrowings Under Vendor Financing Agreement................. 69,514 0 0
Repayments of Loan Agreements............................... (24,602) (2,183) (42,271)
(Repayments to) Advances From Affiliates.................... (3,500) (1,460) 5,051
Proceeds from Other Debt, Net............................... 162 21,723 28,432
Other, Net.................................................. 888 (802) 452
--------- -------- --------
Net Cash Provided From Financing Activities............... 689,234 17,278 5,204
--------- -------- --------
NET INCREASE IN CASH........................................ 184,895 123 137
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR.............. 630 507 370
--------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 185,525 $ 630 $ 507
========= ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Paid During the Year for Interest, Net of Amounts
Capitalized............................................... $ 2,005 $ 1,296 $ 574
Cash Paid During the Year for Income Taxes.................. 103 1,557 712
Noncash Investing and Financing Activities:
Fair Value of Assets Acquired in Powertel Business
Combination............................................. 130,041 0 0
Total Capitalized Interest................................ 29,039 0 0
Fair Value of Common Stock Issued in Unicel Acquisition... 0 0 12,314
Fair Value of Common Stock Purchased...................... (5) 0 (340)
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
F-6
<PAGE> 61
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995, AND 1994
1. ORGANIZATION AND NATURE OF BUSINESS
InterCel, Inc. (the "Company") was incorporated in Delaware in April 1991.
The Company operates a cellular telephone system in contiguous portions of four
rural service areas ("RSAs") in eastern Alabama and western Georgia, as well as
the Bangor, Maine metropolitan service area ("MSA") and Maine RSA 2 and RSA 3
(the "Company Service Area"). The Company Service Area has a population of
approximately 807,700 people (according to a 1996 industry publication) and
covers approximately 100 miles of Interstate Highway 85 and 40 miles of
Interstate Highway 185 in the Alabama/Georgia market as well as over 200 miles
of Interstate Highway 95 and major portions of U.S. Route 1 along the coastline
in the Maine market.
On January 31, 1994, the Company acquired (the "Unicel Acquisition") Unity
Cellular Systems, Inc. ("Unicel"). Unicel is the wireline provider of cellular
telephone service for the Bangor, Maine MSA and for Maine RSA 3 (which includes
Augusta, the state capital), and is the managing partner of (with a 51% interest
in) the Maine RSA 2 Cellular Partnership (the "Northern Maine Partnership" or
the "Partnership"), a partnership which is the wireline provider of cellular
service in Maine RSA 2. The Bangor MSA and Maine RSA 2 and RSA 3 constitute a
"cluster" of contiguous properties that have a population of approximately
512,300 people (according to industry publications). On December 23, 1996, the
Company entered into an asset purchase agreement to sell its interest in Unicel
and the Northern Maine Partnership. See Note 13.
In addition to the existing cellular properties, the Company had a 13.396%
ownership interest in Powertel PCS Partners, L.P. ("Powertel"), a partnership
formed to pursue licenses in the Federal Communication Commission's personal
communications services ("PCS") auction. On February 7, 1996, pursuant to a
Business Combination Agreement dated August 23, 1995, among the Company,
Powertel, and the owners of Powertel, such owners (other than the Company)
exchanged their ownership interests in Powertel for an aggregate of 9,686,410
shares of the Company's common stock in a private placement (Note 3).
On June 28, 1996, the Company acquired the PCS license for the Atlanta
major trading area ("MTA") from GTE Mobilnet, Inc. for approximately $195
million. The Company now holds PCS licenses to provide service in contiguous
parts of ten southeastern states in the four MTAs of Atlanta, Georgia;
Jacksonville, Florida; Memphis, Tennessee/Jackson, Mississippi; and Birmingham,
Alabama. Additionally, in January 1997, the Company was the winning bidder for
additional PCS licenses in 13 Basic Trading Areas ("BTAs") in Tennessee,
Kentucky and Indiana (Note 14). These MTAs and BTAs cover approximately 24.3
million persons (according to industry publications) and provide the Company
with one of the largest contiguous PCS footprints in the southeastern United
States. The Company is currently providing PCS in 16 markets within its service
territory and is in the process of developing and constructing the PCS systems
in numerous other markets.
2. SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements are prepared on the accrual basis of
accounting and include the accounts of the Company and all majority-owned
subsidiaries. All significant intercompany balances have been eliminated.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-7
<PAGE> 62
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SOURCE OF SUPPLIES
The Company relies on local telephone companies and other companies to
provide certain communications services. Although management feels alternative
telecommunications facilities could be found in a timely manner, any disruption
of these services could have an adverse effect on operating results.
Although the Company attempts to maintain multiple vendors for each
required product, its inventory and equipment, which are important components of
its operations, are each currently acquired from one to three sources. In
addition, some of the Company's suppliers have limited resources and production
capacity. If the suppliers are unable to meet the Company's needs as it builds
out its network infrastructure and sells services and equipment, then delays and
increased costs in the expansion of the Company's network infrastructure or
losses of potential customers could result, which would affect operating results
adversely.
PRESENTATION
Certain prior year amounts have been reclassified to conform to the current
year presentation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, demand deposits, and
short-term investments with original maturities of three months or less.
CREDIT RISK
The Company's accounts receivable potentially subject the Company to credit
risk, as collateral is generally not required. The Company's risk of loss is
limited due to advance billings to customers for services and the ability to
terminate access on delinquent accounts. The concentration of credit risk is
mitigated by the large number of customers comprising the customer base. The
carrying amount of the Company's receivables approximates their fair value.
INVENTORIES
The Company maintains inventories for resale of wireless handsets and
accessory parts (i.e., antennae, batteries, cable, etc.). Inventory is valued at
the lower of average cost (which approximates first-in, first-out) or market.
INVESTMENTS
Investments having maturities of more than three months, but less than one
year are categorized as held-to-maturity. Accordingly, they are carried at cost,
without recognition of gains or losses deemed to be temporary, because the
Company has both the intent and ability to hold these investments to maturity.
At December 31, 1996, the fair value of these investments approximated cost.
PROPERTY AND DEPRECIATION
Property and equipment are recorded at cost, including certain engineering
costs. The Company records depreciation using the straight-line method over the
estimated useful lives of the assets, which are 10 to 20 years for towers,
buildings, and improvements; 3 to 10 years for equipment; and 5 to 10 years for
furniture and fixtures. The Company's policy is to remove the cost and
accumulated depreciation of retirements from the accounts and recognize the
related gain or loss upon the disposition of assets. Such gains and losses were
not material for any period presented.
F-8
<PAGE> 63
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ASSETS UNDER CONSTRUCTION
Expenditures to construct the Company's cellular network and PCS system are
recorded as assets under construction until the assets are placed in service.
When the assets are placed in service, they are transferred to the appropriate
property and equipment category and depreciated.
The Company capitalizes interest incurred on borrowings related to assets
under construction. Of the total 1996 capitalized interest of $29.0 million,
$5.3 million was attributed to property, plant and equipment in 1996, of which
$2.9 million is included in assets under construction at December 31, 1996.
There was no capitalized interest in 1995 and 1994.
LICENSES
Licenses, which consist of costs incurred to acquire PCS licenses,
including capitalized interest of $23.7 million, and certain microwave
relocation costs, are stated at cost less accumulated amortization and are being
amortized using the straight line method over 40 years.
GOODWILL
On January 31, 1994, the Company consummated the Unicel Acquisition. In
conjunction with this Acquisition, the Company recorded goodwill of $24.7
million due to the purchase price exceeding the value of the net assets
acquired.
Goodwill is stated at cost less accumulated amortization and is amortized
using the straight-line method over 40 years.
DEFERRED OFFERING COSTS
Through December 31, 1995, the Company had deferred $1.6 million of
expenses associated with the offering of its common stock and the concurrent
offering of units consisting of 12% Senior Discount Notes due February 2006 and
warrants (the "February Offerings") (Notes 4 and 5). During 1996, the Company
recorded an additional $20.8 million of expenses related to the February
Offerings, as well as the April offering of 12% Senior Discount Notes due May
2006 (the "April Offering") (Note 5). Upon completion of the February and April
Offerings, costs of $7.5 million related to the common stock offering were
netted against the proceeds from such offering. Net costs of $14.9 million
related to the February Offering and April Offering will be amortized over the
life of the related notes (10 years).
During 1996, the Company amortized $1.3 million related to these deferred
Offering costs.
DEFERRED CHARGES AND OTHER
The Company offers certain promotional programs under which a customer can
receive either a free cellular telephone, a substantial discount toward a
cellular telephone, or a credit toward future monthly service in return for
signing a noncancelable cellular telephone service agreement for a term of one
to three years. Should a customer cancel service prior to expiration of his
service agreement or be disconnected for nonpayment, the customer becomes liable
to the Company for the full original credit issued under this program. It is the
Company's policy to establish a full reserve for receivables that arise as a
result of such cancellations.
The Company had deferred costs associated with these programs and amortized
such costs over the specific terms of the contracts. Effective January 1, 1996,
the Company changed its method of accounting for these deferred promotional
costs to immediate expensing as incurred to better align itself with industry
practice and to correspond with its treatment of similar promotional costs for
PCS. The cumulative effect of
F-9
<PAGE> 64
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
this change in accounting principle was to increase the net loss for the year
ended December 31, 1996 by $2.6 million or $(0.10) per share.
Deferred charges also includes certain other investments and deferred
software costs. Amortization of deferred charges is included in depreciation and
amortization in the accompanying statements of operations.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company periodically reviews the value assigned to long-lived assets,
including property, goodwill, deferred charges, licenses and deferred offering
costs, to determine if any impairments are other than temporary. Management
believes the long-lived assets in the accompanying balance sheet are
appropriately valued.
MINORITY INTEREST
Minority Interest represents the 49% ownership interest in the Northern
Maine Partnership.
STOCK-BASED COMPENSATION PLANS
The Company accounts for its stock-based compensation plans under
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB 25"). Effective in 1996, the Company adopted the disclosure
option of Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") (Note 6) for all options granted
subsequent to January 1, 1995. SFAS 123 defines a fair value based method of
accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. SFAS 123 requires that companies which do not
choose to account for stock-based compensation as prescribed by this statement
shall disclose the pro forma effects on earnings and earnings per share as if
SFAS 123 had been adopted. Additionally, certain other disclosures are required
with respect to stock compensation and the assumptions used to determine the pro
forma effects of SFAS 123.
REVENUE RECOGNITION
The Company earns revenues by providing cellular and PCS service to both
local subscribers and subscribers of other cellular carriers traveling
("roaming") through the company service area as well as from sales of cellular
and PCS equipment. Service revenue from local subscribers consists of the base
monthly service fee and airtime revenue. Generally, base monthly service fees
are billed one month in advance, but are recognized when earned. The Maine
Market has approximately 7% of its monthly access fees being billed in arrears,
after it is earned. Airtime revenues are recognized when service is provided.
Roamer revenues consist of the airtime fees charged to certain nonsubscribers
for use of the cellular network while traveling in the service area. Roamer
revenues are recognized when the service is rendered.
Long-distance revenues ("toll revenues") are charged to both local and
roamer users and are recognized when service is provided. Equipment sales are
recognized upon delivery of the equipment to the customer. Other revenues
consist of equipment installation charges and connection fees and are recognized
when earned.
NET INCOME (LOSS) PER SHARE
Net income per share for 1995 and 1994 was computed using the weighted
average number of shares outstanding, adjusted for common stock equivalents. Net
loss per share for 1996 does not include the impact of common stock equivalents
as their effect would be antidilutive.
F-10
<PAGE> 65
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
3. POWERTEL BUSINESS COMBINATION AND ATLANTA PCS LICENSE ACQUISITION
On February 7, 1996, pursuant to a Business Combination Agreement dated
August 23, 1995, among the Company, Powertel, and the owners of Powertel, such
owners (other than the Company) exchanged their ownership interests in Powertel
for an aggregate of 9,686,410 shares of the Company's common stock in a private
placement. The combination was recorded under the purchase method of accounting;
accordingly, the results of operations of Powertel for the period from February
7, 1996, are included in the accompanying consolidated financial statements. The
purchase price of $130.0 million has been allocated to assets acquired and
liabilities assumed based on fair market value at the date of acquisition, as
determined by an independent appraisal, and is summarized as follows (in
millions):
<TABLE>
<S> <C>
Licenses.................................................... $113.4
Cash........................................................ 15.4
Other, net.................................................. 1.2
------
Total..................................................... $130.0
======
</TABLE>
On June 28, 1996, pursuant to an asset purchase agreement, dated as of
March 5, 1996, between InterCel Atlanta Licenses, Inc., a wholly-owned
subsidiary of the Company, and GTE Mobilnet Inc., the Company purchased GTE
Mobilnet Inc.'s license to provide PCS in the Atlanta MTA for approximately
$195.2 million.
The following unaudited pro forma condensed consolidated statements of
operations (in millions, except per share data) assume the combination and
acquisition of the Atlanta MTA license occurred at the beginning of each period
presented. In the opinion of management, all adjustments necessary to present
fairly such unaudited pro forma condensed statement of operations have been
made.
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Revenues.................................................. $ 39.1 $29.3
Net (Loss) Income......................................... (27.8) 2.1
Net (Loss) Income per Share............................... $(1.04) $0.06
</TABLE>
4. LONG-TERM OBLIGATIONS
Long-Term Obligations consist of the following (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
12% Senior Discount Notes due February 2006................. $216.5 $ 0.0
12% Senior Discount Notes due May 2006...................... 217.3 0.0
Vendor Financing Agreement.................................. 69.5 0.0
Credit Facility............................................. 0.0 24.6
Note Payable to ITC Holding Company, Inc. ("ITC")........... 0.0 3.5
Other....................................................... 0.9 1.3
------ -----
504.2 29.4
Less current portion........................................ 0.1 0.0
------ -----
Long-term obligations....................................... $504.1 $29.4
====== =====
</TABLE>
On February 1, 1996, the Company issued 35,747 units consisting of $357
million principal amount at maturity of the Company's 12% Senior Discount Notes
due 2006 (the "February Notes") and 1,143,904 warrants to purchase an equal
number of shares of the Company's common stock at an exercise price of $18.15
per share (Note 5), subject to adjustment (the "Unit Offering") for
approximately $200 million gross proceeds. The net proceeds were used to repay
all outstanding borrowings under the Credit Facility and the
F-11
<PAGE> 66
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
note payable to ITC, as well as to partially finance the buildout and operating
costs of the PCS system for the Birmingham, Jacksonville and Memphis MTAs. The
February Notes may be redeemed at any time on or after February 1, 2001, at the
option of the Company, at 106% of their principal amount at maturity, plus
accrued interest, declining to 100% of their principal amount at maturity, plus
accrued interest, on and after February 1, 2003. In addition, at any time prior
to February 1, 1999, up to 25% of the aggregate principal amount at maturity of
the February Notes may be redeemed from the proceeds of one or more public
equity offerings at 112% of their accreted value on the redemption date,
provided that after any such redemption at least $268.1 million aggregate
principal amount at maturity of the February Notes remain outstanding.
The February Notes will fully accrete to face value on February 1, 2001, at
which time they will bear interest, payable in cash, at a rate of 12% per annum
on each February 1 and August 1, commencing August 1, 2001.
On April 16, 1996, the Company issued $360 million aggregate principal
amount at maturity of the Company's 12% Senior Discount Notes due 2006 (the
"April Notes") for approximately $200 million gross proceeds in a public
offering. The net proceeds were used to partially finance the development,
construction and operating costs associated with the Company's PCS system. The
April Notes may be redeemed at any time on or after May 1, 2001, at the option
of the Company, at 106% of their principal amount at maturity, plus accrued
interest, declining to 100% of their principal amount at maturity, plus accrued
interest, on and after May 1, 2003. In addition, at any time prior to May 1,
1999, up to 25% of the aggregate principal amount at maturity of the April Notes
may be redeemed from the proceeds of one or more public equity offerings at 112%
of their accreted value on the redemption date, provided that after any such
redemption at least $270 million aggregate principal amount at maturity of the
April Notes remain outstanding.
The April Notes will fully accrete to face value on May 1, 2001, at which
time they will bear interest, payable in cash, at a rate of 12% per annum on
each May 1 and November 1, commencing November 1, 2001.
Unamortized original issue discount on the February Notes and April Notes
are being amortized using effective interest rates of 12.35% and 12%,
respectively. During 1996, total accretion of the original issue discount was
$39.6 million, of which $27.5 million was capitalized and $12.1 million is
included in interest (income) expense in the accompanying consolidated
statements of operations.
The February Notes and the April Notes contain certain restrictive
covenants including, but not limited to, restrictions related to additional
indebtedness, restricted payments, transactions with related parties and asset
sales. Upon a change in control (as defined in the February Notes and the April
Notes), the Company will be required to make an offer to purchase the February
Notes and the April Notes at a purchase price equal to 101% of their accreted
value, plus accrued interest, to the date of purchase.
On March 4, 1996, the Company entered into a $125 million credit agreement
(the "Vendor Financing Agreement") with Ericcson, Inc. regarding the purchase of
and vendor financing for PCS equipment and services. Under the terms of the
agreement, advances are made as requested by the Company to finance purchases
from Ericcson pursuant to the terms of the related equipment purchase agreement
(Note 9). The aggregate amount of the advances made in each calendar year will
be repaid in twenty equal quarterly installments, commencing on the last day of
the first calendar quarter to occur three years after the end of the calendar
year in which the advances were made and continuing for a period of five years
thereafter, with the last installment in an amount necessary to repay in full
the remaining unpaid principal amount of all the cumulative advances. On October
31, 1996, the Company requested and Ericcson agreed to increase the total
borrowing capacity under the agreement to $165 million. The Company had
borrowings outstanding under this line of credit of $69.5 million at December
31, 1996.
The interest rate under the Vendor Financing Agreement is based on the
applicable Eurodollar Rate plus 3% (8.563% at December 31, 1996) but can be
converted to a fluctuating interest rate per annum based on the higher of
Citibank N.A.'s base rate or .5% above the Federal Funds Rate, plus 1%, at the
discretion of the
F-12
<PAGE> 67
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
lender. Interest on the unpaid principal amount of each advance is payable in
arrears on the last day of each calendar quarter.
The Vendor Financing Agreement is secured by all the equipment purchased
with the proceeds therefrom, subject to the terms of the equipment purchase
agreement, as well as a pledge of the stock of the Company's subsidiaries that
hold the PCS licenses, except for the licenses for the BTAs. The Vendor
Financing Agreement contains certain restrictive covenants including, but not
limited to, restrictions on indebtedness, asset sales, and dividends, as well as
maintenance of certain financial ratios and minimums. The Company was in
compliance with all such covenants as of December 31, 1996.
In connection with the Unicel Acquisition in January 1994, the Company
entered into a new $30 million revolving credit facility (the "Credit Facility")
with the National Bank for Cooperatives to replace the Company's and Unicel's
previous debt facilities. All amounts borrowed under this facility were the
obligation of the Company. Under the terms of the Credit Facility, the maximum
amount available was reduced by $2 million on the first anniversary of the
closing date of the Facility. On the second anniversary of the closing date of
the Credit Facility (the "Termination Date"), the Credit Facility was to convert
to an eight-year secured term loan ($26.5 million maximum) that would mature on
the eighth anniversary of the Termination Date. However, all borrowings under
the Credit Facility were repaid in connection with the Powertel business
combination (Note 3) with proceeds from the 1996 stock offering and Unit
Offering.
On March 10, 1994, the Company entered into a revolving lending arrangement
with its former parent, ITC, under which ITC could lend to the Company from time
to time amounts representing ITC's excess available cash, pursuant to which $9.4
million of outstanding borrowings under the Company's credit facility were
repaid by ITC and loaned back to the Company. The loan from ITC, which was
unsecured and prepayable (without penalty) at any time, bore interest at the
same rates that the Company would have been paying had the amounts remained
outstanding under the Credit Facility. All borrowings under this lending
arrangement were repaid in connection with the Powertel business combination
(Note 3) with proceeds from the 1996 stock offering and the Unit Offering.
The carrying value of the April Notes, the February Notes, including the
related warrants, and Vendor Financing Agreement approximated market value at
December 31, 1996.
Scheduled maturities of long-term obligations are as follows (in millions):
<TABLE>
<S> <C>
1997........................................................ $ 0.1
1998........................................................ 0.1
1999........................................................ 0.1
2000........................................................ 13.0
2001........................................................ 13.9
Thereafter.................................................. 477.0
------
Total $504.2
======
</TABLE>
The indentures relating to the February Notes and the April Notes (the
"Indentures") and Vendor Financing Agreement contain certain restrictive
covenants, and any additional financing agreements may contain additional
restrictive covenants. The restrictions contained in the Indentures and the
Vendor Financing Agreement will affect, and in some cases will significantly
limit or prohibit, among other things, the ability of the Company to incur
indebtedness, make prepayments of certain indebtedness, pay dividends, make
investments, engage in transactions with stockholders and affiliates, issue
capital stock, create liens, sell assets and engage in mergers and
consolidations. If the Company fails to comply with the restrictive covenants in
the Indentures, the Company's obligation to repay the February Notes and the
April Notes may be accelerated. However, the limitations set forth in the
Indentures are subject to a number of important qualifications and exceptions.
In particular, while the Indentures restrict the Company's ability to incur
additional indebtedness
F-13
<PAGE> 68
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
by requiring compliance with specified leverage ratios, they permit the Company
and its subsidiaries to incur an unlimited amount of additional indebtedness to
finance the acquisition of inventory or equipment and up to $25 million of
additional indebtedness under one or more revolving credit or working capital
facilities and in each case to secure such indebtedness. In addition to the
restrictive covenants described above, 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 Vendor Financing Agreement, notwithstanding the ability of the Company
to meet its debt service obligations. An event of default under the Vendor
Financing Agreement would allow the lender thereunder to accelerate the maturity
of such indebtedness. In such event, a significant portion of the Company's
other indebtedness (including the February Notes and the April Notes) may become
immediately due and payable.
5. STOCKHOLDERS' EQUITY
In February 1996, the Company issued 7,124,322 shares of common stock in a
public offering at $16.50 per share. The net proceeds of the offering after
underwriting discount and offering expenses were approximately $110 million. The
Company used the proceeds of the offering to partially finance the buildout and
operating costs of the PCS system and to retire certain indebtedness.
In February 1996, in connection with the Unit Offering (Note 4), the
Company issued 1,143,904 warrants to purchase an equal number of shares of the
Company's common stock at an exercise price of $18.15 per share. The warrants
may be exercised at any time on or after August 1, 1996 and prior to February 1,
2006, after which any unexercised warrants will expire. At December 31, 1996, no
warrants had been exercised.
In February, 1996, the Company issued 9,686,410 shares of common stock at
$13.42 per share in connection with the Powertel business combination (Note 3).
On June 28, 1996, pursuant to a Stock Purchase Agreement dated as of March
4, 1996, between the Company and Ericsson, Inc., the Company issued to Ericsson
100,000 shares of nonvoting Series A Convertible Preferred Stock 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 SCANA
Communications, Inc. ("SCANA"), the Company issued to SCANA 100,000 shares of
nonvoting Series B Convertible Preferred Stock for an aggregate purchase price
of $75 million. Both series are convertible, at the option of the holder, at a
rate of 45.45 shares of the Company's Common Stock per share of Preferred Stock.
The Series A Convertible Preferred Stock is convertible any time subsequent to
June 28, 1998 and the Series B Convertible Preferred Stock is convertible any
time subsequent to June 28, 2000. Both series are redeemable, at the option of
the Company, in whole or in part, on a pro rata basis, at a redemption price of
$750 per share plus declared and unpaid dividends, anytime subsequent to June
28, 2001. Both series have a liquidation preference of $750 per share plus
unpaid dividends in the event of a liquidation, dissolution or winding up of the
Company.
The Company's certificate of incorporation empowers the Board of Directors
of the Company to redeem any of the Company's outstanding capital stock at the
lesser of fair market value or such holder's purchase price (if the stock was
purchased within a year of such redemption) to the extent necessary to prevent
the loss or secure the reinstatement of any license or franchise from any
governmental agency.
The Company's certificate of incorporation authorizes the Board of
Directors to issue, from time to time and without further stockholder action,
one or more series of preferred stock and to fix the relative rights and
preferences of the shares, inducing voting powers, dividend rights, liquidation
preferences, redemption rights, and conversion privileges.
F-14
<PAGE> 69
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. STOCK OPTION PLANS
Employee Stock Option Plan
Under the InterCel, Inc. 1991 Stock Option Plan (the "Stock Plan"),
2,000,000 shares of common stock are reserved for issuance upon exercise of
options. Substantially all of the employees of the Company are eligible to
receive options under the Plan. Management recommends to the Stock Option
Committee the number of options to grant based on management's analysis of the
employee's performance and level of responsibility. As of December 31, 1996,
approximately 1.7 million options had been granted under this plan.
The Stock Option Committee determines the periods within which options may
be exercised, but no option may be exercised more than ten years after the date
of grant. Options granted generally become exercisable 50% two years after the
date of grant, 25% three years after the date of grant, and 25% four years after
the date of grant. Options generally remain exercisable for a period of ten
years following the date of grant. The Board of Directors also may include in
each option granted under the Stock Plan certain additional limitations on the
recipient's right to exercise the option. Options under the Stock Plan may be
either "incentive stock options," as defined under Section 422 of the Internal
Revenue Code, or nonqualified options.
Nonemployee Stock Option Plan
Under the Company's Nonemployee Stock Option Plan (the "Nonemployee Plan"),
400,000 shares of Common Stock are authorized for issuance upon exercise of
options. All nonemployee directors of the Company, and all employees of
affiliates of the Company, are eligible to receive options under the Nonemployee
Plan. Options are granted to each nonemployee director upon his or her election
as a director, and are exercisable at the fair market value of the Common Stock
(as determined by the Board of Directors) on the date of grant.
On March 23, 1994, the Nonemployee Plan was amended to provide that the
options to purchase 10,000 shares of Common Stock (at an exercise price equal to
the fair market value of the Common Stock on the date of grant) would be granted
pursuant thereto to nonemployee directors upon their initial election or
appointment to the Board of Directors. The Nonemployee Plan, as so amended, does
not provide for discretionary option grants. Options generally become
exercisable as to 50% two years after the date of grant, as to an additional 25%
three years after the date of grant, and as to the remaining 25% four years
after the date of grant. As of December 31, 1996, 248,200 options had been
granted under this plan.
Options generally are exercisable at a price established by the Stock
Option Committee equal to at least 100% of the fair market value of the Common
Stock on the options' grant date, except that the exercise price with respect to
options granted to an individual who owns more than 10% of the combined voting
power of all classes of stock of the Company must be at least 110% of the fair
market value of the common stock on the date of grant. The full exercise price
for shares being purchased must be paid at the time of exercise in cash or, if
permitted by the particular option agreement, in whole or in part by delivery of
shares of Common Stock having a fair market value (on the delivery date) of not
less than the exercise price.
Statement of Financial Accounting Standards No. 123
The Company accounts for its stock-based compensation related to the Stock
Plan and the Non-Employee Plan under APB 25; accordingly, no compensation
expense has been recognized, as all options have been granted with an exercise
price equal to the fair value of the Company's stock on the date of grant. For
F-15
<PAGE> 70
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SFAS 123 pro forma purposes, the fair value of each option grant has been
estimated as of the date of grant using the Black-Scholes option pricing model
with the following assumptions:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Risk-free interest rate............................ 6.29% 5.53%
Expected dividend yield............................ 0 0
Expected lives..................................... 8.2 Yrs. 7.3 Yrs.
Expected volatility................................ 51% 52%
</TABLE>
Using these assumptions, the fair value of the stock options granted in
1996 and 1995 is $5.5 million and $4.7 million, respectively, which would be
amortized as compensation expense over the vesting period of the options. Had
compensation cost been determined consistent with the provisions of SFAS 123,
the Company's net loss and pro forma net loss per share, before the cumulative
effect of change in accounting principle for 1996 and net income and pro forma
net income per share for 1995 would have been as follows (in millions except per
share amounts):
<TABLE>
<CAPTION>
1996 1995
------ -----
<S> <C> <C>
Net (loss) income:
As Reported......................................... $(25.0) $ 3.0
Pro Forma........................................... $(27.0) $ 2.4
Net (loss) income per share:
As Reported......................................... $(1.00) $0.29
Pro Forma........................................... $(1.08) $0.23
</TABLE>
Because SFAS 123 has not been applied to options granted prior to January
1, 1995, the resulting pro forma compensation cost may not be representative of
that expected in future years.
A summary of the combined status of the Company's Stock and Non-Employee
Plans at December 31, 1994, 1995, and 1996 and changes during the years ended
December 31, 1995 and 1996 is presented in the following table:
<TABLE>
<CAPTION>
NUMBER OF WEIGHTED AVERAGE
SHARES PRICE PER SHARE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994....................... 639,365 $ 6.50
Granted.............................................. 440,200 14.04
Forfeited............................................ (45,124) 12.90
Exercised............................................ (39,671) 4.67
---------
Outstanding at December 31, 1995....................... 994,770 9.89
Granted.............................................. 788,398 18.63
Forfeited............................................ (49,707) 16.91
Exercised............................................ (41,308) 6.29
---------
Outstanding at December 31, 1996....................... 1,692,153 13.78
=========
</TABLE>
The following table summarizes, as of December 31, 1996, for the number of
options outstanding, the exercise price range, weighted average exercise price,
and remaining contractual lives by year of grant:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
NUMBER EXERCISE PRICE WEIGHTED REMAINING
YEAR OF GRANT OF SHARES RANGE AVERAGE PRICE CONTRACTUAL LIFE
- ------------- --------- --------------- ------------- ----------------
<S> <C> <C> <C> <C>
1996.............................. 762,837 $12.38 - $24.75 $18.63 9.4 Years
1995.............................. 389,730 $11.50 - $17.63 $14.18 8.5 Years
Pre-1995.......................... 539,586 $ 3.33 - $11.75 $ 6.50 6.4 Years
</TABLE>
F-16
<PAGE> 71
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Total stock options exercisable at December 31, 1996 were 401,264 at a
weighted average exercise price of $5.23.
Restricted Stock Plan
Under the Company's 1995 Employee Restricted Stock Plan adopted by the
Board of Directors on April 24, 1995 and approved by stockholders on December
20, 1995 (the "Restricted Stock Plan"), 200,000 shares of authorized but
unissued Common Stock, are reserved for issuance, 35,000 shares of which were
issued on April 24, 1995 (with a $.01 exercise price) and are outstanding as of
December 31, 1996. These restricted stock awards vest in three equal
installments on the first, second and third anniversaries of the date of grant.
The compensation associated with the restricted grants (i.e., the difference
between the market price of the Company's Common Stock on the date of grant and
the exercise price) is being amortized ratably over the three year vesting
period. Such compensation expense totaled $164,792 and $123,594 for the years
ended December 31, 1996 and 1995, respectively. Any unamortized deferred
compensation is reflected as a reduction to stockholders' equity in the
accompanying consolidated balance sheets. The Restricted Stock Plan is
administered by the Compensation Committee of the Board of Directors
7. INCOME TAXES
Prior to 1994, the Company was included in the consolidated income tax
return of ITC. However, for 1994 and subsequent years, the Company has filed a
separate Federal income tax return, and utilization of all credits and net
operating loss and other tax carryforwards is evaluated on a stand-alone basis.
The income tax (benefit) provision reflected in the accompanying financial
statements consisted of the following (in millions):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995 1994
------ ----- ------
<S> <C> <C> <C>
Current:
Federal................................................... $ 0.0 $1.4 $(0.1)
State..................................................... 0.0 0.2 0.2
----- ---- -----
0.0 1.6 0.1
----- ---- -----
Deferred:
Federal................................................... (1.4) 0.5 1.3
State..................................................... (0.3) 0.1 0.1
----- ---- -----
(1.7) 0.6 1.4
----- ---- -----
Total income tax (benefit) provision.............. $(1.7) $2.2 $ 1.5
===== ==== =====
</TABLE>
The following is a summary of the items which caused recorded income taxes
to differ from taxes computed using the statutory federal income tax rate:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Statutory federal tax (benefit) provision................... (34)% 34% 34%
Increase (decrease) in tax (benefit) provision resulting
from --
Goodwill amortization..................................... 1 4 6
Excess Original Issue Discount............................ 1 0 0
State taxes, net of Federal benefit....................... (10) 5 6
Other, net................................................ 0 0 (1)
Valuation Allowance....................................... 36 0 0
--- -- --
Actual income tax (benefit) provision....................... (6)% 43% 45%
=== == ==
</TABLE>
F-17
<PAGE> 72
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The sources of differences between financial accounting and tax basis of
assets and liabilities which gave rise to the net deferred tax asset are as
follows (in millions):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1996 1995
------------ ------------
<S> <C> <C>
Deferred assets
Net operating loss carryforwards.......................... $ 7.1 $ 3.1
Start Up Costs Capitalized................................ 4.7 0.0
Bond Accretion Capitalized................................ 4.9 0.0
Other..................................................... 0.4 0.6
------ -----
17.1 3.7
------ -----
Deferred liabilities
Depreciation.............................................. (3.6) (1.6)
Other..................................................... (0.1) (0.4)
------ -----
(3.7) (2.0)
------ -----
Net Deferred Tax Asset Before Valuation Allowance........... 13.4 1.7
Valuation Allowance......................................... (11.2) 0.0
------ -----
Net Deferred Tax Asset...................................... 2.2 1.7
Less: Current Portion....................................... 0.0 0.3
------ -----
Deferred Tax Asset -- Non-Current Portion................... $ 2.2 $ 1.4
====== =====
</TABLE>
The Tax Reform Act of 1986 provided for certain limitations on the
utilization of net operating loss carryforwards if certain events occur, such as
a 50% change in ownership. Also, the net operating loss carryforwards used to
affect any taxes calculated as alternative minimum tax could be significantly
less than the regular tax net operating loss carryforwards. The net operating
loss carryforwards ("NOLs") generated during 1996 will be used first to reduce
income taxes paid in 1994 and 1995 ($1.7 million) and then to offset taxable
income generated in future years, subject to the applicable limitations and
their expiration in 2011. Since it is currently not more likely than not that
the net deferred tax assets resulting from the NOLs will be realized, a
valuation allowance of $11.2 million has been provided in the accompanying
consolidated financial statements.
8. EMPLOYEE BENEFIT PLANS
Prior to 1995, as a subsidiary of ITC, the Company included its employees
as participants in ITC's pension plan (the "ITC Plan"). The plan provided
retirement, disability, and survivor benefits to eligible employees. The plan
covered all eligible employees of ITC and its majority-owned subsidiaries,
including the Company. The Company's policy was to fund pension cost in
accordance with applicable regulations. Total pension cost related to the ITC
Plan charged to expense in 1996, 1995 and 1994 was $0.0, $0.3 million and $0.2
million, respectively. As of December 31, 1995, the Company's interest in the
ITC Plan's net assets available for benefits and projected benefit obligation
were $0.2 and $0.1, respectively, as computed under Statement of Financial
Accounting Standards No. 87.
Prior to the Unicel Acquisition, employees of Unicel were included in the
Unitel (the former parent company of Unicel) pension plan. This plan covered all
eligible employees of Unitel and Unicel. This plan was curtailed with respect to
the Unicel employees participating in the plan and all benefit accruals were
frozen as of April 29, 1994. In connection with the Unicel Acquisition, the
assets and liabilities of the plan were separated by company and the assets and
liabilities of Unicel were the only assets which remained in the plan. As of
December 31, 1995, this plan's net assets available for benefits was $0.1
million and the projected benefit obligations was $0.1 million, as computed
under Statement of Financial Accounting Standards No. 87.
F-18
<PAGE> 73
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Effective February 1, 1995, the Company elected to freeze its participation
in the ITC Plan and offer a defined contribution 401(k) plan in its place. The
401(k) plan covers all full-time employees. The Company makes an annual
discretionary contribution to the plan ($0.4 and $0.2 million in 1996 and 1995,
respectively) based on each employee's earnings and matches employee
contributions at a rate of 50% of each 1% of employee contributions (up to 2% of
employee contributions) subject to applicable regulations.
On June 1, 1996, the Company spun off all assets attributable to its
employees from the ITC Plan into the Unity Cellular Systems, Inc. Pension Plan
which was simultaneously renamed the InterCel, Inc. Pension Plan (the "Plan").
Effective November 1, 1996, the Company notified participants in the Plan of the
intent to terminate the Plan. Such termination is expected to be completed
during the first quarter of 1997 and is not expected to have a material impact
on the consolidated financial statements. As of December 31, 1996, the Plan's
net assets available for benefits and projected benefit obligation were $0.3
million and $0.3 million, respectively.
9. COMMITMENTS AND CONTINGENCIES
Leases
Lease expenses relate to the lease of office and warehouse space, land for
cell sites, cell sites, dedicated lines and trunk access facilities, computer
equipment, and billboards and include leases with affiliates (Note 10). Rents
charged to expense were approximately $3.2 million, $0.5 million and $0.4
million for the years ended December 31, 1996, 1995 and 1994.
At December 31, 1996, future minimum lease payments under noncancelable
operating leases with initial remaining terms of more than one year are as
follows (in millions):
<TABLE>
<S> <C>
1997........................................................ $ 6.2
1998........................................................ 5.9
1999........................................................ 5.8
2000........................................................ 5.6
2001........................................................ 3.7
Subsequent years............................................ 4.0
-----
$31.2
=====
</TABLE>
Equipment Purchase Commitments
On March 4, 1996, the Company entered into a five-year equipment purchase
agreement with Ericsson, Inc. and the Vendor Financing Agreement (Note 4) for
the purchase of certain equipment and services required for the initial buildout
and operation of the Company's PCS system. Under the terms of the agreement, the
Company is required to purchase its first $75 million worth of PCS equipment and
services for the Atlanta MTA from Ericsson and utilize Ericsson as the exclusive
provider of certain PCS equipment for a period of three years for all its MTAs.
The term of exclusivity runs independently for each MTA and commences six months
prior to the date the Company first uses the equipment for commercial purposes.
The Company's grant of exclusivity is conditioned upon Ericsson's ability to
provide sufficient quantities of PCS equipment to meet the Company's needs in
the PCS markets, provide commercial service for each PCS market by pre-defined
dates, and continue to provide "state of the art" equipment. The Company had
total purchases under the agreement of $69.5 million for the year ended December
31, 1996.
On July 19, 1996, the Company entered into an equipment purchase agreement
with Nokia Mobile Phones Americas, Inc. for the purchase of PCS handsets. Under
the terms of the agreement, which extends to
F-19
<PAGE> 74
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 1998, unless terminated in accordance with the provisions therein,
the Company is committed to purchase a minimum of 50,000 handsets. The Company
had purchased a total of 16,312 handsets under this agreement as of December 31,
1996.
On August 22, 1996, the Company entered into an equipment purchase
agreement with Siemens Rolm Communications, Inc. for the purchase of PCS
handsets. Under the terms of the agreement, which extends to May 31, 1999,
unless terminated in accordance with the provisions therein, the Company is
committed to purchase a minimum of 50,000 handsets. No handsets had been
purchased under this agreement as of December 31, 1996.
On November 1, 1996, the Company entered into an equipment purchase
agreement with Mitsubishi Communications, Inc. for the purchase of PCS handsets.
Under the terms of the agreement, which extends to April 30, 1999, unless
terminated in accordance with the provisions therein, the Company is committed
to purchase a minimum of 50,000 handsets. No handsets had been purchased under
this agreement as of December 31, 1996.
Litigation
The Company is subject to litigation related to matters arising in the
normal course of business. As of December 31, 1996, management is not aware of
any asserted or pending material litigation or claims against the Company.
10. TRANSACTIONS WITH AFFILIATES
The Company leases certain dedicated and trunk telephone access lines, as
well as certain local and long-distance services, through its former parent,
ITC, and certain of ITC's other subsidiaries and related parties. ITC Holding
and its subsidiaries also provide various staff and administrative support
services for the Company. The total expense recorded by the Company for these
services was approximately $2.5 million, $0.6 million and $0.6 million for 1996,
1995 and 1994, respectively.
The Company purchases certain equipment and services related to the
buildout of its PCS system from preferred stockholders and certain of their
subsidiaries. The Company's total purchases for equipment and services were
$74.5 million in 1996.
The Company sells cellular telephones and provides cellular services to
certain of its affiliates and their employees. Revenues recorded by the Company
for these sales and services were approximately $0.3 million, $0.2 million and
$0.3 million in 1996, 1995 and 1994, respectively.
At December 31, 1996, and 1995, the Company owed approximately $0.2 million
and $0.1 million, respectively, to ITC and its subsidiaries for amounts due
under the agreements discussed above.
