<PAGE> 1
As filed with the Securities and Exchange Commission on July 16, 1997.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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POWERTEL, INC.
(Exact Name of Registrant as Specified in its Charter)
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Delaware 4812 58-1944750
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification Number)
Incorporation or Organization) Classification Code Number)
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1233 O.G. Skinner Drive, West Point, Georgia 31833
(706) 645-2000
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
Allen E. Smith
President and Chief Executive Officer
Powertel, Inc.
1233 O.G. Skinner Drive
West Point, Georgia 31833
(706) 645-2000
(706) 645-9523 (Fax)
(Name, Address, Including Zip Code, and Telephone Number, Including Area
Code, of Agent for Service)
------------------------------------
With a Copy to:
Glenn W. Sturm, Esq. Jill F. Dorsey, Esq.
James Walker, Esq. Powertel, Inc.
Nelson Mullins Riley & Scarborough, L.L.P. 1233 O.G. Skinner Drive
First Union Plaza, Suite 1400 West Point, Georgia 31833
999 Peachtree Street, N.E. (706) 645-2000
Atlanta, Georgia 30309 (706) 645-9523 (Fax)
(404) 817-6000
(404) 817-6050 (Fax)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED EXCHANGE OFFER: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Aggregate Offering Amount of
Securities to be Registered Registered Per Unit(1) Price(1) Registration Fee
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11 1/8% Senior Notes Due 2007........... $300,000,000 100% $300,000,000 $90,909
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933.
------------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS
(Subject to Completion)
Issued July 16, 1997 OFFER TO EXCHANGE
All Outstanding
11 1/8% Senior Notes Due 2007
($300,000,000 principal amount outstanding)
for
11 1/8% Senior Notes Due 2007
which have been registered under the Securities Act
of
POWERTEL, INC.
------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JULY 16, 1997, UNLESS EXTENDED.
------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
WHICH INVESTORS SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE NEW NOTES OFFERED HEREBY.
------------------------------------
Powertel, Inc., a Delaware corporation (the "Company" or "Powertel"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus and the accompanying Letter of
Transmittal relating to the Exchange Offer (the "Letter of Transmittal"), to
exchange $1,000 principal amount of its 11 1/8% Senior Notes Due 2007 (the "New
Notes"), which will be registered under the Securities Act of 1933, as amended
(the "Securities Act"), pursuant to a Registration Statement of which this
Prospectus is a part, for each
(cover continued on next page)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The Company will accept for exchange any and all validly tendered Old
Notes on or prior to 5:00 p.m., New York City time, on , 1997 (if and as
extended, the "Expiration Date"). Tenders of Old Notes may be withdrawn at any
time prior to 5:00 p.m., New York City time, on the Expiration Date. See "The
Exchange Offer." Interest on the New Notes will be paid in cash at a rate of
11 1/8% per annum on each June 1 and December 1 commencing December 1, 1997. The
New Notes may be redeemed at the option of the Company in whole or in part, at
any time on or after June 1, 2002 at 105.5625% of their principal amount, plus
accrued and unpaid interest, declining ratably to 100% of their principal
amount, plus accrued and unpaid interest, on or after June 1, 2004. In addition,
at any time prior to June 1, 2000, the Company may redeem up to 35% of the
aggregate principal amount of the New Notes with the proceeds of one or more
Public Equity Offerings (as defined herein), at 111.125% of their principal
amount; provided that after any such redemption, at least $195.0 million
aggregate principal amount of Notes remains outstanding. See "Description of the
Notes."
This Prospectus, together with the Letter of Transmittal, is being sent
to all registered holders of Old Notes as of July , 1997. As of such date,
there were registered holders of the Old Notes.
The Company will not receive any proceeds from this Exchange Offer. No
dealer-manager is being used in connection with this Exchange Offer. See "Use of
Proceeds" and "Plan of Distribution."
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF OLD NOTES IN ANY JURISDICTION IN WHICH
THIS EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH
THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
(cover continued from previous page)
$1,000 principal amount of its outstanding 11 1/8% Senior Notes Due 2007 (the
"Old Notes"), of which an aggregate of $300,000,000 in principal amount was
outstanding as of , 1997.
The New Notes will be obligations of the Company entitled to the
benefits of the Indenture (as defined herein). The form and terms of the New
Notes are identical in all material respects to the form and terms of the Old
Notes except that the New Notes have been registered under the Securities Act.
Any Old Notes not tendered and accepted in the Exchange Offer will remain
outstanding and will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture. Following
consummation of the Exchange Offer: (i) the holders of the Old Notes will
continue to be subject to the existing restrictions upon transfer thereof; (ii)
the Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the Old Notes held by them; and (iii)
neither the New Notes nor the Old Notes will be entitled to the contingent
increase in interest rate provided for pursuant to the Old Notes. The Exchange
Offer is being made pursuant to the terms of the registration rights agreement
(the "Registration Rights Agreement") entered into among the Company and Morgan
Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Oppenheimer & Co., Inc. (the "Placement Agents") pursuant to the terms of
the Placement Agreement dated June 5, 1997 among the Company and the Placement
Agents. The New Notes and the Old Notes are collectively referred to herein as
the "Notes." See "The Exchange Offer -- Purpose and Effect of the Exchange
Offer."
Based on interpretations by the staff of the Securities and Exchange
Commission (the "Commission") set forth in no-action letters issued to third
parties, the Company believes the New Notes issued pursuant to the Exchange
Offer in exchange for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as set forth
below, and any such holder that is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Notes are acquired in the ordinary course of such holder's
business and that such holder has no arrangement or understanding with any
person to participate in the distribution of such New Notes. Any holder who
tenders in the Exchange Offer with the intention to participate, or for the
purpose of participating, in a distribution of the New Notes or who is an
affiliate of the Company may not rely upon such interpretations by the staff of
the Commission and, in the absence of an exemption therefrom, must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transaction. Holders of Old Notes wishing
to accept the Exchange Offer must represent to the Company in the Letter of
Transmittal that such conditions have been met.
Each broker-dealer (other than an affiliate of the Company) that
receives New Notes for its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Notes received in exchange for Old Notes where such Old
Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company has agreed that, for a
period of 180 days after the Expiration Date (as defined herein), it will make
this Prospectus available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution." Any broker-dealer who is an affiliate
of the Company may not rely on such no-action letters and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction.
THIS PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE UPON
REQUEST FROM POWERTEL, INC., 1233 O.G. SKINNER DRIVE, WEST POINT, GEORGIA 31833
(TELEPHONE (706) 645-2000) ATTENTION: JILL F. DORSEY, VICE PRESIDENT/GENERAL
COUNSEL. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY , 1997.
ii
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TABLE OF CONTENTS
PAGE PAGE
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Summary................................ The Preferred Stock Sales...................
Risk Factors........................... Management..................................
Certain Transactions........................
The Exchange Offer..................... Description of Certain Indebtedness.........
Use of Proceeds........................ Description of the Notes....................
Capitalization......................... Certain Federal Income Tax
Selected Historical Financial Considerations............................
Information.......................... Plan of Distribution........................
Pro Forma Financial Information........ Legal Matters...............................
Management's Discussion and Analysis Experts.....................................
of Financial Condition and Results Available Information.......................
of Operations........................ Incorporation of Certain Documents
Business............................... by Reference..............................
The Maine Disposition.................. Index to Consolidated Financial Statements.. F-1
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NO PERSON IS AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED OR INCORPORATED
BY REFERENCE IN THIS PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION NOT CONTAINED OR
INCORPORATED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL NOR
ALL OF THEM TOGETHER CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER
TO BUY ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION IN WHICH
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL OR ALL OF
THEM TOGETHER, NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
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THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE
RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR
OLD NOTES PURSUANT TO THE EXCHANGE OFFER.
------------------------------------
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 and/or Paul Kagan Associates,
Inc.
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THIS PROSPECTUS INCLUDES "FORWARD-LOOKING STATEMENTS" WITHIN THE
MEANING OF THE SECURITIES LAWS. ALL STATEMENTS REGARDING THE COMPANY'S AND ITS
SUBSIDIARIES' EXPECTED FINANCIAL POSITION, BUSINESS AND FINANCING PLANS ARE
FORWARD-LOOKING STATEMENTS. ALTHOUGH THE COMPANY AND ITS SUBSIDIARIES BELIEVE
THAT THE EXPECTATIONS REFLECTED IN SUCH FORWARD-LOOKING STATEMENTS ARE
REASONABLE, THEY CAN GIVE NO ASSURANCE THAT SUCH EXPECTATIONS WILL BE ACHIEVED.
IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM SUCH
EXPECTATIONS ("CAUTIONARY STATEMENTS") ARE DISCLOSED HEREIN, INCLUDING, WITHOUT
LIMITATION, IN CONJUNCTION WITH THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN
AND UNDER "RISK FACTORS." ALL SUBSEQUENT WRITTEN AND ORAL FORWARD-LOOKING
STATEMENTS ATTRIBUTABLE TO THE COMPANY, ITS SUBSIDIARIES OR PERSONS ACTING ON
THEIR BEHALF ARE EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY THE CAUTIONARY
STATEMENTS.
iii
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SUMMARY
The following information is qualified in its entirety by the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere or incorporated by reference in this Prospectus. Holders of
Old Notes contemplating tendering such Old Notes pursuant to the Exchange Offer
should carefully consider the factors set forth herein under the caption "Risk
Factors" and are urged to read this Prospectus in its entirety. Unless otherwise
indicated: (i) the information in this Prospectus, other than the historical
financial information, gives effect to the Maine Disposition, the Preferred
Stock Sales and the June Offering (each as defined below); and (ii) references
herein to the "Company" or "Powertel" refer to Powertel, Inc. and, where
appropriate, its subsidiaries. On June 25, 1997, the Company changed its name
from InterCel, Inc. to Powertel, Inc. The Common Stock of the Company is traded
on the Nasdaq Stock Market under the symbol "PTEL."
THE COMPANY
Powertel provides personal communications services ("PCS") in the
southeastern United States under the name "Powertel" and provides cellular
telephone service in contiguous portions of western Georgia and eastern Alabama
under the name "InterCel." Powertel'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 to serve 13 Basic Trading Areas ("BTAs") in Kentucky
and Tennessee (together with the Current PCS Markets, the "PCS Markets") which
the Company acquired in the recent Federal Communications Commission (the "FCC")
auctions (the "D/E/F Auctions").
In the D/E/F Auctions, the Company acquired 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 (collectively, the
"Kentucky/Tennessee BTAs"). The aggregate purchase price for the licenses, which
encompass an area of approximately 66,000 square miles with a population of
approximately 6.8 million people, was $31.2 million. With the addition of the
Kentucky/Tennessee BTAs, Powertel has one of the largest contiguous PCS
footprints in the southeastern United States. The Company expects its expanded
PCS footprint to provide a competitive advantage in attracting new PCS customers
in its markets.
Powertel 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 15 markets in Alabama, Florida, Georgia, Mississippi
and Tennessee. In all of these markets, the Company was the first to offer PCS
services commercially. Powertel intends to continue to rapidly build out its PCS
network and to launch its PCS services. As of March 31, 1997, the Company had
approximately 35,000 PCS subscribers.