11. BUSINESS SEGMENT DATA
The Company's operations for 1996 are classified into two business
segments: cellular and PCS. Prior to 1996, the Company's operations consisted
entirely of cellular operations. Certain corporate administrative expenses have
been allocated to the segments based upon the nature of the expense. Summarized
financial information by business segment for 1996 is as follows (in millions):
<TABLE>
<CAPTION>
CELLULAR PCS TOTAL
-------- ------ ------
<S> <C> <C> <C>
Revenues.................................................... $34.7 $ 4.4 $ 39.1
Operating income (loss)..................................... 10.4 (39.0) (28.6)
Net income (loss), after effects of change in accounting
principle................................................. 8.2 (35.8) (27.6)
Identifiable assets......................................... 53.7 893.4 947.1
</TABLE>
F-20
<PAGE> 75
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
12. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------ -------
(IN MILLIONS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996 Quarters
Revenues and Sales................................... $ 7.8 $ 8.5 $ 9.1 $ 13.7
Operating Income (Loss).............................. 0.6 (1.2) (4.3) (23.7)
Net Income (Loss) Before Cumulative Effect of Change
in Accounting Principle........................... 0.5 (1.4) 0.1 (24.2)
Cumulative Effect of Change in Accounting
Principle......................................... (2.6) 0.0 0.0 0.0
Net (Loss) Income.................................... (2.1) (1.4) 0.1 (24.2)
Net (Loss) Income Per Share.......................... $(0.11) $(0.05) $ 0.0 $(0.90)
1995 Quarters
Revenues and Sales................................... $ 6.3 $ 7.1 $ 8.0 $ 8.0
Operating Income..................................... 1.1 1.7 2.0 1.7
Net Income........................................... 0.7 0.9 0.8 0.6
Net Income Per Share................................. $ 0.07 $ 0.08 $0.08 $ 0.06
1994 Quarters
Revenues and Sales................................... $ 4.0 $ 5.3 $ 6.1 $ 6.4
Operating Income..................................... 0.7 0.8 1.5 1.0
Net Income........................................... 0.3 0.3 0.8 0.5
Net Income Per Share................................. $ 0.04 $ 0.03 $0.07 $ 0.05
</TABLE>
13. ASSET SALE
Pursuant to an Asset Purchase Agreement, dated as of December 23, 1996,
between Unicel (the "Seller"), Intercel Licenses, Inc. (the "Licensee"), a
wholly owned subsidiary of the Company, and Rural Cellular Corporation (the
"Purchaser"), the Purchaser agreed to acquire substantially all the assets and
FCC licenses of the Seller, constituting the Seller's cellular telephone
operations in Maine, for approximately $77.4 million (the "Sale"). Closing of
the Sale is conditioned upon financing being obtained by the Purchaser, receipt
by Seller of consents from various parties to contracts with Seller and receipt
of all required regulatory approvals. The Sale is also subject to right of first
refusal by Cellco Partnership ("Cellco"), which owns the remaining 49% interest
in the Northern Maine Partnership. If Cellco exercises its right of first
refusal, the purchase price paid by the Purchaser could be reduced by
approximately $12.8 million (the portion of the purchase price allocated to the
Company's interest in the Partnership). The price that would then be paid by
Cellco upon exercise of its right of first refusal has not yet been determined.
If Cellco and the Seller are unable to agree upon a purchase price, the purchase
price may, as contemplated in the agreement governing the Partnership, be
determined by appraisal.
14. SUBSEQUENT EVENTS
On January 15, 1997, the FCC announced its acceptance of the Company's bid
for PCS licenses in the D and E block auctions for 13 BTAs covering
approximately 6.8 million persons located in Kentucky, Tennessee and Indiana
(according to industry publications). The winning bid amounts for these licenses
totaled approximately $31 million. In connection with this bid acceptance, the
Company was charged a bid withdrawal penalty of $1.2 million, which is included
in other expense in the accompanying consolidated statements of operations.
The Company intends to seek additional debt and equity financing in 1997 to
finance the purchase of the D and E block licenses and the initial buildout of
these properties. There can be no assurance that these financings will be
completed.
F-21
<PAGE> 76
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
While there are numerous cellular telephone systems operating in the United
States and other countries, the wireless telecommunications industry has only
limited operating history. Achieving profitable PCS operations will require
successfully competing with other PCS providers in all of its markets, as well
as with both existing and other future wireless providers. In addition,
successful PCS operations will require the development of products which are at
least as commercially effective as its wireless competitors. Any failure to
anticipate and respond to changes to technology and customer wants could have an
adverse effect on the PCS business.
Management anticipates incurring significantly greater expenses in future
periods as a result of the PCS line of business. As a result of such increased
expenses, management expects to incur significant operating losses in the
future. These losses and negative cash flow are expected to increase during the
initial years of the PCS System buildout and operation. There can be no
assurance that the Company will achieve or sustain profitability or positive
cash flow from operating activities in the future. If the Company cannon achieve
profitability or positive cash flow from operating activities, it may not be
able to meet its debt service or working capital requirements.
The successful implementation of the Company's PCS strategy is necessary
for the Company to be able to meet its debt service requirements. The buildout
of the PCS System may require substantial additional capital. In addition, the
Company's ability to satisfy its obligations once the PCS System is operational
will be dependent upon the Company's future performance, which is subject to a
number of factors, many of which are beyond the Company's control. There can be
no assurance that the Company can complete the PCS System or that, once
completed, the Company will generate sufficient cash flow from operating
activities to meet its debt service and working capital requirements. In such an
event, the Company would need to refinance its indebtedness at maturity. The
Company's ability to refinance indebtedness will depend on, among other things,
its financial condition at the time, the restrictions in the instruments
governing its indebtedness and other factors, including market conditions,
beyond the control of the Company. In addition, in the event the implementation
of the PCS System is delayed or the Company does not generate sufficient cash
flow to meet its debt service requirements, the Company may need to seek
additional financing. There can be no assurance that any such financing or
refinancing could be obtained on terms that are acceptable to the Company. In
the absence of such financing or refinancing, the Company could be forced to
dispose of assets in order to make up for any shortfall in the payments due on
its indebtedness under circumstances that might not be favorable to realizing
the highest price for such assets. A substantial portion of the Company's assets
consist of intangible assets, principally licenses granted by the FCC, the value
of which will depend upon a variety of factors (including the success of the
Company's PCS and cellular businesses and the wireless telecommunications
industry in general). In addition, transfers of interests in such licenses are
subject to FCC approval. As a result, there can be no assurance that the
Company's assets could be sold quickly enough, or for sufficient amounts, to
enable the Company to meet its obligations.
F-22
<PAGE> 77
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS AS TO SCHEDULES
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements of INTERCEL, INC. and its subsidiaries
included in this FORM 10-K and have issued our report thereon dated February 3,
1997 (except for Note 14, as to which the date is March 12, 1997). Our audits
were made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index is the
responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audits of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 3, 1997 (except for Note 14, as to
which the date is March 13, 1997)
S-1
<PAGE> 78
INTERCEL, INC.
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------------------------------------------- ------------ ---------- ------------------ --------------
BALANCE AT ADDITIONS
BEGINNING OF CHARGED TO WRITE-OFFS, NET OF BALANCE AT END
CLASSIFICATION PERIOD INCOME RECOVERIES OF PERIOD
- -------------------------------------------- ------------ ---------- ------------------ --------------
<S> <C> <C> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1996
Allowance for Doubtful Accounts 249,454 997,372 (1,029,826) 217,000
Allowance for Obsolete Inventory 127,694 252,662 (326,886) 53,470
------- --------- ---------- -------
377,148 1,250,034 (1,356,712) 270,470
======= ========= ========== =======
FOR THE YEAR ENDED DECEMBER 31, 1995
Allowance for Doubtful Accounts 271,003 768,671 (790,220) 249,454
Allowance for Obsolete Inventory 139,142 120,019 (131,467) 127,694
------- --------- ---------- -------
410,145 888,690 (921,687) 377,148
======= ========= ========== =======
FOR THE YEAR ENDED DECEMBER 31, 1994
Allowance for Doubtful Accounts 98,798 476,203 (303,998) 271,003
Allowance for Obsolete Inventory 25,000 114,142 0 139,142
------- --------- ---------- -------
123,798 590,345 (303,998) 410,145
======= ========= ========== =======
</TABLE>
S-2
<PAGE> 79
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description Page
------ ------------------- ----
<S> <C> <C> <C>
* 2(a) Business Combination Agreement dated as of August 23, 1995 by and among InterCel, Inc.,
Powertel PCS Partners, L.P., the partners of Powertel PCS Partners, L.P. and the
stockholders of certain of the partners of Powertel PCS Partners, L.P. (Filed as
Exhibit 2(a) to Registration Statement on Form S-1, File No. 33-96218 ("February 1996
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 February 1996 Form S-1 and incorporated herein by reference.)...................................
* 3(a) Restated Certificate of Incorporation dated June 3, 1992 of InterCel, Inc.
(Filed as Exhibit 3(a) to 1993 Form S-1 and incorporated herein by reference.).....................
* 3(b) Second Restated Certificate of Incorporation of InterCel, Inc. (Filed as
Exhibit 3(b) to February 1996 Form S-1 and incorporated herein by reference.)......................
* 3(c) Restated By-laws of InterCel, Inc. (Filed as Exhibit 3(b) to 1993 Form S-1 and
incorporated herein by reference.).................................................................
* 4(a) Indenture dated as of February 7, 1996 between InterCel, Inc. and Bankers Trust
Company, as Trustee, relating to the 12% Senior Discount Notes Due 2006 of
InterCel, Inc. (Filed as Exhibit 4(a) to February 1996 Form S-1 and incorporated
herein by reference.)..............................................................................
* 4(b) Warrant Agreement dated as of February 7, 1996 between InterCel, Inc. and Bankers
Trust Company, as Warrant Agent. (Filed as Exhibit 4(b) to February 1996 Form S-1
and incorporated herein by reference.).............................................................
* 4(c) Form of Indenture (including form of Note) between InterCel, Inc. and Bankers
Trust Company, as Trustee, relating to the 12% Senior Discount Notes Due 2006
of InterCel, Inc. (Filed as Exhibit 4(c) to Registration Statement on Form S-1,
File No. 333-2748 (the "April 1996 Form S-1") and incorporated herein by reference.)..............
* 4(d) 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. (Filed as Exhibit
10(tt) to the Form 10-Q for the quarter ended September 30, 1996 (the "1996
Third Quarter 10-Q"), and incorporated herein by reference.).......................................
* 4(e) 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. (Filed as Exhibit 10(uu)
to the 1996 Third Quarter 10-Q and incorporated herein by reference.)..............................
4(f) Certificate of Designations, Powers, Preferences and Relative, Participating or Other
Rights, and the Qualifications, Limitations or Restrictions Thereof, of Series C
Convertible Preferred Stock of InterCel, Inc.......................................................
4(g) Certificate of Designations, Powers, Preferences and Relative, Participating or
Other Rights, and the Qualifications, Limitations or Restrictions Thereof, of Series D
Convertible Preferred Stock of InterCel, Inc.......................................................
* 10(a) 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 December 31,
1991, File No. 33-41230 and incorporated herein by reference.).....................................
* 10(b) InterCel, Inc. 1995 Employee Restricted Stock Plan (as amended on November 17, 1995).
(Filed as Exhibit 10(e) to February 1996 Form S-1 and incorporated herein by reference.)...........
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
* 10(c) InterCel, Inc. 1991 Stock Option Plan (as amended on November 17, 1995). (Filed as
Exhibit 10(f) to February 1996 Form S-1 and incorporated herein by reference.)......................
* 10(d) InterCel, Inc. Amended Nonemployee Stock Option Plan. (Filed as Exhibit 10(q) to
Annual Report on Form 10-K for the year ended December 31, 1994, File No. 0-23102
("1994 Form 10-K"), and incorporated herein by reference.)..........................................
* 10(e) 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(f) Directed Employee Benefit Trust Agreement between The Charles Schwab Trust Company
and InterCel, Inc. (Filed as Exhibit 10(jjj) to 1994 Form 10-K and incorporated
herein by reference.) ..............................................................................
* 10(g) InterCel, Inc. 401(k) Profit Sharing Plan. (Filed as Exhibit 10(j) to February 1996
Form S-1 and incorporated herein by reference.).....................................................
* 10(h) 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(i) Defined Benefit Pension Plan (Unity Telephone Company). (Filed as Exhibit 10(tt)
to 1993 Form S-1 and incorporated herein by reference.).............................................
* 10(j) Amendment to Unity Telephone Company Pension Plan dated June 29, 1992. (Filed as
Exhibit 10(uu) to 1993 Form S-1 and incorporated herein by reference.)..............................
* 10(k) 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(l) 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(m) 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(n) 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(o) 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 filed as Exhibit 10(q).
(Filed as Exhibit 10(xxx) to 1994 Form 10-K and incorporated herein by reference.)..................
* 10(p) Directors and Officers Insurance and Company Reimbursement Policy. (Filed as
Exhibit 10(ii) to 1993 Form S-1 and incorporated herein by reference.)..............................
* 10(q) Form of Indemnity Agreement. (Filed as Exhibit 10(jj) to 1993 Form S-1 and
incorporated herein by reference.)..................................................................
* 10(r) 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(s) 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(t) 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 February 1996 Form S-1 and
incorporated herein by reference.)..................................................................
* 10(u) DMS-MTX Cellular Supply Agreement dated March 29, 1995 between InterCel, Inc.
and Northern Telecom Inc. (Filed as Exhibit 10(pp) to February 1996 Form S-1 and
incorporated herein by reference.)..................................................................
* 10(v) 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 February
1996 Form S-1 and incorporated herein by reference.)................................................
* 10(w) 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
February 1996 Form S-1 and incorporated herein by reference.).......................................
* 10(x) 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 February 1996 Form S-1 and incorporated
herein by reference.)...............................................................................
* 10(y) Information and Network Products and Services Agreement dated June 16, 1994
between InterCel, Inc. and GTE Telecommunications Service Incorporated. (Filed
as Exhibit 10(uu) to February 1996 Form S-1 and incorporated herein by reference.)..................
* 10(z) 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 February 1996 Form S-1 and incorporated herein by reference.).............................
* 10(aa) Site Acquisition Services Agreement entered into as of September 15, 1995, by and
between Silvergate, L.L.C. and Powertel PCS Partners, L.P. (Filed as Exhibit 10(ww)
to February 1996 Form S-1 and incorporated herein by reference.)....................................
* 10(bb) 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 February 1996 Form S-1 and incorporated herein by reference.)....................................
* 10(cc) 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 February 1996 Form S-1 and incorporated herein by reference.)..................
* 10(dd) ITC Holding Company, Inc. Employees Pension Plan and Trust (as amended on December
15, 1994). (Filed as Exhibit 10(zz) to February 1996 Form S-1 and incorporated herein
by reference.)......................................................................................
* 10(ee) Memorandum of Understanding dated January 19, 1996 between InterCel, Inc. and
Ericsson, Inc. (Filed as Exhibit 10(aaa) to February 1996 Form S-1 and incorporated
herein by reference.)...............................................................................
* 10(ff) 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 April 1996 Form S-1 and incorporated herein by reference.).....................
* 10(gg) Stock Purchase Agreement dated as of March 4, 1996 between InterCel, Inc. and MPX
Systems, Inc. (Filed as Exhibit 10(oo) to April 1996 Form S-1 and incorporated
herein by reference.)...............................................................................
* 10(hh) Stock Purchase Agreement dated as of March 4, 1996 between InterCel, Inc. and Ericsson Inc.
(Filed as Exhibit 10(pp) to April 1996 Form S-1 and incorporated herein by reference.)..............
* 10(ii) 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 April 1996 Form S-1 and incorporated herein by reference.).......................................
* 10(jj) Acquisition Agreement dated as of March 4, 1996 between InterCel PCS Services, Inc.
and Ericsson, Inc. (Filed as Exhibit 10(rr) to April 1996 Form S-1 and incorporated
herein by reference.)...............................................................................
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
Page
----
<S> <C> <C> <C>
* 10(kk) Second Amendment to InterCel, Inc. Pension Plan dated as of August 21, 1996.
(Filed as Exhibit 10(ss) to the 1996 Third Quarter 10-Q and incorporated herein
by reference).......................................................................................
* 10(ll) License Agreement between LHS Communications, Inc. and Powertel, Inc. dated August
2, 1996. (Filed as Exhibit 10(vv) to the 1996 Third Quarter 10-Q and incorporated
herein by reference.)...............................................................................
* 10(mm) Amendment No. 1 to the Credit Agreement by and among Powertel, Inc. as Borrower,
Ericsson, Inc., as Initial Lender, and Ericsson, Inc., as Agent, dated as of
October 31, 1996. (Filed as Exhibit 10(ww) to the 1996 Third Quarter 10-Q and
incorporated herein by reference.)..................................................................
* 10(nn) Third Restated Certificate of Incorporation of InterCel, Inc. (Filed as Exhibit
10(yy) to the 1996 Third Quarter 10-Q and incorporated herein by reference.)........................
* 10(oo) Asset Purchase Agreement dated December 23, 1996 by and among Rural Cellular
Corporation, Unity Cellular Systems, Inc., InterCel Licenses, Inc. and InterCel,
Inc. (Filed as Exhibit 99.1 to the Form 8-K dated January 8, 1997 and incorporated
herein by reference.)...............................................................................
10(pp) Stock Purchase Agreement dated as of March 14, 1997 between InterCel, Inc. and
SCANA Communications, Inc...........................................................................
10(qq) Escrow Agreement dated as of March 14, 1997 by and among InterCel, Inc., SCANA
Communications, Inc. and Bankers Trust Company, as Escrow Agent.....................................
10(rr) Stock Purchase Agreement dated as of March 14, 1997 between InterCel, Inc. and
The Huff Alternative Income Fund, L.P...............................................................
10(ss) Escrow Agreement dated as of March 14, 1997 by and among InterCel, Inc., The Huff
Alternative Income Fund, L.P. and Bankers Trust Company, as Escrow Agent............................
11 Statement regarding Computation of Per Share Earnings...............................................
12 Statement regarding Computation of Ratio of Earnings to Fixed Charges...............................
18 Letter from Arthur Andersen LLP regarding Change in Accounting Principle............................
21 Subsidiaries of InterCel, Inc.......................................................................
23 Consent of Arthur Andersen LLP......................................................................
24 Powers of Attorney for the following individuals: Campbell B. Lanier, III, O. Gene
Gabbard, Lawrence M. Gressette, Jr., William H. Scott, III, William B. Timmerman,
Donald W. Weber, Donald W. Burton, Bert G. Clifford and Maurice P. O'Connor (included on
signature page hereto)..............................................................................
27 Financial Data Schedule (for SEC use only)..........................................................
99 Press release dated March 17, 1997 regarding offerings of Senior Notes and Preferred Stock..........
--------------------------------
</TABLE>
* Previously filed.
<PAGE> 1
EXHIBIT 4(f)
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE
PARTICIPATING OR OTHER RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF
SERIES C 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 or by consent of the Board of Directors duly held
or obtained on March 12, 1997:
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. 50,000 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 C Convertible Preferred
Stock (the "Series C Preferred Stock"). Without the consent of the then current
holders of shares of Series C Preferred Stock as provided for herein, the
number of shares of Series C Preferred Stock may not be increased and may not
be decreased below the number of then currently outstanding shares of Series C
Preferred Stock.
Section (2) Definitions. For purposes of the Series C Preferred Stock,
the following terms shall have the meanings indicated:
<PAGE> 2
"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 C
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 C Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant to
Section (7). The initial Conversion Price shall be $12.75 (equivalent
to the rate of approximately 35.29412 shares of Common Stock for each
share of Series C Preferred Stock), which initial conversion price was
established pursuant to a letter dated March 5, 1997 from the
Corporation to initial holder of the Series C Preferred Stock.
"Current Market Price" shall mean, as of a particular date,
the average of the closing 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 C 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, joint
venture corporation, association 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).
"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.
"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.
"Series D Preferred Stock" shall mean the series of preferred
stock, $0.01 par value, of the Corporation designated as Series D
Convertible Preferred Stock.
<PAGE> 3
"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 C Preferred Stock.
Section (3) Dividends. (a) The holders of shares of the Series C
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 C Preferred Stock equal to the dividends payable on the
number of shares of Common Stock into which one share of Series C 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 C 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 C 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 C 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,
junior to or on a parity with the Series C Preferred Stock, for any period,
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 C Preferred Stock
in accordance with paragraph (a) of this Section (3).
(d) So long as any shares of the Series C Preferred Stock are
outstanding, no shares ranking junior to or on a parity with the Series C
Preferred Stock shall be redeemed or purchased by the Corporation or any
Subsidiary, except in accordance with Section (5) hereof and the corresponding
sections of the Certificates of Designations for the Series A Preferred Stock,
the Series B Preferred Stock and the Series D Preferred Stock, and the
provisions of the Certificate of Incorporation of the Corporation.
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
<PAGE> 4
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 C Preferred Stock, upon liquidation, dissolution or winding up, the
holders of the shares of Series C Preferred Stock shall be entitled to receive
$450.00 per share plus an amount equal to all dividends declared and unpaid
thereon to the date of final distribution to such holders; in addition, such
holders shall also 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, Series C Preferred
Stock, Series D Preferred Stock and any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the Series C 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, Series C Preferred Stock, Series D 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, Series C Preferred Stock, Series D 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 entities, (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; provided, however, that any subsequent distribution,
liquidation, dissolution or winding up of the Corporation shall remain subject
to this Section (4).
(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
C 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 C Preferred Stock, as provided in paragraph (a) of this Section (4),
holders of shares of Series C 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 C Preferred Stock in an amount equal to the distributions made in
respect of the number of shares of Common Stock into which such share of Series
C Preferred Stock is then convertible.
Section (5) Redemption at the Option of the Corporation. (a) Series C
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 C Preferred
Stock, in whole or in part, for an aggregate redemption price of $450.00 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, the shares of Series B
Preferred Stock, the shares of Series C Preferred Stock and the shares of
Series D Preferred Stock on a pro rata basis.
<PAGE> 5
(b) In the event the Corporation shall desire to redeem
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D 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, Series B Preferred Stock, Series
C Preferred Stock and Series D 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; (5) the then current Conversion Price; and (6) that
the Corporation is not then in default of any material loan document, indenture
or other borrowing the consequences of which have a Material Adverse Effect.
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 C
Preferred Stock so called for redemption and not converted prior to 5:00 p.m.
New York, New York time, on the redemption date 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, Series B
Preferred Stock, Series C Preferred Stock and Series D 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,
Series B Preferred Stock, Series C Preferred Stock and Series D 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 C Preferred
Stock purchased or redeemed by the Corporation or converted shall be retired
and canceled and shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to series.
Section (7) Conversion. Holders of shares of Series C 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 C Preferred Stock shall have the
right, at his, her or its option, at any time after the eighteen month
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
<PAGE> 6
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
C Preferred Stock may be converted, at the request of its holder, in part into
Common Stock. If a part of a share of Series C 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 C Preferred Stock evidencing the remaining interest
of such holder.
(b) In order to exercise the conversion right, the holder of
each share of Series C 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 C 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 C 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 transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
Holders of shares of Series C 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 C 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 C 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 C Preferred Stock shall have been surrendered and such notice
received by the Corporation as aforesaid, and the person or
<PAGE> 7
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 C 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 C
Preferred Stock. Instead of any fractional interest in a share of Common Stock
which would otherwise be deliverable upon the conversion of a share of Series C
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 C 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 C 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 C 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) options, warrants or other rights to all holders of
Common Stock as a class 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
<PAGE> 8
record date for the determination of shareholders entitled to receive
such options, warrants or other rights or (b) shares of Common Stock
or securities exercisable for (including options, warrants or other
rights 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 C Preferred Stock upon
conversion), then in each such case 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 options, warrants or
other rights 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
options, warrants or other rights 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 options, warrants or other rights
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 such options, warrants or other rights 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 options, warrants or other rights 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 options,
warrants or other rights 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 options, warrants
or other rights 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
<PAGE> 9
determined by the Board of Directors in good faith or, if higher, 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 options, warrants or other
rights 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
options, warrants or other rights 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 as a class 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 options, warrants or other rights 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 C Preferred Stock upon the conversion of the shares of Series C
Preferred Stock so that any such holder converting shares of Series C
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 C 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 C 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 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;
<PAGE> 10
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 C 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 C 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 C Preferred Stock was convertible
immediately prior to such Transaction. The Corporation shall use reasonable
efforts to deliver notice of any Transaction to the holders of Series C
Preferred Stock at least 20 days prior to the earlier of the consummation or
the record date therefor; provided, however, that any unintentional failure by
the Corporation to deliver such required notice shall not impair or affect the
validity or provisions of any such Transaction; and provided, further, that any
failure by the Corporation to deliver such required notice shall toll the time
period in which the holders of Series C Preferred Stock may convert their
shares as aforementioned until such notice is delivered by the Corporation. The
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 C
Preferred Stock which will contain provisions enabling the holders of the
Series C 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
<PAGE> 11
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 C 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, 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
calculation of such 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 C
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 C 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
<PAGE> 12
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 C Preferred Stock, the
Conversion Price for the Series C 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, or both, for the purpose of effecting conversion of
the Series C Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Series C 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 C 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 C 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 C 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 C 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.
<PAGE> 13
(m) The Corporation shall pay any and all documentary stamp
or similar issue or transfer taxes or fees payable in respect of the issue or
delivery of shares of Common Stock on conversion of the Series C Preferred
Stock pursuant hereto imposed by any Governmental Authority (including without
limitation, any fee in respect of an HSR Act filing); 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 C 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:
(i) prior to the Series C 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 C Preferred Stock;
(ii) on a parity with the Series C Preferred Stock,
(A) as to dividends, if such stock shall be Series A Preferred Stock,
Series B Preferred Stock, Series D Preferred Stock or Common Stock or
if the holders of such class of stock and the Series C 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 C Preferred Stock, if such stock shall be
Series A Preferred Stock, Series B Preferred Stock or Series D
Preferred Stock or if the holders of such class of stock and the
Series C 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 C Preferred Stock, (A) as
to dividends, if the holders of Series C 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 C 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 C Preferred Stock shall have no voting
rights.
<PAGE> 14
(b) So long as any shares of the Series C Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds of the
shares of Series C 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, or convertible, exercisable or exchangeable
into any class or series of stock ranking prior to, the Series C
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 C 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 C 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 C 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 C 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 C 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.
[Signatures begin on next page]
<PAGE> 15
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by Fred G. Astor, Jr. , its
EVP-CFO , and attested by Lorena G. Turner its Assistant Secretary, this 13th
day of March, 1997.
INTERCEL, INC.
By /s/ Fred G. Astor, Jr.
-----------------------------------------
Its: Executive Vice President and Chief
Financial Officer
(Corporate Seal)
Attest:
By /s/ Lorena G. Turner
--------------------------------
Lorena G. Turner,
Assistant Secretary
<PAGE> 1
EXHIBIT 4(g)
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE
PARTICIPATING OR OTHER RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF
SERIES D 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 or by consent of the Board of Directors duly held
or obtained on March 12, 1997:
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. 50,000 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 D Convertible Preferred
Stock (the "Series D Preferred Stock"). Without the consent of the then current
holders of shares of Series D Preferred Stock as provided for herein, the
number of shares of Series D Preferred Stock may not be increased and may not
be decreased below the number of then currently outstanding shares of Series D
Preferred Stock.
Section (2) Definitions. For purposes of the Series D Preferred Stock,
the following terms shall have the meanings indicated:
<PAGE> 2
"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 D
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 D Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant to
Section (7). The initial Conversion Price shall be $12.75 (equivalent
to the rate of approximately 35.29412 shares of Common Stock for each
share of Series D Preferred Stock), which initial conversion price was
established pursuant to a letter dated March 5, 1997 from the
Corporation to initial holder of the Series D Preferred Stock.
"Current Market Price" shall mean, as of a particular date,
the average of the closing 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 D 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, joint
venture corporation, association 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).
"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.
"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.
"Series C Preferred Stock" shall mean the series of preferred
stock, $0.01 par value, of the Corporation designated as Series C Convertible
Preferred Stock.
<PAGE> 3
"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 D Preferred Stock.
Section (3) Dividends. (a) The holders of shares of the Series D
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 D Preferred Stock equal to the dividends payable on the
number of shares of Common Stock into which one share of Series D 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 D 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 D 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 D 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,
junior to or on a parity with the Series D Preferred Stock, for any period,
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 D Preferred Stock
in accordance with paragraph (a) of this Section (3).
(d) So long as any shares of the Series D Preferred Stock are
outstanding, no shares ranking junior to or on a parity with the Series D
Preferred Stock shall be redeemed or purchased by the Corporation or any
Subsidiary, except in accordance with Section (5) hereof and the corresponding
sections of the Certificates of Designations for the Series A Preferred Stock,
the Series B Preferred Stock and the Series C Preferred Stock, and the
provisions of the Certificate of Incorporation of the Corporation.
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
<PAGE> 4
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 D Preferred Stock, upon liquidation, dissolution or winding up, the
holders of the shares of Series D Preferred Stock shall be entitled to receive
$450.00 per share plus an amount equal to all dividends declared and unpaid
thereon to the date of final distribution to such holders; in addition, such
holders shall also 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, Series C Preferred
Stock, Series D Preferred Stock and any other shares of stock ranking, as to
liquidation, dissolution or winding up, on a parity with the Series D 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, Series C Preferred Stock, Series D 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, Series C Preferred Stock, Series D 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 entities, (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; provided, however, that any subsequent distribution,
liquidation, dissolution or winding up of the Corporation shall remain subject
to this Section (4).
(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
D 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 D Preferred Stock, as provided in paragraph (a) of this Section (4),
holders of shares of Series D 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 D Preferred Stock in an amount equal to the distributions made in
respect of the number of shares of Common Stock into which such share of Series
D Preferred Stock is then convertible.
Section (5) Redemption at the Option of the Corporation. (a) Series D
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 D Preferred
Stock, in whole or in part, for an aggregate redemption price of $450.00 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, the shares of Series B
Preferred Stock, the shares of Series C Preferred Stock and the shares of
Series D Preferred Stock on a pro rata basis.
<PAGE> 5
(b) In the event the Corporation shall desire to redeem
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D 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, Series B Preferred Stock, Series
C Preferred Stock and Series D 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; (5) the then current Conversion Price; and (6) that
the Corporation is not then in default of any material loan document, indenture
or other borrowing the consequences of which have a Material Adverse Effect.
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 D
Preferred Stock so called for redemption and not converted prior to 5:00 p.m.
New York, New York time, on the redemption date 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, Series B
Preferred Stock, Series C Preferred Stock and Series D 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,
Series B Preferred Stock, Series C Preferred Stock and Series D 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 D Preferred
Stock purchased or redeemed by the Corporation or converted shall be retired
and canceled and shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to series.
Section (7) Conversion. Holders of shares of Series D 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 D Preferred Stock shall have the
right, at his, her or its option, at any time after the fifth 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
<PAGE> 6
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
D Preferred Stock may be converted, at the request of its holder, in part into
Common Stock. If a part of a share of Series D 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 D Preferred Stock evidencing the remaining interest
of such holder.
(b) In order to exercise the conversion right, the holder of
each share of Series D 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 D 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 D 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 transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
Holders of shares of Series D 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 D 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 D 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 D Preferred Stock shall have been surrendered and such notice
received by the Corporation as aforesaid, and the person or
<PAGE> 7
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 D 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 D
Preferred Stock. Instead of any fractional interest in a share of Common Stock
which would otherwise be deliverable upon the conversion of a share of Series D
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 D 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 D 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 D 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) options, warrants or other rights 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
<PAGE> 8
date for the determination of shareholders entitled to receive such
options, warrants or other rights or (b) shares of Common Stock or
securities exercisable for (including options, warrants or other
rights 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 D Preferred Stock upon
conversion), then in each such case 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 options, warrants or
other rights 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
options, warrants or other rights 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 options, warrants or other rights
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 such options, warrants or other rights 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 options, warrants or other rights 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 options,
warrants or other rights 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 options, warrants
or other rights 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
<PAGE> 9
of Directors in good faith or, if higher, 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 options, warrants or other rights 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 options, warrants or
other rights 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 as a class 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 options, warrants or other rights 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 D Preferred Stock upon the conversion of the shares of Series D
Preferred Stock so that any such holder converting shares of Series D
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 D 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 D 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 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;
<PAGE> 10
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 D 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 D 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 D Preferred Stock was convertible
immediately prior to such Transaction. The Corporation shall use reasonable
efforts to deliver notice of any Transaction to the holders of Series D
Preferred Stock at least 20 days prior to the earlier of the consummation or
the record date therefor; provided however, that any unintentional failure by
the Corporation to deliver such required notice shall not impair or affect the
validity or provisions of any such Transaction; and provided, further, that any
failure by the Corporation to deliver such required notice shall toll the time
period in which the holders of Series D Preferred Stock may convert their
shares as aforementioned until such notice is delivered by the Corporation. The
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 D
Preferred Stock which will contain provisions enabling the holders of the
Series D 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
<PAGE> 11
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 D 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, 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
calculation of such 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 D
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 D 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
<PAGE> 12
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 D Preferred Stock, the
Conversion Price for the Series D 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, or both, for the purpose of effecting conversion of
the Series D Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Series D 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 D 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 D 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 D 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 D 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.
<PAGE> 13
(m) The Corporation shall pay any and all documentary stamp
or similar issue or transfer taxes or fees payable in respect of the issue or
delivery of shares of Common Stock on conversion of the Series D Preferred
Stock pursuant hereto imposed by any Governmental Authority (including without
limitation, any fee in respect of an HSR Act filing); 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 D 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:
(i) prior to the Series D 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 D Preferred Stock;
(ii) on a parity with the Series D Preferred Stock,
(A) as to dividends, if such stock shall be Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Common Stock or
if the holders of such class of stock and the Series D 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 D Preferred Stock, if such stock shall be
Series A Preferred Stock, Series B Preferred Stock or Series C
Preferred Stock or if the holders of such class of stock and the
Series D 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 D Preferred Stock, (A) as
to dividends, if the holders of Series D 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 D 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 D Preferred Stock shall have no voting
rights.
<PAGE> 14
(b) So long as any shares of the Series D Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds of the
shares of Series D 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, or convertible, exercisable or exchangeable
into any class or series of stock ranking prior to, the Series D
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 D 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 D 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 D 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 D 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 D 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.
[Signatures begin on next page]
<PAGE> 15
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by Fred G. Astor, Jr. , its
EVP-CFO , and attested by Lorena G. Turner its Assistant Secretary, this 13th
day of March, 1997.
INTERCEL, INC.
By /s/ Fred G. Astor, Jr.
-----------------------------------------
Its: Executive Vice President and Chief
Financial Officer
(Corporate Seal)
Attest:
By /s/ Lorena G. Turner
----------------------------
Lorena G. Turner,
Assistant Secretary
<PAGE> 1
EXHIBIT 10(pp)
- -------------------------------------------------------------------------------
------------------------------------------
STOCK PURCHASE AGREEMENT
------------------------------------------
BETWEEN
INTERCEL, INC.
AND
SCANA COMMUNICATIONS, INC.
DATED AS OF MARCH 14, 1997
- -------------------------------------------------------------------------------
<PAGE> 2
TABLES OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS................................................................. 1
SECTION 1.1 Certain Defined Terms....................................................... 1
ARTICLE II PURCHASE AND SALE........................................................... 7
SECTION 2.1 Purchase and Sale of the Shares............................................. 7
SECTION 2.2 Purchase Price.............................................................. 7
SECTION 2.3 Closing..................................................................... 7
SECTION 2.4 Escrow...................................................................... 7
SECTION 2.5 Closing Deliveries by the Seller............................................ 7
SECTION 2.6 Closing Deliveries by the Purchaser......................................... 7
SECTION 2.7 Closing Deliveries by the Escrow Agent...................................... 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER................................ 8
SECTION 3.1 Organization, Authority and Qualification of the Seller..................... 8
SECTION 3.2 Capitalization of the Seller................................................ 8
SECTION 3.3 Subsidiaries................................................................ 9
SECTION 3.4 No Conflict................................................................. 9
SECTION 3.5 Governmental Consents and Approvals......................................... 10
SECTION 3.6 Seller SEC Documents: Financial Statements.................................. 10
SECTION 3.7 No Undisclosed Liabilities.................................................. 10
SECTION 3.8 Conduct in the Ordinary Course: Absence of Certain
Changes, Events and Conditions.............................................. 11
SECTION 3.9 Litigation.................................................................. 11
SECTION 3.10 Compliance with Laws........................................................ 11
SECTION 3.11 Full Disclosure............................................................. 11
SECTION 3.13 Private Placement........................................................... 11
SECTION 3.14 FCC Regulations............................................................. 12
SECTION 3.15 Brokers..................................................................... 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER................................................................... 12
SECTION 4.1 Organization and Authority of the Purchaser................................. 12
SECTION 4.2 No Conflict................................................................. 12
SECTION 4.3 Governmental Consents and Approvals......................................... 13
SECTION 4.4 Litigation.................................................................. 13
SECTION 4.5 Investment Purpose.......................................................... 13
SECTION 4.6 Accredited Investor......................................................... 13
SECTION 4.7 Brokers..................................................................... 13
ARTICLE V ADDITIONAL AGREEMENTS....................................................... 13
SECTION 5.1 Filing of Certificate of Designation........................................ 13
SECTION 5.2 Treatment of Shares as Equity............................................... 13
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
SECTION 5.3 Regulatory and Other Authorizations: Notices and
Consents.................................................................... 14
SECTION 5.4 Notice of Developments...................................................... 14
SECTION 5.5 Registration Rights......................................................... 14
SECTION 5.6 Resale Restrictions......................................................... 14
SECTION 5.7 Registration of Shares...................................................... 15
SECTION 5.9 Certain Information......................................................... 15
SECTION 5.10 Conduct of Business of the Seller........................................... 15
SECTION 5.11 Further Action.............................................................. 16
ARTICLE VI CONDITIONS TO CLOSING....................................................... 16
SECTION 6.1 Conditions to Obligations of the Seller..................................... 16
SECTION 6.2 Conditions to Obligations of the Purchaser.................................. 17
ARTICLE VII INDEMNIFICATION............................................................. 19
SECTION 7.1 Survival of Representations and Warranties.................................. 19
SECTION 7.2 Indemnification............................................................. 19
SECTION 7.3 Limits on Indemnification................................................... 21
ARTICLE VIII TERMINATION AND WAIVER...................................................... 21
SECTION 8.1 Termination................................................................. 21
SECTION 8.2 Effect of Termination....................................................... 22
SECTION 8.3 Waiver...................................................................... 22
ARTICLE IX GENERAL PROVISIONS.......................................................... 23
SECTION 9.1 Expenses.................................................................... 23
SECTION 9.2 Notices..................................................................... 23
SECTION 9.3 Public Announcements........................................................ 24
SECTION 9.4 Headings.................................................................... 24
SECTION 9.5 Severability................................................................ 24
SECTION 9.6 Entire Agreement............................................................ 24
SECTION 9.7 Assignment.................................................................. 24
SECTION 9.8 No Third Party Beneficiaries................................................ 25
SECTION 9.9 Amendment................................................................... 25
SECTION 9.10 Governing Law............................................................... 25
SECTION 9.11 Counterparts................................................................ 25
SECTION 9.12 Specific Performance........................................................ 25
EXHIBITS
Exhibit 2.4 Form of Escrow Agreement
ANNEXES
ANNEX I.......................................................................................I-1
ANNEX II.....................................................................................II-1
ANNEX III...................................................................................III-1
</TABLE>
ii
<PAGE> 4
THIS STOCK PURCHASE AGREEMENT, dated as of March 14, 1997, is entered
into between INTERCEL, INC., a Delaware corporation (the "Seller"), and SCANA
COMMUNICATIONS, INC., a South Carolina corporation (the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Seller wishes to issue and to sell to the Purchaser, and
the Purchaser wishes to purchase from the Seller, 50,000 shares (the "Shares")
of a new series of convertible preferred stock of the Seller designated Series
D Convertible Preferred Stock, par value $0.01 per share (the "Preferred
Stock"), upon the terms and subject to the conditions set forth herein; and
WHEREAS, the terms of the Preferred Stock are set forth in the form of
Certificate of Designation attached as Annex I hereto (the "Certificate of
Designation");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Seller
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Documents" has the meaning specified in Section
7.1.
"Action" means any claim, action, suit, arbitration, inquiry,
proceeding or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other
Person that directly, or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, such specified
Person.
"Agreement" or "this Agreement" means this Stock Purchase Agreement,
dated as of March 14, 1997, between the Seller and the Purchaser (including the
Annexes hereto, the Exhibits hereto and the Disclosure Schedule) and all
amendments hereto made in accordance with the provisions of Section 9.9.
"Approvals" has the meaning specified in Section 3.5.
"Assets" means the properties, assets (including, without limitation,
Licenses) and contract rights used or intended to be used in the conduct of
Business or otherwise owned, leased or used by the Seller or any Subsidiary or,
with respect to contract rights, to which the Seller or any Subsidiary is a
party or is bound.