Powertel intends to become a leading provider of wireless
telecommunications services in the southeastern United States by: (i) expanding
its market presence and subscriber base by offering significant value to its
customers; (ii) aggressively and creatively marketing a broad range of wireless
telecommunications services; and (iii) increasing cash flow margins by achieving
economies of scale and operating efficiencies and effectively implementing
technological advances. The Company believes that the market for wireless
telecommunications services will expand significantly as equipment costs and
service rates continue to decline, equipment becomes more convenient and
functional and wireless services become more diverse. The Company believes that
by expanding its presence in the southeastern United States it will be well
positioned to capitalize on this market opportunity and on the region's positive
demographics. The Company intends to build upon the extensive experience of its
management team in the telecommunications industry, the Company's experience and
reputation in the southeastern cellular market and its relationships with other
telecommunications providers to create a broad regional wireless
telecommunications company. The Company intends to continue to be among the
first PCS operators in its service areas to market advanced digital PCS wireless
systems with increased capacity, improved quality and greater functionality than
traditional analog cellular systems.
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PCS OPERATIONS
Markets. Powertel's licensed territory includes contiguous portions of
the following 12 southeastern states: Alabama; Arkansas; Florida; Georgia;
Illinois; Indiana; Kentucky; Louisiana; Mississippi; Missouri; South Carolina
and Tennessee. The Company currently provides PCS services in 17 markets in
Alabama, Florida, Georgia, Mississippi and Tennessee and is nearing completion
of its initial buildout of these areas. Generally, the "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. Upon completion of the initial buildout of the Current PCS Markets
(excluding Albany, Georgia and Chattanooga, Tennessee), the Company expects to
be able to offer its PCS services in markets containing approximately 60% of the
population within the Current PCS Markets. This initial coverage is expected to
extend across 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 the major highway corridors connecting those
areas. The Company expects to complete the initial buildout of the Current PCS
Markets (excluding Albany, Georgia and Chattanooga, Tennessee) in late 1997 and
the Albany, Georgia and Chattanooga, Tennessee metropolitan areas in 1998. The
Company intends to commence the initial buildout of the Kentucky/Tennessee BTAs
in late 1997 and expects to begin offering commercial service in such BTAs in
the second half of 1998. Thereafter, based on customer demand and competitive
factors, Powertel intends to continue the buildout of its PCS System to enhance
and expand its coverage.
Strategy. Powertel'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; and (iv) expand the Company's regional market
presence by managing and affiliating with other PCS licensees (including
entering into roaming agreements), as well as potentially acquiring additional
strategic PCS licenses. Because the Company believes that being among the first
to offer PCS services in its PCS Markets 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 believes it can 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 is pursuing 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.
Services. The Company's PCS service offerings consist primarily of
wireline enhancement products in which PCS supplements a customer's landline
communications. The Company currently offers a full range of wireless
telecommunications services, including certain enhanced features and services
not currently provided by analog 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
expand its current offerings to include wireline replacement services that will
serve as the customer's primary mode of telecommunication.
Technology. Powertel has selected and implemented Global System for
Mobile Communications ("GSM") as the digital protocol for its PCS system because
it: (i) has been operating successfully in European and other countries for
approximately six years; (ii) offers enhanced features such as call encryption
and short messaging; and (iii) utilizes an open system architecture that allows
the Company to choose from a variety of equipment options and providers.
Currently, GSM-based systems are operating in more than 100 countries and were
the first PCS systems
2
<PAGE> 7
to be commercially deployed in the United States. According to data collected by
GSM North America, a group of GSM providers of which the Company is a member,
the GSM digital protocol has been implemented or chosen by licensees (including
winning bidders in the D/E/F Auctions) that cover markets with a population of
over 260 million people (representing over 98% of the population in the United
States). However, one of the GSM licensees, Pocket Communications, Inc.
("Pocket"), which recently filed for reorganization under Chapter 11 of the
United States Bankruptcy Code, has licenses in markets containing approximately
35 million people. Powertel has entered into roaming agreements with eight
GSM-based PCS providers in multiple markets in North America and expects to
begin offering roaming commercially in approximately 20 markets outside of the
Company's PCS footprint by the third quarter of 1997. The Company believes that
in the future its subscribers will be able to roam throughout most of the United
States, either on other GSM-based PCS systems or by using dual-mode (GSM/analog
cellular) telephones which are expected to be available in late 1997.
CELLULAR OPERATIONS
Markets. Powertel provides cellular telephone service in contiguous
portions of four Rural Service Areas ("RSAs") in western Georgia and eastern
Alabama (the "Cellular Markets") under the name "InterCel." The Cellular Markets
encompass approximately 2,900 square miles and have a population of
approximately 296,000 persons. As of December 31, 1996, the Company had
increased its cellular subscriber base in the Cellular Markets 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 Cellular Markets at
an average annual compound rate of approximately 32.8% and 215.8%, respectively,
from 1991 to 1996.
Strategy. Powertel'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 the Cellular Markets; (iii) continue to upgrade
its cellular switching systems to capture roaming revenues from digital cellular
users roaming into the 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.
Services. Powertel offers cellular telephones and accessories and a
full range of cellular telephone services, including call forwarding, call
waiting, three party conference calling and voice message storage and retrieval.
The Company has completed an initial upgrade of its cellular networks with
digital technology and is currently marketing its digital service in a limited
manner. Once improved handset equipment is available, which is expected in late
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 who do not transfer to the digital service and will
be able to capture roaming revenues from users of both analog and digital
telephones.
Maine Disposition. In May 1997, the Company sold its cellular
operations in the State of Maine (the "Maine Disposition") for $77.2 million in
cash (which includes $5.4 million that is being held in escrow for
indemnification or purchase price adjustment obligations). The Company acquired
its Maine cellular operations in 1994 for $36.4 million. From its acquisition
through 1996, the Company increased its Maine cellular subscriber base at a
compound annual growth rate of approximately 39% and achieved a market
penetration of approximately 5%. See "The Maine Disposition."
3
<PAGE> 8
THE TRANSACTIONS
In order to concentrate the Company's focus on its markets in the
southeastern United States and to partially finance the Company's buildout and
operating costs and certain acquisition expenses associated with its PCS system,
the Company recently consummated the Maine Disposition and acquired the licenses
for the Kentucky/Tennessee BTAs and also consummated the following transactions
(collectively, with the Maine Disposition and the acquisition of the
Kentucky/Tennessee BTA licenses, the "Transactions"):
(i) pursuant to a stock purchase agreement dated as of May
23, 1997 between the Company and The Huff Alternative Income Fund,
L.P. ("Huff"), Huff purchased 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 in cash (the "Huff
Preferred Stock Sale");
(ii) pursuant to a stock purchase agreement dated as of May
23, 1997 between the Company and SCANA Communications, Inc., a wholly
owned subsidiary of SCANA Corporation ("SCANA"), SCANA purchased 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 in cash (the "SCANA Preferred Stock Sale" and, together with
the Huff Preferred Stock Sale, the "Preferred Stock Sales"); and
(iii) the Company sold $300.0 million aggregate principal
amount of the Old Notes (the "Offering") of which approximately $89.6
million was used to purchase a portfolio of U.S. government securities
(the "Pledged Securities") that were pledged as security for the first
six scheduled interest payments on the Notes.
The Company currently estimates that capital expenditures will total
approximately $200.0 million in 1997 to complete the initial buildout of the
Company's PCS system (the "Current PCS System") in the Current PCS Markets
(excluding Albany, Georgia and Chattanooga, Tennessee) and the digital upgrade
of the Company's cellular system, and $150.0 million ($30.0 million in 1997 and
$120.0 million in 1998) relating to 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").
The Company believes that the net proceeds from the Offering, together
with the net proceeds from the Preferred Stock Sales, cash on hand (including
the proceeds from the Maine Disposition) and borrowings under its $165.0 million
credit agreement (the "Vendor Financing Agreement") with Ericsson Inc.
("Ericsson") and additional vendor financing, which the Company expects to be
available, 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. 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 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 depend
partially on the success of the Company's business. The Company currently has no
source of income or cash flows other than its cellular and newly launched PCS
operations and the interest income earned from investing the net proceeds from
the Maine Disposition and the remaining net proceeds from the 1996 Offerings (as
defined herein). 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 Indenture,
the February 1996 Notes Indenture, the April 1996 Notes Indenture (each as
defined herein and, together with the Indenture, the "Indentures"), the Vendor
Financing Agreement or that may be contained in any future financing
arrangements. See "Risk Factors -- Significant Capital Requirements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
4
<PAGE> 9
<TABLE>
<CAPTION>
THE EXCHANGE OFFER
<S> <C>
The Exchange Offer..............................Pursuant to the Exchange Offer, $1,000 principal amount of New
Notes will be issued in exchange for each $1,000 principal amount
of Old Notes that are validly tendered and not withdrawn. As of
July , 1997, there were registered holders of Old Notes,
and $300,000,000 aggregate principal amount of Old Notes were
outstanding. See "The Exchange Offer."
Holders of Old Notes whose Old Notes are not tendered and accepted
in the Exchange Offer will continue to hold such Old Notes and
will be entitled to all the rights and preferences and will be
subject to the limitations applicable thereto under the Indenture
governing the Old Notes and the New Notes. Following
consummation of the Exchange Offer, the holders of Old Notes
will continue to be subject to the existing restrictions upon transfer
thereof, and the Company will have no further obligation to such
holders to provide for the registration under the Securities Act of
the Old Notes held by them. Following the completion of the
Exchange Offer, none of the Notes will be entitled to the
contingent increase in interest rate provided pursuant to the
Old Notes.
Resale..........................................Based on interpretations by the staff of the Commission set forth in
no-action letters issued to third parties, the Company believes
the New Notes issued pursuant to the Exchange Offer in exchange
for Old Notes may be offered for resale, resold and otherwise
transferred by any holder thereof (other than broker-dealers, as
set forth below, and any such holder that is an "affiliate" of
the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holder's
business and that such holder has no arrangement or understanding
with any person to participate in the distribution of such New
Notes. Any holder who tenders in the Exchange Offer with the
intention to participate, or for the purpose of participating, in
a distribution of the New Notes or who is an affiliate of the
Company may not rely upon such interpretations by the staff of the
Commission and, in the absence of an exemption therefrom, must
comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any secondary resale
transaction. Failure to comply with such requirements in such
instance may result in such holder incurring liabilities under the
Securities Act for which the holder is not indemnified by the
Company. Each broker-dealer (other than an affiliate of the
Company) that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes.
The Letter of Transmittal states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed that, for
</TABLE>
5
<PAGE> 10
<TABLE>
<S> <C>
a period of 180 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Company
accept surrenders for exchange from, holders of Old Notes in any
jurisdiction in which this Exchange Offer or the acceptance thereof
would not be in compliance with the securities or blue sky laws
of such jurisdiction.
Expiration Date.................................The Exchange Offer will expire at 5:00 p.m., New York City time, on ,
1997, unless extended, in which case the term "Expiration Date"
shall mean the latest date and time to which the Exchange Offer is
extended. Any extension, if made, will be publicly announced
through a release to the Dow Jones News Service and as otherwise
required by applicable law or regulations.
Conditions to the Exchange
Offer.........................................The Exchange Offer is subject to certain conditions, which may be
waived by the Company. See "The Exchange Offer -- Conditions
of the Exchange Offer." The Exchange Offer is not conditioned
upon any minimum principal amount of Old Notes being tendered.
Procedures for Tendering
Old Notes.....................................Each holder of Old Notes wishing to accept the Exchange Offer must
complete, sign and date the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained herein and
therein, and mail or otherwise deliver such Letter of Transmittal,
or a facsimile thereof, together with such Old Notes and any
other required documentation to Bankers Trust Company, the
Exchange Agent, at the address set forth herein and therein. By
executing the Letter of Transmittal, each holder will represent to
the Company that, among other things, the New Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary
course of business of the person receiving such New Notes, whether
or not such person is the holder, that neither the holder nor any
such other person has an arrangement or understanding with any
person to participate in the distribution of such New Notes and
that neither the holder nor any such other person is an "affiliate"
of the Company within the meaning of Rule 405 under the Securities
Act. See "The Exchange Offer -- Terms of the Exchange Offer --
Procedures for Tendering Old Notes" and "The Exchange Offer --
Terms of the Exchange Offer -- Guaranteed Delivery Procedures."
Special Procedures for
Beneficial Owners.............................Any beneficial owner whose Old Notes are registered in the name of
a broker, dealer, commercial bank, trust company or other
nominee and who wishes to tender such Old Notes in the
Exchange Offer should contact such registered holder promptly
and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on his
</TABLE>
6
<PAGE> 11
<TABLE>
<S> <C>
own behalf, such owner must, prior to completing and executing the Letter
of Transmittal and delivering his Old Notes, either make appropriate
arrangements to register ownership of the Old Notes in such owner's name or
obtain a properly completed bond power from the registered holder. The
transfer of registered ownership may take considerable time and may not be
able to be completed prior to the Expiration Date. See "The Exchange Offer --
Terms of the Exchange Offer -- Procedures for Tendering Old Notes."
Guaranteed Delivery
Procedures....................................Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not
immediately available or who cannot deliver their Old Notes, the Letter of
Transmittal or any other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date, must tender their Old Notes
according to the guaranteed delivery procedures set forth in "The Exchange
Offer -- Terms of the Exchange Offer -- Guaranteed Delivery Procedures."
Acceptance of Old Notes and
Delivery of New Notes.........................Subject to certain conditions (as described more fully in "The Exchange Offer --
Conditions of the Exchange Offer"), the Company will accept for exchange any
and all Old Notes which are properly tendered in the Exchange Offer and not
withdrawn, prior to 5:00 p.m., New York City time, on the Expiration Date. The
New Notes issued pursuant to the Exchange Offer will be delivered as promptly
as practicable following the Expiration Date.
Withdrawal Rights...............................Except as otherwise provided herein, tenders of Old Notes may be
withdrawn at any time prior to 5:00 p.m., New York City time,
on the Expiration Date. See "The Exchange Offer -- Terms of
the Exchange Offer -- Withdrawal of Tenders of Old Notes."
Certain Federal Income Tax
Considerations................................For a discussion of certain federal income tax considerations relating
to the exchange of the New Notes for the Old Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent..................................Bankers Trust Company is the Exchange Agent. The address,
telephone number and facsimile number of the Exchange Agent
are set forth in "The Exchange Offer -- Exchange Agent."
</TABLE>
7
<PAGE> 12
SUMMARY OF TERMS OF THE NEW NOTES
The Exchange Offer applies to $300,000,000 aggregate principal amount
of Old Notes. The form and terms of the New Notes will be identical in all
material respects to the form and terms of the Old Notes except that: (i) the
New Notes will be registered under the Securities Act and, therefore, will not
bear legends restricting the transfer thereof; and (ii) holders of the New Notes
will not be entitled to certain rights of holders of Old Notes under the
Registration Rights Agreement, which will terminate upon consummation of the
Exchange Offer. The New Notes will evidence the same debt as the Old Notes, will
be entitled to the benefits of the Indenture and will be treated as a single
class thereunder with any Old Notes that remain outstanding. Following the
Exchange Offer, none of the Notes will be entitled to the contingent increase in
interest rate provided for (in the event of a failure to consummate the Exchange
Offer in accordance with the terms of the Registration Rights Agreement)
pursuant to the Old Notes. See "Description of the Notes."
<TABLE>
<S> <C>
Issuer .......................................Powertel, Inc.
Securities Offered..............................$300,000,000 aggregate principal amount of 11 1/8% Senior Notes
due 2007.
Maturity........................................June 1, 2007
Interest .......................................Interest on the Notes is payable semiannually in cash on June 1 and
December 1 of each year, commencing December 1, 1997.
Optional Redemption.............................The Notes may be redeemed at any time on or after June 1, 2002, at
the option of the Company, in whole or in part, at 105.5625% of their
principal amount, plus accrued interest, declining to 100% of their principal
amount, plus accrued interest, on and after June 1, 2004. In addition, at any
time prior to June 1, 2000, up to 35% of the aggregate principal amount of the
Notes may be redeemed from the proceeds of one or more Public Equity Offerings
(as defined herein), at 111.125% of their principal amount; provided that
after any such redemption at least $195.0 million aggregate principal amount
of Notes remains outstanding.
Security........................................The Indenture will require the Company to purchase and pledge to the Trustee under
the Indenture, as security for the benefit of the holders of the Notes,
Pledged Securities consisting of U.S. government securities in an amount
sufficient to provide for the payment in full of the first six scheduled
interest payments due on the Notes. The Company used approximately $89.6
million of the net proceeds of the Offering to acquire the Pledged Securities.
Change of Control...............................Upon a Change of Control (as defined herein), the Company will be
required to make an offer to purchase the Notes at a purchase
price equal to 101% of their principal amount, plus accrued
interest. There can be no assurance that the Company will have
sufficient funds available at the time of any Change of Control to
make any required debt repayment (including repurchases of the
Notes). See "Description of the Notes -- Repurchase of Notes
upon a Change of Control."
Ranking.........................................The Notes will be unsecured (except as described above under
"-- Security") senior indebtedness of the Company ranking pari
passu with the Company's other unsubordinated unsecured
</TABLE>
8
<PAGE> 13
<TABLE>
<S> <C>
indebtedness and senior in right of payment to all subordinated indebtedness
of the Company. After giving pro forma effect to the Transactions and the
application of the proceeds thereof, at March 31, 1997, the Company would have
had $551.1 million of indebtedness outstanding other than the Notes (including
$104.2 million of secured indebtedness), and the Company would have had $61.2
million of availability under the Vendor Financing Agreement for the purchase
of PCS equipment and services. Under the Indenture, the Company is permitted
to incur additional indebtedness to finance the acquisition of inventory or
equipment and up to $25.0 million of indebtedness under one or more revolving
credit or working capital facilities and to secure such indebtedness. The
Notes will be effectively subordinated to such secured indebtedness to the
extent of such security interests. In addition, all existing and future
liabilities (including trade payables) of the Company's subsidiaries will be
effectively senior to the Notes. See "Risk Factors -- Ability to Service Debt;
Restrictive Covenants; Refinancing Risks," "-- Priority of Secured Debt;
Structural Subordination" and "Description of Certain Indebtedness."
Certain Covenants...............................The Indenture, pursuant to which the Old Notes have been issued and
the New Notes will be issued, contains certain covenants that,
among other things, will limit the ability of the Company to incur
indebtedness, pay dividends, prepay subordinated indebtedness,
repurchase capital stock, make investments, engage in transactions
with stockholders and affiliates, create liens, sell assets and engage
in mergers and consolidations. However, these limitations are
subject to a number of important qualifications and exceptions.
See "Description of the Notes -- Covenants."
Use of Proceeds.................................The Company will not receive any proceeds from the issuance of the
New Notes pursuant to this Prospectus.
Book-Entry; Delivery and
Form .......................................Transfers of Notes between participants in The Depository Trust
Company ("DTC") will be effected in the ordinary way in
accordance with DTC rules and will be settled in same-day funds.
See "Description of the Notes -- Book-Entry; Delivery and
Form."