<PAGE> 5
"Beneficially Own" with respect to any securities and "Beneficial
Ownership" mean having beneficial ownership as determined pursuant to Rule
13d-3 under the Exchange Act including having beneficial ownership pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Business" means the business of the Seller and the Subsidiaries as
currently conducted and contemplated as of the date hereof by the Seller to be
conducted (as described in the Debt Offering Memorandum or contemplated by this
Agreement); provided, however, that the Business of Seller shall not be deemed
to include or refer to the business of providing cellular telephone and related
services as conducted by Unity Cellular Systems, Inc., a Maine corporation and
a subsidiary of the Seller, and Northern Maine Cellular Partnership, a Maine
general partnership and a majority-owned subsidiary of Unity Cellular Systems,
Inc.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate of Designation" has the meaning specified in the recitals
to this Agreement.
"Closing" has the meaning specified in Section 2.3.
"Closing Date" has the meaning specified in Section 2.3.
"Commission" means the United States Securities and Exchange
Commission.
"Common Stock" means the common stock, par value $0.01 per share, of
the Seller.
"Control" (including the terms "controlled by" and "under common
control with"), with respect to the relationship between or among two or more
Persons, means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the affairs or
management of a Person, whether through the ownership of voting securities, as
trustee or executor, by contract or otherwise, including, without limitation,
the ownership, directly or indirectly, of securities having the power to elect
a majority of the board of directors or similar body governing the affairs of
such Person.
"Current Market Value" means, as of a particular date, the average of
the closing high bid and low asked prices per share of Common Stock in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or
such other exchange or inter-dealer quotation system on which the Common Stock
is then principally traded or authorized to be quoted.
"Debt Offering Memorandum" means the draft (as of March 13, 1997) of
the Confidential Offering Memorandum (subject to completion, revision and
amendment pursuant to the agreement of the Seller and the placement agents
thereunder) relating to the proposed issuance by the Seller of High Yield Debt
instruments for aggregate gross proceeds of not less than $100 million.
2
<PAGE> 6
"Disclosed by Seller" with respect to information concerning any
event, fact or circumstance, includes information contained in the Seller's SEC
Reports, annual and other reports furnished by Seller to its stockholders as a
group, and press releases of the Seller disseminated to (i) the Dow Jones News
Service, or (ii) the National Association of Securities Dealers, Inc. Automated
Quotation System or other national securities exchange ("Press Releases"), as
well as information disclosed directly to Purchaser by Seller in this
Agreement, the Debt Offering Memorandum, the 1996 Financial Statements or in
writing and attached hereto or delivered pursuant to Section 6.2 hereof. For as
long as Purchaser has a representative on the Seller's Board of Directors,
"Disclosed by Seller" shall also mean written information and materials which
are disclosed or distributed to the Seller's Board of Directors or written
evidence of the meetings of the Board of Directors and committees thereof (such
as minutes, resolutions and written consents). The Press Releases issued by
Seller since September 30, 1996 are attached hereto in the Disclosure Schedule.
"Disclosure Schedule" means the Disclosure Schedule attached hereto,
dated as of the date hereof, and forming a part of this Agreement.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which is (i) maintained by, or for employees
of, the Seller, any of its Subsidiaries or any ERISA Affiliate or (ii) has at
any time within the preceding six years been maintained by, or for the employee
of, the Seller, any of its Subsidiaries or any current or former ERISA
Affiliate.
"Encumbrance" means any security interest, pledge, mortgage, lien,
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Actions" means any complaint, summons, citation,
notice, directive, order, claim, litigation, investigation, proceeding,
judgment, letter or other communication from or to any Governmental Authority,
or any other Person involving or alleging violations of Environmental Laws or
Releases of Hazardous Materials from (i) any assets, properties or businesses
of the Seller or any of its Subsidiaries (or its or their corporate
predecessors); (ii) from adjoining properties or businesses; or (iii) from or
onto any facilities which received Hazardous Materials generated by the Seller
or any of its Subsidiaries (or its or their corporate predecessors).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended; the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq;, as amended; the
Clean Air Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act, 33
U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act, 29
U.S.C. 655 et seq., and any other Governmental Authority's laws, statutes,
regulations, rules or ordinances imposing liability or establishing standards
of conduct or emission for protection or safety of the environment or
concerning public or occupational health.
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"ERISA" means the federal Employee Retirement Income Security Act of
1974, any successor statute of similar import, and the rules and regulations
thereunder, collectively and as from time to time amended and in effect.
"ERISA Affiliate," as applied to the Seller or any of its
Subsidiaries, means any Person who is a member of a group which is under common
control with the Seller or any of its Subsidiaries, or who together with the
Seller or any of its Subsidiaries is treated as a single employer within the
meaning of Section 414(b) and (c) of the Internal Revenue Code of 1986, as
amended.
"Escrow Agent" has the meaning specified in the Escrow Agreement.
"Escrow Agreement" has the meaning specified in Section 2.4.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Executive Officer" has the meaning set forth in Rule 405 of
Regulation C adopted by the Commission under the Securities Act without regard
to whether any party to this Agreement is a registrant as used in Rule 405.
"FCC" means the United States Federal Communications
Commission.
"FCC Licenses" means all licenses granted by the FCC to the Seller for
and related to the provisions of personal communications services and cellular
services in connection with the Seller's Business.
"Governmental Authority" means any United States federal, state or
local or any foreign government, governmental, regulatory or administrative
authority, agency, department, board, investigative body or commission or any
court, tribunal, or judicial or arbitral body or other tribunal.
"Governmental Order" means any order, writ, judgment, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) any element, compound, chemical or
other material (in whatever form or state) that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substance, extremely hazardous substance or chemical, hazardous waste, special
waste, or solid waste under any Environmental Law; (b) petroleum and its
refined products and by-products; (c) polychlorinated biphenyls; (d) any
substance exhibiting a hazardous waste characteristic including but not limited
to corrosivity, ignitability, toxicity or reactivity as well as any radioactive
or explosive materials and materials otherwise damaging to the environment; and
(e) any raw materials, building components, including but not limited to
asbestos-containing materials, and manufactured products containing any of the
materials or substances described in (a) through (d).
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"High Yield Debt" means the issue of high yield debt instruments
proposed to be sold by the Seller pursuant to the Debt Offering Memorandum.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service or any successor thereto.
"Knowledge" of a party with respect to such party's representation or
warranty concerning any event, fact or circumstance means the current actual
knowledge of that party's Executive Officers of information which, after
reasonable consideration by such Executive Officers, would be recognized by
reasonable persons of similar experience in such positions as relevant to the
representation or warranty qualified by the words "to the knowledge" of a
party, "known to" a party or a similar phrase. Knowledge does not include
information not within such current actual knowledge that might be revealed if
the party's files were searched or if any other investigation were made.
"Law" means any United States federal, state, local or foreign
statute, law, ordinance, regulation, rule, code, order, other requirement or
rule of law, including, without limitation, any requirement or rule of law of
the FCC.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licenses" means all FCC Licenses and all other licenses, permits
(including construction permits), consents, approvals and other authority
issued by any Governmental Authority in connection with the legal and proper
operation of the Seller's Business.
"Loss" has the meaning specified in Section 7.2.
"Material Adverse Effect" means any circumstance, change in, or effect
on the Business, the Seller or any Subsidiary that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the
Business, the Seller or any Subsidiary: (a) is, or would reasonably be expected
to be, materially adverse to the Business, operations, Assets or Liabilities,
prospects, results of operations or financial condition of the Seller and the
Subsidiaries, taken as a whole, or (b) would reasonably be expected to
materially adversely affect the ability of the Seller and the Subsidiaries to
operate or conduct the Business in the manner in which it is currently operated
or conducted or contemplated to be operated or conducted by the Seller and the
Subsidiaries.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, joint venture, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Exchange Act.
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"Preferred Stock" has the meaning specified in the recitals
to this Agreement.
"Purchase Price" has the meaning specified in Section 2.2.
"Purchaser" has the meaning specified in the preamble to this
Agreement.
"Reference Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Seller, dated as of
December 31, 1996, a copy of which the Seller has provided to the Purchaser
prior to the execution of this Agreement.
"Reference Balance Sheet Date" means December 31, 1996.
"Related Agreements" has the meaning specified in Annex III
attached hereto.
"Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing (including
the abandonment or discarding of barrels, containers or other closed
receptacles containing Hazardous Materials) of Hazardous Materials into the
environment.
"Sale" has the meaning specified in Section 5.9(b).
"SEC Reports" has the meaning specified in Section 3.6(a).
"Securities Act" means the United States Securities Act of
1933, as amended.
"Seller" has the meaning specified in the preamble to this
Agreement.
"Series C Preferred Stock Purchase Agreement" means that certain Stock
Purchase Agreement of even date herewith between the Seller and The Huff
Alternative Income Fund, L.P., a Delaware limited partnership, as purchaser
thereunder, with respect to the sale and purchase of 50,000 shares of Seller's
Series C Preferred Stock ("Series C Preferred Stock"), together with all
attachments, annexes and exhibits thereto, all documents and agreements
executed in connection therewith, and all amendments, supplements and
modifications thereof.
"Shares" has the meaning specified in the recitals to this Agreement.
"Subsidiaries" means any and all Persons controlled by the Seller
directly or indirectly through one or more intermediaries; provided, however,
that the term "Subsidiaries" shall not include either Unity Cellular Systems,
Inc. or Northern Maine Cellular Partnership.
"Tax" or "Taxes" means any and all taxes, fees, levies, assessments,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or
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net worth; taxes or other charges in the nature of excise, withholding, ad
valorem, stamp, transfer, value added, or gains taxes; license, registration
and documentation fees; and customs duties, tariffs, and similar charges.
"Third Party Claims" has the meaning specified in Section 7.2(b).
"U.S. GAAP" means United States generally accepted accounting
principles and practices as in effect from time to time and applied
consistently throughout the periods involved.
"1996 Financial Statements" has the meaning specified in Section
3.2(b).
ARTICLE II
PURCHASE AND SALE
SECTION 2.1 Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller shall
sell to the Purchaser, and the Purchaser shall purchase from the Seller, the
Shares.
SECTION 2.2 Purchase Price. The aggregate purchase price for the
Shares shall be $22,500,000.00 (the "Purchase Price"), representing a purchase
price of $450.00 per Share.
SECTION 2.3 Closing. Upon the terms and subject to the conditions of
this Agreement, the issuance, sale and purchase of the Shares contemplated by
this Agreement shall take place at a closing (the "Closing") to be held at
10:00 A.M. local time on a date and at a location mutually agreed to by the
parties upon the satisfaction or waiver of all conditions to the obligations of
the parties set forth in Article VI, or at such other place or at such other
time or on such other date as the Seller and the Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date").
SECTION 2.4 Escrow. On or before the Closing Date, the Seller, the
Purchaser and the Escrow Agent shall enter into an Escrow Agreement with the
Escrow Agent substantially in the form of Exhibit 2.4 (the "Escrow Agreement").
In accordance with the terms of the Escrow Agreement, on or before the Closing
Date, the Purchaser shall deposit with the Escrow Agent the Purchase Price, to
be managed and paid out by the Escrow Agent in accordance with the terms of the
Escrow Agreement, and the Seller shall deposit with the Escrow Agent a stock
certificate(s) evidencing the Shares, to be held and delivered by the Escrow
Agent in accordance with the terms and provisions of the Escrow Agreement.
SECTION 2.5 Closing Deliveries by the Seller. At the Closing, the
Seller shall execute and deliver or cause to be delivered to the Purchaser this
Agreement, the Escrow Agreement and the opinions, certificates and other
documents required to be delivered pursuant to Section 6.2, and shall deliver
the stock certificate(s) evidencing the Shares to the Escrow Agent in
accordance with the Escrow Agreement.
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SECTION 2.6 Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall execute and deliver or cause to be delivered to the Seller this
Agreement, the Escrow Agreement and the opinions, certificates and other
documents required to be delivered pursuant to Section 6.1, and shall deliver
the Purchase Price monies to the Escrow Agent in accordance with the Escrow
Agreement.
SECTION 2.7 Closing Deliveries by the Escrow Agent. At or before the
Closing, the Escrow Agent shall execute and deliver to the Seller and the
Purchaser the Escrow Agreement and shall accept and hold the Purchase Price
monies and stock certificate(s) evidencing the Shares pursuant thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the
Seller hereby represents and warrants to the Purchaser as set forth in Annex
III hereto (which is incorporated herein by reference) and as follows:
SECTION 3.1 Organization, Authority and Qualification of the Seller.
The Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder, to consummate the transactions
contemplated hereby and thereby and to conduct its Business, except where the
failure to be so qualified or in good standing would not have a Material
Adverse Effect. The Seller is duly licensed or qualified to do business and is
in good standing in each jurisdiction in which the properties owned or leased
by it or the operation of its Business makes such licensing or qualification
necessary, except as would not have a Material Adverse Effect. The execution
and delivery of this Agreement and the Escrow Agreement by the Seller, the
performance by the Seller of its obligations hereunder and thereunder and the
consummation by the Seller of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of the Preferred Stock in
accordance with the terms of this Agreement and the Certificate of Designation,
have been duly authorized by all requisite action on the part of the Seller.
This Agreement and the Escrow Agreement have been duly executed and delivered
by the Seller, and (assuming due authorization, execution and delivery by the
Purchaser) this Agreement and the Escrow Agreement constitute the legal, valid
and binding obligations of the Seller enforceable against the Seller in
accordance with their respective terms.
SECTION 3.2 Capitalization of the Seller. (a) The authorized capital
stock of the Seller consists of 55,000,000 shares of Common Stock and 1,000,000
shares of preferred stock, par value $0.01 per share. As of March 10, 1997, (i)
26,864,511 shares of Common Stock are issued and outstanding, all of which are
validly issued, fully paid and nonassessable and (ii) 200,000 shares of
preferred stock are issued and outstanding (not including the Preferred Stock
and the Series C Preferred Stock). None of the issued and outstanding shares of
Common Stock or preferred stock was issued in violation of any preemptive
rights. Except as disclosed in Schedule 3.2 of the Disclosure Schedule, there
are no options, warrants, convertible securities or other rights, agreements,
arrangements or commitments of any character to which the Seller
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is a party relating to the issuance or sale of capital stock of the Seller or
obligating the Seller to issue or sell any shares of capital stock of, or any
other equity interest in, the Seller or its Subsidiaries. Except as disclosed
in Schedule 3.2 of the Disclosure Schedule, there are no outstanding
contractual obligations of the Seller to repurchase, redeem or otherwise
acquire any shares of Common Stock or shares of capital stock of its
Subsidiaries. Upon issuance of the Shares to the Purchaser at the Closing and
payment therefor pursuant to this Agreement and the Certificate of Designation,
the Shares will be validly issued, fully paid and nonassessable and free of
preemptive rights. By the Closing Date, the shares of Common Stock issuable
upon conversion of the Shares will be duly authorized and reserved for issuance
upon such conversion and, upon issuance of such shares in accordance with the
Certificate of Designation, will be validly issued, fully paid and
nonassessable and free of preemptive rights. Upon consummation of the
transactions contemplated by this Agreement, including the issuance of the
Shares, registration of the Shares in the name of the Purchaser in the stock
records of the Seller and delivery of the Shares as provided in the Escrow
Agreement, the Purchaser will own the Shares free and clear of all
Encumbrances, other than Encumbrances resulting from any action, or failure to
take action, by the Purchaser.
(b) The outstanding indebtedness of Seller as of December 31,
1996 is accurately reflected (subject to normal and recurring adjustments and
other revisions which were not and are not known or reasonably expected to be
material in amount) in the Seller's balance sheet at December 31, 1996
contained in the Seller's unaudited draft annual consolidated financial
statements and the notes thereto for the year ended December 31, 1996 (the
"1996 Financial Statements").
SECTION 3.3 Subsidiaries. Each Subsidiary: (i) is duly organized and
validly existing under the laws of its jurisdiction of organization; (ii) has
all necessary power and authority to own, operate or lease the properties and
assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary; and
(iii) is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification necessary or
desirable, except where the failure to be so duly licensed or qualified would
not have a Material Adverse Effect. Each Subsidiary is wholly owned, directly
or indirectly, by the Seller.
SECTION 3.4 No Conflict. Assuming that all Approvals described in
Section 3.5 have been obtained and all filings and notifications listed in
Schedule 3.5 of the Disclosure Schedule have been made, the execution, delivery
and performance of this Agreement and the Escrow Agreement by the Seller, and
the issuance of the Shares and the performance of the Seller's obligations in
accordance with the Certificate of Designation, do not and will not, as of the
Closing Date: (i) violate, conflict with or result in the breach of any
provision of the certificate of incorporation or by-laws (or similar
organizational documents) of the Seller or any Subsidiary; (ii) conflict with
or violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to the Seller, any
Subsidiary or any of their respective assets, properties or businesses; or
(iii) except as set forth in Schedule 3.4(iii) of the Disclosure Schedule,
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under,
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require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any of the Shares or on any of the assets
or properties of the Seller or any Subsidiary pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Seller or any
Subsidiary is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
SECTION 3.5 Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Seller do not and will not require any consent, approval, authorization or
other order of, action by, filing with or notification to any Governmental
Authority (collectively, the "Approvals"), except: (i) as described in Schedule
3.5 of the Disclosure Schedule; (ii) as may be required pursuant to the
notification requirements of the HSR Act; (iii) the filing with the Secretary
of State of the State of Delaware of the Certificate of Designation
contemplated by Section 5.1; and (iv) any filings required to effect any
registration pursuant to Section 5.5. Subject to the foregoing exceptions, the
Seller shall obtain the foregoing Approvals on or before the Closing Date.
SECTION 3.6 Seller SEC Documents: Financial Statements. (a) The Seller
has filed all forms, reports and documents required to be filed by it with the
Commission, and has heretofore made available to the Purchaser, in the form
filed with the Commission (excluding any exhibits thereto), (A) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, (B) its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June 30,
1996, and September 30, 1996, (C) all proxy statements relating to the Seller's
meetings of stockholders (whether annual or special) held since December 31,
1995, (D) the Seller's Prospectus dated April 16, 1996 and the related
Registration Statement on Form S-1 with respect to the offering by Seller of
certain debt obligations which mature in 2006, and (E) its Current Reports on
Form 8-K dated after December 31, 1995 (the forms, reports and other documents
referred to in clauses (A), (B), (C), (D) and (E) above being referred to
herein, collectively, as the "SEC Reports").
(b) Except as set forth on Schedule 3.6 of the Disclosure
Schedule, the SEC Reports and any other forms, reports and other documents
filed by the Seller with the Commission as of the date of this Agreement: (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder; and (ii) did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(c) The financial statements (including, in each case, any
notes thereto) contained in the SEC Reports were prepared in accordance with
U.S. GAAP applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each fairly presented the
financial position, results of operations and cash flows of the Seller and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end
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adjustments which were not and are not known or reasonably expected,
individually or in the aggregate, to be material in amount).
(d) Since December 31, 1996 there has not been any change,
occurrence or circumstance in the Business, results of operations or financial
condition of the Seller or any Subsidiary having, individually or in the
aggregate, a Material Adverse Effect, other than changes, occurrences and
circumstances referred to in any subsequently filed SEC Reports or otherwise
Disclosed by Seller.
SECTION 3.7 No Undisclosed Liabilities. There are no Liabilities of
the Seller or any Subsidiary, other than Liabilities: (i) disclosed in Schedule
3.7 of the Disclosure Schedule; (ii) reflected in the SEC Reports or the 1996
Financial Statements or otherwise Disclosed by Seller; (iii) not required to be
reflected in a consolidated balance sheet of the Seller and its Subsidiaries or
in the notes thereto prepared in accordance with U.S. GAAP; or (iv) incurred
since the Reference Balance Sheet Date in the ordinary course of business and
which do not have a Material Adverse Effect.
SECTION 3.8 Conduct in the Ordinary Course: Absence of Certain
Changes, Events and Conditions. Since the Reference Balance Sheet Date, except
as Disclosed by Seller in any subsequently filed SEC Reports or Press Releases,
as reflected in the 1996 Financial Statements or as contemplated by this
Agreement, the Business of the Seller and the Subsidiaries has been conducted
in the ordinary course and the Seller has not suffered any Material Adverse
Effect.
SECTION 3.9 Litigation. Except as set forth in the SEC Reports, as
reflected in the 1996 Financial Statements, as disclosed in Schedule 3.9 of the
Disclosure Schedule or otherwise Disclosed by Seller, there are no Actions by
or against the Seller or any Subsidiary (or by or against any Affiliate thereof
and relating to the Business, the Seller or any Subsidiary), or affecting any
of the Assets, pending before any Governmental Authority (or, to the knowledge
of the Seller, threatened to be brought by or before any Governmental
Authority) that has, has had or could reasonably be expected to have a Material
Adverse Effect or could reasonably be expected to affect the legality, validity
or enforceability of this Agreement or the Escrow Agreement or the consummation
of the transactions contemplated hereby or thereby. None of the Seller, the
Subsidiaries nor any of the Assets is subject to any Governmental Order (nor,
to the knowledge of the Seller, are there any such Governmental Orders
threatened to be imposed by any Governmental Authority) which has, has had or
could have a Material Adverse Effect.
SECTION 3.10 Compliance with Laws. The Seller and the Subsidiaries
have each conducted and continue to conduct the Business in all material
respects in accordance with all Laws and Governmental Orders applicable to the
Seller or any Subsidiary or any of the Assets or the Business, and neither the
Seller nor any Subsidiary is in material violation of any such Law or
Governmental Order.
SECTION 3.11 Full Disclosure. The Seller is not aware of any facts
pertaining to the Seller, any Subsidiary or the Business which could reasonably
be expected to have a Material
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Adverse Effect and which have not been disclosed in this Agreement, the
Disclosure Schedule, the SEC Reports or otherwise Disclosed by Seller.
SECTION 3.12 Delivery of Certain Documents. The Seller has delivered
to the Purchaser a true and complete copy of the most recent drafts of the 1996
Financial Statements, the Debt Offering Memorandum and all Related Agreements.
SECTION 3.13 Private Placement. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Sections 4.5 and
4.6, the offer and sale of the Shares to the Purchaser pursuant to this
Agreement is exempt from registration under the Securities Act.
SECTION 3.14 FCC Regulations. After giving effect to the issuance of
Shares to the Purchaser, the ownership of capital stock of the Seller by aliens
or their representatives or by a foreign government or representative thereof
or by any corporation organized under the laws of a foreign country does not
exceed the limitations set forth in rules and regulations of the FCC.
SECTION 3.15 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.1 Organization and Authority of the Purchaser. The Purchaser
is a corporation duly organized, validly existing and in good standing under
the laws of the State of South Carolina and has all necessary corporate power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Escrow Agreement by the Purchaser, the performance by the Purchaser of
its obligations hereunder and thereunder and the consummation by the Purchaser
of the transactions contemplated hereby and thereby have been duly authorized
by all requisite action on the part of the Purchaser. This Agreement and the
Escrow Agreement have been duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Seller) this
Agreement and the Escrow Agreement constitute the legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with their respective terms.
SECTION 4.2 No Conflict. Except as disclosed by the Purchaser to the
Seller in writing prior to Closing, assuming compliance with the notification
requirements of the HSR Act and the making and obtaining of all filings,
notifications, consents, approvals, authorizations and
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other actions referred to in Section 4.3, and except as may result from any
facts or circumstances relating solely to the Seller, the execution, delivery
and performance of this Agreement and the Escrow Agreement by the Purchaser do
not and will not, as of the date hereof and as of the Closing Date: (i)
violate, conflict with or result in the breach of any provision of the articles
of incorporation or by-laws of the Purchaser; (ii) conflict with or violate any
Law or Governmental Order applicable to the Purchaser; or (iii) conflict with,
or result in any breach of, constitute a default (or event which with the
giving of notice or lapse or time; or both, would become a default) under,
require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation, or cancellation of, or result
in the creation of any Encumbrance on any of the assets or properties of the
Purchaser pursuant to, any note, bond, mortgage or indenture, contract,
agreement, lease, sublease, license, permit, franchise or other instrument or
arrangement to which the Purchaser is a party or by which any of such assets or
properties are bound or affected, which in any such case would have a material
adverse effect on the ability of the Purchaser to consummate the transactions
contemplated by this Agreement or the Escrow Agreement.
SECTION 4.3 Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Purchaser do not and will not require any Approvals, except pursuant to the
notification requirements of the HSR Act and the filing requirements of
Sections 13 and 16(a) of the Exchange Act. The Purchaser shall obtain or comply
with such Approval requirements in a timely manner.
SECTION 4.4 Litigation. There are no Actions by or against the
Purchaser, pending before any Governmental Authority (or, to the knowledge of
the Purchaser, threatened to be brought by or before any Governmental
Authority) that could reasonably be expected to affect the legality, validity
or enforceability of this Agreement or the Escrow Agreement or the consummation
of the transactions contemplated hereby or thereby. The Purchaser is not
subject to any Governmental Order (nor, to the knowledge of the Purchaser, are
there any such Governmental Orders threatened to be imposed by any Governmental
Authority), which could reasonably be expected to materially adversely affect
the legality, validity or enforceability of this Agreement or the Escrow
Agreement or the consummation of the transactions contemplated hereby or
thereby.
SECTION 4.5 Investment Purpose. The Purchaser is acquiring the Shares
and the shares of Common Stock to be issued upon conversion for its own account
solely for the purpose of investment and not with a view to, or for offer or
sale in connection with, any distribution thereof.
SECTION 4.6 Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act.
SECTION 4.7 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
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ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Filing of Certificate of Designation. The Seller covenants
and agrees that at or prior to the Closing, the Seller will file the
Certificate of Designation with the Secretary of State of the State of Delaware
in accordance with the Delaware General Corporation Law and cause the
Certificate of Designation to be effective thereunder.
SECTION 5.2 Treatment of Shares as Equity. The Seller covenants and
agrees that it will treat the Shares as equity, and not as debt, for accounting
and tax purposes and further covenants and agrees that it will not take any
action or position that is inconsistent with such treatment.
SECTION 5.3 Regulatory and Other Authorizations: Notices and Consents.
(a) The Seller and the Purchaser shall use all reasonable efforts to obtain all
Approvals of all Governmental Authorities that may be or become necessary for
each of them to obtain for their execution and delivery of, and the performance
of their respective obligations pursuant to, this Agreement and the Escrow
Agreement. Each party hereto agrees to make an appropriate filing pursuant to
the HSR Act, if required, with respect to the conversion of the Shares at such
times as the Purchaser may request and to supply as promptly as practicable to
the appropriate Governmental Authorities any additional information and
documentary material that may be requested pursuant to the HSR Act.
(b) The Seller shall or shall cause the Subsidiaries to give
promptly such notices to third parties and use its or their reasonable efforts
to obtain such third party consents as are necessary in connection with the
transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable
efforts to assist the Seller in giving such notices and obtaining such
consents; provided, however, that the Purchaser shall have no obligation to
give any guarantee or other consideration of any nature in connection with any
such notice or consent or to consent to any change in the terms of any
agreement or arrangement which the Purchaser in its sole and absolute
discretion may deem adverse to the interests of the Purchaser.
SECTION 5.4 Notice of Developments. (a) Prior to the Closing, the
Seller shall promptly notify the Purchaser in writing of: (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of the Seller in this Agreement or which
could reasonably be expected to have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any respect;
and (ii) all other developments material to the Seller and the Subsidiaries,
taken as a whole, affecting the Assets, Liabilities, business, financial
condition, operations, results of operations or prospects of the Seller, any
Subsidiary or the Business.
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(b) Prior to the Closing, the Purchaser shall promptly notify
the Seller in writing of all events, circumstances, facts and occurrences
arising subsequent to the date of this Agreement which could reasonably be
expected to result in any breach of a representation or warranty or covenant of
the Purchaser in this Agreement or which could reasonably be expected to have
the effect of making any representation or warranty of the Purchaser in this
Agreement untrue or incorrect in any respect.
SECTION 5.5 Registration Rights. Effective at the Closing, the
Purchaser and the Seller shall each have the rights and obligations set forth
in Annex II, which is incorporated by reference herein.
SECTION 5.6 Resale Restrictions. (a) The Purchaser acknowledges that
the Shares and the shares of Common Stock into which the Shares are convertible
have not been registered under the Securities Act or any state securities law,
and hereby agrees not to offer, sell or otherwise transfer, pledge or
hypothecate such shares unless and until registered under the Securities Act
and any applicable state securities law or unless such offer, sale, transfer,
pledge or hypothecation is exempt from registration or is otherwise in
compliance with the Securities Act and such laws.
(b) During the period ending one year after the Closing Date,
the Purchaser shall not, without the prior written consent of the Seller: (i)
offer, pledge, sell or otherwise transfer or dispose of, directly or
indirectly, any Shares or any shares of Common Stock into which any of such
Shares may be converted; or (ii) enter into any swap or similar agreement that
transfers, in whole or in part, any of the economic consequences of ownership
of such Shares or any shares of Common Stock into which such Shares may be
converted, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Shares or such other securities, in cash or
otherwise, other than a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated pledgee;
provided, however, that the Purchaser may at any time enter into any such
transaction described in clause (i) or (ii) above with an Affiliate of the
Purchaser.
SECTION 5.7 Registration of Shares. The Seller shall, upon issuance of
the Shares and prior to the delivery of stock certificates evidencing the
Shares pursuant to Section 2.5, register the Shares in the name of the
Purchaser in the stock records of the Seller.
SECTION 5.8 Delivery of Certain Documents. The Seller shall deliver to
the Purchaser true and correct copies of this Agreement and the Related
Agreements, the Escrow Agreement and all exhibits, schedules, annexes and
agreements related hereto and thereto, as soon as practicable following the
execution and delivery hereof by the parties hereto and thereto.
SECTION 5.9 Certain Information. (a) For a period of at least two
years from the date of this Agreement, the Seller shall file all reports and
other information required to be filed by Section 13 or 15(d) under the
Exchange Act, as the case may be, as shall be necessary in order that the
conditions to the availability of Rule 144 (as amended or to be amended) under
the Securities Act in connection with any Sale of shares of Common Stock by the
Purchaser shall be met. For so long as the Seller is required to file reports
and other information pursuant to
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Section 13 or 15(d) of the Exchange Act and this Section 5.9(a), unless the
Purchaser no longer holds any Shares or shares of Common Stock, the Seller
shall provide the Purchaser with a paper copy of each such report and other
information at or about the same time as filed with the Commission.
(b) For purposes of this Agreement, "Sale" means any sale,
assignment, transfer, distribution or other disposition of shares of Common
Stock or of a participation therein, whether voluntarily or by operation of
law.
SECTION 5.10 Conduct of Business of the Seller. Prior to the Closing,
the Seller agrees (except to the extent that the Purchaser shall otherwise
consent in writing) as follows:
(a) Dividends: Changes in Stock. The Seller shall not take or
permit to be taken any action that would result in an adjustment to the
Conversion Price (as defined in the Certificate of Designation) pursuant to
Section (7)(d) of the Certificate of Designation if the Shares were issued and
outstanding at the time of such action.
(b) Certain Matters. The Seller shall not take or permit to
be taken any action in respect of which holders of Shares would be entitled to
vote pursuant to Section (9) of the Certificate of Designation if the Shares
were outstanding at the time of such action.
SECTION 5.11 Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable
Law, and execute and deliver such documents and other papers, as may be
required to carry out the provisions of this Agreement and consummate and make
effective the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of the Seller. The obligations
of the Seller to execute this Agreement and perform its obligations hereunder
shall be subject to the satisfaction (or waiver by the Seller, at its sole
discretion), at or prior to the Closing, of each of the following conditions:
(a) Representations, Warranties and Covenants. The representations and
warranties of the Purchaser contained in this Agreement shall have been true
and correct in all material respects when made and shall be true and correct in
all material respects as of the Closing, with the same force and effect as if
made as of the Closing, other than such representations and warranties as are
made as of another date, which shall be true and correct as of such date
(provided, however, that if any portion of any representation or warranty is
already qualified by materiality, for purposes of determining whether this
Section 6.1(a) has been satisfied with respect to such portion of such
representation or warranty, such portion of such representation or warranty as
so qualified must be true and correct in all respects), and the covenants and
agreements contained in this Agreement to be complied with by the Purchaser at
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or before the Closing shall have been complied with in all material respects,
and the Seller shall have received a certificate from the Purchaser to such
effect signed by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against either the Seller or
the Purchaser seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Seller, is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the
provisions of this Section 6.1(b) shall not apply if the Seller has directly or
indirectly solicited or encouraged any such Action;
(c) Resolutions of the Purchaser. The Seller shall have
received a true and complete copy, certified by the Secretary or an Assistant
Secretary of the Purchaser, of the resolutions duly and validly adopted by the
Board of Directors of the Purchaser evidencing its authorization, if required
by law, of the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby;
(d) Incumbency Certificate of the Purchaser. The Seller shall
have received a certificate of the Secretary or an Assistant Secretary of the
Purchaser certifying the names and signatures of the officers of the Purchaser
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(e) Legal Opinion. The Seller shall have received from McNair
Law Firm, P.A., counsel to the Purchaser, a legal opinion, addressed to the
Seller and dated the Closing Date, the form and substance of which shall be
substantially as set forth in Exhibit 6.1(e) attached hereto, as to: (i) the
due authorization, execution and delivery by the Purchaser of this Agreement
and the Escrow Agreement; and (ii) the enforceability against the Purchaser of
this Agreement and the Escrow Agreement (assuming New York law is identical in
all respects to South Carolina law);
(f) Consents and Approvals. The Seller shall have received
(or received evidence of), each in form and substance reasonably satisfactory
to the Seller, all Approvals and all third party consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement which the Purchaser has the obligation to obtain; and
(g) Closing of Related Transactions. Closing of the
transactions contemplated by the Series C Stock Purchase Agreement shall have
occurred or shall occur simultaneously with the Closing.
SECTION 6.2 Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to execute this Agreement and perform its
obligations hereunder shall be subject to the satisfaction (or waiver by the
Purchaser, at its sole discretion), at or prior to the Closing, of each of the
following conditions:
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(a) Representations, Warranties and Covenants. The
representations and warranties of the Seller contained in this Agreement
(including those set forth in Annex III hereto) shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing with the same force and effect as if made
as of the Closing, other than such representations and warranties as are made
as of another date, which shall be true and correct as of such date (provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.2(a) has been satisfied with respect to such portion of such representation
or warranty, such portion of such representation or warranty as so qualified
must be true and correct in all respects), and the covenants and agreements
contained in this Agreement to be complied with by the Seller at or before the
Closing shall have been complied with in all material respects, and the
Purchaser shall have received a certificate of the Seller to such effect signed
by a duly authorized officer thereof.
(b) No Proceeding or Litigation. No Action shall have been
commenced by or before any Governmental Authority against either the Seller or
the Purchaser, seeking to restrain or materially and adversely alter the
transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Purchaser, is likely to render it impossible or
unlawful to consummate such transactions or which could have a Material Adverse
Effect; provided, however, that the provisions of this Section 6.2(b) shall not
apply if the Purchaser has directly or indirectly solicited or encouraged any
such Action;
(c) Resolutions of the Seller. The Purchaser shall have
received a true and complete copy, certified by the Secretary or an Assistant
Secretary of the Seller, of the resolutions duly and validly adopted by the
Board of Directors of the Seller and, to the extent that such authorization is
necessary, the shareholders of the Seller evidencing their authorization of the
execution and delivery of this Agreement, the issuance and terms of the Shares
including, without limitation, the convertibility thereof into shares of Common
Stock, and the consummation of the transactions contemplated hereby;
(d) Incumbency Certificate of the Seller. The Purchaser shall
have received a certificate of the Secretary or an Assistant Secretary of the
Seller certifying the names and signatures of the officers of the Seller
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(e) Legal Opinion. The Purchaser shall have received from
Nelson Mullins Riley & Scarborough, L.L.P., counsel to the Seller, a legal
opinion, addressed to the Purchaser and dated the Closing Date, the form and
substance of which shall be substantially as set forth in Exhibit 6.2(e)
attached hereto, as to: (i) the due authorization by all necessary corporate
action, execution and delivery by the Seller of this Agreement and the Escrow
Agreement; (ii) the enforceability against the Seller of this Agreement and the
Escrow Agreement; (iii) the validity of the Shares and the due authorization of
the shares of Common Stock into which the Shares may be converted; and (iv) the
good standing of the Seller and each Subsidiary under the laws of their
respective State(s) of incorporation or organization, and related matters;
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(f) FCC Opinion. The Purchaser shall have received from
Kurtis & Associates, L.P., special counsel to the Seller, a legal opinion,
addressed to the Purchaser and dated the Closing Date, the form and substance
of which shall be substantially as set forth in Exhibit 6.2(f) attached hereto,
as to certain matters relating to the FCC Licenses.
(g) Consents and Approvals. The Purchaser shall have received
(or received evidence of), each in form and substance reasonably satisfactory
to the Purchaser, all Approvals and all third party consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement which the Seller has the obligation to obtain;
(h) Closing of Related Transactions. Closing of the
transactions contemplated by the Series C Stock Purchase Agreement shall have
occurred or shall occur simultaneously with the Closing;
(i) Organizational Documents. The Purchaser shall have
received a copy of: (i) the certificate of incorporation, as amended, of the
Seller, and the Certificates of Designations with respect to the Preferred
Stock and the Series C Preferred Stock, certified by the Secretary of State of
the State of Delaware, as of a date not earlier than five Business Days prior
to the Closing Date and accompanied by a certificate of the Secretary or
Assistant Secretary of the Seller, dated as of the Closing Date, stating that
no amendments have been made to such certificate of incorporation since such
date; and (ii) the by-laws of the Seller, certified by the Secretary or
Assistant Secretary of the Seller;
(j) Good Standing. The Purchaser shall have received a good
standing certificate for the Seller from the Secretary of State of the State of
Delaware, dated as of a date not earlier than five Business Days prior to the
Closing Date and accompanied by a bring-down certificate dated within
twenty-four hours of the Closing Date; and
(k) No Material Adverse Effect. No event or events shall have
occurred which, individually or in the aggregate, have, or could have, a
Material Adverse Effect.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. (a) The
representations and warranties of the Seller to Purchaser contained in this
Agreement (including Annex III hereto) and in the Exhibits to this Agreement
and the Disclosure Schedule (collectively, the "Acquisition Documents"), shall
survive the Closing until the later of the second anniversary of the Closing
Date or the conversion of the Preferred Stock into Common Stock. Neither the
period of survival nor the liability of the Seller with respect to the Seller's
representations and warranties shall be reduced by any investigation made at
any time by or on behalf of the Purchaser. If written notice of a claim has
been given prior to the expiration of the applicable representations and
warranties by the Purchaser to the Seller, then the relevant representations
and warranties shall survive as to such claim, until such claim has been
finally resolved.
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(b) The representations and warranties of the Purchaser
contained in the Acquisition Documents shall survive the Closing until the
later of the second anniversary of the Closing Date or the conversion of the
Preferred Stock into Common Stock. Neither the period of survival nor the
liability of the Purchaser with respect to the Purchaser's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Seller. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by the Seller to
the Purchaser, then the relevant representations and warranties shall survive
as to such claim, until such claim has been finally resolved.
SECTION 7.2 Indemnification. (a)(i) The Purchaser, its successors and
assigns, and the stockholders, officers, directors, employees, Affiliates and
agents of the Purchaser and its successors and assigns shall be indemnified and
held harmless by the Seller for any and all Liabilities, losses, damages,
claims, costs and expenses, interest, awards, judgments and penalties
(including, without limitation, attorneys' and consultants' fees and expenses)
actually suffered or incurred by them (including, without limitation, any
Action brought or otherwise initiated by any of them) (hereinafter a "Loss"),
arising out of or resulting from:
(A) the breach of any representation or
warranty made by the Seller contained in the
Acquisition Documents; or
(B) the breach of any covenant or agreement
by the Seller contained in the Acquisition Documents.
(ii) The Seller, its successors and assigns, and
the stockholders, officers, directors, employees, Affiliates and agents of the
Seller and its successors and assigns shall be indemnified and held harmless by
the Purchaser for any and all Losses actually suffered or incurred by them,
arising out of or resulting from:
(A) the breach of any representation or
warranty made by the Purchaser in the Acquisition Documents;
or
(B) the breach of any covenant or
agreement by the Purchaser contained in the Acquisition
Documents.
To the extent that the Seller's or the Purchaser's undertakings set forth in
this Section 7.2 may be unenforceable, the Seller or the Purchaser, as the case
may be, shall contribute the maximum amount that it is permitted to contribute
under applicable law to the payment and satisfaction of all Losses incurred by
the Purchaser or the Seller, as the case may be.