</TABLE>
9
<PAGE> 14
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary financial and operating
information for the Company as of and for each of the years in the three-year
period ended December 31, 1996 and as of and for the three months ended March
31, 1997 and 1996. The summary historical financial information as of and for
the years ended December 31, 1996, 1995 and 1994 was derived from the Company's
consolidated financial statements and notes thereto included elsewhere in this
Prospectus, which have been audited by Arthur Andersen LLP, independent public
accountants. The financial information as of and for the three months ended
March 31, 1997 and 1996 was derived from the unaudited financial statements of
the Company. In the opinion of management, the unaudited financial statements
include all adjustments (consisting only of normal recurring adjustments)
necessary to present fairly the information set forth herein. 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 unaudited pro forma statement of operations data give effect to the
Transactions as if they occurred at January 1, 1996, and the unaudited pro forma
balance sheet data give effect to the Transactions as if they occurred at March
31, 1997. The unaudited pro forma financial information does not purport to
represent what the Company's results of operations or financial position would
have been if the Transactions had in fact occurred on such dates, nor does it
purport to indicate the future financial position or results of future
operations of the Company. The unaudited pro forma adjustments are based upon
currently available information and certain assumptions that management believes
to be reasonable. The selected historical and pro forma financial information
set forth below should be read in conjunction with "Use of Proceeds," "Selected
Historical Financial Information," "Pro Forma Financial Information,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Certain Transactions" and the Company's consolidated financial
statements and notes thereto and other financial and operating information
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
--------------------------------------
PRO FORMA HISTORICAL
------------------------
1997 1997 1996
---- ---- ----
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C>
Service revenues......................... $ 10,677 $ 14,084 $ 6,996
Equipment sales ......................... 4,937 5,025 854
---------- ---------- -----------
Total revenues and sales .............. 15,614 19,109 7,850
---------- ---------- -----------
Cost of services ........................ 4,879 5,428 684
Cost of equipment sales ................. 11,602 11,987 694
Operations expenses ..................... 3,302 3,809 1,204
Selling and marketing ................... 4,562 5,237 1,274
General and administrative .............. 7,238 7,680 1,810
Depreciation ............................ 7,849 8,340 731
Amortization ............................ 1,014 1,178 881
---------- ---------- -----------
Total operating expenses .............. 40,446 43,659 7,278
---------- ---------- -----------
Operating income (loss) ................. (24,832) (24,550) 572
Interest (income) expense(b) ............ 10,927 4,543 (739)
Miscellaneous (income) expense .......... 586 473 303
---------- ---------- -----------
Income (loss) before income taxes ....... (36,345) (29,566) 1,008
Income tax (benefit) expense ............ -- -- 472
---------- ---------- -----------
Net income (loss) before cumulative
effect ................................ (36,345) (29,566) 536
Cumulative effect of change in
accounting principle, net of tax(c) ... -- -- (2,583)
---------- ---------- -----------
Net income (loss)........................ $ (36,345) $ (29,566) $ (2,047)
========== ========== ===========
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(d)................................ $ (11,971) $ (12,244) $ 4,193
Ratio of earnings to fixed charges(e) ... -- -- --
Capital expenditures..................... $ 35,878 $ 36,209 $ 10,874
Cellular subscribers at end of period(f). 23,245 49,731 40,403
Net cellular population equivalents(g)... 295,600 737,800 737,800
PCS subscribers at end of period ........ 34,886 34,886 --
Net PCS population equivalents(g)........ 24,293,000 24,293,000 17,460,000
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------
PRO HISTORICAL
FORMA ----------------------------------
1996(a) 1996 1995 1994
-------- --------- ---- ----
(dollars in thousands)
<S> <C> <C> <C> <C>
Service revenues......................... $ 17,963 $ 31,875 $ 25,384 $ 18,903
Equipment sales ......................... 5,078 7,250 3,928 2,859
---------- ---------- --------- --------
Total revenues and sales .............. 23,041 39,125 29,312 21,762
---------- ---------- --------- --------
Cost of services ........................ 3,993 5,811 2,394 1,921
Cost of equipment sales ................. 9,866 11,653 3,127 2,391
Operations expenses ..................... 7,888 9,927 3,596 2,722
Selling and marketing ................... 10,828 13,301 4,280 3,405
General and administrative .............. 15,700 16,963 4,218 3,651
Depreciation ............................ 4,179 5,887 2,741 2,130
Amortization ............................ 1,733 4,214 2,360 1,543
---------- ---------- --------- --------
Total operating expenses .............. 54,187 67,756 22,716 17,763
---------- ---------- --------- --------
Operating income (loss) ................. (31,146) (28,631) 6,596 3,999
Interest (income) expense(b) ............ 10,553 (3,175) 1,657 635
Miscellaneous (income) expense .......... 1,666 1,226 (295) (48)
---------- ---------- --------- --------
Income (loss) before income taxes ....... (43,365) (26,682) 5,234 3,412
Income tax (benefit) expense ............ (1,654) (1,654) 2,230 1,535
---------- ---------- --------- --------
Net income (loss) before cumulative
effect ................................ (41,711) (25,028) 3,004 1,877
Cumulative effect of change in
accounting principle, net of tax(c) ... (765) (2,583) -- --
---------- ---------- --------- --------
Net income (loss)........................ $ (42,476) $ (27,611) $ 3,004 $ 1,877
========== ========== ========= ========
Other Financial and Operating Data:
EBITDA(d)................................ $ (4,602) $ (2,466) $ 11,992 $ 7,720
Ratio of earnings to fixed charges(e) ... -- -- 3.9x 5.5x
Capital expenditures..................... $ 227,101 $ 233,551 $ 7,661 $ 2,866
Cellular subscribers at end of period(f). 22,161 47,617 38,582 28,624
Net cellular population equivalents(g)... 295,600 737,800 732,900 728,200
PCS subscribers at end of period ........ 14,892 14,892 -- --
Net PCS population equivalents(g)........ 24,293,000 17,460,000 -- --
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
AT MARCH 31, AT DECEMBER 31,
------------------------- -------------------------------
PRO FORMA HISTORICAL HISTORICAL
-------------------------------
1997 1997 1996 1995 1994
-------- ---------- ------ ---------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................$ 551,618 $ 200,646 $ 256,349 $ 977 $ 2,710
Property and equipment, net.................... 271,693 284,713 251,269 18,066 13,262
Licenses, goodwill and other intangibles, net.. 406,567 429,085 402,321 24,904 23,903
Total assets................................... 1,331,476 973,094 947,117 74,330 50,812
Long-term obligations.......................... 850,976 551,366 504,065 29,411 11,030
Retained earnings (accumulated deficit)........ (8,657) (52,332) (22,766) 4,845 1,841
Stockholders' equity........................... 465,937 377,487 407,007 36,674 33,374
</TABLE>
- -------------------
(a) Adjusted to reflect the pro forma effects of the Transactions, the 1996
Offerings and the Powertel Combination (as defined herein) as if they
occurred at January 1, 1996. See "Selected Historical Financial
Information" and "Pro Forma Financial Information."
(b) The Company had interest income of $3.3 million and $2.3 million for
the three months ended March 31, 1997 and 1996, respectively, $4.5
million for the three months ended March 31, 1997 on a pro forma basis,
and $17.3 million and $22.2 million for the year ended December 31,
1996 on a historical and pro forma basis, respectively. The Company had
no interest income for the years ended December 31, 1995 and 1994.
Excludes capitalized interest of $7.7 million, $6.7 million and $2.7
million for the three months ended March 31, 1997 on a pro forma basis,
and for the three months ended March 31, 1997 and 1996 on a historical
basis, respectively, and $29.0 million and $55.8 million for the year
ended December 31, 1996 on a historical and pro forma basis,
respectively. 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." Accordingly,
management expects that a majority of the interest on the February 1996
Notes, the April 1996 Notes, the Vendor Financing Agreement and the
Notes will be capitalized during the construction of the PCS System.
Pro forma interest expense will not be indicative of interest expense
that will be recognized as additional portions of the PCS System are
placed in service.
(c) During 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.
(d) EBITDA represents earnings from continuing operations 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.
(e) Earnings were insufficient to cover fixed charges by $36.3 million,
$2.2 million and $56.2 million for the three months ended March 31,
1997 and 1996 and for the year ended December 31, 1996, respectively.
Earnings would have been insufficient to cover fixed charges by $44.0
million and $99.2 million for the three months ended March 31, 1997 and
for the year ended December 31, 1996, respectively, on a pro forma
basis. 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.
(f) Cellular subscribers at end of period include 14,216, 20,288, 25,456,
21,320 and 26,486 subscribers in the State of Maine for the years ended
December 31, 1994, 1995 and 1996 and the three months ended March 31,
1996 and 1997, respectively. See "The Maine Disposition."
(g) 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. For the
years ended December 31, 1994, 1995 and 1996 and the three months ended
March 31, 1996 and 1997, Net Cellular Population Equivalents include
441,900, 442,000, 442,200, 442,000 and 442,200 population equivalents,
respectively, from the Company's Maine market areas. See "The Maine
Disposition."
11
<PAGE> 17
RISK FACTORS
An investment in the Notes involves a significant degree of risk. In
determining whether to make an investment in the Notes, prospective investors
should consider carefully all of the information set forth in this Prospectus
and, in particular, the following factors.
SIGNIFICANT CAPITAL REQUIREMENTS
The development, construction and start-up phase associated with the
implementation of the Company's PCS System will continue to require substantial
capital. 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 to
complete the digital upgrade of the Company's cellular system, and $150.0
million ($30.0 million in 1997 and $120.0 million in 1998) relating to the
initial buildout of the Kentucky/Tennessee PCS System. Upon completion of the
initial buildout of the Current PCS System (excluding Albany, Georgia and
Chattanooga, Tennessee), the Company expects to be able to offer PCS services in
markets containing approximately 60% of the population within the Current PCS
Markets. The initial coverage is expected to extend across 23 metropolitan areas
and secondary cities within the Current PCS Markets, as well as the major
highway corridors connecting those areas. The Company expects to complete the
initial buildout of the Current PCS System (excluding Albany, Georgia and
Chattanooga, Tennessee) in late 1997 and in the Albany, Georgia and Chattanooga,
Tennessee metropolitan areas in 1998. Upon the completion of the initial
buildout of the Kentucky/Tennessee PCS System, the Company expects to be able to
offer PCS services in markets containing approximately 55% of the population
within the PCS Markets. Thereafter, based on customer demand and competitive
factors, Powertel intends to continue to build out its PCS System to enhance and
expand its coverage.
The Company believes that the net proceeds from the Offering, together
with the net proceeds from the Preferred Stock Sales, cash on hand (including
the proceeds from the Maine Disposition) and borrowings under the Vendor
Financing Agreement and additional vendor financing, which the Company expects
to be available, 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. Failure to
obtain such financing could result in the delay or abandonment of some or all of
the Company's development and expansion plans and expenditures, which could
limit the ability of the Company to meet its debt service obligations (including
its obligations with respect to the Notes) and could have a material adverse
effect on its business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
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 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 depend partially on the success of the Company's business. The
Company currently has no sources of income or cash flows other than its cellular
and newly launched PCS operations and the interest income earned from investing
the net proceeds from the Maine Disposition, the approximately $290.8 million of
net proceeds from the Offering and the remaining net proceeds ($207.5 million as
of March 31, 1997) from the sale in 1996 of: (i) 7,124,322 shares of its common
stock, par value $.01 per share (the "Common Stock") in a public offering (the
"Stock Offering"); (ii) 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"); and (iii) $360.0
million principal amount at maturity of the 12% Senior Discount Notes due May
2006 (the "April 1996 Notes") in a public offering (the "Debt Offering" and,
together with the Stock Offering and the Unit Offering, 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 that may be contained in any future financing
arrangements.
12
<PAGE> 18
FUTURE OPERATING LOSSES AND NEGATIVE CASH FLOW FROM OPERATIONS
The Company had an operating loss of $24.6 million and negative EBITDA
of $12.2 million for the three months ended March 31, 1997 and had an operating
loss of $28.6 million and negative EBITDA of $2.5 million for the year ended
December 31, 1996. The Company expects to incur significant operating losses and
to generate negative cash flow from operating activities during the next several
years while it develops and constructs its PCS System and builds a PCS customer
base. 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 cannot achieve
profitability or positive cash flow from operating activities, it may not be
able to meet its debt service or working capital requirements (including its
obligations with respect to the Notes, the February 1996 Notes and the April
1996 Notes). See "-- PCS System Implementation Risks; Operational Risks,"
"Selected Historical Financial Information," "Pro Forma Financial Information"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
ABILITY TO SERVICE DEBT; RESTRICTIVE COVENANTS; REFINANCING RISKS
As of March 31, 1997, on a pro forma basis after giving effect to the
Transactions, the Company's total indebtedness would have been $851.1 million,
and its stockholders' equity would have been $465.9 million. The Company's
earnings were insufficient to cover fixed charges by $36.3 million and $56.2
million for the three months ended March 31, 1997 and the year ended December
31, 1996, respectively. On a pro forma basis after giving effect to the
Transactions, the Company's earnings would have been insufficient to cover fixed
charges by $44.0 million and $99.2 million for the three months ended March 31,
1997 and the year ended December 31, 1996, respectively. See "Capitalization"
and "Pro Forma Financial Information." In addition, the accretion of original
issue discount on the February 1996 Notes and the April 1996 Notes will cause an
increase in liabilities from March 31, 1997 of $266.2 million ($129.9 million by
February 1, 2001 with respect to the February 1996 Notes and $136.3 million by
May 1, 2001 with respect to the April 1996 Notes). The Company's total
indebtedness and debt service requirements will be substantially increased as a
result of the Offering, and the Company will continue to be subject to
significant financial restrictions and limitations.
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 Notes, the February 1996
Notes and the April 1996 Notes may be accelerated. However, the limitations set
forth in the Indentures will be subject to a number of important qualifications
and exceptions. In particular, while the Indentures restrict the Company's
ability to incur additional indebtedness 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 $25.0 million of additional indebtedness under
one or more revolving credit or working capital facilities and in each case to
secure such indebtedness. See "Description of Certain Indebtedness -- The
February 1996 Notes," "-- The April 1996 Notes" and "Description of the Notes."
In addition to the restrictive covenants described above, the Vendor Financing
Agreement requires the Company to maintain certain financial ratios. See
"Description of Certain Indebtedness -- The Vendor Financing Agreement." 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 Notes,
the February 1996 Notes and the April 1996 Notes) may become immediately due and
payable.
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. See "--
Significant Capital Requirements." In addition, the Company's ability to satisfy
its obligations
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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. See "-- PCS System Implementation Risks; Operational
Risks." 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.
The indebtedness under the Vendor Financing Agreement, the February 1996 Notes
and the April 1996 Notes will mature prior to the maturity of the Notes, and
such indebtedness and the Notes may need to be refinanced at their maturity. The
Company's ability to refinance its 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 (including its obligations with
respect to the Notes).
PRIORITY OF SECURED DEBT; STRUCTURAL SUBORDINATION
The Indentures do not limit the amount of indebtedness the Company may
incur to finance the acquisition of inventory or equipment and permit the
Company to secure such indebtedness. The Indentures also permit the Company to
incur up to $25.0 million of indebtedness under one or more revolving credit or
working capital facilities and to secure such indebtedness. The Company expects
to continue to finance the purchase of a substantial amount of equipment to
build its PCS System with indebtedness under the Vendor Financing Agreement. The
Company's obligations under the Vendor Financing Agreement are secured by all
tangible assets purchased with such financing and by a pledge of the stock of
the Company's subsidiaries that own the Company's PCS licenses for the Current
PCS Markets. The Company intends to pursue additional vendor financing
arrangements. The Company's obligations under any such future vendor financing
arrangement would likely be secured by both the tangible assets purchased with
such financing and by a pledge of stock in certain of the Company's subsidiaries
which own PCS licenses. In the event of a default on the Notes or a bankruptcy,
liquidation or reorganization of the Company, assets securing the Vendor
Financing Agreement or any future vendor financings will be available to satisfy
obligations of the secured debt before any payment could be made on the Notes,
the February 1996 Notes and the April 1996 Notes. Accordingly, there may only be
a limited amount of assets available to satisfy any claims of the holders of the
Notes upon an acceleration of the Notes. A significant portion of the Company's
assets are intangible assets including licenses and goodwill. In addition, to
the extent that the value of such collateral is insufficient to satisfy such
secured indebtedness, amounts remaining outstanding on such secured indebtedness
would be entitled to share pari passu with the Notes, the February 1996 Notes
and the April 1996 Notes with respect to any other assets of the Company.
Because the Indentures permit the Company or its subsidiaries to incur an
unlimited amount of indebtedness to finance the acquisition of inventory or
equipment, up to $25.0 million of indebtedness under one or more revolving
credit or working capital facilities and up to $50.0 million of additional
indebtedness, in the event any such indebtedness is incurred by the Company's
subsidiaries, such indebtedness will be effectively senior to the Notes.
RISKS RELATING TO SELECTION OF PCS DIGITAL PROTOCOL
When the FCC first licensed cellular systems in the United States, it
mandated all technical aspects of system operation and protocol to ensure
nationwide compatibility between all cellular carriers. However, the FCC has not
mandated the technology protocols for PCS operations, leaving each licensee free
to select among several competing technologies that have sufficient
technological differences to preclude their interoperability. This opportunity
to choose among technologies could be altered by certain actions the FCC may
take in its rulemaking to implement the Telecommunications Act of 1996, as
amended (the "1996 Telecommunications
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<PAGE> 20
Act"). In order to promote network interconnectivity, the 1996
Telecommunications Act requires the FCC to oversee coordinated network planning
and participate in industry standards-setting organizations. Although the
Company believes that GSM offers the Company certain advantages over the other
two principal competing PCS technologies, there are also certain risks
associated with the deployment of GSM, including the potential that the
interconnectivity activities encouraged by the 1996 Telecommunications Act could
require technological overlays to permit interoperability with systems using
different technology protocols. Any such interoperability requirement could have
a material adverse effect on the Company's business, financial condition or
results of operations. See "-- Government Regulation."
In the event interoperability standards are not required, a risk
associated with the selection of GSM as the Company's PCS protocol is the
inability to implement reciprocal PCS roamer service to, and obtain PCS roamer
service from, other markets where a compatible PCS protocol has not been
implemented. In order for the Company's subscribers to roam in other wireless
markets (and vice versa), at least one PCS licensee in the other market must
utilize the GSM protocol, or the subscribers must use a handset that is capable
of operating on multiple technology platforms (i.e., dual-mode). Such dual-mode
handsets would permit the subscriber to use the existing analog cellular
wireless system in markets where a GSM system is not deployed. Such dual-mode
phones are not expected to be available until late 1997 and are expected to be
heavier and more expensive than single-mode (GSM only or cellular only) phones.
According to data collected by GSM North America, a group of GSM providers of
which the Company is a member, PCS licensees (including winning bidders in the
D/E/F Auctions) who have announced or otherwise indicated their choice of the
GSM protocol cover markets containing approximately 260 million persons, or
approximately 98% of the U.S. population. However, one of the GSM licensees,
Pocket, which recently filed for reorganization under Chapter 11 of the United
States Bankruptcy Code, has licenses in markets containing approximately 35
million people. The Company has entered into roaming agreements with several
GSM-based PCS providers and intends to pursue additional roaming arrangements
for areas where GSM-based PCS service may be offered in the future. However,
there can be no assurance that GSM-based PCS systems will be deployed in all of
these markets or that the Company will be successful in implementing roaming
arrangements for such markets.
PCS licensees choosing IS-136 technology, including AT&T Wireless PCS,
Inc. ("AT&T Wireless"), are expected to cover the entire U.S. population because
IS-136 handsets are currently capable of operating at both cellular and PCS
frequencies. See "Business - The Wireless Telecommunications Industry - Digital
Technology." PCS licensees, including PrimeCo Personal Communications, L.P.
("PrimeCo") and Sprint Spectrum, L.P. ("Sprint PCS"), have deployed, or publicly
announced that they intend to deploy, Code Division Multiple Access ("CDMA")
based PCS systems. Together, these CDMA-based PCS licensees are expected to
cover approximately 100% of the U.S. population. The fact that the Company's PCS
subscribers will not be able to roam into regions not served by GSM-based PCS
systems, unless the subscribers use dual-mode telephones (which are not yet
available) that would permit them to use the existing analog cellular wireless
system, may adversely affect the Company's ability to establish a PCS customer
base and to compete successfully in the PCS business with those PCS operators
offering greater roaming capabilities.
Finally, to the extent that most competitors in the PCS industry
utilize a competing technology that is not compatible with GSM, the Company's
business, financial condition and results of operations could be adversely
affected, and the Company's GSM-based system might be rendered obsolete. See "--
Competition," "Business -- The Wireless Telecommunications Industry -- Digital
Technology" and "Business -- PCS Operations."
PCS SYSTEM IMPLEMENTATION RISKS; OPERATIONAL RISKS
The Company's investment in the ownership, development and operation of
its PCS System involves a high degree of risk.
The Company expects to complete the initial buildout of its Current PCS
System (excluding Albany, Georgia and Chattanooga, Tennessee) in late 1997, at
which time the Company expects to be able to offer service in markets containing
approximately 60% of the population in the Current PCS Markets. This initial
coverage is expected to extend across 23 metropolitan areas and secondary cities
within the Current PCS Markets as well as the major highway corridors connecting
those areas. The Company expects to complete the initial
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<PAGE> 21
buildout of its PCS System in the Albany, Georgia and Chattanooga, Tennessee
metropolitan areas in 1998. The Company intends to commence the initial buildout
of the Kentucky/Tennessee PCS System in late 1997 and expects to begin offering
commercial service in such BTAs in the second half of 1998. There can be no
assurance that the Company will be able to implement the PCS System in any
particular market in accordance with its current buildout plan and schedule. If
the Company is not able to implement its PCS buildout plan, the Company may be
unable to provide services comparable to those provided by the cellular and
other PCS operators in the PCS Markets, and the Company's PCS subscriber growth
may be limited. In addition, FCC rules require all PCS licensees to meet certain
buildout and population coverage requirements. See "Business -- Regulation of
Wireless Telecommunications Systems." Failure to comply with these requirements
could cause revocation or forfeiture of the Company's PCS licenses or the
imposition of fines on the Company by the FCC.
The successful implementation of the PCS System will be dependent, to a
significant degree, upon the Company's ability to lease or acquire sites for the
location of its base station equipment. The site selection process requires the
negotiation of lease or acquisition agreements for over 1,800 sites for the
entire PCS System (approximately 1,200 and 1,500 sites by the end of 1997 and
1998, respectively) and, in many cases, requires the Company to obtain zoning
variances or other governmental approvals or permits. See "-- Necessity of
Zoning Approvals." As of March 31, 1997, the Company had leased or acquired
approximately 625 sites in the Current PCS Markets. The Company has retained
firms to provide site identification and acquisition services in each of the
Current PCS Markets and is in the process of hiring such firms for the
Kentucky/Tennessee BTAs. The Company expects that the site acquisition process
will continue throughout the buildout of the PCS System, as the Company expands
its geographic coverage. In addition to site selection, the buildout of the
Company's PCS System involves construction, base station and equipment
installation and systems testing and will require that the Company relocate
additional existing licensees operating fixed microwave systems in the Company's
licensed frequency band. The Company currently is in the site selection and
construction phase of its initial buildout of the Atlanta, Georgia MTA, which
initial buildout (excluding Albany, Georgia and Chattanooga, Tennessee) is
expected to be completed with a total of approximately 450 cell sites in 1997.
The Company currently is evaluating base station systems and other equipment and
is negotiating with equipment vendors for the Kentucky/Tennessee BTAs. Like site
acquisition, the Company expects that construction, installation, testing and
microwave relocation will continue throughout the buildout of the PCS System as
the Company expands its geographic coverage. See "-- Relocation of Fixed
Microwave Licensees." Each stage involves various risks and contingencies, many
of which are not within the control of the Company and all of which could
adversely affect the implementation of the Company's PCS System should there be
delays or other problems.
The Company considers several factors in determining the buildout
schedule and selection of sites for its PCS System in each metropolitan area,
including estimates of future market demand for its services. Market demand is
difficult to predict and may be affected by numerous factors, including
demographics, competition and marketing promotions of the Company and its
competitors. From November 29, 1996 to January 18, 1997, as part of a special,
limited-time promotion (the "Prestige Partners Promotion"), the Company offered
users unlimited local airtime throughout 1997 for $50 per month (with the
exception of certain subscribers in the Memphis area who were unable to obtain
the PCS handsets of their choice due to a handset shortage in that market and
for whom the promotional pricing extends through April 30, 1998). Customer
response to this promotion greatly exceeded the Company's expectations.