(b) An indemnified party shall give the party from whom
indemnification is sought notice of any matter which an indemnified party has
determined has given or could give rise to a right of indemnification under
this Agreement, within 60 days of such determination, stating the amount of the
Loss, if known, and method of computation thereof, and containing a reference
to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises; provided, however, that the failure to
provide such notice shall not release
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the indemnifying party from any of its obligations under this Article VII
except to the extent the indemnifying party is materially prejudiced by such
failure and shall not relieve the indemnifying party from any other obligation
or Liability that it may have to any indemnified party otherwise than under
this Article VII. The obligations and Liabilities of an indemnifying party
under this Article VII with respect to Losses arising from claims of any third
party which are subject to the indemnification provided for in this Article VII
("Third Party Claims") shall be governed by and contingent upon the following
additional terms and conditions: If an indemnified party shall receive notice
of any Third Party Claim, the indemnified party shall give the indemnifying
party notice of such Third Party Claim within 30 days of the receipt by the
indemnified party of such notice; provided, however, that the failure to
provide such notice shall not release the indemnifying party from any of its
obligations under this Article VII except to the extent the indemnifying party
is materially prejudiced by such failure and shall not relieve the indemnifying
party from any other obligation or Liability that it may have to any
indemnified party otherwise than under this Article VII. If the indemnifying
party acknowledges in writing its obligation to indemnify the indemnified party
hereunder against any Losses that may result from such Third Party Claim, then
the indemnifying party shall be entitled to assume and control the defense of
such Third Party Claim at its expense and through counsel of its choice if it
gives notice of its intention to do so to the indemnified party within five
days of the receipt of such notice from the indemnified party; provided,
however, that if there exists or is reasonably likely to exist a conflict of
interest that would make it inappropriate in the judgment of the indemnified
party, in its sole and absolute discretion, for the same counsel to represent
both the indemnified party and the indemnifying party, then the indemnified
party shall be entitled to retain its own counsel, in each jurisdiction for
which the indemnified party determines counsel is required, at the expense of
the indemnifying party. In the event the indemnifying party exercises the right
to undertake any such defense against any such Third Party Claim as provided
above, the indemnified party shall cooperate with the indemnifying party in
such defense and make available to the indemnifying party, at the indemnifying
party's expense, all witnesses, pertinent records, materials and information in
the indemnified party's possession or under the indemnified party's control
relating thereto as is reasonably required by the indemnifying party.
Similarly, in the event the indemnified party is, directly or indirectly,
conducting the defense against any such Third Party Claim, the indemnifying
party shall cooperate with the indemnified party in such defense and make
available to the indemnified party, at the indemnifying party's expense, all
such witnesses, pertinent records, materials and information in the
indemnifying party's possession or under the indemnifying party's control
relating thereto as is reasonably required by the indemnified party. No such
Third Party Claim may be settled by the indemnifying party or the indemnified
party without the prior written consent of the other.
SECTION 7.3 Limits on Indemnification. Notwithstanding anything to the
contrary contained in this Agreement, the maximum amount of indemnifiable
Losses which may be recovered from an indemnifying party arising out of or
resulting from the causes enumerated in Section 7.2 shall be an amount equal to
the Purchase Price.
ARTICLE VIII
TERMINATION AND WAIVER
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SECTION 8.1 Termination. This Agreement may be terminated as follows:
(a) by the Purchaser if, between the date hereof and the time
scheduled for the Closing: (i) an event or condition occurs that has resulted
in a Material Adverse Effect; (ii) any representation or warranty of the Seller
contained in this Agreement shall not have been true and correct in all
material respects when made or as of the Closing Date; (iii) the Seller shall
not have complied in all material respects with any covenant or agreement to be
complied with by it and contained in this Agreement; or (iv) the Seller or any
Subsidiary makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against the Seller or any Subsidiary
seeking to adjudicate any of them a bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or
(b) by the Seller if, between the date hereof and the time
scheduled for the Closing: (i) any representation or warranty of the Purchaser
contained in this Agreement shall not have been true and correct in all
material respects when made or as of the Closing Date; (ii) the Purchaser shall
not have complied in all material respects with any covenant or agreement to be
complied with by it and contained in this Agreement; or (iii) the Purchaser
makes a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against the Purchaser seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up or reorganization,
arrangement, adjustment, protection, relief or composition of its debts under
any Law relating to bankruptcy, insolvency or reorganization; or
(c) by the Purchaser if the closing of the offering of debt
contemplated by the Debt Offering Memorandum and the receipt by Seller of a
minimum of $100 million in gross proceeds therefrom shall not have occurred on
or prior to April 30, 1997; provided, however, that the Purchaser must notify
the Seller in writing within five Business Days of notice from the Seller of
the failure of such closing contemplated by the Debt Offering Memorandum to
occur of Purchaser's election to proceed (in which case, Purchaser agrees to
waive any conditions to Closing and breaking escrow which are not then met due
to the failure of such closing under the Debt Offering Memorandum) or to
terminate this Agreement or else this Agreement automatically shall be deemed
to be terminated; or
(d) by either the Purchaser or the Seller in the event that
any Governmental Authority shall have issued an order, decree or ruling or
taken any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(e) by the mutual written consent of the Seller and the
Purchaser.
SECTION 8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided
in Section 8.1, this Agreement shall forthwith become void and there shall be
no liability on the part of either party hereto except that nothing herein
shall relieve either party from liability for any breach of this Agreement
occurring prior to termination.
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(b) In the event of termination of this Agreement as provided
in Section 8.1, the Escrow Agent shall, pursuant to the provisions of the
Escrow Agreement, return the Purchase Price to the Purchaser and shall return
the certificate(s) evidencing the Shares to the Seller.
SECTION 8.3 Waiver. Either party to this Agreement may: (i) extend the
time for the performance of any of the obligations or other acts of the other
party; (ii) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered by the other party
pursuant hereto; or (iii) waive compliance with any of the agreements or
conditions of the other party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. Any waiver of any term or condition shall not be
construed as a waiver of any subsequent breach or a subsequent waiver of the
same term or condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights hereunder shall
not constitute a waiver of any of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Expenses. Except as otherwise specified in this Agreement,
all costs and expenses, including, without limitation, fees and disbursements
of counsel, financial advisors and accountants, incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by the
party incurring such costs and expenses, whether or not the Closing shall have
occurred; provided however, that the Seller shall reimburse the Purchaser for
the fees and disbursements of Purchaser's counsel actually incurred in
connection with this Agreement and the transactions contemplated hereby up to
an aggregate of $30,000.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.2):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
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Nelson Mullins Riley & Scarborough L.L.P.
999 Peachtree Street, Suite 1400
Atlanta, GA 30309
Telecopy: (404) 817-6050
Attention: Glenn W. Sturm, Esq.
(b) if to the Purchaser:
SCANA Communications, Inc.
c/o SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: (803) 748-3336
Attention: Kevin Marsh
with a copy to:
SCANA Communications, Inc.
c/o SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: (803) 748-3336
Attention: H. Thomas Arthur II, Esq.
SECTION 9.3 Public Announcements. No party to this Agreement shall
make, or cause to be made, any press release or public announcement or
otherwise communicate with any news media in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party (which shall not be unreasonably withheld or delayed), and the parties
shall cooperate as to the timing and contents of any such press release or
public announcement; provided, however, that with respect to any disclosure
required by law or by a listing agreement with the National Association of
Securities Dealers, Inc. Automated Quotation System National Market System or
any national securities exchange to which the Purchaser or the Seller is a
party, the party required to make such disclosure shall use its best efforts to
consult with the other party as to the timing and contents of such disclosure
and to obtain such consent prior to the time such disclosure is required to be
made.
SECTION 9.4 Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the or interpretation of this Agreement.
SECTION 9.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in
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<PAGE> 28
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the transactions contemplated hereby are consummated as originally contemplated
to the greatest extent possible.
SECTION 9.6 Entire Agreement. This Agreement and the Escrow Agreement
constitute the entire agreement of the parties hereto with respect to the
subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Seller and the Purchaser with
respect to the subject matter hereof and thereof.
SECTION 9.7 Assignment. This Agreement may not be assigned by
operation of Law or otherwise without the express written consent of the Seller
and the Purchaser (which consent may be granted or withheld in the sole
discretion of the Seller or the Purchaser); provided, however, that the
Purchaser may, without the consent of the Seller, assign this Agreement prior
to the Closing to SCANA Corporation or to a subsidiary controlled by SCANA
Corporation, but no such assignment shall relieve the Purchaser of any of its
obligations under this Agreement.
SECTION 9.8 No Third Party Beneficiaries. Except for the provisions of
Article VII relating to indemnified parties, this Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their successors
and permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
SECTION 9.9 Amendment. This Agreement may not be amended or modified
except: (i) by an instrument in writing signed by, or on behalf of, the Seller
and the Purchaser; or (ii) by a waiver in accordance with Section 8.3.
SECTION 9.10 Governing Law. This Agreement shall be governed by the
laws of the State of New York.
SECTION 9.11 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.12 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the term hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
[SIGNATURES BEGIN ON NEXT PAGE]
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<PAGE> 29
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTERCEL, INC.
By: /s/ Allen E. Smith
-----------------------------------------
Name: Allen E. Smith
Title: President and Chief Executive Officer
SCANA COMMUNICATIONS, INC.
By: /s/ Kevin B. Marsh
------------------------------------------
Name: Kevin B. Marsh
Title: Vice President and Chief Financial Officer
26
<PAGE> 30
ANNEX I
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE
PARTICIPATING OR OTHER RIGHTS, AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS THEREOF, OF
SERIES D 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 or by consent of the Board of Directors duly held
or obtained on March ___, 1997:
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. 50,000 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 D Convertible Preferred
Stock (the "Series D Preferred Stock"). Without the consent of the then current
holders of shares of Series D Preferred Stock as provided for herein, the
number of shares of Series D Preferred Stock may not be increased and may not
be decreased below the number of then currently outstanding shares of Series D
Preferred Stock.
<PAGE> 31
Section (2) Definitions. For purposes of the Series D 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 D
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 D Preferred Stock is
convertible, as such Conversion Price may be adjusted pursuant to
Section (7). The initial Conversion Price shall be $12.75 (equivalent
to the rate of approximately 35.29412 shares of Common Stock for each
share of Series D Preferred Stock), which initial conversion price was
established pursuant to a letter dated March 5, 1997 from the
Corporation to initial holder of the Series D Preferred Stock.
"Current Market Price" shall mean, as of a particular date,
the average of the closing 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 D 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, joint
venture corporation, association 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).
"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.
"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.
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"Series C Preferred Stock" shall mean the series of preferred
stock, $0.01 par value, of the Corporation designated as Series C 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 D Preferred Stock.
Section (3) Dividends. (a) The holders of shares of the Series D
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 D Preferred Stock equal to the dividends payable on the
number of shares of Common Stock into which one share of Series D 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 D 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 D 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 D 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,
junior to or on a parity with the Series D Preferred Stock, for any period,
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 D Preferred Stock
in accordance with paragraph (a) of this Section (3).
(d) So long as any shares of the Series D Preferred Stock are
outstanding, no shares ranking junior to or on a parity with the Series D
Preferred Stock shall be redeemed or purchased by the Corporation or any
Subsidiary, except in accordance with Section (5) hereof and the corresponding
sections of the Certificates of Designations for the Series A Preferred Stock,
the Series B Preferred Stock and the Series C Preferred Stock, and the
provisions of the Certificate of Incorporation of the Corporation.
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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 D Preferred Stock, upon liquidation,
dissolution or winding up, the holders of the shares of Series D Preferred
Stock shall be entitled to receive $450.00 per share plus an amount equal to
all dividends declared and unpaid thereon to the date of final distribution to
such holders; in addition, such holders shall also 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, Series C Preferred Stock, Series D Preferred Stock and any other shares
of stock ranking, as to liquidation, dissolution or winding up, on a parity
with the Series D 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, Series C
Preferred Stock, Series D 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, Series C Preferred Stock,
Series D 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 entities, (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; provided, however, that
any subsequent distribution, liquidation, dissolution or winding up of the
Corporation shall remain subject to this Section (4).
(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
D 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 D Preferred Stock, as provided in paragraph (a) of this Section (4),
holders of shares of Series D 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 D Preferred Stock in an amount equal to the distributions made in
respect of the number of shares of Common Stock into which such share of Series
D Preferred Stock is then convertible.
Section (5) Redemption at the Option of the Corporation. (a) Series D
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 D Preferred
Stock, in whole or in part, for an aggregate redemption price of $450.00 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,
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<PAGE> 34
the shares of Series B Preferred Stock, the shares of Series C Preferred Stock
and the shares of Series D Preferred Stock on a pro rata basis.
(b) In the event the Corporation shall desire to redeem
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D 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, Series B Preferred Stock, Series
C Preferred Stock and Series D 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; (5) the then current Conversion Price; and (6) that
the Corporation is not then in default of any material loan document, indenture
or other borrowing the consequences of which have a Material Adverse Effect.
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 D
Preferred Stock so called for redemption and not converted prior to 5:00 p.m.
New York, New York time, on the redemption date 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, Series B
Preferred Stock, Series C Preferred Stock and Series D 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,
Series B Preferred Stock, Series C Preferred Stock and Series D 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 D Preferred
Stock purchased or redeemed by the Corporation or converted shall be retired
and canceled and shall be restored to the status of authorized but unissued
shares of preferred stock, without designation as to series.
Section (7) Conversion. Holders of shares of Series D Preferred Stock
shall have the right to convert all or a portion of such shares into shares of
Common Stock as follows:
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(a) Subject to and upon compliance with the provisions of
this Section (7), a holder of shares of Series D Preferred Stock shall have the
right, at his, her or its option, at any time after the fifth 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
D Preferred Stock may be converted, at the request of its holder, in part into
Common Stock. If a part of a share of Series D 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 D Preferred Stock evidencing the remaining interest
of such holder.
(b) In order to exercise the conversion right, the holder of
each share of Series D 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 D 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 D 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 transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
Holders of shares of Series D 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 D 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 D 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).
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<PAGE> 36
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 D 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 D 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 D
Preferred Stock. Instead of any fractional interest in a share of Common Stock
which would otherwise be deliverable upon the conversion of a share of Series D
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 D 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 D 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 D 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.
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(ii) In case the Corporation shall issue after the Issue Date
(a) options, warrants or other rights 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 options,
warrants or other rights or (b) shares of Common Stock or securities
exercisable for (including options, warrants or other rights 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 D Preferred Stock upon conversion), then in each
such case 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 options, warrants or other rights 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 options, warrants or other
rights 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 options, warrants or other rights 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 such
options, warrants or other rights 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 options, warrants or other rights 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 options,
warrants or other rights 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
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consideration received or receivable by the Corporation upon
issuance and upon exercise of such options, warrants or other rights
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, 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 options, warrants or other rights 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 options, warrants or
other rights 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 as a class 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 options, warrants or other rights 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 D Preferred Stock upon the conversion of the shares of Series D
Preferred Stock so that any such holder converting shares
of Series D 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 D 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 D 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 immediately, except as provided in
paragraph (h) below, after the record date for the determination of
stockholders entitled to receive such distribution.
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(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 D 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 D 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 D Preferred Stock was convertible
immediately prior to such Transaction. The Corporation shall use reasonable
efforts to deliver notice of any Transaction to the holders of Series D
Preferred Stock at least 20 days prior to the earlier of the consummation or
the record date therefor; provided however, that any unintentional failure by
the Corporation to deliver such required notice shall not impair or affect the
validity or provisions of any such Transaction; and provided, further, that any
failure by the Corporation to deliver such required notice shall toll the time
period in which the holders of Series D Preferred Stock may convert their
shares as aforementioned until such notice is delivered by the Corporation. The
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
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<PAGE> 40
case may be, for the benefit of the holders of the Series D Preferred Stock
which will contain provisions enabling the holders of the Series D 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 D 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, 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
calculation of such 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 D
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
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may defer until the occurrence of such event (A) issuing to the holder of any
share of Series D 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 D Preferred Stock, the
Conversion Price for the Series D 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, or both, for the purpose of effecting conversion of
the Series D Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Series D 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 D 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 D 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 D 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 D Preferred Stock, the
Corporation shall use all reasonable efforts to comply with all federal and
state laws and regulations thereunder requiring the registration
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<PAGE> 42
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 or fees payable in respect of the issue or
delivery of shares of Common Stock on conversion of the Series D Preferred
Stock pursuant hereto imposed by any Governmental Authority (including without
limitation, any fee in respect of an HSR Act filing); 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 D 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:
(i) prior to the Series D 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 D Preferred Stock;
(ii) on a parity with the Series D Preferred Stock,
(A) as to dividends, if such stock shall be Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock or Common Stock or
if the holders of such class of stock and the Series D 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 D Preferred Stock, if such stock
shall be Series A Preferred Stock, Series B Preferred Stock or Series
C Preferred Stock or if the holders of such class of stock and the
Series D 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 D Preferred Stock, (A) as
to dividends, if the holders of Series D 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 D 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.
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<PAGE> 43
Section (9) Voting.
(a) Except as herein provided or as otherwise from time to
time required by law, holders of Series D Preferred Stock shall have no voting
rights.
(b) So long as any shares of the Series D Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds of the
shares of Series D 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, or convertible, exercisable or exchangeable
into any class or series of stock ranking prior to, the Series D
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 D 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 D 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 D 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 D 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 D 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.
[Signatures begin on next page]
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<PAGE> 44
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by [ ], its [ ], and attested
by [ ] its [ ], this [ ] day of [ ], 1997.
INTERCEL, INC.
By
-----------------------------------------
Its:
-------------------------------------
(Corporate Seal)
Attest:
By
---------------------------------
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<PAGE> 45
ANNEX II
REGISTRATION RIGHTS
(a) The Purchaser shall have the right at any time after the Closing
to make three requests, one of which may be a Shelf Request (as defined in
paragraph (b) hereof) of the Seller in writing for registration under the
Securities Act of shares of Common Stock into which Shares have been converted
or are to be converted prior to the closing of the offering pursuant to such
registration (the "Securities"): with respect to the first of any such request
to register under the Securities Act at least $10 million in market value of
Securities Beneficially Owned by the Purchaser (the shares subject to any such
request hereunder being referred to as the "Subject Stock"), and with each
subsequent such request being at least 6 months following the completion of the
prior offering pursuant to a registration statement with respect to the Subject
Stock which was effective until the earlier of the completion of such offering
or three months. The Seller shall use all reasonable efforts to cause the
Subject Stock to be registered under the Securities Act as soon as reasonably
practicable after receipt of a request so as to permit promptly the sale
thereof, and in connection therewith, the Seller shall prepare and file, on
such appropriate form as the Seller in its discretion shall determine, a
registration statement under the Securities Act to effect such registration.
The Seller shall use all reasonable efforts to list all Subject Stock covered
by such registration statement on any national securities exchange on which the
Common Stock is then listed or to list such Subject Stock on the National
Association of Securities Dealers, Inc. Automated Quotation System or National
Market System. The Purchaser hereby undertakes to provide all such information
and materials and take all such action as may be required in order to permit
the Seller to comply with all applicable requirements of the Commission and to
obtain any desired acceleration of the effective date of such registration
statement. Any registration statement filed at the Purchaser's request
hereunder will not count as a requested registration unless effectiveness is
maintained until the earlier of completion of the offering or three months
(other than in the case of a Shelf Registration, in which case effectiveness
must be maintained for an aggregate of six months or until completion of the
offering, whichever occurs first). Notwithstanding the foregoing, the Seller
(i) shall not be obligated to cause any special audit to be undertaken in
connection with any such registration (provided that this provision shall not
relieve the Seller of its obligation to obtain any required consents with
respect to financial statements in prior periods) and (ii) shall be entitled to
postpone for a reasonable period (not to exceed 90 days) of time the filing of
any registration statement otherwise required to be prepared and filed by the
Seller if the Seller is, at such time, either (A) conducting, or proposing to
file with the Commission within 90 days a registration statement with respect
to, an underwritten public offering for the account of the Seller of equity
securities (or securities convertible into equity securities) or is subject to
a contractual obligation not to engage in a public offering and is advised in
writing by its managing underwriter or underwriters (with a copy to the
Purchaser) that such offering would in its or their opinion be adversely
affected by the registration so requested or (B) subject to an existing
contractual obligation to its underwriters not to engage in a public offering.
Notwithstanding any other provision of this Annex II, the Seller may postpone
action under this Annex II for as long as it reasonably deems necessary (but no
longer than 90 days) if the Seller determines, in its
<PAGE> 46
reasonable discretion, that effecting the registration at such time might (i)
adversely affect a pending or contemplated financing, acquisition, disposition
of assets or stock, merger or other significant transaction, or (ii) require
the Seller to make public disclosure of information the public disclosure of
which at such time the Seller in good faith believes could have a significant
adverse effect upon the Seller.
No securities, other than Purchaser's, may be registered on a
registration statement requested by the Purchaser pursuant to the first
paragraph of paragraph (a) of this Annex II without the Purchaser's express
written consent, unless the amount of such securities is subject to reduction
prior to any reduction in the number of securities originally requested by the
Purchaser in the event the lead underwriter of the related offering believes
that the success of such offering would be materially and adversely affected by
inclusion of all the securities requested to be included therein.
At any time after the Closing, if the Seller proposes to file a
registration statement under the Securities Act with respect to an offering of
its equity securities (i) for its own account (other than a registration
statement on Form S-4 or S-8 or any substitute form that may be adopted by the
Commission) or (ii) for the account of any holders of its securities (including
pursuant to a demand registration), then the Seller shall give written notice
of such proposed filing to the Purchaser as soon as practicable (but in any
event not less than 10 Business Days before the anticipated filing date), and
such notice shall offer the Purchaser the opportunity to register such number
of shares of Securities as the Purchaser requests. If the Purchaser wishes to
register securities of the same class or series as the Seller or such holder,
such registration shall be on the same terms and conditions as the registration
of the Seller's or such holders' securities (a "Piggyback Registration").
Notwithstanding anything contained herein, if the lead underwriter of an
offering involving a Piggyback Registration delivers a written opinion to the
Seller that the success of such offering would be materially and adversely
affected by inclusion of all the securities requested to be included, then the
number of securities to be registered by the Purchaser shall be reduced prior
to any reduction in the number of securities originally requested to be
registered pursuant to clauses (i) and (ii) of the first sentence of this
paragraph; provided, however, that the Seller must provide prompt written
notice of such written opinion to the Purchaser. The Purchaser shall have the
right at any time to convert its request for a Piggyback Registration into a
requested registration pursuant to the first paragraph of paragraph (a) of this
Annex II.
(b) Upon the request of the Purchaser (the "Shelf Request"), the
Seller shall:
(i) as promptly as reasonably practicable, prepare and file
pursuant to SEC Rule 415 on Form S-3 or such other form as Seller in its
discretion shall determine with the SEC, and thereafter shall use all
reasonable efforts to cause to be declared effective as promptly as reasonably
practicable, a Shelf Registration Statement relating to the offer and sale of
the Shares by the Purchaser from time to time in accordance with the methods of
distribution elected by the Purchaser and set forth in the Shelf Registration
Statement;
(ii) use all reasonable efforts to keep the Shelf
Registration Statement effective in order to permit the prospectus forming part
thereof to be useable by the Purchaser for an
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aggregate period of six months, or for such shorter period that will terminate
when all Shares covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement or cease to be outstanding; and
(iii) notwithstanding any other provisions hereof, use all
reasonable efforts to ensure that (A) any Shelf Registration Statement and any
amendments thereto and any prospectus forming part thereof and any supplement
thereof complies in all material respects with the Securities Act and the rules
and regulation thereunder, (B) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (C) any prospectus
forming part of any Shelf Registration Statement, and any supplement to such
prospectus (as amended or supplemented from time to time), does not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in light of the circumstances under which they
were made, not misleading.
(c) In connection with any offering of shares of Subject Stock
registered pursuant to this Annex II, the Seller (i) shall furnish to the
Purchaser such number of copies of any prospectus (including any preliminary
prospectus) as it may reasonably request in order to effect the offering and
sale of the Subject Stock to be offered and sold, but only while the Seller
shall be required under the provisions hereof to cause the registration
statement to remain current and (ii) take such action as shall be necessary to
qualify the shares covered by such registration statement under such "blue sky"
or other state securities laws for offer and sale as the Purchaser shall
reasonably request; provided, however, that the Seller shall not be obligated
to qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it shall not then be qualified or to file any general
consent to service of process in any jurisdiction in which such a consent has
not been previously filed. If applicable, the Seller shall enter into an
underwriting agreement with a managing underwriter or underwriters selected by
the Purchaser (reasonably satisfactory to the Seller) containing
representations, warranties, indemnities and agreements then customarily
included by an issuer in underwriting agreements with respect to secondary
distributions; provided, however, that such underwriter or underwriters shall
agree to use their best efforts to ensure that the offering results in a
distribution of the Subject Stock sold in accordance with the terms of this
Agreement. In connection with any offering of Subject Stock registered pursuant
to this Annex II, the Seller shall (x) furnish to the underwriter, at the
Seller's expense, unlegended certificates representing ownership of the Subject
Stock being sold in such denominations as reasonably requested and (y) instruct
any transfer agent and registrar of the Subject Stock to release any stop
transfer orders with respect to such Subject Stock. If Purchaser enters into an
underwriting agreement with respect to the Subject Stock, Purchaser's
representations, warranties and indemnities contained therein shall be made
severally rather than jointly with the Company or any other selling stockholder
and shall be limited to (i) Purchaser's ownership of the Subject Stock, (ii)
Purchaser's authority to enter into the underwriting agreement and related
matters, (iii) any information provided by Purchaser for inclusion in the
registration statement, and (iv) such other matters as are at the time of such
underwriting customarily included in underwriting agreements with the Managing
Underwriter relating to sales of common stock by a selling shareholder where
the failure by the Purchaser to make such representations, warranties or
indemnities causes the Managing Underwriter to refuse to conduct
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<PAGE> 48
or complete the offering. In the event an offering of Subject Stock fails to
close due to the Purchaser's unwillingness, inability or other failure to
comply with clause (iv) of the immediately preceding sentence, then Purchaser
agrees that the Seller shall be deemed to have satisfied all of its obligations
to conduct the related offering of such Subject Stock, shall be excused from
any failure of any obligation of Seller with respect thereto and shall not be
liable for the failure of such offering of such Subject Stock to close. Upon
any registration becoming effective pursuant to this Annex II (other than a
Shelf Registration Statement), the Seller shall use all reasonable efforts to
keep such registration statement current for such period as shall be required
for the disposition of all of said Subject Stock; provided, however, that such
period need not exceed three months.
(d) The Purchaser shall pay all underwriting discounts and commissions
related to shares of Subject Stock being sold by the Purchaser and the fees and
disbursements of counsel and other advisors to the Purchaser. All other fees
and expenses in connection with the first requested registration pursuant to
the first paragraph of paragraph (a) (which may be the Shelf Request, if any)
of this Annex II, including, without limitation, all registration and filing
fees, all fees and expenses of complying with securities or "blue sky" laws,
fees and disbursements of the Seller's counsel and accountants (including the
expenses of "cold comfort" letters required by or incident to such performance
and compliance) and any fees and disbursements of underwriters customarily paid
by issuers in secondary offerings, shall be paid by the Seller, and all such
other fees and expenses in connection with the second and third requested
registration pursuant to this Annex II shall be borne equally by the Purchaser
and the Seller; provided, however, that in the event the Purchaser fails to
convert Shares into Common Stock prior to any such offering, such that such
offering is not able to be completed, the Purchaser shall pay all such other
fees and expenses.
(e) In the case of any offering registered pursuant to this Annex II.
the Seller agrees to indemnify and hold the Purchaser, each underwriter of
Securities under such registration and each person who controls any of the
foregoing within the meaning of Section 15 of the Securities Act and the
directors and officers of the Purchaser, harmless against any and all losses,
claims, damages, liabilities or action to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, and to reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of or shall be based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
relating to the sale of such Subject Stock, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus (as
amended or supplemented if the Seller shall have filed with the Commission any
amendment thereof or supplement thereto), if used prior to the effective date
of such registration statement, or contained in the prospectus (as amended or
supplemented if the Seller shall have filed with the Commission any amendment
thereof or supplement thereto), or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the indemnification agreement contained
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in this paragraph (e) shall not apply to such losses, claims, damages,
liabilities or actions which shall arise from the sale of Subject Stock by the
Purchaser if such losses, claims, damages, liabilities or actions shall arise
out of or shall be based upon any such untrue statement or alleged untrue
statement, or any such omission or alleged omission, (x) made in reliance upon
and in conformity with information furnished in writing to the Seller by the
Purchaser or any such underwriter specifically for use in connection with the
preparation of the registration statement or any preliminary prospectus or
prospectus contained in the registration statement or any such amendment
thereof or supplement thereto or (y) made in any preliminary prospectus, and
the prospectus contained in the registration statement in the form filed by the
Seller with the Commission pursuant to Rule 424(b) under the Securities Act
shall have corrected such statement or omission and a copy of such prospectus
shall not have been sent or given to such person at or prior to the
confirmation of such sale to him.
(f) In the case of each offering registered pursuant to this Annex II,
the Purchaser and each underwriter participating therein shall agree, in the
same manner and to the same extent as set forth in paragraph (e) of this Annex
II, severally to indemnify and hold harmless the Seller and each person, if
any, who controls the Seller within the meaning of Section 15 of the Securities
Act, and the directors and officers of the Seller, and in the case of each such
underwriter, the Purchaser, each person, if any, who controls the Purchaser
within the meaning of the Securities Act and the directors, officers and
partners of the Purchaser, with respect to any statement in or omission from
such registration statement or any preliminary prospectus (as amended or as
supplemented, if amended or supplemented as aforesaid) or prospectus contained
in such registration statement (as amended or as supplemented, if amended or
supplemented as aforesaid), if such statement or omission shall have been made
in reliance upon and in conformity with information furnished in writing to the
Seller by the Purchaser or such underwriter specifically for use in connection
with the preparation of such registration statement or any preliminary
prospectus or prospectus contained in such registration statement or any such
amendment thereof or supplement thereto.
(g) Each party indemnified under paragraph (e) or (f) of this Annex II
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought
hereunder, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party to so notify an indemnifying
party of any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such indemnified party
on account of the indemnity agreement contained in paragraph (e) or (f) of this
Annex II, unless the indemnifying party was prejudiced by such omission, and in
no event shall relieve the indemnifying party from any other liability which it
may have to such indemnified party. In case any such action shall be brought
against any indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may desire, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under paragraph (e) or (f) of this Annex II for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation; provided, however, that if there exists or is reasonably
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likely to exist a conflict of interest that would make it inappropriate in the
judgment of the indemnified party, in its sole and absolute discretion, for the
same counsel to represent both the indemnified party and the indemnifying
party, then the indemnified party shall be entitled to retain its own counsel,
in each jurisdiction for which the indemnified party determines counsel is
required, at the expense of the indemnifying party. No such third party claim
may be settled by the indemnifying party or the indemnified party without the
prior written consent of the other, which consent shall not be unreasonably
withheld.
(h) If the indemnification provided for under paragraph (e) or (f)
shall for any reason be held by a court to be unavailable to an indemnified
party under paragraph (e) or (f) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount
paid or payable under paragraph (e) or (f) hereof, the indemnified party and
the indemnifying party under paragraph (e) or (f) hereof shall contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the Seller
and the prospective seller of Securities covered by the registration statement
which resulted in such loss, claim, damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such proportion as
shall be appropriate to reflect the relative benefits received by the Seller
and such prospective seller from the offering of the securities covered by such
registration statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.
(i) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable losses which may be recovered
from an indemnifying party arising out of or resulting from the causes
enumerated in paragraph (e) or (f) shall be an amount equal to the Purchase
Price.
(j) Capitalized terms not defined in this Annex shall have the
meanings set forth in the Agreement.
(k) Any successor to the Seller (whether by merger, consolidation,
sale of assets, assignment or otherwise) shall expressly assume in writing the
Seller's obligations hereunder.
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<PAGE> 51
EXHIBIT 10(pp)
ANNEX III
ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF SELLER
As an inducement to the Purchaser to enter into this Agreement, the
Seller hereby represents and warrants, to the knowledge of Seller and except as
otherwise Disclosed by Seller, as follows:
1. Intellectual Property. Each of the Seller and its Subsidiaries
has or has the right to use all franchises, patents, patent applications, patent
licenses, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, licenses, permits, authorizations and other intellectual
property rights as are necessary for the Business as currently conducted,
except to the extent that the failure to have any of them would not have a
Material Adverse Effect. All of the foregoing are in full force and effect,
and each of the Seller and its Subsidiaries is in compliance with the foregoing
without any conflict with the rights of others which could have a Material
Adverse Effect.
2. Title to Assets; Leases. Prior to, upon and immediately after
the Closing, each of the Seller and its Subsidiaries owns or has the right to
use all of the Assets necessary for the Business as currently conducted, the
absence of which would have a Material Adverse Effect. Prior to, upon and
immediately after the Closing, each of the Seller and its Subsidiaries enjoys
peaceful and undisturbed possession of all leases of real property on which
facilities operated by it are situated and all leases of other Property used in
its Business, and all such leases are valid and in full force and effect, in
each case the absence of which would have a Material Adverse Effect.
3. Related Agreements. The Purchaser has heretofore or
simultaneously herewith been furnished with complete and correct copies of the
agreements set forth on the Disclosure Schedule and all appendices, schedules,
exhibits and other attachments thereto, including, without limitation, the
Series C Stock Purchase Agreement between the Seller and The Huff Alternative
Income Fund, L.P. relating to Series C Convertible Preferred Stock
(collectively, together with the Transaction Documents other than this
Agreement and the Escrow Agreement, the "Related Agreements"). Assuming due
execution and delivery thereof by all parties thereto, each of the Related
Agreements creates a legally binding obligation of each party thereto,
enforceable against such parties in accordance with the respective terms and
provisions thereof. This Agreement, the Escrow Agreement, the Debt Offering
Memorandum and the Related Agreements are the only material agreements relating
to the High Yield Debt, the financing thereof and the transactions contemplated
hereby to which the Seller or any Subsidiary is a party. "Transaction
Documents" means this Agreement (including the Annexes), the Escrow Agreement
and the Certificate of Designation.
4. Environmental Protection. Except as would not have a Material
Adverse Effect, (i) the operations of the Seller and each of its Subsidiaries
are in compliance with
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Environmental Laws; (ii) there has been no Release at any of the properties
presently or formerly owned or operated by the Seller or any of its
Subsidiaries or any disposal or treatment facility which received Hazardous
Materials generated by the Seller or any of its Subsidiaries or any of its or
their predecessor(s) in interest; (iii) no Environmental Actions have been
asserted against the Seller or any of its Subsidiaries or any of its or their
predecessor(s) in interest nor does the Seller or any of its Subsidiaries have
knowledge or notice of any threatened or pending Environmental Action; and (iv)
no Environmental Actions have been asserted against any facilities that may
have received Hazardous Materials generated by the Seller or any of its
Subsidiaries or any of its or their predecessor(s) in interest.
5. Withholding; Union Contracts, Labor Relations. Each of the
Seller and its Subsidiaries has withheld all amounts required by law or
agreement to be withheld by it from the wages, salaries, benefits and other
payments to or for the benefit of its employees, and is not liable for any
arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing except where the failure to withhold would not have a Material
Adverse Effect. Neither the Seller nor any of its Subsidiaries is a party to
any employment agreement, arrangement or understanding other than as disclosed
on the Disclosure Schedule. There are no, and there have never been any,
collective bargaining agreements covering any of the employees of the Seller or
any of its Subsidiaries. Except as disclosed on the Disclosure Schedule, none
of the Seller, any Subsidiary thereof or any employee of the Seller or any
Subsidiary thereof is subject to any employment agreement or non-competition
agreement with any former employer or any other Person which agreement would
have a Material Adverse Effect due to (i) any information which the Seller or
any Subsidiary thereof would be prohibited from using under the terms of such
agreements or (ii) any legal considerations relating to unfair competition,
trade secrets or proprietary information.
6. Business; Property and Licenses.
(a) Business and Property. Neither the Seller nor any of its
Subsidiaries engages in or currently proposes to engage in any business or
activity unrelated to the Business, other than the direct or indirect ownership
of the capital stock of or other interests in the Seller's Subsidiaries, Unity
Cellular Systems, Inc. and Northern Maine Cellular Partnership.
(b) Licenses. There is set forth in the Disclosure Schedule a
description of all FCC Licenses which, as of the Closing, will be held by the
Seller or any of its Subsidiaries and indicating which such Person holds each
such FCC License. Except to the extent it would not have a Material Adverse
Effect: (i) all of such FCC Licenses are in full force and effect and have been
duly issued in the name of, or validly assigned to, the Seller or one of its
Subsidiaries and no default or breach exists thereunder; (ii) no event has
occurred with respect to the FCC Licenses that permits, or after giving notice,
lapse of time or both would permit, revocation or termination of such FCC
Licenses or would result in any material impairment of the rights of the holder
thereof; and (iii) all such FCC Licenses are in effect for the usual FCC
License terms and are unimpaired by any condition or other restriction imposed
by the FCC or other Governmental Authority (other than restrictions and
conditions generally applicable to licenses of the same or similar type or
class).
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<PAGE> 53
Except to the extent it would not have a Material Adverse Effect: (i)
all applications necessary for renewal or extension of the FCC Licenses have
been timely filed in accordance with the requirements of the FCC or other
Governmental Authority issuing such FCC Licenses; (ii) the Seller has not been
informed that any of the FCC Licenses will not be renewed in the ordinary
course; and (iii) no allegations, complaints, charges, investigations, renewal
or revocation hearings, or other proceedings have been threatened or initiated
in any forum, nor has any Governmental Authority (including, but not limited
to, the FCC) proposed, announced, used, or adopted any amendment, modification,
or change to any law or regulation, with respect to or impacting upon such FCC
Licenses.
(c) Other Licenses and Approvals. Except to the extent it would
not have a Material Adverse Effect, each of the Seller and its Subsidiaries has
or has the right to use all Licenses and Approvals that are necessary for the
Seller and its Subsidiaries to carry on the Business as currently conducted.
(d) Operation and Maintenance of Equipment. No Person owning or
operating any equipment and other tangible personal property in connection with
the operation of the Business has used, operated or maintained the same in a
manner which now or hereafter could result in the cancellation or termination
of the right of the Seller or any Subsidiary to use or make use of the same
which could result in a Material Adverse Effect. All of the material equipment
and other tangible personal property which will be owned by the Seller or any
Subsidiary upon the Closing is in good operating condition and repair (subject
to normal wear and tear) and has been used, operated and maintained in
compliance with all material applicable laws, rules and regulations, including,
without limitation, any Licenses and Environmental Laws the failure of
compliance with which could result in a Material Adverse Effect.
7. FCC Matters. Except to the extent it would not have a
Material Adverse Effect, each of the Seller and its Subsidiaries: (i) is in
compliance with the provisions of the Communications Act as implemented,
interpreted, and applied by the FCC; (ii) is in compliance with FCC
requirements and restrictions relating to FCC License ownership, and will
continue to be in such compliance immediately following the Closing; (iii) has
duly and timely filed all reports and other filings which are required to be
filed by it under the Communications Act or any other applicable law, rule or
regulation of any Governmental Authority; and (iv) is in compliance with all
such laws, rules and regulations, the noncompliance with which would have a
Material Adverse Effect on the continuation of any License held by the Seller
or any of its Subsidiaries. Except to the extent it would not have a Material
Adverse Effect, all information provided by or on behalf of the Seller or any
Subsidiary in any filing with the FCC was, at the time of filing, true,
complete and correct in all material respects when made, and the FCC has been
notified of any substantial or significant changes in such information as may
be required in accordance with applicable laws, rules and regulations.
8. Representations and Warranties under Related Agreements. All
representations and warranties made by the Seller or any of its Subsidiaries in
any of the Related Agreements or in the certificates delivered in connection
therewith are true and
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<PAGE> 54
correct in all material respects as of the date hereof with the same force and
effect as though made on and as of the date hereof, except to the extent that
any of such representations and warranties relate expressly to an earlier date
or may have been affected by the consummation of the transactions contemplated
and permitted or required by this Agreement and the Related Agreements. All
representations and warranties made in the Related Agreements by or on behalf
of any party thereto other than the Seller or any of its Subsidiaries are true
and correct in all material respects as of the date hereof with the same force
and effect as though made on and as of the date hereof, except to the extent
that any of such representations and warranties related expressly to an earlier
date or may have been affected by the consummation of the transactions
contemplated and permitted or required by this Agreement and the Related
Agreements, which representations and warranties were true in all material
respects as of such earlier date or without giving effect to the consummation
of such transactions, as the case may be.
9. Tax Returns. Except to the extent it would not have a
Material Adverse Effect: (i) each of Seller and its Subsidiaries has filed all
federal, state, local and other tax returns which are required to be filed by
it within the period required for such filings and any extensions granted
therefor and within the period that the same may be filed without interest or
penalties; (ii) each such Person has paid, or made adequate provision for the
payment of, all taxes (if any), including any interest and penalties thereon,
which have or may become due and payable pursuant to any of the said returns or
pursuant to any matters raised by audits or for other reasons known to it; and
(iii) each such Person has made adequate provision for all current taxes. No
audit by any Governmental Authority of the federal, state, local or other tax
returns, forms or information statements of the Seller or any of its
Subsidiaries with respect to such taxes is currently in progress or overtly
threatened.