Accordingly, during certain peak usage times in suburban areas of two of the
Company's markets, customers experienced call blocking from certain cell sites.
Although the Company has taken measures, including accelerating capital
expenditures to increase capacity and establish fill-in cell sites, to
accommodate the large demand it has experienced in these areas and is continuing
to upgrade its switching equipment software to enable additional network
capacity, no assurance can be given that the Company's PCS System will not
experience similar capacity constraints in the future due to the difficulty in
predicting market demand and customer usage patterns. There can be no assurance
that any such capacity constraints will not have a material adverse effect on
the Company's business, financial condition or results of operations.
The Company's success in the implementation and operation of its PCS
System also is subject to other factors beyond the Company's control. These
factors include, without limitation, changes in general and local economic
conditions, availability of equipment necessary to operate or use the PCS
System, changes in communications service rates charged by others, changes in
the supply and demand for PCS and the commercial
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<PAGE> 22
viability of PCS systems as a result of competing with wireline and wireless
operators in the same geographic area, demographic changes that might negatively
affect the potential market for PCS, changes in the federal and state regulatory
scheme affecting the operation of PCS systems (including the enactment,
implementation and interpretation of new statutes, including the 1996
Telecommunications Act, and the promulgation of changes in the interpretation or
enforcement of existing or new rules and regulations) and changes in technology
that have the potential of rendering obsolete the technology and equipment that
the Company intends to use to construct its PCS System. See "-- Risks Relating
to Selection of PCS Digital Protocol" and "-- Government Regulation." Although
the Company attempts to maintain multiple vendors for each required product,
certain of its inventory and equipment, which are important components of its
operations, are acquired from a limited number of sources. Some of the Company's
suppliers have limited resources and production capacity. During its Prestige
Partners Promotion, the Company was temporarily unable to obtain a sufficient
number of a certain brand of PCS handsets. If the suppliers are unable to meet
the Company's needs as it builds out its network infrastructure and sells
services and equipment, delays and increased costs in the expansion of the
Company's network infrastructure or losses of potential customers could result.
In addition, the extent of the potential demand for PCS cannot be estimated with
any degree of certainty. There can be no assurance that one or more of these
factors will not have an adverse effect on the Company's business, financial
condition or results of operations.
The development, construction and operation of its PCS System is
expected to place significant demands on the Company's management, operational
and financial resources. The Company's PCS System is much larger than its
existing cellular system and is expected to have significantly more customers.
The Company's future performance will depend, in part, on the Company's ability
to implement and improve its operational and financial systems and to expand,
train and manage its employee base, including customer support and marketing and
sales personnel. There can be no assurance that the Company will be able
successfully to manage expected operations. Any failure to effectively manage
growth (including implementing adequate systems, procedures and controls in a
timely manner) could have a material adverse effect on the Company's business,
financial condition or results of operations.
Although the Company believes it has carefully planned for the
implementation of the new operational structure that will be necessary as a
result of its entry into the PCS business, there can be no assurance that such
plans can be executed as envisioned, or that the implementation of those plans
will not have an adverse impact on the Company's existing operations.
LITIGATION
The Company, through its subsidiary Powertel/Birmingham, Inc.
("Powertel/Birmingham"), was served with a complaint filed on April 4, 1997 by
American Page One, Inc. d/b/a American Mobile Wireless Communications
("Plaintiff") in the Circuit Court of Macon County, Alabama. Plaintiff claims
that Powertel/Birmingham has breached its agency contract and has committed
other torts with respect to Plaintiff by failing to accurately track Plaintiff's
account with respect to inventory invoicing and commissions, failing to pay
timely commissions, failing to provide services to Plaintiff's customers in a
competent and accurate manner, billing Plaintiff's customers inaccurately and in
excessive amounts, and making false representations with regard to its customer
service and operational capabilities. Plaintiff is seeking unspecified damages.
While the Company believes that the claims are without merit and intends to
vigorously defend itself, there can be no assurance that these claims or the
loss of its agency relationship with Plaintiff will not result in a loss of
customers acquired from such agency relationship or otherwise have a material
adverse effect on the Company's business, financial condition and results of
operations.
The Company recently received a Civil Investigative Demand (the
"Demand") from the U.S. Department of Justice Antitrust Division (the "Antitrust
Division") requiring the Company to produce certain documents and answer certain
interrogatories in connection with the Antitrust Division's investigation of
possible bid rigging and market allocation for licenses auctioned by the FCC for
broadband PCS frequency blocks. The Company intends to cooperate fully with the
Antitrust Division's requests.
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NECESSITY OF ZONING APPROVALS
State and local authorities generally have broad power to establish
regulations concerning the use of land in their jurisdictions. These regulations
may restrict or prohibit the construction of antenna towers in certain locations
and, consequently, may limit the number of antenna sites available to the
Company. The Company has experienced and may in the future experience difficulty
in obtaining zoning approval for tower and antenna sites in certain locations
which may delay, or in certain cases prevent, the Company's construction of
towers and placement of antennae.
Under the 1996 Telecommunications Act, states may not restrict cell
siting or modification based upon the environmental effects of radio frequency
("RF") 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 (the
"Petition") filed with the FCC by the Cellular Telecommunications Industry
Association ("CTIA"). The Petition argues that these restrictions effectively
impede the entry of new telecommunications services and providers and,
therefore, are in violation of the 1996 Telecommunications Act. CTIA is seeking
federal preemption of state and local siting and zoning moratoria regulation. In
certain cases, judicial proceedings are also pending to challenge a local
government's authority in this area. However, it is possible that local
governmental authorities may continue to adopt policies or moratoria on
construction of new towers or facilities which will delay or prevent the
construction of portions of the Company's PCS System. See "-- Radio Frequency
Emissions Concerns; Health Risks."
There can be no assurance that the application of zoning and other land
use regulations by state and local authorities will not have a material adverse
effect on the business, financial condition or results of operations of the
Company.
COMPETITION
The Company's PCS business will directly compete with multiple PCS
providers in each of its PCS Markets. While the FCC has initially provided for
six PCS licenses per market, it has recently amended its rules to allow an
existing PCS licensee to: (i) disaggregate its licenses by transferring part of
its spectrum to another entity; or (ii) partition its licenses by transferring
part of its geographic territory to another entity. The Company also expects
that existing cellular providers in the PCS Markets, some of which have an
infrastructure in place and have been operational for a number of years, will
continue to upgrade their systems to provide comparable services in competition
with its PCS System. Principal cellular providers in the PCS Markets are
AirTouch Communications, Inc. ("AirTouch"), GTE Mobile Communications
Corporation ("GTE Mobile"), Palmer Communications, Inc. ("Palmer"), BellSouth
Cellular Corp., operating as BellSouth Mobility, Inc. ("BellSouth Mobility"),
Alltel Mobile Communications, Inc. ("Alltel") and Century Cellunet, Inc.
Principal PCS competitors in the PCS Markets are PrimeCo, Sprint PCS and AT&T
Wireless. 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 ("BellSouth Wireless"), each of which was the winning bidder for 10
MHz licenses in many of the same BTA's in which the Company holds licenses.
The Company currently competes with other cellular licensees in each of
its Cellular Markets and expects to compete in its Cellular Markets with several
PCS licensees. Among the PCS operators expected to compete with the Company in
the Cellular Markets are AT&T Wireless and Sprint PCS.
The Company expects to compete with other communications technologies
that now exist, such as paging (including two-way digital paging), enhanced
specialized mobile radio ("ESMR") and domestic and global mobile satellite
service ("MSS"). 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. ("Nextel") operates
digital mobile networks in most major U.S. markets, including in the
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<PAGE> 24
Atlanta market. Southern Communications Services, Inc. ("Southern
Communications") has introduced commercial two-way wireless service using ESMR
technology in Georgia (including the Atlanta area) and in Alabama, northern
Florida and southeastern Mississippi. In the future, cellular service and PCS
will also compete more directly with traditional landline telephone service
providers, utilities, local multipoint distribution service providers and cable
operators. The FCC has recently concluded an auction for 30 MHz of spectrum
located in the 2.3 GHz band, known as the Wireless Communications Service
("WCS"). These licenses were auctioned in 5 MHz and 10 MHz blocks in each
license area. The FCC has determined that WCS providers will be permitted to
offer a broad range of broadcast services, but has imposed certain restrictions
which the FCC has indicated will make the use of WCS spectrum for mobile
applications "prohibitively expensive" and "technologically infeasible." The FCC
has recently announced that it will auction two local multipoint distribution
service 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, the Company may face
competition from technologies that may be introduced in the future. See "--
Government Regulation" and "Business -- Competition; Other Telecommunications
Technologies."
All of such competition will be intense and may lead to subscriber
attrition and require the Company to decrease the prices it charges to its
customers. The Company competes to attract and retain customers principally on
the basis of pricing, services and enhancements, its customer service and the
size and location of its service areas. The Company may need to reduce its
prices in order to meet reductions in rates by others. Such reductions could
adversely affect the Company. There can be no assurance that the Company will be
able to compete successfully in this environment or that new technologies and
products that are more commercially effective than the Company's technologies
and products will not be developed. In addition, many of the Company's
competitors have substantially greater financial, technical, marketing, sales,
manufacturing and distribution resources than those of the Company and have
significantly greater experience than the Company in testing new or improved
telecommunications products and services and obtaining regulatory approvals.
Some competitors are expected to market other services, such as cable television
access or landline local exchange or interexchange services, with their wireless
telecommunications 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. See "Business -- Competition; Other Telecommunications
Technologies."
RELOCATION OF FIXED MICROWAVE LICENSEES
For a period of up to five years from the grant of a PCS license, a PCS
licensee will be required to share spectrum with existing licensees that operate
certain fixed microwave systems within its license area. To secure a sufficient
amount of unencumbered spectrum to operate its PCS System efficiently, the
Company has relocated many of these incumbent licensees and will need to
relocate additional incumbent microwave users in its PCS Markets in the future
and in new markets as they are developed. 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 licenses for its Current PCS
Markets ("A" and "B" block PCS licenses), 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. The
FCC recently shortened the voluntary negotiation period with respect to all
D/E/F block licenses, including the Company's 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. As of March 31, 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 the PCS Markets. There can be no
assurance that the Company will be successful in reaching timely agreements with
the remaining microwave licensees or that any such agreements will be on terms
favorable to the Company. Any delay in the relocation of such licensees may
adversely affect the Company's ability to commence timely commercial operation
of its PCS System. Furthermore, depending on the terms of such agreements, if
any, the Company's ability to operate its PCS System profitably may be adversely
affected. See "Business -- PCS Operations -- PCS System."
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SIGNIFICANT CHANGE IN WIRELESS TELECOMMUNICATIONS INDUSTRY
The wireless telecommunications industry is experiencing significant
technological change, as evidenced by the increasing pace of digital upgrades in
existing analog wireless systems, evolving industry standards, ongoing
improvements in the capacity and quality of digital technology, shorter
development cycles for new products and enhancements, and changes in end-user
requirements and preferences. There is also uncertainty as to the extent of
customer demand as well as the extent to which airtime and monthly access rates
may continue to decline. As a result, the future prospects of the industry and
the Company and the success of PCS and other competitive services remain
uncertain.