10. ERISA.
(a) No Other Plans. None of the Seller, any of its Subsidiaries
or any ERISA Affiliate maintains or contributes to, or has any obligation
under, any Employee Benefit Plans other than those identified on the Disclosure
Schedule.
(b) ERISA and Code Compliance and Liability. Each of the Seller,
its Subsidiaries and each ERISA Affiliate is in compliance with all applicable
provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans except where failure to
comply would not result in a material liability to any such Person and except
for any required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has been
determined by the IRS to be so qualified, and each trust related to such plan
has been determined to be exempt under Section 501(a) of the Code, the absence
of which determination could have a Material Adverse Effect. No material
liability, whether the form of a funding liability, tax liability, or
otherwise, has been incurred by the Seller, any of its Subsidiaries or any
ERISA Affiliate which remains unsatisfied with respect to any Employee Benefit
Plan or any Multiemployer Plan.
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<PAGE> 55
(c) ERISA Litigation. No material proceeding, claim, lawsuit
and/or investigation is existing or overtly threatened concerning or involving
any (i) employee welfare benefit plan (as defined in Section 3(10) of ERISA)
currently maintained or contributed to by the Seller, any of its Subsidiaries
or any ERISA Affiliate, (ii) Pension Plan or (iii) Multiemployer Plan, the
outcome of which could have a Material Adverse Effect.
(d) Termination Event. Except to the extent it would not have a
Material Adverse Effect, no Termination Event has occurred or is reasonably
expected to occur. "Termination Event" means (i) a "Reportable Event"
described in Section 4043 of ERISA; (ii) the withdrawal of the Seller, and of
its Subsidiaries or any ERISA Affiliate from a Pension Plan during a plan year
in which it was a "substantial employer" as defined in Section 4001(a)(2) OR
4068(f) of ERISA; (iii) the termination of a Pension Plan, the filing of a
notice of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; (iv) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, any
Pension Plan by the PBGC; (v) any other event or condition which would
constitute grounds under Section 4042(a) of the ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan, (vi) the
partial or complete withdrawal of the Seller, any of its Subsidiaries or any
ERISA Affiliate from a Multiemployer Plan; (vii) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 or ERISA; (viii) any event
or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or 4245 of ERISA; or (ix) any event or
condition which results in the termination of a Multiemployer Plan under
Section 40141A or ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
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<PAGE> 1
EXHIBIT 10(qq)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of March 14, 1997 (including
the exhibits and schedules attached hereto, this "Agreement"), is by and among
INTERCEL, INC., a Delaware corporation (the "Seller"), SCANA COMMUNICATIONS,
INC., a South Carolina corporation (the "Purchaser"), and BANKERS TRUST
COMPANY, a New York banking corporation (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchaser and the Seller have entered into a
Stock Purchase Agreement, dated as of March 14, 1997 (including the exhibits,
annexes, schedules and attachments thereto, the "Purchase Agreement"; terms not
otherwise defined herein being used as defined therein), pursuant to which the
Purchaser has agreed to purchase from the Seller, and the Seller has agreed to
sell to the Purchaser, the Shares;
WHEREAS, it is contemplated under the Purchase Agreement that
the Purchaser will deposit or cause to be deposited into escrow the sum of
$22,500,000 in cash (the "Escrow Amount") and the Seller shall deposit into
escrow a certificate or certificates representing 50,000 shares (the "Shares")
of Series D Preferred Stock (collectively, the "Certificate"), each to be held
and disbursed by the Escrow Agent in accordance with this Agreement;
WHEREAS, the Seller and the Purchaser currently contemplate
that the Seller will offer certain high yield debt obligations pursuant to a
Confidential Offering Memorandum, a preliminary draft of which has been
delivered by the Seller to the Purchaser (the "Debt Offering Memorandum"); and
WHEREAS, the Purchaser and the Seller desire to appoint the
Escrow Agent as escrow agent for the purpose of receiving, holding and
distributing the Escrow Fund (as defined below) and the Certificate, and the
Escrow Agent is willing to act as the Escrow Agent subject to and in accordance
with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
1. Appointment and Agreement of Escrow Agent. The
Purchaser and the Seller hereby appoint the Escrow Agent to serve as, and the
Escrow Agent hereby agrees to act as, escrow agent upon the terms and
conditions of this Agreement.
2. Establishment of the Escrow Fund. (a) Pursuant to
Section 2.4 of the Purchase Agreement, the Purchaser shall deliver to the
Escrow Agent on the date hereof the
<PAGE> 2
Escrow Amount and the Seller shall deliver to the Escrow Agent on the date
hereof the Certificate, together with the instruction notice in the form
attached hereto as Exhibit A. The Escrow Agent shall hold the Escrow Amount
and all interest and other amounts earned thereon (the "Escrow Fund") and the
Certificate in escrow pursuant to this Agreement.
(b) Each of the Purchaser and the Seller confirms to the
Escrow Agent and to each other that the Escrow Fund and the Certificate are
free and clear of all Encumbrances except as may be created by this Agreement
and the Purchase Agreement.
3. Distributions from the Escrow Fund. (a) Upon
execution and delivery of this Agreement, the Seller and the Purchaser shall
deliver to the lead placement agent under the Debt Offering Memorandum a
written notice that the Purchase Price monies and the Certificate have been
delivered to the Escrow Agent pursuant to this Agreement. Furthermore, such
notice shall provide that, upon the pricing of the offering of debt
contemplated by the Debt Offering Memorandum (the "Debt Offering"), the
delivery by the Seller and the lead placement agent of the Joint Notice (as
defined below), and the delivery to the Escrow Agent of confirmation of the
closing of the Debt Offering provided for in Section 3(b) below, the Escrow
Agent will disburse the proceeds of the Escrow Fund to the Seller and deliver
the Certificate to the Purchaser in accordance with this Section 3. As
promptly as practicable after the Purchaser and the Seller have received
evidence (which the parties agree may be telephonic or otherwise) that the
pricing of the Debt Offering has been established between the Seller and the
lead placement agent under the Debt Offering Memorandum and, in any event, at
least one full Business Day prior to the Proposed Offering Closing Date (as
defined in the Joint Notice), the Seller and the Purchaser shall deliver
written notice to the Escrow Agent substantially in the form attached hereto as
Exhibit B with the blanks properly filled in (the "Joint Notice"), and the
Escrow Agent shall, as promptly as practicable thereafter (and in any event, in
time to enable the Escrow Agent to transfer the proceeds of the Escrow Fund on
the Proposed Offering Closing Date as set forth in Section 3(b) below, unless
the Escrow Fund is invested in a vehicle other than the BT Institutional Cash
Management Fund), liquidate all investments in the Escrow Fund.
(b) On or before the Proposed Offering Closing Date, the
Seller shall deliver a list of persons who will be authorized to give the
Placement Agent Confirmation (as defined below) to the Escrow Agent pursuant to
Section 3(b) below. Unless the Escrow Agent receives the notice described in
Section 3(c) below after the Escrow Agent receives the Joint Notice, the Escrow
Agent shall, as promptly as practicable after its receipt of confirmation from
the Seller and the lead placement agent (the "Placement Agent Confirmation")
under the Debt Offering Memorandum (which the parties agree may be telephonic
or otherwise) to the effect that all of the conditions to closing of the Debt
Offering and delivery to the Seller of a minimum of an aggregate of $100
million in gross proceeds therefrom have either been satisfied or waived (other
than a waiver of the impending delivery to the Seller of such proceeds), with
the sole exception of disbursement of the Escrow Fund to the Seller and
delivery of the Certificate to the Purchaser (and, therefore, that such
placement agent then controls the delivery of proceeds from the Debt Offering
to the Seller), the Escrow Agent shall: (i) pay in full to the Seller in
immediately available funds all amounts as shall have been received upon the
liquidation of such investments (and any and all other amounts then on deposit
in the Escrow Fund) by wire transfer to the Seller's account indicated in the
Joint Notice; (ii) contemporaneous with such delivery of
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funds to the Seller, deliver the Certificate to the Purchaser at the address
set forth in the Joint Notice via overnight delivery service; and (iii)
immediately after accomplishing the items set forth in (i) and (ii) hereof,
provide the Seller and the lead placement agent under the Debt Offering
Memorandum with written notice in the form attached hereto as Exhibit C.
(c) The parties acknowledge and agree that the terms of
the Purchase Agreement provide that the Purchaser may elect to proceed with the
disbursement of the Escrow Fund proceeds to the Seller and delivery of the
Certificate to the Purchaser even though the Debt Offering fails to close on or
before April 30, 1997. In the event that the Debt Offering fails to close on
or before such date, the parties agree that the Purchaser may, before the
expiration of the five Business Day period referenced in Section 8.1(c) of the
Purchase Agreement, deliver notice to the Escrow Agent (and a copy thereof to
the Seller) of the Purchaser's election to proceed to consummate the sale and
purchase of the Shares in accordance with the provisions of Section 8.1(c) of
the Purchase Agreement. Such notice shall be in the form attached hereto as
Exhibit D. In such event, the Escrow Agent shall, as promptly as practicable
after receipt of the Purchaser's notice pursuant to this Section 3(c),
liquidate all investments in the Escrow Fund and comply with the provisions of
clauses (i) and (ii) of Section 3(b) above and immediately after accomplishing
the items set forth in (i) and (ii) above, provide the Seller and the Purchaser
with written notice in the form attached hereto as Exhibit C.
(d) Upon the termination of the Purchase Agreement, the
Seller or the Purchaser shall notify the Escrow Agent in writing to such
effect, and the Escrow Agent shall, as promptly as practicable after its
receipt of such notice: (i) liquidate all investments in the Escrow Fund and
pay in full to the Purchaser in immediately available funds all such amounts as
shall be received upon the liquidation of such investments (and any and all
other amounts then on deposit in the Escrow Fund); and (ii) return the
Certificate to the Seller.
4. Maintenance of the Escrow Fund and Certificate;
Termination of the Escrow Fund. (a) The Escrow Agent shall continue to
maintain the Escrow Fund and hold the Certificate until the earlier of (i) the
time at which the Escrow Fund is disbursed and the Certificate is delivered in
accordance with Section 3 and (ii) the termination of this Agreement.
(b) Unless otherwise directed in writing signed by both
the Seller and the Purchaser, the Escrow Agent shall invest and reinvest moneys
on deposit in the Escrow Fund only in the BT Institutional Cash Management
Fund.
Notwithstanding the foregoing, the Escrow Agent shall have the power
to sell or liquidate the foregoing investments whenever the Escrow Agent shall
be required to release all or any portion of the Escrow Fund pursuant to
Section 3 hereof. The Escrow Agent shall not have any liability for any loss
suffered as a result of any investment made as provided above, any liquidation
of any such investment prior to its maturity, or the failure of any authorized
person of the Seller and the Purchaser to give the Escrow Agent any written
instruction to invest or reinvest the Escrow Fund or any earnings thereon.
5. Assignment; Successors. This Agreement may not be
assigned by operation of Law or otherwise without the express written consent
of the other parties hereto
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<PAGE> 4
(which consent may be granted or withheld in the sole discretion of such other
parties); provided, however, that the Purchaser may, without the consent of the
other parties, assign this Agreement prior to the disbursement of the Escrow
Fund and delivery of the Certificate pursuant to Section 3 above to SCANA
Corporation or to a subsidiary controlled by SCANA Corporation to which the
Purchaser has assigned any of its rights under the Purchase Agreement, but no
such assignment shall relieve the Purchaser of any of its obligations under
this Agreement. This Agreement shall be binding upon and inure solely to the
benefit of the parties hereto and their permitted assigns.
6. Escrow Agent. (a) Except as expressly contemplated
by this Agreement or by joint written instructions from the Purchaser and the
Seller, the Escrow Agent shall not sell, transfer or otherwise dispose of in
any manner all or any portion of the Escrow Fund or the Certificate, except
pursuant to an order of a court of competent jurisdiction.
(b) The duties and obligations of the Escrow Agent shall
be determined solely by this Agreement, and the Escrow Agent shall not be
liable except for the performance of such duties and obligations as are
specifically set forth in this Agreement. The Escrow Agent shall neither be
responsible for or under, nor chargeable with knowledge of the terms and
conditions of, any other agreement, instrument or document in connection
herewith, including but not limited to the Purchase Agreement.
(c) In the performance of its duties hereunder, the
Escrow Agent shall be entitled to rely upon any document, instrument or
signature believed by it in good faith to be genuine and signed by any party
hereto or an authorized officer or agent thereof, and shall not be required to
investigate the truth or accuracy of any statement contained in any such
document or instrument. The Escrow Agent may assume that any Person purporting
to give any notice in accordance with the provisions of this Agreement has been
duly authorized to do so. The Escrow Agent shall have no responsibility for
the contents of any such writing contemplated herein and may conclusively rely
without any liability upon the contents thereof.
(d) The Escrow Agent shall not be liable for any error of
judgment, or any action taken, suffered or omitted to be taken, hereunder
except in the case of its gross negligence, bad faith or willful misconduct.
The Escrow Agent may consult with counsel of its own choice and shall have full
and complete authorization and protection for any action taken or suffered by
it hereunder in good faith and in accordance with the opinion of such counsel.
(e) The Escrow Agent shall have no duty as to the
collection or protection of the Escrow Fund or income thereon or the
Certificate, nor as to the preservation of any rights pertaining thereto,
beyond the safe custody of any such property actually in its possession.
(f) As compensation for its services to be rendered under
this Agreement, for each year or any portion thereof, the Escrow Agent has
received a fee from the Seller in the amount specified in Schedule A to this
Agreement and such payment and receipt thereof by the Escrow Agent is hereby
acknowledged by the Escrow Agent. The Escrow Agent shall also be reimbursed
upon request for all expenses, disbursements and advances, including reasonable
fees of outside counsel, if any, incurred or made by it in connection with the
preparation of this
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<PAGE> 5
Agreement and the carrying out of its duties under this Agreement. All such
fees and expenses shall be the responsibility of the Seller.
(g) To the extent that the Escrow Agent becomes liable
for the payment of taxes, including withholding taxes, in respect of income
derived from the investment of funds held hereunder and/or possession of the
Certificate or any payment made hereunder, the Escrow Agent may pay such taxes.
The Escrow Agent may withhold from any payment of monies held by it hereunder
such amount, as directed by the Seller and the Purchaser in writing, to be
sufficient to provide for the payment of such taxes not yet paid, and may use
the sum withheld for that purpose. The Escrow Agent shall be indemnified by
the Seller and held harmless against any liability for taxes and for any
penalties or interest in respect of taxes on such investment income and/or with
respect to the possession of the Certificate or payments in the manner provided
in Section 6(h). Each of the Seller and the Purchaser shall furnish to Escrow
Agent such information as may be reasonably requested by the Escrow Agent so
that the Escrow Agent may prepare and file with the Internal Revenue Service
any required tax reports.
(h) The Seller shall reimburse and indemnify the Escrow
Agent its employees, directors, officers and agents for, and hold each harmless
against, any loss, liability or expense, including, without limitation,
reasonable attorneys' fees, incurred without gross negligence, bad faith or
willful misconduct on the part of the Escrow Agent arising out of, or in
connection with the acceptance of, or the performance of, its duties and
obligations under this Agreement; provided that the Purchaser shall reimburse
and indemnify the Escrow Agent for, and hold it harmless against, any such
loss, liability or expense incurred as a result of gross negligence, bad faith
or willful misconduct on the part of the Purchaser. Promptly after the receipt
by the Escrow Agent of notice of any demand or claim or the commencement of any
action, suit or proceeding, the Escrow Agent shall, if a claim in respect
thereof is to be made against any of the other parties hereto, notify such
other parties thereof in writing; but the failure by the Escrow Agent to give
such notice shall not relieve such party from any liability which it may have
to the Escrow Agent hereunder, except to the extent such indemnifying party is
materially prejudiced by such failure. For the purposes hereof, the term
"expense or loss" shall include all amounts paid or payable to satisfy any
claim, demand or liability, or in settlement of any claim, demand, action, suit
or proceeding settled with the express written consent of the indemnifying
party, and all reasonable costs and expenses, including, but not limited to,
counsel fees and disbursements paid or incurred in investigating or defending
against any such claim, demand, action, suit or proceeding. The Escrow Agent
shall have no right of setoff under this Agreement or otherwise against amounts
in the Escrow Fund or against the Certificate.
(i) The Escrow Agent may at any time resign by giving
twenty Business Days' prior written notice of resignation to the Seller and the
Purchaser. The Seller and the Purchaser may at any time jointly remove the
Escrow Agent by giving ten Business Days' prior written notice signed by each
of them to the Escrow Agent. If the Escrow Agent shall resign or be removed, a
successor Escrow Agent, which shall be a bank or trust company having assets in
excess of $2 billion, shall be appointed by the Seller and the Purchaser by
written instrument executed by the Seller and the Purchaser and delivered to
the Escrow Agent and to such successor Escrow Agent and, thereupon, the
resignation or removal of the predecessor Escrow Agent shall become effective
and such successor Escrow Agent, without any further act, deed
-5-
<PAGE> 6
or conveyance, shall become vested with all right, title and interest to all
cash and property held hereunder of such predecessor Escrow Agent, and such
predecessor Escrow Agent shall, on the written request of the Seller, the
Purchaser or the successor Escrow Agent, execute and deliver to such successor
Escrow Agent all the right, title and interest hereunder in and to the Escrow
Fund and the Certificate of such predecessor Escrow Agent and all other rights
hereunder of such predecessor Escrow Agent. If no successor Escrow Agent shall
have been appointed within twenty Business Days of a notice of resignation by
the Escrow Agent, the Escrow Agent's sole responsibility shall thereafter be to
hold the Escrow Fund and the Certificate until its receipt of designation of a
successor Escrow Agent, and the Escrow Agent shall be entitled to apply to a
court of competent jurisdiction for the appointment of a successor. Upon its
resignation and delivery of the Escrow Fund and the Certificate as set forth
above, the Escrow Agent shall be discharged from any and all further
obligations arising in connection with the escrow contemplated by this
Agreement.
7. Termination. This Escrow Agreement shall terminate
on the date on which there is no property remaining in the Escrow Fund and the
Certificate has been delivered or returned in accordance with Section 3;
provided that the rights of the Escrow Agent and the other parties hereto under
Section 6 shall survive the termination hereof and the resignation or removal
of the Escrow Agent; provided further that nothing herein shall relieve any
party from liability for any breach of this Agreement.
8. Further Assurances. From time to time on and after
the date hereof, the other parties hereto shall deliver or cause to be
delivered to the Escrow Agent such further documents and instruments and shall
do and cause to be done such further acts as the Escrow Agent shall reasonably
request (it being understood that the Escrow Agent shall have no obligation to
make any such request) to carry out more effectively the provisions and
purposes of this Agreement, to evidence compliance herewith or to secure itself
that it is protected in acting hereunder.
9. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or by
-6-
<PAGE> 7
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, GA 30309
Telecopy: (404) 817-6050
Attention: Glenn W. Sturm, Esq.
(b) if to the Purchaser:
Scana Communications, Inc
c/o SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: (803) 748-3336
Attention: Kevin Marsh
with a copy to:
Scana Communications, Inc
c/o SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telecopy: (803) 748-3336
Attention: H. Thomas Arthur II, Esq.
(c) if to the Escrow Agent, to:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Telecopy: (212) 250-6961
Attention: Corporate Trust and Agency Group
-7-
<PAGE> 8
with a copy (which shall not constitute notice) to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Telecopy: (212) 424-8500
Attention: David P. Dicks, Esq.
(d) if to the lead placement agent under the Debt
Offering Memorandum to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Telecopy: (212) 761-0369
Attention: Robert Shepardson
The parties acknowledge and agree that the identity and address of the
lead placement agent under the Debt Offering Memorandum are subject to change
solely upon the delivery of notice by the Seller to the parties hereto of such
change.
10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
are consummated as originally contemplated to the greatest extent possible.
12. Entire Agreement. This Agreement and the Purchase
Agreement constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, among the Seller, the Purchaser and the Escrow Agent
with respect to the subject matter hereof.
13. No Third Party Beneficiaries. This Agreement is for
the sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
14. Amendment. This Agreement may not be amended or
modified except: (i) by an instrument in writing signed by, or on behalf of,
the Seller, the Purchaser and the Escrow Agent; or (ii) by a waiver in
accordance with Section 15 of this Agreement.
-8-
<PAGE> 9
15. Waiver. Any party hereto (the "Waiving Party") may:
(i) extend the time for the performance of any obligation or other act of any
other party hereto owed to the Waiving Party; or (ii) waive compliance with any
agreement or condition contained herein, (it being understood and agreed that
such an extension or waiver shall not constitute, by itself, an extension or
waiver by any other party hereto of any such obligation, act, agreement or
condition owed to, or for the benefit of, such third party). Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby. Any waiver of any
term or condition shall not be construed as a waiver of any subsequent breach
or a subsequent waiver of the same term or condition, or a waiver of any other
term or condition, of this Agreement. The failure of any party to assert any
of its rights hereunder shall not constitute a waiver of any of such rights.
16. Governing Law. This Agreement shall be governed by
the laws of the State of New York.
17. Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which when taken together shall constitute one and the same agreement.
SIGNATURES BEGIN ON NEXT PAGE
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTERCEL, INC.
By /s/ Allen E. Smith
-------------------------------------
Name: Allen E. Smith
Title: President and Chief Executive
Officer
SCANA COMMUNICATIONS, INC.
By /s/ Kevin B. Marsh
-------------------------------------
Name: Kevin B. Marsh
Title: Vice President and Chief
Financial Officer
BANKERS TRUST COMPANY
By /s/ Kevin Weeks
-------------------------------------
Name: Kevin Weeks
Title: Assistant Treasurer
-10-
<PAGE> 11
Exhibit A
INSTRUCTIONS TO THE ESCROW AGENT
March 14, 1997
Bankers Trust Company, as Escrow Agent
under the Escrow Agreement
referred to below
4 Albany Street
New York, NY 10006
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., Scana Communications, Inc. and
Bankers Trust Company, as Escrow Agent, you are hereby directed to hold in
escrow the sum of $22,500,000 and InterCel, Inc. Series D preferred stock
certificate number 1D in accordance with the terms of the Escrow Agreement.
INTERCEL, INC.
By
-------------------------------------
Name:
Title:
SCANA COMMUNICATIONS, INC.
By
-------------------------------------
Name:
Title:
Agreed to and received as of
this __ day of ______, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
------------------------------
Name:
Title:
-12-
<PAGE> 12
Exhibit B
JOINT INSTRUCTIONS TO ESCROW AGENT
Bankers Trust Company, as Escrow Agent
under the Escrow Agreement referred to below
4 Albany Street
New York, NY 10006
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., SCANA Communications, Inc. and
Bankers Trust Company, as Escrow Agent thereunder, you are hereby directed to
promptly liquidate all investments in the Escrow Fund. Furthermore, upon your
receipt of the Placement Agent Confirmation you are hereby directed to disburse
the monies received upon such liquidation of the Escrow Fund and deliver the
Certificate as directed in Section 3 of the Escrow Agreement. The monies
received upon liquidation of the Escrow Fund shall be delivered to the Seller
by wire transfer to: ________________. The Certificate shall be delivered to
SCANA Communications, Inc., 1426 Main Street, Columbia, SC 29201, Attention:
Kevin Marsh, telephone number (803) 733-4097 via overnight delivery. The
proposed date for closing of the Debt Offering pursuant to the Debt Offering
Memorandum is _______________, 1997 (the "Proposed Offering Closing Date").
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Escrow Agreement.
INTERCEL, INC.
By
-------------------------------------
Name:
Title:
SCANA COMMUNICATIONS, INC.
By
-------------------------------------
Name:
Title:
Agreed to and accepted as of
this __ day of ______, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
------------------------------
Name:
Title:
-13-
<PAGE> 13
Exhibit C
ESCROW AGENT NOTICE REGARDING DISBURSEMENT AND DELIVERY
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
[Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Telecopy: (212) 761-0369
Attention: Robert Shepardson]
[SCANA Communications, Inc.
1426 Main Street
Columbia, SC 29201
Telecopy: (803) 748-3336
Attention: Kevin Marsh]
Re: Disbursement of Escrow Fund Proceeds and Delivery of Certificate
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., SCANA Communications, Inc. and
Bankers Trust Company, as Escrow Agent thereunder, we hereby notify you that we
have delivered the proceeds of the Escrow Fund to the Seller in accordance with
Section 3 of the Escrow Agreement, and contemporaneous with such delivery of
funds to the Seller, we have deposited the Certificate with an overnight
delivery service to be delivered to the Purchaser.
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Escrow Agreement.
BANKERS TRUST COMPANY,
as Escrow Agent
By:
-------------------------------------
Name:
Title:
-14-
<PAGE> 14
Exhibit D
PURCHASER NOTICE TO ESCROW AGENT
Bankers Trust Company, as Escrow Agent
under the Escrow Agreement referred to below
4 Albany Street
New York, NY 10006
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., SCANA Communications, Inc. and
Bankers Trust Company, as Escrow Agent thereunder, you are hereby notified of
the Purchaser's election to proceed with the disbursement of the Escrow Fund
proceeds to the Seller. Thus, you are hereby directed to promptly liquidate
all investments in the Escrow Fund, to disburse the monies received upon such
liquidation of the Escrow Fund and to deliver the Certificate to the Purchaser
at SCANA Communications, Inc., 1426 Main Street, Columbia, SC 29201,
Attention: Kevin Marsh, telephone number (803) 733-4097 via overnight delivery
in accordance with the provisions of Section 3(c) of the Escrow Agreement.
Attached to this notice is the Seller's notice to the Purchaser which has been
delivered to the Purchaser pursuant to Section 8.1(c) of the Purchase
Agreement. In addition, the Purchaser hereby represents and warrants that this
notice is being properly given pursuant to the terms and provisions of the
Purchase Agreement and the Escrow Agreement.
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Escrow Agreement.
SCANA COMMUNICATIONS, INC.
By
------------------------------------
Name:
Title:
Agreed to and accepted as of
this __ day of ______, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
------------------------------
Name:
Title:
-15-
<PAGE> 1
EXHIBIT 10(rr)
- --------------------------------------------------------------------------------
------------------------------------------
STOCK PURCHASE AGREEMENT
------------------------------------------
BETWEEN
INTERCEL, INC.
AND
THE HUFF ALTERNATIVE
INCOME FUND, L.P.
DATED AS OF MARCH 14, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLES OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II PURCHASE AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.1 Purchase and Sale of the Shares . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.3 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.4 Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.5 Closing Deliveries by the Seller . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.6 Closing Deliveries by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 2.7 Closing Deliveries by the Escrow Agent . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.1 Organization, Authority and Qualification of the Seller . . . . . . . . . . . . . 8
SECTION 3.2 Capitalization of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.4 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 3.5 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.6 Seller SEC Documents; Financial Statements . . . . . . . . . . . . . . . . . . . 10
SECTION 3.7 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.8 Conduct in the Ordinary Course: Absence of Certain
Changes, Events and Conditions . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.10 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.11 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.13 Private Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 3.14 FCC Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 3.15 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.1 Organization and Authority of the Purchaser . . . . . . . . . . . . . . . . . . . 12
SECTION 4.2 No Conflict . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 4.3 Governmental Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.4 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.5 Investment Purpose . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.6 Accredited Investor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 4.7 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.1 Filing of Certificate of Designation . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.2 Treatment of Shares as Equity . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.3 Regulatory and Other Authorizations: Notices and
Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.4 Notice of Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.5 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 5.6 Resale Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.7 Registration of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.9 Certain Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.10 Conduct of Business of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 5.11 Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE VI CONDITIONS TO CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.1 Conditions to Obligations of the Seller . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.2 Conditions to Obligations of the Purchaser . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.1 Survival of Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 7.3 Limits on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VIII TERMINATION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE IX GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 9.3 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.4 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.5 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.7 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
SECTION 9.8 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9.9 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9.10 Management Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 9.11 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 9.12 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 9.14 Specific Performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
EXHIBITS
Exhibit 2.4 Form of Escrow Agreement
ANNEXES
ANNEX I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I-1
ANNEX II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . II-1
ANNEX III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . III-1
</TABLE>
ii
<PAGE> 4
THIS STOCK PURCHASE AGREEMENT, dated as of March 14, 1997, is entered
into between INTERCEL, INC., a Delaware corporation (the "Seller"), and THE
HUFF ALTERNATIVE INCOME FUND, L.P., a Delaware limited partnership (the
"Purchaser").
WITNESSETH:
WHEREAS, the Seller wishes to issue and to sell to the Purchaser, and the
Purchaser wishes to purchase from the Seller, 50,000 shares (the "Shares") of a
new series of convertible preferred stock of the Seller designated Series C
Convertible Preferred Stock, par value $0.01 per share (the "Preferred Stock"),
upon the terms and subject to the conditions set forth herein; and
WHEREAS, the terms of the Preferred Stock are set forth in the form of
Certificate of Designation attached as Annex I hereto (the "Certificate of
Designation");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, the Purchaser and the Seller
hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
"Acquisition Documents" has the meaning specified in Section 7.1.
"Action" means any claim, action, suit, arbitration, inquiry, proceeding
or investigation by or before any Governmental Authority.
"Affiliate" means, with respect to any specified Person, any other Person
that directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such specified Person.
"Agreement" or "this Agreement" means this Stock Purchase Agreement,
dated as of March 14, 1997, between the Seller and the Purchaser (including the
Annexes hereto, the Exhibits hereto and the Disclosure Schedule) and all
amendments hereto made in accordance with the provisions of Section 9.9.
"Approvals" has the meaning specified in Section 3.5.
"Assets" means the properties, assets (including, without limitation,
Licenses) and contract rights used or intended to be used in the conduct of
Business or otherwise owned, leased or used by the Seller or any Subsidiary or,
with respect to contract rights, to which the Seller or any Subsidiary is a
party or is bound.
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"Beneficially Own" with respect to any securities and "Beneficial
Ownership" mean having beneficial ownership as determined pursuant to Rule
13d-3 under the Exchange Act including having beneficial ownership pursuant to
any agreement, arrangement or understanding, whether or not in writing.
"Business" means the business of the Seller and the Subsidiaries as
currently conducted and contemplated as of the date hereof by the Seller to be
conducted (as described in the Debt Offering Memorandum or contemplated by this
Agreement); provided, however, that the Business of Seller shall not be deemed
to include or refer to the business of providing cellular telephone and related
services as conducted by Unity Cellular Systems, Inc., a Maine corporation and
a subsidiary of the Seller, and Northern Maine Cellular Partnership, a Maine
general partnership and a majority-owned subsidiary of Unity Cellular Systems,
Inc.
"Business Day" means any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate of Designation" has the meaning specified in the recitals to
this Agreement.
"Closing" has the meaning specified in Section 2.3.
"Closing Date" has the meaning specified in Section 2.3.
"Commission" means the United States Securities and Exchange Commission.
"Common Stock" means the common stock, par value $0.01 per share, of the
Seller.
"Control" (including the terms "controlled by" and "under common control
with"), with respect to the relationship between or among two or more Persons,
means the possession, directly or indirectly or as trustee or executor, of the
power to direct or cause the direction of the affairs or management of a
Person, whether through the ownership of voting securities, as trustee or
executor, by contract or otherwise, including, without limitation, the
ownership, directly or indirectly, of securities having the power to elect a
majority of the board of directors or similar body governing the affairs of
such Person.
"Current Market Value" means, as of a particular date, the average of the
closing high bid and low asked prices per share of Common Stock in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotation System or such other system then in use, or
such other exchange or inter-dealer quotation system on which the Common Stock
is then principally traded or authorized to be quoted.
"Debt Offering Memorandum" means the draft (as of March 13, 1997) of the
Confidential Offering Memorandum (subject to completion, revision and amendment
pursuant to the agreement of the Seller and the placement agents thereunder)
relating to the proposed issuance by the Seller of High Yield Debt instruments
for aggregate gross proceeds of not less than $100 million.
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"Disclosed by Seller" with respect to information concerning any event,
fact or circumstance, includes information contained in the Seller's SEC
Reports, annual and other reports furnished by Seller to its stockholders as a
group, and press releases of the Seller disseminated to (i) the Dow Jones News
Service, or (ii) the National Association of Securities Dealers, Inc. Automated
Quotation System or other national securities exchange ("Press Releases"), as
well as information disclosed directly to Purchaser by Seller in this
Agreement, the Debt Offering Memorandum, the 1996 Financial Statements, or in
writing and attached hereto or delivered pursuant to Section 6.2 hereof. The
Press Releases issued by Seller since September 30, 1996 are attached hereto in
the Disclosure Schedule.
"Disclosure Schedule" means the Disclosure Schedule attached hereto,
dated as of the date hereof, and forming a part of this Agreement.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of Section 3(3) of ERISA which is (i) maintained by, or for employees
of, the Seller, any of its Subsidiaries or any ERISA Affiliate or (ii) has at
any time within the preceding six years been maintained by, or for the employee
of, the Seller, any of its Subsidiaries or any current or former ERISA
Affiliate.
"Encumbrance" means any security interest, pledge, mortgage, lien,
charge, encumbrance, adverse claim, preferential arrangement or restriction of
any kind, including, without limitation, any restriction on the use, voting,
transfer, receipt of income or other exercise of any attributes of ownership.
"Environmental Actions" means any complaint, summons, citation, notice,
directive, order, claim, litigation, investigation, proceeding, judgment,
letter or other communication from or to any Governmental Authority, or any
other Person involving or alleging violations of Environmental Laws or Releases
of Hazardous Materials from (i) any assets, properties or businesses of the
Seller or any of its Subsidiaries (or its or their corporate predecessors);
(ii) from adjoining properties or businesses; or (iii) from or onto any
facilities which received Hazardous Materials generated by the Seller or any of
its Subsidiaries (or its or their corporate predecessors).
"Environmental Laws" means the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. 9601 et seq., as amended; the
Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq;, as amended; the
Clean Air Act, 42 U.S.C. 7401 et seq., as amended; the Clean Water Act, 33
U.S.C. 1251 et seq., as amended; the Occupational Safety and Health Act, 29
U.S.C. 655 et seq., and any other Governmental Authority's laws, statutes,
regulations, rules or ordinances imposing liability or establishing standards
of conduct or emission for protection or safety of the environment or
concerning public or occupational health.
"ERISA" means the federal Employee Retirement Income Security Act of
1974, any successor statute of similar import, and the rules and regulations
thereunder, collectively and as from time to time amended and in effect.
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"ERISA Affiliate," as applied to the Seller or any of its Subsidiaries,
means any Person who is a member of a group which is under common control with
the Seller or any of its Subsidiaries, or who together with the Seller or any
of its Subsidiaries is treated as a single employer within the meaning of
Section 414(b) and (c) of the Internal Revenue Code of 1986, as amended.
"Escrow Agent" has the meaning specified in the Escrow Agreement.
"Escrow Agreement" has the meaning specified in Section 2.4.
"Exchange Act" means the United States Securities Exchange Act of 1934,
as amended.
"Executive Officer" has the meaning set forth in Rule 405 of Regulation C
adopted by the Commission under the Securities Act without regard to whether
any party to this Agreement is a registrant as used in Rule 405.
"FCC" means the United States Federal Communications Commission.
"FCC Licenses" means all licenses granted by the FCC to the Seller for
and related to the provisions of personal communications services and cellular
services in connection with the Seller's Business.
"Governmental Authority" means any United States federal, state or local
or any foreign government, governmental, regulatory or administrative
authority, agency, department, board, investigative body or commission or any
court, tribunal, or judicial or arbitral body or other tribunal.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" means (a) any element, compound, chemical or other
material (in whatever form or state) that is defined, listed or otherwise
classified as a contaminant, pollutant, toxic pollutant, toxic or hazardous
substance, extremely hazardous substance or chemical, hazardous waste, special
waste, or solid waste under any Environmental Law; (b) petroleum and its
refined products and by-products; (c) polychlorinated biphenyls; (d) any
substance exhibiting a hazardous waste characteristic including but not limited
to corrosivity, ignitability, toxicity or reactivity as well as any radioactive
or explosive materials and materials otherwise damaging to the environment; and
(e) any raw materials, building components, including but not limited to
asbestos-containing materials, and manufactured products containing any of the
materials or substances described in (a) through (d).
"High Yield Debt" means the issue of high yield debt instruments proposed
to be sold by the Seller pursuant to the Debt Offering Memorandum.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
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"IRS" means the Internal Revenue Service or any successor thereto.
"Knowledge" of a party with respect to such party's representation or
warranty concerning any event, fact or circumstance means the current actual
knowledge of that party's Executive Officers of information which, after
reasonable consideration by such Executive Officers, would be recognized by
reasonable persons of similar experience in such positions as relevant to the
representation or warranty qualified by the words "to the knowledge" of a
party, "known to" a party or a similar phrase. Knowledge does not include
information not within such current actual knowledge that might be revealed if
the party's files were searched or if any other investigation were made.
"Law" means any United States federal, state, local or foreign statute,
law, ordinance, regulation, rule, code, order, other requirement or rule of
law, including, without limitation, any requirement or rule of law of the FCC.
"Liabilities" means any and all debts, liabilities and obligations,
whether accrued or fixed, absolute or contingent, matured or unmatured or
determined or determinable, including, without limitation, those arising under
any Law, Action or Governmental Order and those arising under any contract,
agreement, arrangement, commitment or undertaking.
"Licenses" means all FCC Licenses and all other licenses, permits
(including construction permits), consents, approvals and other authority
issued by any Governmental Authority in connection with the legal and proper
operation of the Seller's Business.
"Loss" has the meaning specified in Section 7.2.
"Material Adverse Effect" means any circumstance, change in, or effect on
the Business, the Seller or any Subsidiary that, individually or in the
aggregate with any other circumstances, changes in, or effects on, the
Business, the Seller or any Subsidiary: (a) is, or would reasonably be expected
to be, materially adverse to the Business, operations, Assets or Liabilities,
prospects, results of operations or financial condition of the Seller and the
Subsidiaries, taken as a whole, or (b) would reasonably be expected to
materially adversely affect the ability of the Seller and the Subsidiaries to
operate or conduct the Business in the manner in which it is currently operated
or conducted or contemplated to be operated or conducted by the Seller and the
Subsidiaries.
"Person" means any individual, partnership, limited liability company,
firm, corporation, association, trust, joint venture, unincorporated
organization or other entity, as well as any syndicate or group that would be
deemed to be a person under Section 13(d)(3) of the Exchange Act.
"Preferred Stock" has the meaning specified in the recitals to this
Agreement.
"Purchase Price" has the meaning specified in Section 2.2.
"Purchaser" has the meaning specified in the preamble to this Agreement.
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"Reference Balance Sheet" means the audited consolidated balance sheet
(including the related notes and schedules thereto) of the Seller, dated as of
December 31, 1996, a copy of which the Seller has provided to the Purchaser
prior to the execution of this Agreement.
"Reference Balance Sheet Date" means December 31, 1996.
"Related Agreements" has the meaning specified in Annex III attached
hereto.
"Release" means any spilling, leaking, pumping, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing (including
the abandonment or discarding of barrels, containers or other closed
receptacles containing Hazardous Materials) of Hazardous Materials into the
environment.
"Sale" has the meaning specified in Section 5.9(b).
"SEC Reports" has the meaning specified in Section 3.6(a).
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Seller" has the meaning specified in the preamble to this Agreement.
"Series D Preferred Stock Purchase Agreement" means that certain Stock
Purchase Agreement of even date herewith between the Seller and SCANA
Communications, Inc., a South Carolina corporation, as purchaser thereunder,
with respect to the sale and purchase of 50,000 shares of Seller's Series D
Preferred Stock ("Series D Preferred Stock"), together with all attachments,
annexes and exhibits thereto, all documents and agreements executed in
connection therewith, and all amendments, supplements and modifications
thereof.
"Shares" has the meaning specified in the recitals to this Agreement.
"Subsidiaries" means any and all Persons controlled by the Seller
directly or indirectly through one or more intermediaries; provided, however,
that the term "Subsidiaries" shall not include either Unity Cellular Systems,
Inc. or Northern Maine Cellular Partnership.
"Tax" or "Taxes" means any and all taxes, fees, levies, assessments,
duties, tariffs, imposts, and other charges of any kind (together with any and
all interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any government or taxing authority, including,
without limitation: taxes or other charges on or with respect to income,
franchises, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, or net worth; taxes or other charges in the nature
of excise, withholding, ad valorem, stamp, transfer, value added, or gains
taxes; license, registration and documentation fees; and customs duties,
tariffs, and similar charges.
"Third Party Claims" has the meaning specified in Section 7.2(b).
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<PAGE> 10
"U.S. GAAP" means United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently
throughout the periods involved.
"1996 Financial Statements" has the meaning specified in Section 3.2(b).
ARTICLE II
PURCHASE AND SALE
SECTION 2.1 Purchase and Sale of the Shares. Upon the terms and
subject to the conditions of this Agreement, at the Closing, the Seller shall
sell to the Purchaser, and the Purchaser shall purchase from the Seller, the
Shares.
SECTION 2.2 Purchase Price. The aggregate purchase price for the
Shares shall be $22,500,000.00 (the "Purchase Price"), representing a purchase
price of $450.00 per Share.
SECTION 2.3 Closing. Upon the terms and subject to the conditions
of this Agreement, the issuance, sale and purchase of the Shares contemplated
by this Agreement shall take place at a closing (the "Closing") to be held at
10:00 A.M. local time on a date and at a location mutually agreed to by the
parties upon the satisfaction or waiver of all conditions to the obligations of
the parties set forth in Article VI, or at such other place or at such other
time or on such other date as the Seller and the Purchaser may mutually agree
upon in writing (the day on which the Closing takes place being the "Closing
Date").
SECTION 2.4 Escrow. On or before the Closing Date, the Seller,
the Purchaser and the Escrow Agent shall enter into an Escrow Agreement with
the Escrow Agent substantially in the form of Exhibit 2.4 (the "Escrow
Agreement"). In accordance with the terms of the Escrow Agreement, on or
before the Closing Date, the Purchaser shall deposit with the Escrow Agent the
Purchase Price, to be managed and paid out by the Escrow Agent in accordance
with the terms of the Escrow Agreement, and the Seller shall deposit with the
Escrow Agent a stock certificate(s) evidencing the Shares, to be held and
delivered by the Escrow Agent in accordance with the terms and provisions of
the Escrow Agreement.
SECTION 2.5 Closing Deliveries by the Seller. At the Closing, the
Seller shall execute and deliver or cause to be delivered to the Purchaser this
Agreement, the Escrow Agreement and the opinions, certificates and other
documents required to be delivered pursuant to Section 6.2, and shall deliver
the stock certificate(s) evidencing the Shares to the Escrow Agent in
accordance with the Escrow Agreement.
SECTION 2.6 Closing Deliveries by the Purchaser. At the Closing,
the Purchaser shall execute and deliver or cause to be delivered to the Seller
this Agreement, the Escrow Agreement and the opinions, certificates and other
documents required to be delivered pursuant to Section 6.1, and shall deliver
the Purchase Price monies to the Escrow Agent in accordance with the Escrow
Agreement.
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SECTION 2.7 Closing Deliveries by the Escrow Agent. At or before
the Closing, the Escrow Agent shall execute and deliver to the Seller and the
Purchaser the Escrow Agreement and shall accept and hold the Purchase Price
monies and stock certificate(s) evidencing the Shares pursuant thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
As an inducement to the Purchaser to enter into this Agreement, the
Seller hereby represents and warrants to the Purchaser as set forth in Annex
III hereto (which is incorporated herein by reference) and as follows:
SECTION 3.1 Organization, Authority and Qualification of the
Seller. The Seller is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has all necessary
power and authority to enter into this Agreement and the Escrow Agreement, to
carry out its obligations hereunder and thereunder, to consummate the
transactions contemplated hereby and thereby and to conduct its Business,
except where the failure to be so qualified or in good standing would not have
a Material Adverse Effect. The Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the properties
owned or leased by it or the operation of its Business makes such licensing or
qualification necessary, except as would not have a Material Adverse Effect.
The execution and delivery of this Agreement and the Escrow Agreement by the
Seller, the performance by the Seller of its obligations hereunder and
thereunder and the consummation by the Seller of the transactions contemplated
hereby and thereby, including, without limitation, the issuance of the
Preferred Stock in accordance with the terms of this Agreement and the
Certificate of Designation, have been duly authorized by all requisite action
on the part of the Seller. This Agreement and the Escrow Agreement have been
duly executed and delivered by the Seller, and (assuming due authorization,
execution and delivery by the Purchaser) this Agreement and the Escrow
Agreement constitute the legal, valid and binding obligations of the Seller
enforceable against the Seller in accordance with their respective terms.
SECTION 3.2 Capitalization of the Seller. (a) The authorized
capital stock of the Seller consists of 55,000,000 shares of Common Stock and
1,000,000 shares of preferred stock, par value $0.01 per share. As of March
10, 1997, (i) 26,864,511 shares of Common Stock are issued and outstanding, all
of which are validly issued, fully paid and nonassessable and (ii) 200,000
shares of preferred stock are issued and outstanding (not including the
Preferred Stock and the Series D Preferred Stock). None of the issued and
outstanding shares of Common Stock or preferred stock was issued in violation
of any preemptive rights. Except as disclosed in Schedule 3.2 of the
Disclosure Schedule, there are no options, warrants, convertible securities or
other rights, agreements, arrangements or commitments of any character to which
the Seller is a party relating to the issuance or sale of capital stock of the
Seller or obligating the Seller to issue or sell any shares of capital stock
of, or any other equity interest in, the Seller or its Subsidiaries. Except as
disclosed in Schedule 3.2 of the Disclosure Schedule, there are no outstanding
contractual obligations of the Seller to repurchase, redeem or otherwise
acquire any shares of Common Stock or shares of capital stock of its
Subsidiaries. Upon issuance of the Shares to the Purchaser at the Closing and
payment therefor pursuant to this Agreement and the
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Certificate of Designation, the Shares will be validly issued, fully paid and
nonassessable and free of preemptive rights. By the Closing Date, the shares
of Common Stock issuable upon conversion of the Shares will be duly authorized
and reserved for issuance upon such conversion and, upon issuance of such
shares in accordance with the Certificate of Designation, will be validly
issued, fully paid and nonassessable and free of preemptive rights. Upon
consummation of the transactions contemplated by this Agreement, including the
issuance of the Shares, registration of the Shares in the name of the Purchaser
in the stock records of the Seller and delivery of the Shares as provided in
the Escrow Agreement, the Purchaser will own the Shares free and clear of all
Encumbrances, other than Encumbrances resulting from any action, or failure to
take action, by the Purchaser.
(b) The outstanding indebtedness of Seller as of December
31, 1996 is accurately reflected (subject to normal and recurring adjustments
and other revisions which were not and are not reasonably expected to be
material in amount) in the Seller's balance sheet at December 31, 1996
contained in the Seller's unaudited draft annual consolidated financial
statements and the notes thereto for the year ended December 31, 1996 (the
"1996 Financial Statements").
SECTION 3.3 Subsidiaries. Each Subsidiary: (i) is duly organized
and validly existing under the laws of its jurisdiction of organization; (ii)
has all necessary power and authority to own, operate or lease the properties
and assets owned, operated or leased by such Subsidiary and to carry on its
business as it has been and is currently conducted by such Subsidiary; and
(iii) is duly licensed or qualified to do business and is in good standing in
each jurisdiction in which the properties owned or leased by it or the
operation of its business makes such licensing or qualification necessary or
desirable, except where the failure to be so duly licensed or qualified would
not have a Material Adverse Effect. Each Subsidiary is wholly owned, directly
or indirectly, by the Seller.
SECTION 3.4 No Conflict. Assuming that all Approvals described in
Section 3.5 have been obtained and all filings and notifications listed in
Schedule 3.5 of the Disclosure Schedule have been made, the execution, delivery
and performance of this Agreement and the Escrow Agreement by the Seller, and
the issuance of the Shares and the performance of the Seller's obligations in
accordance with the Certificate of Designation, do not and will not, as of the
Closing Date: (i) violate, conflict with or result in the breach of any
provision of the certificate of incorporation or by-laws (or similar
organizational documents) of the Seller or any Subsidiary; (ii) conflict with
or violate (or cause an event which could have a Material Adverse Effect as a
result of) any Law or Governmental Order applicable to the Seller, any
Subsidiary or any of their respective assets, properties or businesses; or
(iii) except as set forth in Schedule 3.4(iii) of the Disclosure Schedule,
conflict with, result in any breach of, constitute a default (or event which
with the giving of notice or lapse of time, or both, would become a default)
under, require any consent under, or give to others any rights of termination,
amendment, acceleration, suspension, revocation or cancellation of, or result
in the creation of any Encumbrance on any of the Shares or on any of the assets
or properties of the Seller or any Subsidiary pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license, permit,
franchise or other instrument or arrangement to which the Seller or any
Subsidiary is a party or by which any of the Shares or any of such assets or
properties is bound or affected.
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SECTION 3.5 Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Seller do not and will not require any consent, approval, authorization or
other order of, action by, filing with or notification to any Governmental
Authority (collectively, the "Approvals"), except: (i) as described in Schedule
3.5 of the Disclosure Schedule; (ii) as may be required pursuant to the
notification requirements of the HSR Act; (iii) the filing with the Secretary
of State of the State of Delaware of the Certificate of Designation
contemplated by Section 5.1; and (iv) any filings required to effect any
registration pursuant to Section 5.5. Subject to the foregoing exceptions, the
Seller shall obtain the foregoing Approvals on or before the Closing Date.
SECTION 3.6 Seller SEC Documents; Financial Statements. (a) The
Seller has filed all forms, reports and documents required to be filed by it
with the Commission, and has heretofore made available to the Purchaser, in the
form filed with the Commission (excluding any exhibits thereto), (A) its Annual
Report on Form 10-K for the fiscal year ended December 31, 1995, (B) its
Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June 30,
1996, and September 30, 1996, (C) all proxy statements relating to the Seller's
meetings of stockholders (whether annual or special) held since December 31,
1995, (D) the Seller's Prospectus dated April 16, 1996 and the related
Registration Statement on Form S-1 with respect to the offering by Seller of
certain debt obligations which mature in 2006, and (E) its Current Reports on
Form 8-K dated after December 31, 1995 (the forms, reports and other documents
referred to in clauses (A), (B), (C), (D) and (E) above being referred to
herein, collectively, as the "SEC Reports").
(b) Except as set forth on Schedule 3.6 of the Disclosure
Schedule, the SEC Reports and any other forms, reports and other documents
filed by the Seller with the Commission as of the date of this Agreement: (i)
were prepared in all material respects in accordance with the requirements of
the Securities Act and the Exchange Act, as the case may be, and the rules and
regulations thereunder; and (ii) did not at the time they were filed contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
(c) The financial statements (including, in each case, any
notes thereto) contained in the SEC Reports were prepared in accordance with
U.S. GAAP applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each fairly presented the
financial position, results of operations and cash flows of the Seller and its
consolidated subsidiaries as at the respective dates thereof and for the
respective periods indicated therein (subject, in the case of unaudited
statements, to normal and recurring year-end adjustments which were not and are
not reasonably expected, individually or in the aggregate, to be material in
amount).
(d) Since December 31, 1996 there has not been any change,
occurrence or circumstance in the Business, results of operations or financial
condition of the Seller or any Subsidiary having, individually or in the
aggregate, a Material Adverse Effect, other than changes, occurrences and
circumstances referred to in any subsequently filed SEC Reports or otherwise
Disclosed by Seller.
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SECTION 3.7 No Undisclosed Liabilities. There are no Liabilities
of the Seller or any Subsidiary, other than Liabilities: (i) disclosed in
Schedule 3.7 of the Disclosure Schedule; (ii) reflected in the SEC Reports or
the 1996 Financial Statements or otherwise Disclosed by Seller; (iii) not
required to be reflected in a consolidated balance sheet of the Seller and its
Subsidiaries or in the notes thereto prepared in accordance with U.S. GAAP; or
(iv) incurred since the Reference Balance Sheet Date in the ordinary course of
business and which do not have a Material Adverse Effect.
SECTION 3.8 Conduct in the Ordinary Course: Absence of Certain
Changes, Events and Conditions. Since the Reference Balance Sheet Date, except
as Disclosed by Seller in any subsequently filed SEC Reports or Press Releases,
as reflected in the 1996 Financial Statements or as contemplated by this
Agreement, the Business of the Seller and the Subsidiaries has been conducted
in the ordinary course and the Seller has not suffered any Material Adverse
Effect.
SECTION 3.9 Litigation. Except as set forth in the SEC Reports,
as reflected in the 1996 Financial Statements, as disclosed in Schedule 3.9 of
the Disclosure Schedule or otherwise Disclosed by Seller, there are no Actions
by or against the Seller or any Subsidiary (or by or against any Affiliate
thereof and relating to the Business, the Seller or any Subsidiary), or
affecting any of the Assets, pending before any Governmental Authority (or, to
the knowledge of the Seller, threatened to be brought by or before any
Governmental Authority) that has, has had or could reasonably be expected to
have a Material Adverse Effect or could reasonably be expected to affect the
legality, validity or enforceability of this Agreement or the Escrow Agreement
or the consummation of the transactions contemplated hereby or thereby. None
of the Seller, the Subsidiaries nor any of the Assets is subject to any
Governmental Order (nor, to the knowledge of the Seller, are there any such
Governmental Orders threatened to be imposed by any Governmental Authority)
which has, has had or could have a Material Adverse Effect.
SECTION 3.10 Compliance with Laws. The Seller and the Subsidiaries
have each conducted and continue to conduct the Business in all material
respects in accordance with all Laws and Governmental Orders applicable to the
Seller or any Subsidiary or any of the Assets or the Business, and neither the
Seller nor any Subsidiary is in material violation of any such Law or
Governmental Order.
SECTION 3.11 Full Disclosure. The Seller is not aware of any facts
pertaining to the Seller, any Subsidiary or the Business which could reasonably
be expected to have a Material Adverse Effect and which have not been disclosed
in this Agreement, the Disclosure Schedule, the SEC Reports or otherwise
Disclosed by Seller.
SECTION 3.12 Delivery of Certain Documents. The Seller has
delivered to the Purchaser a true and complete copy of the most recent drafts
of the 1996 Financial Statements, the Debt Offering Memorandum and all Related
Agreements.
SECTION 3.13 Private Placement. Assuming the accuracy of the
representations and warranties of the Purchaser contained in Sections 4.5 and
4.6, the offer and sale of the
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Shares to the Purchaser pursuant to this Agreement is exempt from registration
under the Securities Act.
SECTION 3.14 FCC Regulations. After giving effect to the issuance
of Shares to the Purchaser, the ownership of capital stock of the Seller by
aliens or their representatives or by a foreign government or representative
thereof or by any corporation organized under the laws of a foreign country
does not exceed the limitations set forth in rules and regulations of the FCC.
SECTION 3.15 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
As an inducement to the Seller to enter into this Agreement, the
Purchaser hereby represents and warrants to the Seller as follows:
SECTION 4.1 Organization and Authority of the Purchaser. The
Purchaser is a limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all necessary power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the Escrow Agreement by the Purchaser, the performance by the Purchaser of
its obligations hereunder and thereunder and the consummation by the Purchaser
of the transactions contemplated hereby and thereby have been duly authorized
by all requisite action on the part of the Purchaser. This Agreement and the
Escrow Agreement have been duly executed and delivered by the Purchaser, and
(assuming due authorization, execution and delivery by the Seller) this
Agreement and the Escrow Agreement constitute the legal, valid and binding
obligations of the Purchaser enforceable against the Purchaser in accordance
with their respective terms.
SECTION 4.2 No Conflict. Except as disclosed by the Purchaser to
the Seller in writing prior to Closing, assuming compliance with the
notification requirements of the HSR Act and the making and obtaining of all
filings, notifications, consents, approvals, authorizations and other actions
referred to in Section 4.3, and except as may result from any facts or
circumstances relating solely to the Seller, the execution, delivery and
performance of this Agreement and the Escrow Agreement by the Purchaser do not
and will not, as of the date hereof and as of the Closing Date: (i) violate,
conflict with or result in the breach of any provision of the Limited
Partnership Agreement of the Purchaser; (ii) conflict with or violate any Law
or Governmental Order applicable to the Purchaser; or (iii) conflict with, or
result
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in any breach of, constitute a default (or event which with the giving of
notice or lapse or time; or both, would become a default) under, require any
consent under, or give to others any rights of termination, amendment,
acceleration, suspension, revocation, or cancellation of, or result in the
creation of any Encumbrance on any of the assets or properties of the Purchaser
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
sublease, license, permit, franchise or other instrument or arrangement to
which the Purchaser is a party or by which any of such assets or properties are
bound or affected, which in any such case would have a material adverse effect
on the ability of the Purchaser to consummate the transactions contemplated by
this Agreement or the Escrow Agreement.
SECTION 4.3 Governmental Consents and Approvals. The execution,
delivery and performance of this Agreement and the Escrow Agreement by the
Purchaser do not and will not require any Approvals, except pursuant to the
notification requirements of the HSR Act and the filing requirements of
Sections 13 and 16(a) of the Exchange Act. The Purchaser shall obtain or
comply with such Approval requirements in a timely manner.
SECTION 4.4 Litigation. There are no Actions by or against the
Purchaser, pending before any Governmental Authority (or, to the knowledge of
the Purchaser, threatened to be brought by or before any Governmental
Authority) that could reasonably be expected to affect the legality, validity
or enforceability of this Agreement or the Escrow Agreement or the consummation
of the transactions contemplated hereby or thereby. The Purchaser is not
subject to any Governmental Order (nor, to the knowledge of the Purchaser, are
there any such Governmental Orders threatened to be imposed by any Governmental
Authority), which could reasonably be expected to materially adversely affect
the legality, validity or enforceability of this Agreement or the Escrow
Agreement or the consummation of the transactions contemplated hereby or
thereby.
SECTION 4.5 Investment Purpose. The Purchaser is acquiring the
Shares and the shares of Common Stock to be issued upon conversion for its own
account solely for the purpose of investment and not with a view to, or for
offer or sale in connection with, any distribution thereof.
SECTION 4.6 Accredited Investor. The Purchaser is an "accredited
investor" within the meaning of Rule 501 under the Securities Act.
SECTION 4.7 Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based upon arrangements
made by or on behalf of the Purchaser.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Filing of Certificate of Designation. The Seller
covenants and agrees that at or prior to the Closing, the Seller will file the
Certificate of Designation with the Secretary of State of the State of Delaware
in accordance with the Delaware General Corporation Law and cause the
Certificate of Designation to be effective thereunder.
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SECTION 5.2 Treatment of Shares as Equity. The Seller covenants
and agrees that it will treat the Shares as equity, and not as debt, for
accounting and tax purposes and further covenants and agrees that it will not
take any action or position that is inconsistent with such treatment.
SECTION 5.3 Regulatory and Other Authorizations: Notices and
Consents. (a) The Seller and the Purchaser shall use all reasonable efforts
to obtain all Approvals of all Governmental Authorities that may be or become
necessary for each of them to obtain for their execution and delivery of, and
the performance of their respective obligations pursuant to, this Agreement and
the Escrow Agreement. Each party hereto agrees to make an appropriate filing
pursuant to the HSR Act, if required, with respect to the conversion of the
Shares at such times as the Purchaser may request and to supply as promptly as
practicable to the appropriate Governmental Authorities any additional
information and documentary material that may be requested pursuant to the HSR
Act.
(b) The Seller shall or shall cause the Subsidiaries to
give promptly such notices to third parties and use its or their reasonable
efforts to obtain such third party consents as are necessary in connection with
the transactions contemplated by this Agreement.
(c) The Purchaser shall cooperate and use all reasonable
efforts to assist the Seller in giving such notices and obtaining such
consents; provided, however, that the Purchaser shall have no obligation to
give any guarantee or other consideration of any nature in connection with any
such notice or consent or to consent to any change in the terms of any
agreement or arrangement which the Purchaser in its sole and absolute
discretion may deem adverse to the interests of the Purchaser.
SECTION 5.4 Notice of Developments. (a) Prior to the Closing,
the Seller shall promptly notify the Purchaser in writing of: (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of the Seller in this Agreement or which
could reasonably be expected to have the effect of making any representation or
warranty of the Seller in this Agreement untrue or incorrect in any respect;
and (ii) all other developments material to the Seller and the Subsidiaries,
taken as a whole, affecting the Assets, Liabilities, business, financial
condition, operations, results of operations or prospects of the Seller, any
Subsidiary or the Business.
(b) Prior to the Closing, the Purchaser shall promptly
notify the Seller in writing of all events, circumstances, facts and
occurrences arising subsequent to the date of this Agreement which could
reasonably be expected to result in any breach of a representation or warranty
or covenant of the Purchaser in this Agreement or which could reasonably be
expected to have the effect of making any representation or warranty of the
Purchaser in this Agreement untrue or incorrect in any respect.
SECTION 5.5 Registration Rights. Effective at the Closing, the
Purchaser and the Seller shall each have the rights and obligations set forth
in Annex II, which is incorporated by reference herein.
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SECTION 5.6 Resale Restrictions. (a) The Purchaser acknowledges
that the Shares and the shares of Common Stock into which the Shares are
convertible have not been registered under the Securities Act or any state
securities law, and hereby agrees not to offer, sell or otherwise transfer,
pledge or hypothecate such shares unless and until registered under the
Securities Act and any applicable state securities law or unless such offer,
sale, transfer, pledge or hypothecation is exempt from registration or is
otherwise in compliance with the Securities Act and such laws.
(b) During the period ending one year after the Closing
Date, the Purchaser shall not, without the prior written consent of the Seller:
(i) offer, pledge, sell or otherwise transfer or dispose of, directly or
indirectly, any Shares or any shares of Common Stock into which any of such
Shares may be converted; or (ii) enter into any swap or similar agreement that
transfers, in whole or in part, any of the economic consequences of ownership
of such Shares or any shares of Common Stock into which such Shares may be
converted, whether any such transaction described in clause (i) or (ii) above
is to be settled by delivery of Shares or such other securities, in cash or
otherwise, other than a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and unaffiliated pledgee;
provided, however, that the Purchaser may at any time enter into any such
transaction described in clause (i) or (ii) above with an Affiliate of the
Purchaser.
SECTION 5.7 Registration of Shares. The Seller shall, upon
issuance of the Shares and prior to the delivery of stock certificates
evidencing the Shares pursuant to Section 2.5, register the Shares in the name
of the Purchaser in the stock records of the Seller.
SECTION 5.8 Delivery of Certain Documents. The Seller shall
deliver to the Purchaser true and correct copies of this Agreement and the
Related Agreements, the Escrow Agreement and all exhibits, schedules, annexes
and agreements related hereto and thereto, as soon as practicable following the
execution and delivery hereof by the parties hereto and thereto.
SECTION 5.9 Certain Information. (a) For a period of at least
two years from the date of this Agreement, the Seller shall file all reports
and other information required to be filed by Section 13 or 15(d) under the
Exchange Act, as the case may be, as shall be necessary in order that the
conditions to the availability of Rule 144 (as amended or to be amended) under
the Securities Act in connection with any Sale of shares of Common Stock by the
Purchaser shall be met. For so long as the Seller is required to file reports
and other information pursuant to Section 13 or 15(d) of the Exchange Act and
this Section 5.9(a), unless the Purchaser no longer holds any Shares or shares
of Common Stock, the Seller shall provide the Purchaser with a paper copy of
each such report and other information at or about the same time as filed with
the Commission.
(b) For purposes of this Agreement, "Sale" means any sale,
assignment, transfer, distribution or other disposition of shares of Common
Stock or of a participation therein, whether voluntarily or by operation of
law.
SECTION 5.10 Conduct of Business of the Seller. Prior to the
Closing, the Seller agrees (except to the extent that the Purchaser shall
otherwise consent in writing) as follows:
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(a) Dividends: Changes in Stock. The Seller shall not
take or permit to be taken any action that would result in an adjustment to the
Conversion Price (as defined in the Certificate of Designation) pursuant to
Section (7)(d) of the Certificate of Designation if the Shares were issued and
outstanding at the time of such action.
(b) Certain Matters. The Seller shall not take or permit
to be taken any action in respect of which holders of Shares would be entitled
to vote pursuant to Section (9) of the Certificate of Designation if the Shares
were outstanding at the time of such action.
SECTION 5.11 Further Action. Each of the parties hereto shall use
all reasonable efforts to take, or cause to be taken, all appropriate action,
do or cause to be done all things necessary, proper or advisable under
applicable Law, and execute and deliver such documents and other papers, as may
be required to carry out the provisions of this Agreement and consummate and
make effective the transactions contemplated by this Agreement.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.1 Conditions to Obligations of the Seller. The
obligations of the Seller to execute this Agreement and perform its obligations
hereunder shall be subject to the satisfaction (or waiver by the Seller, at its
sole discretion), at or prior to the Closing, of each of the following
conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Purchaser contained in this Agreement
shall have been true and correct in all material respects when made and shall
be true and correct in all material respects as of the Closing, with the same
force and effect as if made as of the Closing, other than such representations
and warranties as are made as of another date, which shall be true and correct
as of such date (provided, however, that if any portion of any representation
or warranty is already qualified by materiality, for purposes of determining
whether this Section 6.1(a) has been satisfied with respect to such portion of
such representation or warranty, such portion of such representation or
warranty as so qualified must be true and correct in all respects), and the
covenants and agreements contained in this Agreement to be complied with by the
Purchaser at or before the Closing shall have been complied with in all
material respects, and the Seller shall have received a certificate from the
Purchaser to such effect signed by a duly authorized officer thereof;
(b) No Proceeding or Litigation. No Action shall have
been commenced by or before any Governmental Authority against either the
Seller or the Purchaser seeking to restrain or materially and adversely alter
the transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Seller, is likely to render it impossible or
unlawful to consummate such transactions; provided, however, that the
provisions of this Section 6.1(b) shall not apply if the Seller has directly or
indirectly solicited or encouraged any such Action;
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(c) Partnership Certificate. The Seller shall have
received a true and complete certificate of the general partner of the
Purchaser confirming that it has the authority under the Purchaser's
partnership agreement to execute and deliver this Agreement and the Escrow
Agreement on behalf of the Purchaser and to consummate the transactions
contemplated hereby and thereby;
(d) Incumbency Certificate of the Purchaser. The Seller
shall have received a certificate of the general partner of the Purchaser
certifying the names and signatures of the representatives of the Purchaser
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(e) Legal Opinion. The Seller shall have received from
Proskauer Rose Goetz & Mendelsohn LLP, counsel to the Purchaser, a legal
opinion, addressed to the Seller and dated the Closing Date, the form and
substance of which shall be substantially as set forth in Exhibit 6.1(e)
attached hereto, as to: (i) the due authorization, execution and delivery by
the Purchaser of this Agreement and the Escrow Agreement; and (ii) the
enforceability against the Purchaser of this Agreement and the Escrow
Agreement;
(f) Consents and Approvals. The Seller shall have received
(or received evidence of), each in form and substance reasonably satisfactory
to the Seller, all Approvals and all third party consents necessary or
desirable for the consummation of the transactions contemplated by this
Agreement which the Purchaser has the obligation to obtain; and
(g) Closing of Related Transactions. Closing of the
transactions contemplated by the Series D Stock Purchase Agreement shall have
occurred or shall occur simultaneously with the Closing.
SECTION 6.2 Conditions to Obligations of the Purchaser. The
obligations of the Purchaser to execute this Agreement and perform its
obligations hereunder shall be subject to the satisfaction (or waiver by the
Purchaser, at its sole discretion), at or prior to the Closing, of each of the
following conditions:
(a) Representations, Warranties and Covenants. The
representations and warranties of the Seller contained in this Agreement
(including those set forth in Annex III hereto) shall have been true and
correct in all material respects when made and shall be true and correct in all
material respects as of the Closing with the same force and effect as if made
as of the Closing, other than such representations and warranties as are made
as of another date, which shall be true and correct as of such date (provided,
however, that if any portion of any representation or warranty is already
qualified by materiality, for purposes of determining whether this Section
6.2(a) has been satisfied with respect to such portion of such representation
or warranty, such portion of such representation or warranty as so qualified
must be true and correct in all respects), and the covenants and agreements
contained in this Agreement to be complied with by the Seller at or before the
Closing shall have been complied with in all material respects, and the
Purchaser shall have received a certificate of the Seller to such effect signed
by a duly authorized officer thereof.
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(b) No Proceeding or Litigation. No Action shall have
been commenced by or before any Governmental Authority against either the
Seller or the Purchaser, seeking to restrain or materially and adversely alter
the transactions contemplated by this Agreement which, in the reasonable, good
faith determination of the Purchaser, is likely to render it impossible or
unlawful to consummate such transactions or which could have a Material Adverse
Effect; provided, however, that the provisions of this Section 6.2(b) shall not
apply if the Purchaser has directly or indirectly solicited or encouraged any
such Action;
(c) Resolutions of the Seller. The Purchaser shall have
received a true and complete copy, certified by the Secretary or an Assistant
Secretary of the Seller, of the resolutions duly and validly adopted by the
Board of Directors of the Seller and, to the extent that such authorization is
necessary, the shareholders of the Seller evidencing their authorization of the
execution and delivery of this Agreement, the issuance and terms of the Shares
including, without limitation, the convertibility thereof into shares of Common
Stock, and the consummation of the transactions contemplated hereby;
(d) Incumbency Certificate of the Seller. The Purchaser
shall have received a certificate of the Secretary or an Assistant Secretary of
the Seller certifying the names and signatures of the officers of the Seller
authorized to sign this Agreement and the other documents to be delivered
hereunder;
(e) Legal Opinion. The Purchaser shall have received from
Nelson Mullins Riley & Scarborough, L.L.P., counsel to the Seller, a legal
opinion, addressed to the Purchaser and dated the Closing Date, the form and
substance of which shall be substantially as set forth in Exhibit 6.2(e)
attached hereto, as to: (i) the due authorization by all necessary corporate
action, execution and delivery by the Seller of this Agreement and the Escrow
Agreement; (ii) the enforceability against the Seller of this Agreement and the
Escrow Agreement; (iii) the validity of the Shares and the due authorization of
the shares of Common Stock into which the Shares may be converted; and (iv) the
good standing of the Seller and each Subsidiary under the laws of their
respective State(s) of incorporation or organization, and related matters;
(f) FCC Opinion. The Purchaser shall have received from
Kurtis & Associates, L.P., special counsel to the Seller, a legal opinion,
addressed to the Purchaser and dated the Closing Date, the form and substance
of which shall be substantially as set forth in Exhibit 6.2(f) attached hereto,
as to certain matters relating to the FCC Licenses.
(g) Consents and Approvals. The Purchaser shall have
received (or received evidence of), each in form and substance reasonably
satisfactory to the Purchaser, all Approvals and all third party consents
necessary or desirable for the consummation of the transactions contemplated by
this Agreement which the Seller has the obligation to obtain;
(h) Closing of Related Transactions. Closing of the
transactions contemplated by the Series D Stock Purchase Agreement shall have
occurred or shall occur simultaneously with the Closing;
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(i) Organizational Documents. The Purchaser shall have
received a copy of: (i) the certificate of incorporation, as amended, of the
Seller, and the Certificates of Designations with respect to the Preferred
Stock and the Series D Preferred Stock, certified by the Secretary of State of
the State of Delaware, as of a date not earlier than five Business Days prior
to the Closing Date and accompanied by a certificate of the Secretary or
Assistant Secretary of the Seller, dated as of the Closing Date, stating that
no amendments have been made to such certificate of incorporation since such
date; and (ii) the by-laws of the Seller, certified by the Secretary or
Assistant Secretary of the Seller;
(j) Good Standing. The Purchaser shall have received a
good standing certificate for the Seller from the Secretary of State of the
State of Delaware, dated as of a date not earlier than five Business Days prior
to the Closing Date and accompanied by a bring-down certificate dated within
twenty-four hours of the Closing Date; and
(k) No Material Adverse Effect. No event or events shall
have occurred which, individually or in the aggregate, have, or could have, a
Material Adverse Effect.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1 Survival of Representations and Warranties. (a) The
representations and warranties of the Seller to Purchaser contained in this
Agreement (including Annex III hereto) and in the Exhibits to this Agreement
and the Disclosure Schedule (collectively, the "Acquisition Documents"), shall
survive the Closing until the later of the second anniversary of the Closing
Date or the conversion of the Preferred Stock into Common Stock. Neither the
period of survival nor the liability of the Seller with respect to the Seller's
representations and warranties shall be reduced by any investigation made at
any time by or on behalf of the Purchaser. If written notice of a claim has
been given prior to the expiration of the applicable representations and
warranties by the Purchaser to the Seller, then the relevant representations
and warranties shall survive as to such claim, until such claim has been
finally resolved.
(b) The representations and warranties of the Purchaser
contained in the Acquisition Documents shall survive the Closing until the
later of the second anniversary of the Closing Date or the conversion of the
Preferred Stock into Common Stock. Neither the period of survival nor the
liability of the Purchaser with respect to the Purchaser's representations and
warranties shall be reduced by any investigation made at any time by or on
behalf of the Seller. If written notice of a claim has been given prior to the
expiration of the applicable representations and warranties by the Seller to
the Purchaser, then the relevant representations and warranties shall survive
as to such claim, until such claim has been finally resolved.
SECTION 7.2 Indemnification. (a)((i) The Purchaser, its
successors and assigns, and the stockholders, officers, directors, employees,
Affiliates and agents of the Purchaser and its successors and assigns shall be
indemnified and held harmless by the Seller for any and all Liabilities,
losses, damages, claims, costs and expenses, interest, awards, judgments and
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penalties (including, without limitation, attorneys' and consultants' fees and
expenses) actually suffered or incurred by them (including, without limitation,
any Action brought or otherwise initiated by any of them) (hereinafter a
"Loss"), arising out of or resulting from:
(A) the breach of any representation or
warranty made by the Seller contained in the Acquisition
Documents; or
(B) the breach of any covenant or
agreement by the Seller contained in the Acquisition
Documents.
(ii) The Seller, its successors and assigns, and
the stockholders, officers, directors, employees, Affiliates and agents of the
Seller and its successors and assigns shall be indemnified and held harmless by
the Purchaser for any and all Losses actually suffered or incurred by them,
arising out of or resulting from:
(A) the breach of any representation or
warranty made by the Purchaser in the Acquisition Documents;
or
(B) the breach of any covenant or
agreement by the Purchaser contained in the Acquisition
Documents.
To the extent that the Seller's or the Purchaser's undertakings set forth in
this Section 7.2 may be unenforceable, the Seller or the Purchaser, as the case
may be, shall contribute the maximum amount that it is permitted to contribute
under applicable law to the payment and satisfaction of all Losses incurred by
the Purchaser or the Seller, as the case may be.
(b) An indemnified party shall give the party from whom
indemnification is sought notice of any matter which an indemnified party has
determined has given or could give rise to a right of indemnification under
this Agreement, within 60 days of such determination, stating the amount of the
Loss, if known, and method of computation thereof, and containing a reference
to the provisions of this Agreement in respect of which such right of
indemnification is claimed or arises; provided, however, that the failure to
provide such notice shall not release the indemnifying party from any of its
obligations under this Article VII except to the extent the indemnifying party
is materially prejudiced by such failure and shall not relieve the indemnifying
party from any other obligation or Liability that it may have to any
indemnified party otherwise than under this Article VII. The obligations and
Liabilities of an indemnifying party under this Article VII with respect to
Losses arising from claims of any third party which are subject to the
indemnification provided for in this Article VII ("Third Party Claims") shall
be governed by and contingent upon the following additional terms and
conditions: If an indemnified party shall receive notice of any Third Party
Claim, the indemnified party shall give the indemnifying party notice of such
Third Party Claim within 30 days of the receipt by the indemnified party of
such notice; provided, however, that the failure to provide such notice shall
not release the indemnifying party from any of its obligations under this
Article VII except to the extent the indemnifying party is materially
prejudiced by such failure and shall not relieve the indemnifying party from
any other obligation or Liability that it may have to any indemnified party
otherwise than under this Article VII. If the indemnifying party acknowledges
in writing its obligation to
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indemnify the indemnified party hereunder against any Losses that may result
from such Third Party Claim, then the indemnifying party shall be entitled to
assume and control the defense of such Third Party Claim at its expense and
through counsel of its choice if it gives notice of its intention to do so to
the indemnified party within five days of the receipt of such notice from the
indemnified party; provided, however, that if there exists or is reasonably
likely to exist a conflict of interest that would make it inappropriate in the
judgment of the indemnified party, in its sole and absolute discretion, for the
same counsel to represent both the indemnified party and the indemnifying
party, then the indemnified party shall be entitled to retain its own counsel,
in each jurisdiction for which the indemnified party determines counsel is
required, at the expense of the indemnifying party. In the event the
indemnifying party exercises the right to undertake any such defense against
any such Third Party Claim as provided above, the indemnified party shall
cooperate with the indemnifying party in such defense and make available to the
indemnifying party, at the indemnifying party's expense, all witnesses,
pertinent records, materials and information in the indemnified party's
possession or under the indemnified party's control relating thereto as is
reasonably required by the indemnifying party. Similarly, in the event the
indemnified party is, directly or indirectly, conducting the defense against
any such Third Party Claim, the indemnifying party shall cooperate with the
indemnified party in such defense and make available to the indemnified party,
at the indemnifying party's expense, all such witnesses, pertinent records,
materials and information in the indemnifying party's possession or under the
indemnifying party's control relating thereto as is reasonably required by the
indemnified party. No such Third Party Claim may be settled by the
indemnifying party or the indemnified party without the prior written consent
of the other.
SECTION 7.3 Limits on Indemnification. Notwithstanding anything
to the contrary contained in this Agreement, the maximum amount of
indemnifiable Losses which may be recovered from an indemnifying party arising
out of or resulting from the causes enumerated in Section 7.2 shall be an
amount equal to the Purchase Price.
ARTICLE VIII
TERMINATION AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated as
follows:
(a) by the Purchaser if, between the date hereof and the
time scheduled for the Closing: (i) an event or condition occurs that has
resulted in a Material Adverse Effect; (ii) any representation or warranty of
the Seller contained in this Agreement shall not have been true and correct in
all material respects when made or as of the Closing Date; (iii) the Seller
shall not have complied in all material respects with any covenant or agreement
to be complied with by it and contained in this Agreement; or (iv) the Seller
or any Subsidiary makes a general assignment for the benefit of creditors, or
any proceeding shall be instituted by or against the Seller or any Subsidiary
seeking to adjudicate any of them a bankrupt or insolvent, or seeking
liquidation, winding up or reorganization, arrangement, adjustment, protection,
relief or composition of its debts under any Law relating to bankruptcy,
insolvency or reorganization; or
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(b) by the Seller if, between the date hereof and the time
scheduled for the Closing: (i) any representation or warranty of the
Purchaser contained in this Agreement shall not have been true and correct in
all material respects when made or as of the Closing Date; (ii) the Purchaser
shall not have complied in all material respects with any covenant or agreement
to be complied with by it and contained in this Agreement; or (iii) the
Purchaser makes a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against the Purchaser seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition of
its debts under any Law relating to bankruptcy, insolvency or reorganization;
or
(c) by the Purchaser if the closing of the offering of debt
contemplated by the Debt Offering Memorandum and the receipt by Seller of a
minimum of $100 million in gross proceeds therefrom shall not have occurred
on or prior to April 30, 1997; provided, however, that the Purchaser must
notify the Seller in writing within five Business Days of notice from the
Seller of the failure of such closing contemplated by the Debt Offering
Memorandum to occur of Purchaser's election to proceed (in which case,
Purchaser agrees to waive any conditions to Closing and breaking escrow which
are not then met due to the failure of such closing under the Debt Offering
Memorandum) or to terminate this Agreement or else this Agreement automatically
shall be deemed to be terminated; or
(d) by either the Purchaser or the Seller in the event that any
Governmental Authority shall have issued an order, decree or ruling or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or
(e) by the mutual written consent of the Seller and the Purchaser.
SECTION 8.2 Effect of Termination.
(a) In the event of termination of this Agreement as provided in
Section 8.1, this Agreement shall forthwith become void and there shall be no
liability on the part of either party hereto except that nothing herein shall
relieve either party from liability for any breach of this Agreement occurring
prior to termination.
(b) In the event of termination of this Agreement as provided in
Section 8.1, the Escrow Agent shall, pursuant to the provisions of the Escrow
Agreement, return the Purchase Price to the Purchaser and shall return the
certificate(s) evidencing the Shares to the Seller.
SECTION 8.3 Waiver. Either party to this Agreement may: (i)
extend the time for the performance of any of the obligations or other acts of
the other party; (ii) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered by
the other party pursuant hereto; or (iii) waive compliance with any of the
agreements or conditions of the other party contained herein. Any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any
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subsequent breach or a subsequent waiver of the same term or condition, or a
waiver of any other term or condition, of this Agreement. The failure of any
party to assert any of its rights hereunder shall not constitute a waiver of
any of such rights.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Expenses. Except as otherwise specified in this
Agreement, all costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses, whether or not the
Closing shall have occurred; provided however, that the Seller shall reimburse
the Purchaser for the fees and disbursements of Purchaser's counsel actually
incurred in connection with this Agreement and the transactions contemplated
hereby up to an aggregate of $30,000.
SECTION 9.2 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given or made
(and shall be deemed to have been duly given or made upon receipt) by delivery
in person, by courier service, by telecopy or by registered or certified mail
(postage prepaid, return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as shall be specified
in a notice given in accordance with this Section 9.2):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Nelson Mullins Riley & Scarborough L.L.P.
999 Peachtree Street, Suite 1400
Atlanta, GA 30309
Telecopy: (404) 817-6050
Attention: Glenn W. Sturm, Esq.