RADIO FREQUENCY EMISSION CONCERNS; HEALTH RISKS
Media reports have suggested that RF emissions from wireless telephones
might be linked to cancer or have other adverse health consequences. The FCC has
recently conducted a rulemaking proceeding mandating acceptable levels of RF
emissions with respect to wireless communications equipment. Such FCC standards
are consistent with criteria established by the National Council on Radiation
Protection and Measurements and endorsed by the Environmental Protection Agency
and, in certain respects, are similar to existing standards developed by the
American National Standards Institute. The Company believes its equipment and
network comply with such standards. The 1996 Telecommunications Act further
mandates that state and local governments may not deny requests for facilities
siting, construction or modification based on the environmental effects of RF
emissions, so long as the facilities comply with the FCC's emissions standards.
Although the Company believes its wireless handsets comply with applicable
standards, concerns over RF emissions may have the effect of discouraging the
use of wireless communications services, such as PCS and cellular, which could
have an adverse effect on the Company's business, financial condition or results
of operations.
Certain interest groups have requested that the FCC investigate claims
that digital wireless handsets pose health concerns and cause interference with
hearing aids and other medical devices. The Center for the Study of
Electromagnetic Compatibility at the University of Oklahoma (the "Center"),
which was founded in 1994 with funds from the wireless industry, is studying
this issue. The Center recently released results from the first phase of its
study, which focused on the operation of handsets at maximum power. This study
indicated that the three wireless technologies tested, including GSM, caused
interference with hearing aids in some instances. In addition, the Personal
Communications Industry Association ("PCIA") announced in July 1995 that it was
undertaking an industry-wide study to gather information on possible PCS
interference with medical devices for all PCS standards. Results from
researchers working under the guidance of Wireless Technology Research LLC
indicate that digital wireless handsets may cause interference with some
pacemakers, although those results show that GSM handsets cause only minimal
interference. These researchers have recommended preliminarily that patients
dependent on pacemakers avoid using digital wireless telephones and that
nondependent patients keep such telephones away from their implanted devices. A
recent study reported in The Journal of Radiation Research found that
genetically-engineered mice (mice injected with a cancer causing gene) that were
exposed to wireless phone-like radio signals had a higher than normal cancer
rate and an increased incidence of tumors. The New England Journal of Medicine
recently published a study that found an increased risk of collision when using
a cellular telephone in a moving automobile. Such study found no causal link
between cellular telephone use in automobiles and automobile accidents, but only
found a relationship between the two events. Furthermore, the study considered a
cellular telephone to be in use at the time of an accident if it was in use
during the five minute period prior to the accident (and not necessarily in use
at the actual time of the accident).
These types of reports receive widespread media coverage and may have a
negative effect on demand for the Company's services, and may lead to claims
against the Company or government regulations, any of which could have an
adverse impact on the Company's business, financial condition or results of
operations. See "Business -- Regulation of the Wireless Telecommunications
Systems."
GOVERNMENT REGULATION
The licensing, construction, operation, acquisition and disposition of
PCS networks, as well as the number of PCS, cellular and other wireless
licensees permitted in each market, are regulated by the FCC. Changes in the
regulation of such activities could have a material adverse effect on the
Company's business,
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financial condition and results of operations. To the extent not otherwise
preempted by federal law, the states are permitted to regulate any other terms
and conditions of wireless services (other than market entry and rates), such
as, but not limited to, billing and consumer protection matters,
facilities-siting issues, transfer of control, bundling of services and
equipment, and availability of capacity on a wholesale basis. In addition, under
the 1996 Telecommunications Act, any agreement reached between a local exchange
carrier ("LEC") and another telecommunications carrier for interconnection,
provision of services, or access to network elements will have to be submitted
to the relevant state commission for approval.
The FCC also has the authority to revoke and renew licenses to provide
cellular and PCS services. The Company's cellular licenses for its Cellular
Markets will expire in 2000, its PCS licenses in its Current PCS Markets will
expire in 2005 and its PCS licenses in the Kentucky/Tennessee BTAs will expire
in 2007. Although the FCC will grant a preference, or "renewal expectancy," to
the existing cellular licensee upon a showing that it has (i) provided
"substantial" service during its past license term and (ii) substantially
complied with applicable FCC rules and policies and the Communications Act,
there can be no assurance that the Company's licenses will be renewed. See
"Business -- Regulation of Wireless Telecommunications Systems."
The recently enacted 1996 Telecommunications Act imposes on all
telecommunications carriers, including the Company, duties to: (i) interconnect
with other telecommunications carriers; (ii) employ technical standards and
features common with other networks; and (iii) ensure that service is accessible
to disabled persons, if readily achievable. Although the 1996 Telecommunications
Act prohibits the FCC from requiring wireless operators to provide subscribers
with equal access to long distance carriers, the 1996 Telecommunications Act
permits the FCC, if subscribers are denied access to their preferred long
distance carriers, to require unblocked access to the long distance carriers
through the use of carrier access codes. In addition, the 1996
Telecommunications Act contemplates that interstate telecommunications
providers, including providers such as the Company that are defined by the FCC
as commercial mobile radio service ("CMRS") providers, will "make an equitable
and non-discriminatory contribution" to support the cost of providing universal
service. The FCC has recently adopted a plan for the implementation of universal
service reform. While the plan does not impose a surcharge on wireless customers
in order to meet universal service funding goals, the FCC adopted a
competitively neutral contribution mechanism based on end-user
telecommunications revenues. The FCC has not yet adopted a method for
determining what percentage of revenues each carrier should contribute, but the
FCC has stated that it agrees with a previous finding of the Federal-State Joint
Board, established pursuant to the 1996 Telecommunications Act, that the 1996
Telecommunications Act does not preclude states from requiring CMRS providers
such as the Company to contribute to state support mechanisms. The Company
cannot predict the outcome of the implementation of the 1996 Telecommunications
Act or of the FCC's final order on universal service reform and the effect of
any resulting regulation on provision of cellular service or PCS, and there can
be no assurance that such laws will not adversely affect the Company's business,
financial condition or results of operations. See "Business -- Regulation of
Wireless Telecommunications Systems."
Under existing law, except in the case of a special finding of public
interest by the FCC, no more than 25% of the Company's capital stock may be
owned, directly or indirectly, or voted by non-U.S. citizens or their
representatives, by a foreign government or its representatives or by a foreign
corporation. See "Business -Regulation of Wireless Telecommunications Systems."
If the foreign ownership of the Company were to exceed 25%, the FCC could revoke
the Company's FCC licenses if the FCC found the public interest would be served
by such revocation, although the Company could seek a waiver from the FCC of the
foreign ownership restrictions or take other actions to reduce the Company's
foreign ownership percentage in order to avoid the loss of its licenses. The
Company's Restated Certificate of Incorporation authorizes, and the Indentures
permit, the Board of Directors to cause the Company to redeem Common Stock at
its fair market value, or in certain cases the holder's purchase price, in order
to ensure compliance with the rules, regulations and policies of the FCC. The
restrictions on foreign ownership could also adversely affect the ability of the
Company to attract additional equity financing from entities that are, or are
owned by, non-U.S. persons.
DEPENDENCE ON KEY EMPLOYEES
The Company's affairs are managed by a small number of key management
personnel, the loss of any of whom could have an adverse impact on the Company.
The Company does not have any employment contracts with such persons, and it
does not intend to obtain "key man" insurance. There can be no assurance
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<PAGE> 27
that the Company can retain its key managerial and technical employees or that
it can attract, assimilate or retain other skilled technical personnel in the
future. Significant additional personnel also will be required to develop,
construct and operate the Company's PCS System. See "Management."
CONFLICTS OF INTEREST
As of May 15, 1997, ITC Holding Company, Inc. ("ITC Holding") owned
approximately 27.3%, SCANA owned approximately 16.7% (without taking into
consideration the Series B Convertible Preferred Stock or Series D Convertible
Preferred Stock) and Huff owned approximately 7.7% (without taking into
consideration the Series C Convertible Preferred Stock) of the outstanding
Common Stock. See "Security Ownership of Certain Beneficial Owners and
Management." The Company has adopted a policy requiring that any material
transaction 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 Company expects to
resolve any potential conflicts of interest on a case-by-case basis, subject to
the applicable provisions of the Indentures, by taking into consideration
relevant factors and prevailing corporate practices.
Certain decisions concerning the operations or financial structure of
the Company may present conflicts of interest between the owners of the
Company's capital stock and the holders of the Notes. For example, if the
Company encounters financial difficulties, or is unable to pay its debts as they
mature, the interests of the Company's equity investors might conflict with
those of the holders of the Notes. In addition, the equity investors may have an
interest in pursuing acquisitions, divestitures, financings or other
transactions that, in their judgment, could enhance their equity investment,
even though such transactions might involve risk to the holders of the Notes.
LACK OF PUBLIC MARKET
The New Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the New Notes on
any national securities exchange or to seek approval for quotation through any
automated quotation system. The Company has been advised by the Placement Agents
that following completion of the Exchange Offer, the Placement Agents intend to
make a market in the New Notes. However, the Placement Agents are not obligated
to do so and any market-making activities with respect to the New Notes may be
discontinued at any time without notice. Accordingly, no assurance can be given
that an active public or other market will develop for the New Notes or as to
the liquidity of or the trading market for the New Notes. If a trading market
does not develop or is not maintained, holders of the New Notes may experience
difficulty in reselling the New Notes or may be unable to sell them at all. If a
market for the New Notes develops, any such market may cease to continue at any
time. If a public trading market develops for the New Notes, future trading
prices of the New Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities and other factors, including the financial
conditions of the Company.
CONSEQUENCES OF THE EXCHANGE OFFER ON NON-TENDERING HOLDERS OF THE OLD NOTES
In the event the Exchange Offer is consummated, the Company will not be
required to register any Old Notes not tendered and accepted in the Exchange
Offer. In such event, holders of Old Notes seeking liquidity in their investment
would have to rely on exemptions to the registration requirements under the
securities laws, including the Securities Act. Following the Exchange Offer,
none of the Notes will be entitled to the contingent increase in interest rate
provided for (in the event of a failure to consummate the Exchange Offer in
accordance with the terms of the Registration Rights Agreement) pursuant to the
Old Notes.
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<PAGE> 28
THE EXCHANGE OFFER
PURPOSE AND EFFECT OF THE EXCHANGE OFFER
The Old Notes were sold by Powertel on June 10, 1997 to the Placement
Agents in reliance on Section 4(2) of the Securities Act. The Placement Agents
offered and sold the Old Notes only: (i) to "qualified institutional buyers" (as
defined in Rule 144A) ("QIBs") in compliance with Rule 144A; and (ii) outside
the United States to persons other than U.S. persons ("foreign purchasers"),
which term includes dealers or other professional fiduciaries in the United
States acting on a discretionary basis for foreign beneficial owners (other than
an estate or trust), in reliance upon Regulation S under the Securities Act.