(b) if to the Purchaser:
The Huff Alternative Income Fund, L.P.
67 Park Place
Morristown, NJ 07960
Telecopy: (201) 984-5818
Attention: General Partner
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with a copy (which shall not constitute notice) to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, NY 10036-8299
Telecopy: (212) 969-2900
Attention: Peter G. Samuels, Esq.
SECTION 9.3 Public Announcements. No party to this Agreement shall
make, or cause to be made, any press release or public announcement or
otherwise communicate with any news media in respect of this Agreement or the
transactions contemplated hereby without the prior written consent of the other
party (which shall not be unreasonably withheld or delayed), and the parties
shall cooperate as to the timing and contents of any such press release or
public announcement; provided, however, that with respect to any disclosure
required by law or by a listing agreement with the National Association of
Securities Dealers, Inc. Automated Quotation System National Market System or
any national securities exchange to which the Purchaser or the Seller is a
party, the party required to make such disclosure shall use its best efforts to
consult with the other party as to the timing and contents of such disclosure
and to obtain such consent prior to the time such disclosure is required to be
made.
SECTION 9.4 Headings. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the or interpretation of this Agreement.
SECTION 9.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated hereby are
consummated as originally contemplated to the greatest extent possible.
SECTION 9.6 Entire Agreement. This Agreement and the Escrow
Agreement constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
undertakings, both written and oral, between the Seller and the Purchaser with
respect to the subject matter hereof and thereof.
SECTION 9.7 Assignment. This Agreement may not be assigned by
operation of Law or otherwise without the express written consent of the Seller
and the Purchaser (which consent may be granted or withheld in the sole
discretion of the Seller or the Purchaser); provided, however, that the
Purchaser may, without the consent of the Seller, assign this Agreement prior
to the Closing to a Person who controls, is controlled by or is under common
control with the Purchaser, but no such assignment shall relieve the Purchaser
of any of its obligations under this Agreement.
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SECTION 9.8 No Third Party Beneficiaries. Except for the
provisions of Article VII relating to indemnified parties, this Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
successors and permitted assigns and nothing herein, express or implied, is
intended to or shall confer upon any other Person any legal or equitable right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
SECTION 9.9 Amendment. This Agreement may not be amended or
modified except: (i) by an instrument in writing signed by, or on behalf of,
the Seller and the Purchaser; or (ii) by a waiver in accordance with Section
8.3.
SECTION 9.10 Management Rights For so long as the Purchaser holds
Common Stock or Shares convertible into Common Stock which, in the aggregate,
have a Current Market Value of $15 million, the Purchaser shall have the
following rights:
(a) Attendance at Meetings. The Purchaser shall have the right to
receive notice of, and have one of its representatives (the "Observer") attend
all meetings of Seller's board of directors (the "Board") and all meetings of
committees of the Board on a non-voting basis. The Purchaser shall receive all
materials distributed to the Board and committees of the Board at the same time
as the materials are distributed to the Board and committees. If any director
of the Seller who is also a director or Executive Officer of a Person that has
a class of Securities registered with the Commission or on a national exchange
or is otherwise subject to the reporting requirements of the Exchange Act,
requests that the Purchaser's representative not be allowed to remain present
during any portion of any meeting of the Board or any committee thereof due to
the material non-public information about such Person which is to be discussed
or disclosed at such meeting, the Purchaser agrees that its representative
shall not be entitled to attend such portion(s) of such meeting(s) and shall
comply with any such request from such director of the Board.
(b) Consultation Right. The Purchaser shall have the right to
regularly consult with Seller's Board and executive and financial management
with respect to Seller's Business and to make proposals with respect to such
Business. The parties agree that the Board and executive and financial
management are under no obligation to take any action with respect to the
proposals and other advice given by the Purchaser; however, Seller agrees to
direct its executive and financial management and the Board to take such
proposals and advice seriously and give due consideration thereto.
(c) Books and Records. The Purchaser shall have the right, upon
reasonable notice and at reasonable times during business hours, to inspect,
and Seller shall keep and make available to the Purchaser at Seller's principal
office all of the following:
(i) Copies of Seller's Federal, state and local income tax
or information returns (including any schedules and exhibits thereto) and
reports, if any, with respect to the six most recent fiscal years (or, if
shorter, since the commencement of Seller's Business), or for such longer
period required by any waivers extending periods of limitation to assess any
such Taxes;
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(ii) The audited financial statements of Seller for the six
most recent fiscal years (or, if shorter, since the commencement of Seller's
Business), or for such longer period required by any waivers extending periods
of limitation to assess any Federal, state or local Taxes; and
(iii) Seller's books and records for the six most recent
fiscal years (or, if shorter, since the commencement of Seller's Business), or
for such longer period required by any waivers extending periods of limitation
to assess any Federal, state or local Taxes.
SECTION 9.11 Confidentiality.
(a) The Purchaser acknowledges that the relationship set forth in
Section 9.10 above places the Observer and the Purchaser in a position to learn
confidential information, both written and oral, about the Seller's business
operations, financial condition, assets and affairs, including but not limited
to copies of unaudited financial statements of the Seller, negotiations between
the Seller and third parties and other information which is highly sensitive in
nature. All information, data, reports, discussions, prospects, compilations,
financial plans, negotiations, prospects, memoranda and other materials (in any
form) received by or communicated to the Observer directly or indirectly by
Seller pursuant to Section 9.10 above (collectively "Confidential
Information"), shall be treated as strictly confidential by the Purchaser in
accordance with the terms and provisions of Section 9.11(b) through (f) below.
The term "Confidential Information," however, does not include information
that: (i) is filed with the Commission and which is not subject to a pending
request for confidential treatment made to the Commission or any other
Governmental Authority; (ii) becomes generally available to the public other
than as a result of an improper disclosure by the Purchaser or its
representatives and employees; (iii) was available to the Purchaser or its
representatives (provided the Purchaser, its representatives and employees have
no knowledge that such information was obtained, directly or indirectly, from a
source that was bound by a confidentiality agreement with or other obligation
of secrecy to the Seller or its representatives); (iv) becomes available to the
Purchaser or its representatives and employees, directly or indirectly, from a
source other than the Seller or its representatives and employees, provided
that such source is not known by the Purchaser, its representatives or
employees to be bound by a confidentiality agreement with or other obligation
of secrecy to the Seller or its representatives and Affiliates; or (v) a
director of the Board is under no obligation or duty to keep confidential.
(b) For a period of two years from the date the Purchaser receives
such information, the Purchaser agrees to keep all Confidential Information to
itself and not to use, reveal, transfer, market, publish, divulge or otherwise
disclose to any Person, directly or indirectly, any Confidential Information
without the express written consent of the Seller (which consent may be
withheld in the sole discretion of Seller). The Purchaser agrees that the
Purchaser will not, without the Seller's prior written consent (which consent
may be withheld in the sole discretion of Seller), make or permit to be made
any copies, abstracts or summaries of the Confidential Information, except as
necessary to assist the Purchaser in exercising its rights under Section 9.10
above. The Purchaser also agrees that, promptly upon demand, after the
Purchaser ceases to have the right to an Observer under Section 9.10 above, the
Purchaser will return to the Seller or destroy all written or tangible
Confidential Information received by the Purchaser or its
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representative and employees (without retaining any copies thereof) and shall
destroy all notes, reports and other materials prepared by or for the Purchaser
based in whole or in part on Confidential Information received by the
Purchaser. The Purchaser agrees to execute any additional confidentiality
agreement required by the Seller in connection with any Confidential
Information on substantially the same terms as the Seller has agreed to be
bound with respect to such Confidential Information. The Purchaser agrees not
to use for any purpose any portion of the Confidential Information except to
exercise its rights pursuant to Section 9.10 above and not to use the
Confidential Information in any way which is detrimental to the Seller.
(c) It is each party's responsibility to ensure that its officers,
directors, investment advisors, attorneys, employees, partners, affiliates and
other representatives who are given access to the Confidential Information will
be bound by and will conduct themselves in accordance with the terms of this
Section 9.11. Neither the Seller nor its Affiliates nor their representatives
make (or shall be deemed to have made) any representation or warranty as to the
accuracy or completeness of any Confidential Information (except as may be
specifically provided elsewhere in this Agreement). Neither the Seller nor its
Affiliates nor their representatives will have any liability to the Purchaser,
its employees, agents or representatives resulting from the use of the
Confidential Information by the Purchaser or its permitted employees, agents or
representatives (except as may be specifically provided in this Agreement).
(d) The Purchaser acknowledges that it is aware, and that it will
advise its officers, directors, partners, advisors, attorneys, employees and
other representatives who become informed of any Confidential Information, that
the securities laws of the United States and various states prohibit any Person
who has received material nonpublic information with respect to an issuer from
trading in any securities of such issuer or from communicating such information
to any other Person under circumstances in which it is reasonably foreseeable
that such other Person may trade in any such securities. Without in any way
limiting the obligations of the Purchaser pursuant to the provisions of this
Agreement (other than this Section 9.11(d)) and applicable law, this Section
9.11(d), by itself, shall not give rise to an additional cause of action by the
Seller against the Purchaser which is not available to the Seller pursuant to
other terms and provisions of this Agreement or applicable law.
(e) In the event that the Purchaser is requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process) in any judicial or
administrative proceeding or is otherwise required by Law to disclose any
Confidential Information, the Purchaser will give the Seller prompt notice of
such request or requirement so that the Seller may seek an appropriate
protective order or other relief. It is further agreed that if, in the absence
of a protective order or the receipt of a waiver hereunder, the Purchaser is
nonetheless, in the considered and reasoned opinion of its counsel required by
Law, to disclose Confidential Information, the Purchaser may disclose such
Confidential Information as required by Law, without liability hereunder;
provided, however, that the Purchaser gives the Seller written notice of the
Confidential Information to be disclosed as far in advance of its disclosure as
is practicable and that the Purchaser use commercially reasonable efforts to
obtain assurances that confidential treatment will be accorded to such
Confidential Information; and, further provided, the Purchaser will furnish
only that portion of the Confidential Information which is legally required.
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(f) The Seller acknowledges that the Purchaser and its
representatives review, and will continue to review, other potential
investments in the securities of issuers other than Seller (including, without
limitation, investments in other entities which may conduct a business of or
similar to that conducted by the Seller). This Agreement does not limit or
prohibit the Purchaser's ability to participate or invest, directly or
indirectly, in any such other securities. The Purchaser acknowledges and
agrees that, notwithstanding any other term or provision of this Agreement to
the contrary, upon any breach by the Purchaser or its employees, agents or
representatives of any of the terms or provisions of this Agreement, in
addition to all of its other rights and remedies hereunder and under applicable
law, the Seller shall be entitled to immediately revoke the rights of the
Purchaser under Section 9.10 above. This Section 9.11 shall survive the
Closing and any termination of this Agreement.
SECTION 9.12 Governing Law. This Agreement shall be governed by
the laws of the State of New York.
SECTION 9.13 Counterparts. This Agreement may be executed in one
or more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.
SECTION 9.14 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the term hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
(SIGNATURES BEGIN ON NEXT PAGE)
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IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
INTERCEL, INC.
By: /s/ Allen E. Smith
------------------------------------
Name: Allen E. Smith
Title: President and Chief Excutive
Officer
THE HUFF ALTERNATIVE
INCOME FUND, L.P.
By: WRH PARTNERS, L.L.C., GENERAL PARTNER
By: /s/ Joseph R. Thornton
------------------------------------
Name: Joseph R. Thornton
Title: Attorney-in-Fact
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<PAGE> 33
ANNEX I
CERTIFICATE OF THE DESIGNATIONS, POWERS, PREFERENCES AND RELATIVE
PARTICIPATING OR OTHER RIGHTS, AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF
SERIES C 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 or by consent of the Board of Directors duly held
or obtained on March ___, 1997:
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. 50,000 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 C Convertible Preferred
Stock (the "Series C Preferred Stock"). Without the consent of the then
current holders of shares of Series C Preferred Stock as provided for herein,
the number of shares of Series C Preferred Stock may not be increased and may
not be decreased below the number of then currently outstanding shares of
Series C Preferred Stock.
<PAGE> 34
Section (2) Definitions. For purposes of the Series C 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 C
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 C Preferred Stock is convertible,
as such Conversion Price may be adjusted pursuant to Section (7). The
initial Conversion Price shall be $12.75 (equivalent to the rate of
approximately 35.29412 shares of Common Stock for each share of Series C
Preferred Stock), which initial conversion price was established pursuant
to a letter dated March 5, 1997 from the Corporation to initial holder of
the Series C Preferred Stock.
"Current Market Price" shall mean, as of a particular date,
the average of the closing 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 C 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, joint
venture corporation, association 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).
"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.
"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.
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"Series D Preferred Stock" shall mean the series of preferred
stock, $0.01 par value, of the Corporation designated as Series D
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 C Preferred Stock.
Section (3) Dividends. (a) The holders of shares of the Series C
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 C Preferred Stock equal to the dividends payable on the
number of shares of Common Stock into which one share of Series C 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 C 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 C 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 C 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, junior to or on a parity with the Series C Preferred Stock, for any
period, 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 C Preferred Stock
in accordance with paragraph (a) of this Section (3).
(d) So long as any shares of the Series C Preferred Stock
are outstanding, no shares ranking junior to or on a parity with the Series C
Preferred Stock shall be redeemed or purchased by the Corporation or any
Subsidiary, except in accordance with Section (5) hereof and the corresponding
sections of the Certificates of Designations for the Series A Preferred Stock,
the Series B Preferred Stock and the Series D Preferred Stock, and the
provisions of the Certificate of Incorporation of the Corporation.
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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 C Preferred Stock, upon
liquidation, dissolution or winding up, the holders of the shares of Series C
Preferred Stock shall be entitled to receive $450.00 per share plus an amount
equal to all dividends declared and unpaid thereon to the date of final
distribution to such holders; in addition, such holders shall also 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, Series C Preferred Stock, Series D Preferred
Stock and any other shares of stock ranking, as to liquidation, dissolution or
winding up, on a parity with the Series C 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, Series C Preferred Stock, Series D 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, Series C Preferred Stock, Series D 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 entities, (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;
provided, however, that any subsequent distribution, liquidation, dissolution
or winding up of the Corporation shall remain subject to this Section (4).
(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
C 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 C Preferred Stock, as provided in paragraph (a) of this Section (4),
holders of shares of Series C 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 C Preferred Stock in an amount equal to the distributions made in
respect of the number of shares of Common Stock into which such share of Series
C Preferred Stock is then convertible.
Section (5) Redemption at the Option of the Corporation. (a)
Series C 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 C
Preferred Stock, in whole or in part, for an aggregate redemption price of
$450.00 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, the shares of Series B Preferred Stock,
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the shares of Series C Preferred Stock and the shares of Series D Preferred
Stock on a pro rata basis.
(b) In the event the Corporation shall desire to redeem
shares of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D 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, Series B Preferred Stock, Series
C Preferred Stock and Series D 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; (5) the then current Conversion Price; and (6) that
the Corporation is not then in default of any material loan document, indenture
or other borrowing the consequences of which have a Material Adverse Effect.
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 C
Preferred Stock so called for redemption and not converted prior to 5:00 p.m.
New York, New York time, on the redemption date 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, Series B
Preferred Stock, Series C Preferred Stock and Series D 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,
Series B Preferred Stock, Series C Preferred Stock and Series D 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 C
Preferred Stock purchased or redeemed by the Corporation or converted shall be
retired and canceled and shall be restored to the status of authorized but
unissued shares of preferred stock, without designation as to series.
Section (7) Conversion. Holders of shares of Series C Preferred
Stock shall have the right to convert all or a portion of such shares into
shares of Common Stock as follows:
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<PAGE> 38
(a) Subject to and upon compliance with the provisions of
this Section (7), a holder of shares of Series C Preferred Stock shall have the
right, at his, her or its option, at any time after the eighteen month
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 C Preferred Stock may be converted, at the request of its
holder, in part into Common Stock. If a part of a share of Series C 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 C Preferred Stock evidencing the
remaining interest of such holder.
(b) In order to exercise the conversion right, the holder
of each share of Series C 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 C 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 C 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 transfer or similar tax (or evidence reasonably
satisfactory to the Corporation demonstrating that such taxes have been paid).
Holders of shares of Series C 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 C 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 C
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).
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<PAGE> 39
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 C 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 C 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 C
Preferred Stock. Instead of any fractional interest in a share of Common Stock
which would otherwise be deliverable upon the conversion of a share of Series C
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 C 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 C 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 C 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.
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(ii) In case the Corporation shall issue after the
Issue Date (a) options, warrants or other rights to all holders of Common
Stock as a class 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 options, warrants or other rights or (b) shares of Common Stock or
securities exercisable for (including options, warrants or other rights
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 C Preferred Stock upon conversion), then in each such case 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 options,
warrants or other rights 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 options, warrants or other rights 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 options, warrants or other rights 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 such options,
warrants or other rights 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
options, warrants or other rights 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 options, warrants or other rights 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
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<PAGE> 41
account any net consideration received or receivable by the Corporation
upon issuance and upon exercise of such options, warrants or other rights
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, 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 options, warrants or other rights 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 options, warrants or other rights 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 as a class 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 options, warrants or other rights 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 C Preferred
Stock upon the conversion of the shares of Series C Preferred Stock so
that any such holder converting shares of Series C 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 C 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 C 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 immediately, except as provided in paragraph (h) below, after
the record date for the determination of stockholders entitled to receive
such distribution.
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<PAGE> 42
(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 C 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 C 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 C Preferred Stock was convertible
immediately prior to such Transaction. The Corporation shall use reasonable
efforts to deliver notice of any Transaction to the holders of Series C
Preferred Stock at least 20 days prior to the earlier of the consummation or
the record date therefor; provided, however, that any unintentional failure by
the Corporation to deliver such required notice shall not impair or affect the
validity or provisions of any such Transaction; and provided, further, that any
failure by the Corporation to deliver such required notice shall toll the time
period in which the holders of Series C Preferred Stock may convert their
shares as aforementioned until such notice is delivered by the Corporation.
The 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
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<PAGE> 43
case may be, for the benefit of the holders of the Series C Preferred Stock
which will contain provisions enabling the holders of the Series C 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 C 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, 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
calculation of such 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 C
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
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<PAGE> 44
may defer until the occurrence of such event (A) issuing to the holder of any
share of Series C 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 C Preferred
Stock, the Conversion Price for the Series C 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, or both, for the purpose of effecting conversion of
the Series C Preferred Stock, the full number of shares of Common Stock
deliverable upon the conversion of all outstanding shares of Series C 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 C 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 C 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 C 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 C Preferred Stock, the
Corporation shall use all reasonable efforts to comply with all federal and
state laws and regulations thereunder requiring the registration
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<PAGE> 45
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 or fees payable in respect of the
issue or delivery of shares of Common Stock on conversion of the Series C
Preferred Stock pursuant hereto imposed by any Governmental Authority
(including without limitation, any fee in respect of an HSR Act filing);
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 C 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:
(i) prior to the Series C 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 C Preferred Stock;
(ii) on a parity with the Series C Preferred
Stock, (A) as to dividends, if such stock shall be Series A Preferred
Stock, Series B Preferred Stock, Series D Preferred Stock or Common Stock
or if the holders of such class of stock and the Series C 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 C Preferred Stock, if such stock shall be Series A
Preferred Stock, Series B Preferred Stock or Series D Preferred Stock or
if the holders of such class of stock and the Series C 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 C Preferred Stock, (A) as
to dividends, if the holders of Series C 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 C 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.
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<PAGE> 46
Section (9) Voting.
(a) Except as herein provided or as otherwise from time to
time required by law, holders of Series C Preferred Stock shall have no voting
rights.
(b) So long as any shares of the Series C Preferred Stock
remain outstanding, the consent of the holders of at least two-thirds of the
shares of Series C 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, or convertible, exercisable or exchangeable
into any class or series of stock ranking prior to, the Series C
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 C 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 C 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 C 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 C 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 C 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.
[Signatures begin on next page]
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<PAGE> 47
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
made under the seal of the Corporation and signed by [ ], its [ ],
and attested by [ ] its [ ], this [ ] day of [ ],
1997.
INTERCEL, INC.
By
-------------------------------------
Its:
-----------------------------------
(Corporate Seal)
Attest:
By
--------------------------------
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<PAGE> 48
ANNEX II
REGISTRATION RIGHTS
(a) The Purchaser shall have the right at any time after the
Closing to make three requests, one of which may be a Shelf Request (as defined
in paragraph (b) hereof), of the Seller in writing for registration under the
Securities Act of shares of Common Stock into which Shares have been converted
or are to be converted prior to the closing of the offering pursuant to such
registration (the "Securities"): with respect to the first of any such request
to register under the Securities Act at least $10 million in market value of
Securities Beneficially Owned by the Purchaser (the shares subject to any such
request hereunder being referred to as the "Subject Stock"), and with each
subsequent such request being at least 6 months following the completion of the
prior offering pursuant to a registration statement with respect to the Subject
Stock which was effective until the earlier of the completion of such offering
or three months. The Seller shall use all reasonable efforts to cause the
Subject Stock to be registered under the Securities Act as soon as reasonably
practicable after receipt of a request so as to permit promptly the sale
thereof, and in connection therewith, the Seller shall prepare and file, on
such appropriate form as the Seller in its discretion shall determine, a
registration statement under the Securities Act to effect such registration.
The Seller shall use all reasonable efforts to list all Subject Stock covered
by such registration statement on any national securities exchange on which the
Common Stock is then listed or to list such Subject Stock on the National
Association of Securities Dealers, Inc. Automated Quotation System or National
Market System. The Purchaser hereby undertakes to provide all such information
and materials and take all such action as may be required in order to permit
the Seller to comply with all applicable requirements of the Commission and to
obtain any desired acceleration of the effective date of such registration
statement. Any registration statement filed at the Purchaser's request
hereunder will not count as a requested registration unless effectiveness is
maintained until the earlier of completion of the offering or three months
(other than in the case of a Shelf Registration, in which case effectiveness
must be maintained for an aggregate of six months or until completion of the
offering, whichever occurs first). Notwithstanding the foregoing, the Seller
(i) shall not be obligated to cause any special audit to be undertaken in
connection with any such registration (provided that this provision shall not
relieve the Seller of its obligation to obtain any required consents with
respect to financial statements in prior periods) and (ii) shall be entitled to
postpone for a reasonable period (not to exceed 90 days) of time the filing of
any registration statement otherwise required to be prepared and filed by the
Seller if the Seller is, at such time, either (A) conducting, or proposing to
file with the Commission within 90 days a registration statement with respect
to, an underwritten public offering for the account of the Seller of equity
securities (or securities convertible into equity securities) or is subject to
a contractual obligation not to engage in a public offering and is advised in
writing by its managing underwriter or underwriters (with a copy to the
Purchaser) that such offering would in its or their opinion be adversely
affected by the registration so requested or (B) subject to an existing
contractual obligation to its underwriters not to engage in a public offering.
Notwithstanding any other provision of this Annex II, the Seller may postpone
action under this Annex II for as long as it reasonably deems necessary (but no
longer than 90 days) if the Seller determines, in its
<PAGE> 49
reasonable discretion, that effecting the registration at such time might (i)
adversely affect a pending or contemplated financing, acquisition, disposition
of assets or stock, merger or other significant transaction, or (ii) require
the Seller to make public disclosure of information the public disclosure of
which at such time the Seller in good faith believes could have a significant
adverse effect upon the Seller.
No securities, other than Purchaser's, may be registered on a
registration statement requested by the Purchaser pursuant to the first
paragraph of paragraph (a) of this Annex II without the Purchaser's express
written consent, unless the amount of such securities is subject to reduction
prior to any reduction in the number of securities originally requested by the
Purchaser in the event the lead underwriter of the related offering believes
that the success of such offering would be materially and adversely affected by
inclusion of all the securities requested to be included therein.
At any time after the Closing, if the Seller proposes to file a
registration statement under the Securities Act with respect to an offering of
its equity securities (i) for its own account (other than a registration
statement on Form S-4 or S-8 or any substitute form that may be adopted by the
Commission) or (ii) for the account of any holders of its securities (including
pursuant to a demand registration), then the Seller shall give written notice
of such proposed filing to the Purchaser as soon as practicable (but in any
event not less than 10 Business Days before the anticipated filing date), and
such notice shall offer the Purchaser the opportunity to register such number
of shares of Securities as the Purchaser requests. If the Purchaser wishes to
register securities of the same class or series as the Seller or such holder,
such registration shall be on the same terms and conditions as the registration
of the Seller's or such holders' securities (a "Piggyback Registration").
Notwithstanding anything contained herein, if the lead underwriter of an
offering involving a Piggyback Registration delivers a written opinion to the
Seller that the success of such offering would be materially and adversely
affected by inclusion of all the securities requested to be included, then the
number of securities to be registered by the Purchaser shall be reduced prior
to any reduction in the number of securities originally requested to be
registered pursuant to clauses (i) and (ii) of the first sentence of this
paragraph; provided, however, that the Seller must provide prompt written
notice of such written opinion to the Purchaser. The Purchaser shall have the
right at any time to convert its request for a Piggyback Registration into a
requested registration pursuant to the first paragraph of paragraph (a) of this
Annex II.
(b) Upon the request of the Purchaser (the "Shelf Request"), the
Seller shall:
(i) as promptly as reasonably practicable, prepare and
file pursuant to SEC Rule 415 on Form S-3 or such other form as Seller in its
discretion shall determine with the SEC, and thereafter shall use all
reasonable efforts to cause to be declared effective as promptly as reasonably
practicable, a Shelf Registration Statement relating to the offer and sale of
the Shares by the Purchaser from time to time in accordance with the methods of
distribution elected by the Purchaser and set forth in the Shelf Registration
Statement;
(ii) use all reasonable efforts to keep the Shelf
Registration Statement effective in order to permit the prospectus forming part
thereof to be useable by the Purchaser for an
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aggregate period of six months, or for such shorter period that will terminate
when all Shares covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement or cease to be outstanding; and
(iii) notwithstanding any other provisions hereof, use all
reasonable efforts to ensure that (A) any Shelf Registration Statement and any
amendments thereto and any prospectus forming part thereof and any supplement
thereof complies in all material respects with the Securities Act and the rules
and regulation thereunder, (B) any Shelf Registration Statement and any
amendment thereto does not, when it becomes effective, contain an untrue
statement of material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading and (C) any prospectus
forming part of any Shelf Registration Statement, and any supplement to such
prospectus (as amended or supplemented from time to time), does not include an
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements, in light of the circumstances under which they
were made, not misleading.
(c) In connection with any offering of shares of Subject Stock
registered pursuant to this Annex II, the Seller (i) shall furnish to the
Purchaser such number of copies of any prospectus (including any preliminary
prospectus) as it may reasonably request in order to effect the offering and
sale of the Subject Stock to be offered and sold, but only while the Seller
shall be required under the provisions hereof to cause the registration
statement to remain current and (ii) take such action as shall be necessary to
qualify the shares covered by such registration statement under such "blue sky"
or other state securities laws for offer and sale as the Purchaser shall
reasonably request; provided, however, that the Seller shall not be obligated
to qualify as a foreign corporation to do business under the laws of any
jurisdiction in which it shall not then be qualified or to file any general
consent to service of process in any jurisdiction in which such a consent has
not been previously filed. If applicable, the Seller shall enter into an
underwriting agreement with a managing underwriter or underwriters selected by
the Purchaser (reasonably satisfactory to the Seller) containing
representations, warranties, indemnities and agreements then customarily
included by an issuer in underwriting agreements with respect to secondary
distributions; provided, however, that such underwriter or underwriters shall
agree to use their best efforts to ensure that the offering results in a
distribution of the Subject Stock sold in accordance with the terms of this
Agreement. In connection with any offering of Subject Stock registered
pursuant to this Annex II, the Seller shall (x) furnish to the underwriter, at
the Seller's expense, unlegended certificates representing ownership of the
Subject Stock being sold in such denominations as reasonably requested and (y)
instruct any transfer agent and registrar of the Subject Stock to release any
stop transfer orders with respect to such Subject Stock. If Purchaser enters
into an underwriting agreement with respect to the Subject Stock, Purchaser's
representations, warranties and indemnities contained therein shall be made
severally rather than jointly with the Company or any other selling stockholder
and shall be limited to (i) Purchaser's ownership of the Subject Stock, (ii)
Purchaser's authority to enter into the underwriting agreement and related
matters, and (iii) any information provided by Purchaser for inclusion in the
registration statement. Upon any registration becoming effective pursuant to
this Annex II (other than a Shelf Registration Statement), the Seller shall use
all reasonable efforts to keep such registration statement current for such
period as shall be required for the disposition of all of said Subject Stock;
provided, however, that such period need not exceed three months.
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(d) The Purchaser shall pay all underwriting discounts and
commissions related to shares of Subject Stock being sold by the Purchaser and
the fees and disbursements of counsel and other advisors to the Purchaser. All
other fees and expenses in connection with the first requested registration
pursuant to the first paragraph of paragraph (a) (which may be the Shelf
Request, if any) of this Annex II, including, without limitation, all
registration and filing fees, all fees and expenses of complying with
securities or "blue sky" laws, fees and disbursements of the Seller's counsel
and accountants (including the expenses of "cold comfort" letters required by
or incident to such performance and compliance) and any fees and disbursements
of underwriters customarily paid by issuers in secondary offerings, shall be
paid by the Seller, and all such other fees and expenses in connection with the
second and third requested registration pursuant to this Annex II shall be
borne equally by the Purchaser and the Seller; provided, however, that in the
event the Purchaser fails to convert Shares into Common Stock prior to any such
offering, such that such offering is not able to be completed, the Purchaser
shall pay all such other fees and expenses.
(e) In the case of any offering registered pursuant to this Annex
II, the Seller agrees to indemnify and hold the Purchaser, each underwriter of
Securities under such registration and each person who controls any of the
foregoing within the meaning of Section 15 of the Securities Act and the
directors and officers of the Purchaser, harmless against any and all losses,
claims, damages, liabilities or action to which they or any of them may become
subject under the Securities Act or any other statute or common law or
otherwise, and to reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating any claims and defending any
actions, insofar as any such losses, claims, damages, liabilities or actions
shall arise out of or shall be based upon (i) any untrue statement or alleged
untrue statement of a material fact contained in the registration statement
relating to the sale of such Subject Stock, or the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading or (ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus (as
amended or supplemented if the Seller shall have filed with the Commission any
amendment thereof or supplement thereto), if used prior to the effective date
of such registration statement, or contained in the prospectus (as amended or
supplemented if the Seller shall have filed with the Commission any amendment
thereof or supplement thereto), or the omission or alleged omission to state
therein a material fact necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading;
provided, however, that the indemnification agreement contained in this
paragraph (e) shall not apply to such losses, claims, damages, liabilities or
actions which shall arise from the sale of Subject Stock by the Purchaser if
such losses, claims, damages, liabilities or actions shall arise out of or
shall be based upon any such untrue statement or alleged untrue statement, or
any such omission or alleged omission, (x) made in reliance upon and in
conformity with information furnished in writing to the Seller by the Purchaser
or any such underwriter specifically for use in connection with the preparation
of the registration statement or any preliminary prospectus or prospectus
contained in the registration statement or any such amendment thereof or
supplement thereto or (y) made in any preliminary prospectus, and the
prospectus contained in the registration statement in the form filed by the
Seller with the Commission pursuant to Rule 424(b) under the Securities Act
shall have corrected such statement
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<PAGE> 52
or omission and a copy of such prospectus shall not have been sent or given to
such person at or prior to the confirmation of such sale to him.
(f) In the case of each offering registered pursuant to this Annex
II, the Purchaser and each underwriter participating therein shall agree, in
the same manner and to the same extent as set forth in paragraph (e) of this
Annex II, severally to indemnify and hold harmless the Seller and each person,
if any, who controls the Seller within the meaning of Section 15 of the
Securities Act, and the directors and officers of the Seller, and in the case
of each such underwriter, the Purchaser, each person, if any, who controls the
Purchaser within the meaning of the Securities Act and the directors, officers
and partners of the Purchaser, with respect to any statement in or omission
from such registration statement or any preliminary prospectus (as amended or
as supplemented, if amended or supplemented as aforesaid) or prospectus
contained in such registration statement (as amended or as supplemented, if
amended or supplemented as aforesaid), if such statement or omission shall have
been made in reliance upon and in conformity with information furnished in
writing to the Seller by the Purchaser or such underwriter specifically for use
in connection with the preparation of such registration statement or any
preliminary prospectus or prospectus contained in such registration statement
or any such amendment thereof or supplement thereto.
(g) Each party indemnified under paragraph (e) or (f) of this
Annex II shall, promptly after receipt of notice of the commencement of any
action against such indemnified party in respect of which indemnity may be
sought hereunder, notify the indemnifying party in writing of the commencement
thereof. The omission of any indemnified party to so notify an indemnifying
party of any such action shall not relieve the indemnifying party from any
liability in respect of such action which it may have to such indemnified party
on account of the indemnity agreement contained in paragraph (e) or (f) of this
Annex II, unless the indemnifying party was prejudiced by such omission, and in
no event shall relieve the indemnifying party from any other liability which it
may have to such indemnified party. In case any such action shall be brought
against any indemnified party and it shall notify an indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it may desire, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under paragraph (e) or (f) of this Annex II for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation; provided, however, that if there exists or is reasonably likely
to exist a conflict of interest that would make it inappropriate in the
judgment of the indemnified party, in its sole and absolute discretion, for the
same counsel to represent both the indemnified party and the indemnifying
party, then the indemnified party shall be entitled to retain its own counsel,
in each jurisdiction for which the indemnified party determines counsel is
required, at the expense of the indemnifying party. No such third party claim
may be settled by the indemnifying party or the indemnified party without the
prior written consent of the other, which consent shall not be unreasonably
withheld.
(h) If the indemnification provided for under paragraph (e) or (f)
shall for any reason be held by a court to be unavailable to an indemnified
party under paragraph (e) or (f) hereof
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<PAGE> 53
in respect of any loss, claim, damage or liability, or any action in respect
thereof, then, in lieu of the amount paid or payable under paragraph (e) or (f)
hereof, the indemnified party and the indemnifying party under paragraph (e) or
(f) hereof shall contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in
connection with investigating the same), (i) in such proportion as is
appropriate to reflect the relative fault of the Seller and the prospective
seller of Securities covered by the registration statement which resulted in
such loss, claim, damage or liability, or action in respect thereof, with
respect to the statements or omissions which resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations or (ii) if the allocation provided by clause
(i) above is not permitted by applicable law, in such proportion as shall be
appropriate to reflect the relative benefits received by the Seller and such
prospective seller from the offering of the securities covered by such
registration statement. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11 (f) of the Securities Act) shall be entitled
to contribution from any Person who was not guilty of such fraudulent
misrepresentation. In addition, no Person shall be obligated to contribute
hereunder any amounts in payment for any settlement of any action or claim
effected without such Person's consent, which consent shall not be unreasonably
withheld.
(i) Notwithstanding anything to the contrary contained in this
Agreement, the maximum amount of indemnifiable losses which may be recovered
from an indemnifying party arising out of or resulting from the causes
enumerated in paragraph (e) or (f) shall be an amount equal to the Purchase
Price.
(j) Capitalized terms not defined in this Annex shall have the
meanings set forth in the Agreement.
(k) Any successor to the Seller (whether by merger, consolidation,
sale of assets, assignment or otherwise) shall expressly assume in writing the
Seller's obligations hereunder.
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<PAGE> 54
EXHIBIT 10(rr)
ANNEX III
ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF SELLER
As an inducement to the Purchaser to enter into this Agreement, the
Seller hereby represents and warrants, to the knowledge of Seller and except as
otherwise Disclosed by Seller, as follows:
1. Intellectual Property. Each of the Seller and its Subsidiaries has
or has the right to use all franchises, patents, patent applications, patent
licenses, patent rights, trademarks, trademark rights, trade names, trade name
rights, copyrights, licenses, permits, authorizations and other intellectual
property rights as are necessary for the Business as currently conducted,
except to the extent that the failure to have any of them would not have a
Material Adverse Effect. All of the foregoing are in full force and effect, and
each of the Seller and its Subsidiaries is in compliance with the foregoing
without any conflict with the rights of others which could have a Material
Adverse Effect.
2. Title to Assets; Leases. Prior to, upon and immediately after the
Closing, each of the Seller and its Subsidiaries owns or has the right to use
all of the Assets necessary for the Business as currently conducted, the
absence of which would have a Material Adverse Effect. Prior to, upon and
immediately after the Closing, each of the Seller and its Subsidiaries enjoys
peaceful and undisturbed possession of all leases of real property on which
facilities operated by it are situated and all leases of other Property used in
its Business, and all such leases are valid and in full force and effect, in
each case the absence of which would have a Material Adverse Effect.
3. Related Agreements. The Purchaser has heretofore or simultaneously
herewith been furnished with complete and correct copies of the agreements set
forth on the Disclosure Schedule and all appendices, schedules, exhibits and
other attachments thereto, including, without limitation, the Series D Stock
Purchase Agreement between the Seller and SCANA Communications, Inc. relating
to Series D Convertible Preferred Stock (collectively, together with the
Transaction Documents other than this Agreement and the Escrow Agreement, the
"Related Agreements"). Assuming due execution and delivery thereof by all
parties thereto, each of the Related Agreements creates a legally binding
obligation of each party thereto, enforceable against such parties in
accordance with the respective terms and provisions thereof. This Agreement,
the Escrow Agreement, the Debt Offering Memorandum and the Related Agreements
are the only material agreements relating to the High Yield Debt, the financing
thereof and the transactions contemplated hereby to which the Seller or any
Subsidiary is a party. "Transaction Documents" means this Agreement (including
the Annexes), the Escrow Agreement, the Certificate of Designation.
4. Environmental Protection. Except as would not have a Material
Adverse Effect, (i) the operations of the Seller and each of its Subsidiaries
are in compliance with Environmental Laws; (ii) there has been no Release at
any of the properties presently or
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formerly owned or operated by the Seller or any of its Subsidiaries or any
disposal or treatment facility which received Hazardous Materials generated by
the Seller or any of its Subsidiaries or any of its or their predecessor(s) in
interest; (iii) no Environmental Actions have been asserted against the Seller
or any of its Subsidiaries or any of its or their predecessor(s) in interest
nor does the Seller or any of its Subsidiaries have knowledge or notice of any
threatened or pending Environmental Action; and (iv) no Environmental Actions
have been asserted against any facilities that may have received Hazardous
Materials generated by the Seller or any of its Subsidiaries or any of its or
their predecessor(s) in interest.
5. Withholding; Union Contracts, Labor Relations. Each of the Seller
and its Subsidiaries has withheld all amounts required by law or agreement to
be withheld by it from the wages, salaries, benefits and other payments to or
for the benefit of its employees, and is not liable for any arrears of wages or
any taxes or penalties for failure to comply with any of the foregoing except
where the failure to withhold would not have a Material Adverse Effect. Neither
the Seller nor any of its Subsidiaries is a party to any employment agreement,
arrangement or understanding other than as disclosed on the Disclosure
Schedule. There are no, and there have never been any, collective bargaining
agreements covering any of the employees of the Seller or any of its
Subsidiaries. Except as disclosed on the Disclosure Schedule, none of the
Seller, any Subsidiary thereof or any employee of the Seller or any Subsidiary
thereof is subject to any employment agreement or non-competition agreement
with any former employer or any other Person which agreement would have a
Material Adverse Effect due to (i) any information which the Seller or any
Subsidiary thereof would be prohibited from using under the terms of such
agreements or (ii) any legal considerations relating to unfair competition,
trade secrets or proprietary information.
6. Business; Property and Licenses.
(a) Business and Property. Neither the Seller nor any of its
Subsidiaries engages in or currently proposes to engage in any business or
activity unrelated to the Business, other than the direct or indirect ownership
of the capital stock of or other interests in the Seller's Subsidiaries, Unity
Cellular Systems, Inc. and Northern Maine Cellular Partnership.
(b) Licenses. There is set forth in the Disclosure Schedule a
description of all FCC Licenses which, as of the Closing, will be held by the
Seller or any of its Subsidiaries and indicating which such Person holds each
such FCC License. Except to the extent it would not have a Material Adverse
Effect: (i) all of such FCC Licenses are in full force and effect and have been
duly issued in the name of, or validly assigned to, the Seller or one of its
Subsidiaries and no default or breach exists thereunder; (ii) no event has
occurred with respect to the FCC Licenses that permits, or after giving notice,
lapse of time or both would permit, revocation or termination of such FCC
Licenses or would result in any material impairment of the rights of the holder
thereof; and (iii) all such FCC Licenses are in effect for the usual FCC
License terms and are unimpaired by any condition or other restriction imposed
by the FCC or other Governmental Authority (other than restrictions and
conditions generally applicable to licenses of the same or similar type or
class).
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<PAGE> 56
Except to the extent it would not have a Material Adverse Effect: (i)
all applications necessary for renewal or extension of the FCC Licenses have
been timely filed in accordance with the requirements of the FCC or other
Governmental Authority issuing such FCC Licenses; (ii) the Seller has not been
informed that any of the FCC Licenses will not be renewed in the ordinary
course; and (iii) no allegations, complaints, charges, investigations, renewal
or revocation hearings, or other proceedings have been threatened or initiated
in any forum, nor has any Governmental Authority (including, but not limited
to, the FCC) proposed, announced, used, or adopted any amendment, modification,
or change to any law or regulation, with respect to or impacting upon such FCC
Licenses.
(c) Other Licenses and Approvals. Except to the extent it would not
have a Material Adverse Effect, each of the Seller and its Subsidiaries has or
has the right to use all Licenses and Approvals that are necessary for the
Seller and its Subsidiaries to carry on the Business as currently conducted.
(d) Operation and Maintenance of Equipment. No Person owning or
operating any equipment and other tangible personal property in connection with
the operation of the Business has used, operated or maintained the same in a
manner which now or hereafter could result in the cancellation or termination
of the right of the Seller or any Subsidiary to use or make use of the same
which could result in a Material Adverse Effect. All of the material equipment
and other tangible personal property which will be owned by the Seller or any
Subsidiary upon the Closing is in good operating condition and repair (subject
to normal wear and tear) and has been used, operated and maintained in
compliance with all material applicable laws, rules and regulations, including,
without limitation, any Licenses and Environmental Laws the failure of
compliance with which could result in a Material Adverse Effect.
7. FCC Matters. Except to the extent it would not have a Material
Adverse Effect, each of the Seller and its Subsidiaries: (i) is in compliance
with the provisions of the Communications Act as implemented, interpreted, and
applied by the FCC; (ii) is in compliance with FCC requirements and
restrictions relating to FCC License ownership, and will continue to be in such
compliance immediately following the Closing; (iii) has duly and timely filed
all reports and other filings which are required to be filed by it under the
Communications Act or any other applicable law, rule or regulation of any
Governmental Authority; and (iv) is in compliance with all such laws, rules and
regulations, the noncompliance with which would have a Material Adverse Effect
on the continuation of any License held by the Seller or any of its
Subsidiaries. Except to the extent it would not have a Material Adverse Effect,
all information provided by or on behalf of the Seller or any Subsidiary in any
filing with the FCC was, at the time of filing, true, complete and correct in
all material respects when made, and the FCC has been notified of any
substantial or significant changes in such information as may be required in
accordance with applicable laws, rules and regulations.
8. Representations and Warranties under Related Agreements. All
representations and warranties made by the Seller or any of its Subsidiaries in
any of the Related Agreements or in the certificates delivered in connection
therewith are true and
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<PAGE> 57
correct in all material respects as of the date hereof with the same force and
effect as though made on and as of the date hereof, except to the extent that
any of such representations and warranties relate expressly to an earlier date
or may have been affected by the consummation of the transactions contemplated
and permitted or required by this Agreement and the Related Agreements. All
representations and warranties made in the Related Agreements by or on behalf
of any party thereto other than the Seller or any of its Subsidiaries are true
and correct in all material respects as of the date hereof with the same force
and effect as though made on and as of the date hereof, except to the extent
that any of such representations and warranties related expressly to an earlier
date or may have been affected by the consummation of the transactions
contemplated and permitted or required by this Agreement and the Related
Agreements, which representations and warranties were true in all material
respects as of such earlier date or without giving effect to the consummation
of such transactions, as the case may be.
9. Tax Returns. Except to the extent it would not have a Material
Adverse Effect: (i) each of Seller and its Subsidiaries has filed all federal,
state, local and other tax returns which are required to be filed by it within
the period required for such filings and any extensions granted therefor and
within the period that the same may be filed without interest or penalties;
(ii) each such Person has paid, or made adequate provision for the payment of,
all taxes (if any), including any interest and penalties thereon, which have or
may become due and payable pursuant to any of the said returns or pursuant to
any matters raised by audits or for other reasons known to it; and (iii) each
such Person has made adequate provision for all current taxes. No audit by any
Governmental Authority of the federal, state, local or other tax returns, forms
or information statements of the Seller or any of its Subsidiaries with respect
to such taxes is currently in progress or overtly threatened.
10. ERISA.
(a) No Other Plans. None of the Seller, any of its Subsidiaries or
any ERISA Affiliate maintains or contributes to, or has any obligation under,
any Employee Benefit Plans other than those identified on the Disclosure
Schedule.
(b) ERISA and Code Compliance and Liability. Each of the Seller, its
Subsidiaries and each ERISA Affiliate is in compliance with all applicable
provisions of ERISA and the regulations and published interpretations
thereunder with respect to all Employee Benefit Plans except where failure to
comply would not result in a material liability to any such Person and except
for any required amendments for which the remedial amendment period as defined
in Section 401(b) of the Code has not yet expired. Each Employee Benefit Plan
that is intended to be qualified under Section 401(a) of the Code has been
determined by the IRS to be so qualified, and each trust related to such plan
has been determined to be exempt under Section 501(a) of the Code, the absence
of which determination could have a Material Adverse Effect. No material
liability, whether the form of a funding liability, tax liability, or
otherwise, has been incurred by the Seller, any of its Subsidiaries or any
ERISA Affiliate which remains unsatisfied with respect to any Employee Benefit
Plan or any Multiemployer Plan.
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(c) ERISA Litigation. No material proceeding, claim, lawsuit and/or
investigation is existing or overtly threatened concerning or involving any (i)
employee welfare benefit plan (as defined in Section 3(10) of ERISA) currently
maintained or contributed to by the Seller, any of its Subsidiaries or any
ERISA Affiliate, (ii) Pension Plan or (iii) Multiemployer Plan, the outcome of
which could have a Material Adverse Effect.
(d) Termination Event. Except to the extent it would not have a
Material Adverse Effect, no Termination Event has occurred or is reasonably
expected to occur. "Termination Event" means (i) a "Reportable Event" described
in Section 4043 of ERISA; (ii) the withdrawal of the Seller, and of its
Subsidiaries or any ERISA Affiliate from a Pension Plan during a plan year in
which it was a "substantial employer" as defined in Section 4001(a)(2) OR
4068(f) of ERISA; (iii) the termination of a Pension Plan, the filing of a
notice of intent to terminate a Pension Plan or the treatment of a Pension Plan
amendment as a termination under Section 4041 of ERISA; (iv) the institution of
proceedings to terminate, or the appointment of a trustee with respect to, any
Pension Plan by the PBGC; (v) any other event or condition which would
constitute grounds under Section 4042(a) of the ERISA for the termination of,
or the appointment of a trustee to administer, any Pension Plan, (vi) the
partial or complete withdrawal of the Seller, any of its Subsidiaries or any
ERISA Affiliate from a Multiemployer Plan; (vii) the imposition of a Lien
pursuant to Section 412 of the Code or Section 302 or ERISA; (viii) any event
or condition which results in the reorganization or insolvency of a
Multiemployer Plan under Section 4241 or 4245 of ERISA; or (ix) any event or
condition which results in the termination of a Multiemployer Plan under
Section 40141A or ERISA or the institution by the PBGC of proceedings to
terminate a Multiemployer Plan under Section 4042 of ERISA.
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EXHIBIT 10(ss)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of March 14, 1997 (including
the exhibits and schedules attached hereto, this "Agreement"), is by and among
INTERCEL, INC., a Delaware corporation (the "Seller"), THE HUFF ALTERNATIVE
INCOME FUND, L.P., a Delaware limited partnership (the "Purchaser"), and
BANKERS TRUST COMPANY, a New York banking corporation (the "Escrow Agent").
W I T N E S S E T H:
WHEREAS, the Purchaser and the Seller have entered into a
Stock Purchase Agreement, dated as of March 14, 1997 (including the exhibits,
annexes, schedules and attachments thereto, the "Purchase Agreement"; terms not
otherwise defined herein being used as defined therein), pursuant to which the
Purchaser has agreed to purchase from the Seller, and the Seller has agreed to
sell to the Purchaser, the Shares;
WHEREAS, it is contemplated under the Purchase Agreement that
the Purchaser will deposit or cause to be deposited into escrow the sum of
$22,500,000 in cash (the "Escrow Amount") and the Seller shall deposit into
escrow a certificate or certificates representing 50,000 shares (the "Shares")
of Series C Preferred Stock (collectively, the "Certificate"), each to be held
and disbursed by the Escrow Agent in accordance with this Agreement;
WHEREAS, the Seller and the Purchaser currently contemplate
that the Seller will offer certain high yield debt obligations pursuant to a
Confidential Offering Memorandum, a preliminary draft of which has been
delivered by the Seller to the Purchaser (the "Debt Offering Memorandum"); and
WHEREAS, the Purchaser and the Seller desire to appoint the
Escrow Agent as escrow agent for the purpose of receiving, holding and
distributing the Escrow Fund (as defined below) and the Certificate, and the
Escrow Agent is willing to act as the Escrow Agent subject to and in accordance
with the terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the
agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree as follows:
1. Appointment and Agreement of Escrow Agent. The Purchaser
and the Seller hereby appoint the Escrow Agent to serve as, and the Escrow
Agent hereby agrees to act as, escrow agent upon the terms and conditions of
this Agreement.
2. Establishment of the Escrow Fund. (a) Pursuant to Section
2.4 of the Purchase Agreement, the Purchaser shall deliver to the Escrow Agent
on the date hereof the Escrow Amount and the Seller shall deliver to the Escrow
Agent on the date hereof the
<PAGE> 2
Certificate, together with the instruction notice in the form attached hereto
as Exhibit A. The Escrow Agent shall hold the Escrow Amount and all interest
and other amounts earned thereon (the "Escrow Fund") and the Certificate in
escrow pursuant to this Agreement.
(b) Each of the Purchaser and the Seller confirms to the
Escrow Agent and to each other that the Escrow Fund and the Certificate are
free and clear of all Encumbrances except as may be created by this Agreement
and the Purchase Agreement.
3. Distributions from the Escrow Fund. (a) Upon execution and
delivery of this Agreement, the Seller and the Purchaser shall deliver to the
lead placement agent under the Debt Offering Memorandum a written notice that
the Purchase Price monies and the Certificate have been delivered to the Escrow
Agent pursuant to this Agreement. Furthermore, such notice shall provide that,
upon the pricing of the offering of debt contemplated by the Debt Offering
Memorandum (the "Debt Offering"), the delivery by the Seller and the lead
placement agent of the Joint Notice (as defined below), and the delivery to the
Escrow Agent of confirmation of the closing of the Debt Offering provided for
in Section 3(b) below, the Escrow Agent will disburse the proceeds of the
Escrow Fund to the Seller and deliver the Certificate to the Purchaser in
accordance with this Section 3. As promptly as practicable after the Purchaser
and the Seller have received evidence (which the parties agree may be
telephonic or otherwise) that the pricing of the Debt Offering has been
established between the Seller and the lead placement agent under the Debt
Offering Memorandum and, in any event, at least one full Business Day prior to
the Proposed Offering Closing Date (as defined in the Joint Notice), the Seller
and the Purchaser shall deliver written notice to the Escrow Agent
substantially in the form attached hereto as Exhibit B with the blanks properly
filled in (the "Joint Notice"), and the Escrow Agent shall, as promptly as
practicable thereafter (and in any event, in time to enable the Escrow Agent to
transfer the proceeds of the Escrow Fund on the Proposed Offering Closing Date
as set forth in Section 3(b) below, unless the Escrow Fund is invested in a
vehicle other than the BT Institutional Cash Management Fund), liquidate all
investments in the Escrow Fund.
(b) On or before the Proposed Offering Closing Date, the
Seller shall deliver a list of persons who will be authorized to give the
Placement Agent Confirmation (as defined below) to the Escrow Agent pursuant to
Section 3(b) below. Unless the Escrow Agent receives the notice described in
Section 3(c) below after the Escrow Agent receives the Joint Notice, the Escrow
Agent shall, as promptly as practicable after its receipt of confirmation from
the Seller and the lead placement agent (the "Placement Agent Confirmation")
under the Debt Offering Memorandum (which the parties agree may be telephonic
or otherwise) to the effect that all of the conditions to closing of the Debt
Offering and delivery to the Seller of a minimum of an aggregate of $100
million in gross proceeds therefrom have either been satisfied or waived (other
than a waiver of the impending delivery to the Seller of such proceeds), with
the sole exception of disbursement of the Escrow Fund to the Seller and
delivery of the Certificate to the Purchaser (and, therefore, that such
placement agent then controls the delivery of proceeds from the Debt Offering
to the Seller), the Escrow Agent shall: (i) pay in full to the Seller in
immediately available funds all amounts as shall have been received upon the
liquidation of such investments (and any and all other amounts then on deposit
in the Escrow Fund) by wire transfer to the Seller's account indicated in the
Joint Notice; (ii) contemporaneous with such delivery of funds to the Seller,
deliver the Certificate to the Purchaser at the address set forth in the Joint
-2-
<PAGE> 3
Notice via overnight delivery service; and (iii) immediately after
accomplishing the items set forth in (i) and (ii) hereof, provide the Seller
and the lead placement agent under the Debt Offering Memorandum with written
notice in the form attached hereto as Exhibit C.
(c) The parties acknowledge and agree that the terms of the
Purchase Agreement provide that the Purchaser may elect to proceed with the
disbursement of the Escrow Fund proceeds to the Seller and delivery of the
Certificate to the Purchaser even though the Debt Offering fails to close on or
before April 30, 1997. In the event that the Debt Offering fails to close on or
before such date, the parties agree that the Purchaser may, before the
expiration of the five Business Day period referenced in Section 8.1(c) of the
Purchase Agreement, deliver notice to the Escrow Agent (and a copy thereof to
the Seller) of the Purchaser's election to proceed to consummate the sale and
purchase of the Shares in accordance with the provisions of Section 8.1(c) of
the Purchase Agreement. Such notice shall be in the form attached hereto as
Exhibit D. In such event, the Escrow Agent shall, as promptly as practicable
after receipt of the Purchaser's notice pursuant to this Section 3(c),
liquidate all investments in the Escrow Fund and comply with the provisions of
clauses (i) and (ii) of Section 3(b) above and immediately after accomplishing
the items set forth in (i) and (ii) above, provide the Seller and the Purchaser
with written notice in the form attached hereto as Exhibit C.
(d) Upon the termination of the Purchase Agreement, the
Seller or the Purchaser shall notify the Escrow Agent in writing to such
effect, and the Escrow Agent shall, as promptly as practicable after its
receipt of such notice: (i) liquidate all investments in the Escrow Fund and
pay in full to the Purchaser in immediately available funds all such amounts as
shall be received upon the liquidation of such investments (and any and all
other amounts then on deposit in the Escrow Fund); and (ii) return the
Certificate to the Seller.
4. Maintenance of the Escrow Fund and Certificate;
Termination of the Escrow Fund. (a) The Escrow Agent shall continue to maintain
the Escrow Fund and hold the Certificate until the earlier of (i) the time at
which the Escrow Fund is disbursed and the Certificate is delivered in
accordance with Section 3 and (ii) the termination of this Agreement.
(b) Unless otherwise directed in writing signed by both the
Seller and the Purchaser, the Escrow Agent shall invest and reinvest moneys on
deposit in the Escrow Fund only in the BT Institutional Cash Management Fund.
Notwithstanding the foregoing, the Escrow Agent shall have the power
to sell or liquidate the foregoing investments whenever the Escrow Agent shall
be required to release all or any portion of the Escrow Fund pursuant to
Section 3 hereof. The Escrow Agent shall not have any liability for any loss
suffered as a result of any investment made as provided above, any liquidation
of any such investment prior to its maturity, or the failure of any authorized
person of the Seller and the Purchaser to give the Escrow Agent any written
instruction to invest or reinvest the Escrow Fund or any earnings thereon.
5. Assignment; Successors. This Agreement may not be assigned
by operation of Law or otherwise without the express written consent of the
other parties hereto (which consent may be granted or withheld in the sole
discretion of such other parties);
-3-
<PAGE> 4
provided, however, that the Purchaser may, without the consent of the other
parties, assign this Agreement prior to the disbursement of the Escrow Fund and
delivery of the Certificate pursuant to Section 3 above to Purchaser or to an
entity controlled by Purchaser to which the Purchaser has assigned any of its
rights under the Purchase Agreement, but no such assignment shall relieve the
Purchaser of any of its obligations under this Agreement. This Agreement shall
be binding upon and inure solely to the benefit of the parties hereto and their
permitted assigns.
6. Escrow Agent. (a) Except as expressly contemplated by this
Agreement or by joint written instructions from the Purchaser and the Seller,
the Escrow Agent shall not sell, transfer or otherwise dispose of in any manner
all or any portion of the Escrow Fund or the Certificate, except pursuant to an
order of a court of competent jurisdiction.
(b) The duties and obligations of the Escrow Agent shall be
determined solely by this Agreement, and the Escrow Agent shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Agreement. The Escrow Agent shall neither be responsible for
or under, nor chargeable with knowledge of the terms and conditions of, any
other agreement, instrument or document in connection herewith, including but
not limited to the Purchase Agreement.
(c) In the performance of its duties hereunder, the Escrow
Agent shall be entitled to rely upon any document, instrument or signature
believed by it in good faith to be genuine and signed by any party hereto or an
authorized officer or agent thereof, and shall not be required to investigate
the truth or accuracy of any statement contained in any such document or
instrument. The Escrow Agent may assume that any Person purporting to give any
notice in accordance with the provisions of this Agreement has been duly
authorized to do so. The Escrow Agent shall have no responsibility for the
contents of any such writing contemplated herein and may conclusively rely
without any liability upon the contents thereof.
(d) The Escrow Agent shall not be liable for any error of
judgment, or any action taken, suffered or omitted to be taken, hereunder
except in the case of its gross negligence, bad faith or willful misconduct.
The Escrow Agent may consult with counsel of its own choice and shall have full
and complete authorization and protection for any action taken or suffered by
it hereunder in good faith and in accordance with the opinion of such counsel.
(e) The Escrow Agent shall have no duty as to the collection
or protection of the Escrow Fund or income thereon or the Certificate, nor as
to the preservation of any rights pertaining thereto, beyond the safe custody
of any such property actually in its possession.
(f) As compensation for its services to be rendered under
this Agreement, for each year or any portion thereof, the Escrow Agent has
received a fee from the Seller in the amount specified in Schedule A to this
Agreement and such payment and receipt thereof by the Escrow Agent is hereby
acknowledged by the Escrow Agent. The Escrow Agent shall also be reimbursed
upon request for all expenses, disbursements and advances, including reasonable
fees of outside counsel, if any, incurred or made by it in connection with the
preparation of this Agreement and the carrying out of its duties under this
Agreement. All such fees and expenses shall be the responsibility of the
Seller.
-4-
<PAGE> 5
(g) To the extent that the Escrow Agent becomes liable for
the payment of taxes, including withholding taxes, in respect of income derived
from the investment of funds held hereunder and/or possession of the
Certificate or any payment made hereunder, the Escrow Agent may pay such taxes.
The Escrow Agent may withhold from any payment of monies held by it hereunder
such amount, as directed by the Seller and the Purchaser in writing, to be
sufficient to provide for the payment of such taxes not yet paid, and may use
the sum withheld for that purpose. The Escrow Agent shall be indemnified by the
Seller and held harmless against any liability for taxes and for any penalties
or interest in respect of taxes on such investment income and/or with respect
to the possession of the Certificate or payments in the manner provided in
Section 6(h). Each of the Seller and the Purchaser shall furnish to Escrow
Agent such information as may be reasonably requested by the Escrow Agent so
that the Escrow Agent may prepare and file with the Internal Revenue Service
any required tax reports.
(h) The Seller shall reimburse and indemnify the Escrow Agent
its employees, directors, officers and agents for, and hold each harmless
against, any loss, liability or expense, including, without limitation,
reasonable attorneys' fees, incurred without gross negligence, bad faith or
willful misconduct on the part of the Escrow Agent arising out of, or in
connection with the acceptance of, or the performance of, its duties and
obligations under this Agreement; provided that the Purchaser shall reimburse
and indemnify the Escrow Agent for, and hold it harmless against, any such
loss, liability or expense incurred as a result of gross negligence, bad faith
or willful misconduct on the part of the Purchaser. Promptly after the receipt
by the Escrow Agent of notice of any demand or claim or the commencement of any
action, suit or proceeding, the Escrow Agent shall, if a claim in respect
thereof is to be made against any of the other parties hereto, notify such
other parties thereof in writing; but the failure by the Escrow Agent to give
such notice shall not relieve such party from any liability which it may have
to the Escrow Agent hereunder, except to the extent such indemnifying party is
materially prejudiced by such failure. For the purposes hereof, the term
"expense or loss" shall include all amounts paid or payable to satisfy any
claim, demand or liability, or in settlement of any claim, demand, action, suit
or proceeding settled with the express written consent of the indemnifying
party, and all reasonable costs and expenses, including, but not limited to,
counsel fees and disbursements paid or incurred in investigating or defending
against any such claim, demand, action, suit or proceeding. The Escrow Agent
shall have no right of setoff under this Agreement or otherwise against amounts
in the Escrow Fund or against the Certificate.
(i) The Escrow Agent may at any time resign by giving twenty
Business Days' prior written notice of resignation to the Seller and the
Purchaser. The Seller and the Purchaser may at any time jointly remove the
Escrow Agent by giving ten Business Days' prior written notice signed by each
of them to the Escrow Agent. If the Escrow Agent shall resign or be removed, a
successor Escrow Agent, which shall be a bank or trust company having assets in
excess of $2 billion, shall be appointed by the Seller and the Purchaser by
written instrument executed by the Seller and the Purchaser and delivered to
the Escrow Agent and to such successor Escrow Agent and, thereupon, the
resignation or removal of the predecessor Escrow Agent shall become effective
and such successor Escrow Agent, without any further act, deed or conveyance,
shall become vested with all right, title and interest to all cash and property
held hereunder of such predecessor Escrow Agent, and such predecessor Escrow
Agent shall, on the written request of the Seller, the Purchaser or the
successor Escrow Agent, execute and deliver
-5-
<PAGE> 6
to such successor Escrow Agent all the right, title and interest hereunder in
and to the Escrow Fund and the Certificate of such predecessor Escrow Agent and
all other rights hereunder of such predecessor Escrow Agent. If no successor
Escrow Agent shall have been appointed within twenty Business Days of a notice
of resignation by the Escrow Agent, the Escrow Agent's sole responsibility
shall thereafter be to hold the Escrow Fund and the Certificate until its
receipt of designation of a successor Escrow Agent, and the Escrow Agent shall
be entitled to apply to a court of competent jurisdiction for the appointment
of a successor. Upon its resignation and delivery of the Escrow Fund and the
Certificate as set forth above, the Escrow Agent shall be discharged from any
and all further obligations arising in connection with the escrow contemplated
by this Agreement.
7. Termination. This Escrow Agreement shall terminate on the
date on which there is no property remaining in the Escrow Fund and the
Certificate has been delivered or returned in accordance with Section 3;
provided that the rights of the Escrow Agent and the other parties hereto under
Section 6 shall survive the termination hereof and the resignation or removal
of the Escrow Agent; provided further that nothing herein shall relieve any
party from liability for any breach of this Agreement.
8. Further Assurances. From time to time on and after the
date hereof, the other parties hereto shall deliver or cause to be delivered to
the Escrow Agent such further documents and instruments and shall do and cause
to be done such further acts as the Escrow Agent shall reasonably request (it
being understood that the Escrow Agent shall have no obligation to make any
such request) to carry out more effectively the provisions and purposes of this
Agreement, to evidence compliance herewith or to secure itself that it is
protected in acting hereunder.
9. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given or made (and
shall be deemed to have been duly given or made upon receipt) by delivery in
person, by courier service, by telecopy or by
-6-
<PAGE> 7
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
9):
(a) if to the Seller:
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
with a copy (which shall not constitute notice) to:
Nelson Mullins Riley & Scarborough, L.L.P.
999 Peachtree Street
Suite 1400
Atlanta, GA 30309
Telecopy: (404) 817-6050
Attention: Glenn W. Sturm, Esq.
(b) if to the Purchaser:
The Huff Alternative Income Fund, L.P.
67 Park Place
Morristown, NJ 07960
Telecopy: (201) 984-5818
Attention: General Partner
with a copy (which shall not constitute notice) to:
Proskauer Rose Goetz & Mendelsohn LLP
1585 Broadway
New York, NY 10036-8299
Telecopy: (212) 969-2900
Attention: Peter G. Samuels, Esq.
(c) if to the Escrow Agent, to:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Telecopy: (212) 250-6961
Attention: Corporate Trust and Agency Group
-7-
<PAGE> 8
with a copy (which shall not constitute notice) to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Telecopy: (212) 424-8500
Attention: David P. Bicks, Esq.
(d) if to the lead placement agent under the Debt
Offering Memorandum to:
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Telecopy: (212) 761-0369
Attention: Robert Shepardson
The parties acknowledge and agree that the identity and address of the
lead placement agent under the Debt Offering Memorandum are subject to change
solely upon the delivery of notice by the Seller to the parties hereto of such
change.
10. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
11. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated by this Agreement is not affected in
any manner materially adverse to any party. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions contemplated by this Agreement
are consummated as originally contemplated to the greatest extent possible.
12. Entire Agreement. This Agreement and the Purchase
Agreement constitute the entire agreement of the parties hereto with respect to
the subject matter hereof and supersede all prior agreements and undertakings,
both written and oral, among the Seller, the Purchaser and the Escrow Agent
with respect to the subject matter hereof.
13. No Third Party Beneficiaries. This Agreement is for the
sole benefit of the parties hereto and their permitted assigns and nothing
herein, express or implied, is intended to or shall confer upon any other
Person any legal or equitable right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement.
-8-
<PAGE> 9
14. Amendment. This Agreement may not be amended or modified
except: (i) by an instrument in writing signed by, or on behalf of, the Seller,
the Purchaser and the Escrow Agent; or (ii) by a waiver in accordance with
Section 15 of this Agreement.
15. Waiver. Any party hereto (the "Waiving Party") may: (i)
extend the time for the performance of any obligation or other act of any other
party hereto owed to the Waiving Party; or (ii) waive compliance with any
agreement or condition contained herein, (it being understood and agreed that
such an extension or waiver shall not constitute, by itself, an extension or
waiver by any other party hereto of any such obligation, act, agreement or
condition owed to, or for the benefit of, such third party). Any such extension
or waiver shall be valid only if set forth in an instrument in writing signed
by the party or parties to be bound thereby. Any waiver of any term or
condition shall not be construed as a waiver of any subsequent breach or a
subsequent waiver of the same term or condition, or a waiver of any other term
or condition, of this Agreement. The failure of any party to assert any of its
rights hereunder shall not constitute a waiver of any of such rights.
16. Governing Law. This Agreement shall be governed by the
laws of the State of New York. All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined in any New York state
or federal court sitting in the City of New York, and the parties hereto
irrevocably submit to the jurisdiction of such courts and waive any defense of
an inconvenient forum to the maintenance of any such action or proceeding.
17. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate
counterparts, each of which when executed shall be deemed to be an original but
all of which when taken together shall constitute one and the same agreement.
SIGNATURES BEGIN ON NEXT PAGE
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this
Escrow Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
INTERCEL, INC.
By /s/ Allen E. Smith
--------------------------------------------
Name: Allen E. Smith
Title: President and Chief Executive Officer
THE HUFF ALTERNATIVE INCOME
FUND, L.P.
By WHR Partners, L.L.C., GP
By /s/ Joseph R. Thornton
----------------------------------------------
Name: Joseph R. Thornton
Title: Attorney in Fact
BANKERS TRUST COMPANY
By /s/ Kevin Weeks
----------------------------------------------
Name: Kevin Weeks
Title: Assistant Treasurer
-10-
<PAGE> 11
Exhibit A
INSTRUCTIONS TO THE ESCROW AGENT
March 14, 1997
Bankers Trust Company, as Escrow Agent
under the Escrow Agreement
referred to below
4 Albany Street
New York, NY 10006
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow
Agreement"), dated as of March 14, 1997 among InterCel, Inc., The Huff
Alternative Income Fund, L.P. and Bankers Trust Company, as Escrow Agent, you
are hereby directed to hold in escrow the sum of $22,500,000 and InterCel, Inc.
Series C preferred stock certificate number 1C in accordance with the terms of
the Escrow Agreement.
INTERCEL, INC.
By
-----------------------------------------
Name:
Title:
THE HUFF ALTERNATIVE INCOME
FUND, L.P.
By:
By
------------------------------------------
Name:
Title:
Agreed to and received as of
this __ day of ______, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
-----------------------------
Name:
Title:
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<PAGE> 12
Exhibit B
JOINT INSTRUCTIONS TO ESCROW AGENT
Bankers Trust Company, as Escrow Agent
under the Escrow Agreement referred to below
4 Albany Street
New York, NY 10006
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., The Huff Alternative Income
Fund, L.P. and Bankers Trust Company, as Escrow Agent thereunder, you are
hereby directed to promptly liquidate all investments in the Escrow Fund.
Furthermore, upon your receipt of the Placement Agent Confirmation you are
hereby directed to disburse the monies received upon such liquidation of the
Escrow Fund and deliver the Certificate as directed in Section 3 of the Escrow
Agreement. The monies received upon liquidation of the Escrow Fund shall be
delivered to the Seller by wire transfer to: _________. The Certificate shall
be delivered to The Huff Alternative Income Fund, L.P., 67 Park Place, 9th
Floor, Morristown, NJ 07960, Attention: Joseph R. Thornton telephone number
(201) 984-1233, via overnight delivery. The proposed date for closing of the
Debt Offering pursuant to the Debt Offering Memorandum is _________, 1997 (the
"Proposed Offering Closing Date").
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Escrow Agreement.
INTERCEL, INC.
By
-----------------------------------------
Name:
Title:
THE HUFF ALTERNATIVE INCOME FUND, L.P.
BY: WRH Partners, L.L.C., General Partner
By
------------------------------------------
Name: Joseph R. Thornton
Title: Attorney-in-Fact
Agreed to and accepted as of
this __ day of ______, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
------------------------------
Name:
Title:
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<PAGE> 13
Exhibit C
ESCROW AGENT NOTICE REGARDING DISBURSEMENT AND DELIVERY
InterCel, Inc.
1239 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
[Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Telecopy: (212) 761-0369
Attention: Robert Shepardson]
[The Huff Alternative Income Fund, L.P.
67 Park Place
Morristown, NJ 07960
Telecopy: (201) 984-5818
Attention: General Partner]
Re:Disbursement of Escrow Fund Proceeds and Delivery of
Certificate
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., The Huff Alternative Income
Fund, L.P. and Bankers Trust Company, as Escrow Agent thereunder, we hereby
notify you that we have delivered the proceeds of the Escrow Fund to the Seller
in accordance with Section 3 of the Escrow Agreement, and contemporaneous with
such delivery of funds to the Seller, we have deposited the Certificate with an
overnight delivery service to be delivered to the Purchaser.
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Escrow Agreement.
BANKERS TRUST COMPANY,
as Escrow Agent
By:
---------------------------------------
Name:
Title:
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<PAGE> 14
Exhibit D
PURCHASER NOTICE TO ESCROW AGENT
Bankers Trust Company, as Escrow Agent
under the Escrow Agreement referred to below
4 Albany Street
New York, NY 10006
Ladies and Gentlemen:
Pursuant to the terms of the Escrow Agreement (the "Escrow Agreement")
dated as of March 14, 1997 among InterCel, Inc., The Huff Alternative Income
Fund, L.P. and Bankers Trust Company, as Escrow Agent thereunder, you are
hereby notified of the Purchaser's election to proceed with the disbursement of
the Escrow Fund proceeds to the Seller. Thus, you are hereby directed to
promptly liquidate all investments in the Escrow Fund, to disburse the monies
received upon such liquidation of the Escrow Fund and to deliver the
Certificate to the Purchaser at The Huff Alternative Income Fund, L.P., 67 Park
Place, 9th Floor, Morristown, NJ 07960, Telephone (201) 984-1233, Attention:
Joseph R. Thornton via overnight delivery in accordance with the provisions of
Section 3(c) of the Escrow Agreement. Attached to this notice is the Seller's
notice to the Purchaser which has been delivered to the Purchaser pursuant to
Section 8.1(c) of the Purchase Agreement. In addition, the Purchaser hereby
represents and warrants that this notice is being properly given pursuant to
the terms and provisions of the Purchase Agreement and the Escrow Agreement.
All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed thereto in the Escrow Agreement.
THE HUFF ALTERNATIVE INCOME
FUND, L.P.
BY: WRA PARTNERS, L.L.C., General
Partner
By
----------------------------------------
Name:
Title:
Agreed to and accepted as of
this __ day of ______, 1997
BANKERS TRUST COMPANY,
as Escrow Agent
By:
---------------------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 11
EARNINGS PER SHARE CALCULATION
PRIMARY & FULLY DILUTED EARNINGS PER SHARE:
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
(In Thousands, Except Per Share Data)
<S> <C> <C>
Net(Loss) Income Before Cumulative Effect of
Change in Accounting Principle $ (25,028) $ 3,004
Cumulative Effect of Change in Accounting Principle $ (2,583) $ -
------------- -------------
Net(Loss) Income $ (27,611) $ 3,004
============= =============
Weighted average shares outstanding 25,087 9,904
Common stock equivalents outstanding - (b) 377(a)
------------- -------------
25,087 10,281
============= =============
PER SHARE DATA:
Net(Loss) Income Before Cumulative Effect of
Change in Accounting Principle $ (1.00) $ 0.29
Cumulative Effect of Change in Accounting Principle $ (0.10) -
------------- -------------
$ (1.10) $ 0.29
============= =============
</TABLE>
(a)Common stock equivalents outstanding includes the dilutive effect of all
outstanding stock options calculated using the average stock price for each
period under the treasury stock method
(b)Excludes 879,123 common stock equivalents(as calculated under the treasury
stock method) for the year ended December 31, 1996 as inclusion of such
equivalents would have an anti-dilutive effect on earnings per share for that
period.
<PAGE> 1
EXHIBIT 12
INTERCEL, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHANGES
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT RATIO)
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and
cumulative effect of change in
accounting principle $(26,682) $5,234 $3,412 $1,580 $ 152
Add(deduct):
Fixed Changes 44,125 1,809 753 60 141
Interest capitalized(a) (29,039) - - - -
Minority Interest (474) - - - -
-------- ------ ------ ------ -----
Earnings as adjusted (12,070) 7,043 4,165 1,640 293
======== ====== ====== ====== =====
Fixed Charges:
Interest expense 12,864 1,657 635 46 131
Capitalized interest 29,039 - - - -
Debt issuance costs 1,251 - - - -
Capitalized debt issuance costs - - - - -
Rent expense (1/3 of total) 971 152 118 14 10
-------- ------ ------ ------ -----
44,125 1,809 753 60 141
======== ====== ====== ====== =====
Ratio of earnings to fixed changes - (a) 3.9 5.5 27.3 2.1
======== ====== ====== ====== =====
</TABLE>
(a) For the year ended December 31, 1996, earnings were insufficient to cover
fixed charges by $56,195.
<PAGE> 1
EXHIBIT 18
To the Management of InterCel, Inc.:
Re: Form 10-K Report for the year ended December 31, 1996
Ladies and Gentlemen:
This letter is written to meet the requirements of Regulation S-K calling for a
letter from a registrant's independent accountants whenever there has been a
change in accounting principle or practice.
As of January 1, 1996, the Company changed from the deferral method of
accounting for certain promotional costs (e.g., free cellular phones,
substantial discounts toward cellular phones, or credits toward future monthly
service in return for a customer signing a noncancelable cellular telephone
service agreement for a term of one to three years) to the immediate expensing
of these costs as incurred method. According to the management of the Company,
this change was made to better align itself with industry practice and to
correspond with its treatment of similar promotional costs for its Personal
Communication Services' operations.
A complete coordinated set of financial and reporting standards for determining
the preferability of accounting principles among acceptable alternative
principles has not been established by the accounting profession. Thus, we
cannot make an objective determination of whether the change in accounting
described in the preceding paragraph is to a preferable method. However, we
have reviewed the pertinent factors, including those related to financial
reporting, in this particular case on a subjective basis, and our opinion
stated below is based on our determination made in this manner.
We are of the opinion that the Company's change in method of accounting is to
an acceptable alternative method of accounting, which, based upon the reasons
stated for the change and our discussions with you, is also preferable under
the circumstances in this particular case. In arriving at this opinion, we have
relied on the business judgment and business planning of your management.
Very truly yours,
/s/ Arthur Andersen LLP
- ------------------------
February 3, 1997
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF INTERCEL
Intercel Licenses, Inc.
Powertel, Inc.
Powertel/Atlanta, Inc.
Powertel Atlanta Licenses, Inc.
Powertel/Birmingham, Inc.
Powertel Birmingham Licenses, Inc.
Powertel/Jacksonville, Inc.
Powertel Jacksonville Licenses, Inc.
Powertel/Memphis, Inc.
Powertel Memphis Licenses, Inc.
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports, included in this Form 10-K, into the Company's previously filed
Registration Statement File Nos. 333-09769, 33-52550, 33-81842, 33-91734 and
33-52552.
/s/ Arthur Andersen LLP
-----------------------
Atlanta, Georgia
March 13, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF INTERCEL, INC., FOR THE YEAR ENDED DECEMBER 31, 1996,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 185,525
<SECURITIES> 75,659
<RECEIVABLES> 8,228
<ALLOWANCES> 217
<INVENTORY> 7,805
<CURRENT-ASSETS> 289,859
<PP&E> 261,251
<DEPRECIATION> 9,982
<TOTAL-ASSETS> 947,117
<CURRENT-LIABILITIES> 33,510
<BONDS> 433,810
0
2
<COMMON> 269
<OTHER-SE> 406,736
<TOTAL-LIABILITY-AND-EQUITY> 947,117
<SALES> 7,250
<TOTAL-REVENUES> 39,125
<CGS> 11,653
<TOTAL-COSTS> 67,756
<OTHER-EXPENSES> (1,949)
<LOSS-PROVISION> 1,011
<INTEREST-EXPENSE> 14,115
<INCOME-PRETAX> (26,682)
<INCOME-TAX> (1,654)
<INCOME-CONTINUING> (25,028)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,583)
<NET-INCOME> (27,611)
<EPS-PRIMARY> (1.10)
<EPS-DILUTED> (1.10)
</TABLE>
<PAGE> 1
EXHIBIT 99
INTERCEL, INC. ANNOUNCES $300 MILLION
SENIOR NOTE OFFERING
West Point, Georgia, March 17, 1997 -- InterCel, Inc. (NASDAQ:ICEL)
announced today that it proposes to offer a new issue of $300 million of Senior
Notes due 2007 (the "Notes").
InterCel also announced today that it has closed into escrow the sales
of 50,000 shares of Series C Convertible Preferred Stock for $22.5 million in
cash to The Huff Alternative Income Fund, L.P. and 50,000 shares of Series D
Convertible Preferred Stock for $22.5 million in cash to SCANA Communications,
Inc. The funds will be released from escrow upon the closing of the sale of the
Notes, provided such closing occurs on or before April 30, 1997. The Series C
Convertible Preferred Stock and the Series D Convertible Preferred Stock become
convertible into InterCel common stock at a conversion ratio equal to $12.75
per share of common stock, subject to adjustment, upon the dates that are 18
months and five years, respectively, following the issuance of each such
Series. Both Huff and SCANA will have certain registration rights in connection
with the common stock issued and issuable upon conversion of the preferred
stock. Holders of the Series C and Series D Convertible Preferred Stock are not
entitled to vote except in certain limited circumstances and are not entitled
to receive dividends except for their proportionate share of any dividends that
InterCel pays with respect to its common stock.
Proceeds from the sale of the Notes and the Series C and Series D
Convertible Preferred Stock will be used primarily to purchase licenses for 13
Basic Trading Areas in Kentucky and Tennessee, for which InterCel was the
winning bidder in recent FCC auctions, to finance certain development,
construction and operating costs associated with InterCel's PCS system and to
finance the first six interest payments on the Notes.
Neither the issuance of the Notes, the Preferred Stock nor the common
stock issuable upon the conversion of the Preferred Stock have been registered
under the Securities Act of 1933, as amended (the "Securities Act"), and such
securities may not be offered or sold in the United States except pursuant to
an applicable exemption from, or in a transaction not subject to, the
registration requirements of the Securities Act.
This press release shall not constitute an offer to sell or the
solicitation of an offer to buy the Notes, the Preferred Stock or the common
stock issuable upon conversion of the Preferred Stock.
InterCel provides personal communications services (PCS) under the
Powertel brand name. Following the final grant of the licenses for the Kentucky
and Tennessee BTAs, InterCel will hold licenses to provide PCS in areas that
encompass portions of 12 southeastern states and approximately 24 million
people. The Company also provides cellular telephone service in western
Georgia, eastern Alabama and Maine. As previously announced, InterCel has
agreed to sell substantially all of the assets related to its cellular
operations in the State of Maine.