In connection with the sale of the Old Notes, the Company and the
Placement Agents entered into a Registration Rights Agreement dated as of June
10, 1997 (the "Registration Rights Agreement"), which requires the Company: (i)
to cause the Old Notes to be registered under the Securities Act; or (ii) to
file with the Commission a registration statement under the Securities Act with
respect to an issue of new notes of the Company identical in all material
respects to the Old Notes and use its best efforts to cause such registration
statement to become effective under the Securities Act and, upon the
effectiveness of that registration statement, to offer to the holders of the Old
Notes the opportunity to exchange their Old Notes for a like principal amount of
New Notes, which will be issued without a restrictive legend and which may be
reoffered and resold by the holder without restrictions or limitations under the
Securities Act. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part. The
Exchange Offer is being made pursuant to the Registration Rights Agreement to
satisfy the Company's obligations thereunder with regard to the Notes. The term
"holder" with respect to the Exchange Offer means any person in whose name Old
Notes are registered on the trustee's books or any other person who has obtained
a properly completed bond power from the registered holder, or any person whose
Old Notes are held of record by DTC who desires to deliver such Old Note by
book-entry transfer at DTC.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Notes issued pursuant to the Exchange Offer in exchange for the Old Notes may be
offered for sale, resold or otherwise transferred by any holder without
compliance with the registration and prospectus delivery provisions of the
Securities Act. Based on interpretations by the staff of the Commission set
forth in no-action letters issued to third parties, the Company believes the New
Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by any holder thereof
(other than broker-dealers, as set forth below, and any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such New Notes are acquired in the ordinary
course of such holder's business and that such holder has no arrangement or
understanding with any person to participate in the distribution of such New
Notes. Any holder who tenders in the Exchange Offer with the intention to
participate, or for the purpose of participating, in a distribution of the New
Notes or who is an affiliate of the Company may not rely upon such
interpretations by the staff of the Commission and, in the absence of an
exemption therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any secondary resale
transaction. Failure to comply with such requirements in such instance may
result in such holder incurring liabilities under the Securities Act for which
the holder is not indemnified by the Company. Each broker-dealer (other than an
affiliate of the Company) that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. The Company has agreed that, for a period of 180 days after the
Expiration Date, it will make the Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Company accept
surrenders for exchange from, holders of Old Notes in any jurisdiction in which
this Exchange Offer or the acceptance thereof would not be in compliance with
the securities or blue sky laws of such jurisdiction.
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By tendering in the Exchange Offer, each holder of Old Notes will
represent to the Company that, among other things: (i) the New Notes acquired
pursuant to the Exchange Offer are being obtained in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the holder; (ii) neither the holder of Old Notes nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such New Notes; (iii) if the holder is not a broker-dealer, or
is a broker-dealer but will not receive New Notes for its own account in
exchange for Old Notes, neither the holder nor any such other person is engaged
in or intends to participate in the distribution of such New Notes; and (iv)
neither the holder nor any such other person is an "affiliate" of the Company
within the meaning of Rule 405 under the Securities Act or, if such holder is an
"affiliate," that such holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable.
Following the completion of the Exchange Offer, none of the Notes will
be entitled to the contingent increase in interest rate provided pursuant to the
Old Notes. Holders of Notes will not have any further registration rights, and
the Old Notes will continue to be subject to certain restrictions on transfer.
See "-- Consequences of Failure to Exchange." Accordingly, the liquidity of the
market for the Old Notes could be adversely affected. See "Risk Factors --
Consequences of the Exchange Offer on Non-Tendering Holders of the Old Notes."
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to participate in the Exchange Offer. Holders of the
Old Notes are urged to consult their financial and tax advisors in making their
own decisions on whether to participate in the Exchange Offer.
TERMS OF THE EXCHANGE OFFER
General. Upon the terms and subject to the conditions set forth in this
Prospectus and in the Letter of Transmittal, the Company will accept any and all
Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City
time, on the Expiration Date. Subject to the minimum denomination requirements
of the New Notes, the Company will issue $1,000 principal amount of New Notes in
exchange for each $1,000 principal amount of outstanding Old Notes accepted in
the Exchange Offer. Holders may tender some or all of their Old Notes pursuant
to the Exchange Offer. However, Old Notes may be tendered only in amounts that
are integral multiples of $1,000 principal amount.
The form and terms of the New Notes will be identical in all material
respects to the form and terms of the Old Notes except that: (i) the New Notes
will be registered under the Securities Act and, therefore, will not bear
legends restricting the transfer thereof; and (ii) holders of the New Notes will
not be entitled to certain rights of holders of Old Notes under the Registration
Rights Agreement, which will terminate upon consummation of the Exchange Offer.
The New Notes will evidence the same debt as the Old Notes, will be entitled to
the benefits of the Indenture and will be treated as a single class thereunder
with any Old Notes that remain outstanding. The Exchange Offer is not
conditioned upon any minimum aggregate principal amount of Old Notes being
tendered for exchange.
As of July , 1997, $300,000,000 aggregate principal amount of the Old
Notes were outstanding, and there were registered holders of the
Old Notes. This Prospectus, together with the Letter of Transmittal, is being
sent to such registered holders.
Holders of Old Notes do not have any appraisal or dissenters' rights
under the Delaware General Corporation Law or the Indenture in connection with
the Exchange Offer. The Company intends to conduct the Exchange Offer in
accordance with the provisions of the Registration Rights Agreement and the
applicable requirements of the Exchange Act, and the rules and regulations of
the Commission thereunder. Old Notes which are not tendered for exchange in the
Exchange Offer will remain outstanding and interest thereon will continue to
accrue, but such Old Notes will not be entitled to any rights or benefits under
the Registration Rights Agreement.
The Company shall be deemed to have accepted validly tendered Old Notes
when, as and if the Company has given written notice thereof to the Exchange
Agent. The Exchange Agent will act as agent for
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<PAGE> 30
the tendering holders for the purposes of receiving the New Notes from the
Company. If any tendered Old Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Old Notes will be returned,
without expense, to the tendering holder thereof as promptly as practicable
after the Expiration Date.
Holders who tender Old Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "-- Fees and Expenses."
Expiration Date; Extensions; Amendments. The term "Expiration Date"
shall mean 5:00 p.m., New York City time, on , 1997, unless the
Company, in its sole discretion, extends the Exchange Offer, in which case the
term "Expiration Date" shall mean the latest date and time to which the
Exchange Offer is extended. Although the Company has no current intention to
extend the Exchange Offer, the Company reserves the right to extend the
Exchange Offer at any time and from time to time by giving written notice to
the Exchange Agent and by timely public announcement communicated, unless
otherwise required by applicable law or regulation, by making a release to the
Dow Jones News Service. During any extension of the Exchange Offer, all Old
Notes previously tendered pursuant to the Exchange Offer and not withdrawn will
remain subject to the Exchange Offer. The date of the exchange of the New Notes
for Old Notes will be the first New York Stock Exchange trading day following
the Expiration Date.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Old Notes, to extend the Exchange Offer or to terminate the
Exchange Offer if any of the conditions set forth below under "-- Conditions of
the Exchange Offer" shall not have been satisfied, by giving written notice of
such delay, extension or termination to the Exchange Agent or (ii) to amend the
terms of the Exchange Offer in any manner. Any such delay in acceptance,
extension, termination or amendment will be followed as promptly as practicable
by written notice thereof to the registered holders. If the Exchange Offer is
amended in any manner determined by the Company to constitute a material change,
the Company will promptly disclose such amendment by means of a prospectus
supplement that will be distributed to the registered holders, and the Company
will extend the Exchange Offer, depending upon the significance of the amendment
and the manner of disclosure to the registered holders, if the Exchange Offer
would otherwise expire during such period.
In all cases, issuance of the New Notes for Old Notes that are accepted
for exchange pursuant to the Exchange Offer will be made only after timely
receipt by the Exchange Agent of a properly completed and duly executed Letter
of Transmittal and all other required documents; provided, however, that the
Company reserves the absolute right to waive any conditions of the Exchange
Offer or defects or irregularities in the tender of Old Notes. If any tendered
Old Notes are not accepted for any reason set forth in the terms and conditions
of the Exchange Offer or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes or substitute Old Notes evidencing the unaccepted portion, as appropriate,
will be returned without expense to the tendering holder, unless otherwise
provided in the Letter of Transmittal, as promptly as practicable after the
expiration or termination of the Exchange Offer.
Interest on the New Notes. Holders of Old Notes that are accepted for
exchange will not receive accrued interest thereon at the time of exchange.
However, each New Note will bear interest from the most recent date to which
interest has been paid on the Old Notes or New Notes, or if no interest has been
paid on the Old Notes or the New Notes, from June 10, 1997.
Procedures for Tendering Old Notes. The tender to the Company of Old
Notes by a holder thereof pursuant to one of the procedures set forth below will
constitute an agreement between such holder and the Company in accordance with
the terms and subject to the conditions set forth herein and in the Letter of
Transmittal. A holder of the Old Notes may tender such Old Notes by: (i)
properly completing and signing a Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to a Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with any
corresponding certificate or certificates representing the Old Notes being
tendered (if in certificated form) and any required signature
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guarantees, to the Exchange Agent at its address set forth in the Letter of
Transmittal on or prior to the Expiration Date (or complying with the procedure
for book-entry transfer described below); or (ii) complying with the guaranteed
delivery procedures described below.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in DTC (also referred to as a book-entry facility) whose name
appears on a security listing as the owner of Old Notes), the signature of such
signer need not be guaranteed. In any other case, the tendered Old Notes must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Company and duly executed by the registered holder and the signature on
the endorsement or instrument of transfer must be guaranteed by a member firm of
a registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act (any of the foregoing hereinafter
referred to as an "Eligible Institution"). If the New Notes or Old Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Old Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
THE METHOD OF DELIVERY OF OLD NOTES, THE LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL,
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT
BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR OLD NOTES SHOULD BE SENT
TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS,
COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS
FOR SUCH HOLDERS.
The Company understands that the Exchange Agent has confirmed with DTC
that any financial institution that is a participant in DTC's system may utilize
DTC's Automated Tender Offer Program ("ATOP") to tender Old Notes. The Company
further understands that the Exchange Agent will request, within two business
days after the date the Exchange Offer commences that DTC establish an account
with respect to the Old Notes for the purpose of facilitating the Exchange
Offer, and any participant may make book-entry delivery of Old Notes by causing
DTC to transfer such Old Notes into the Exchange Agent's account in accordance
with DTC's ATOP procedures for transfer. However, the exchange of the Old Notes
so tendered will only be made after timely confirmation (a "Book-Entry
Confirmation") of such book-entry transfer and timely receipt by the Exchange
Agent of an Agent's Message (as defined in the next sentence), and any other
documents required by the Letter of Transmittal. The term "Agent's Message"
means a message, transmitted by DTC and received by the Exchange Agent and
forming part of Book-Entry Confirmation, which states that DTC has received an
express acknowledgment from a participant tendering Old Notes which are the
subject of such Book-Entry Confirmation and that such participant has received
and agrees to be bound by the terms of the Letter of Transmittal and that the
Company may enforce such agreement against such participant.
A tender will be deemed to have been received as of the date when (i)
the tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at DTC), is received by the Exchange
Agent or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
transmission to similar effect (as provided below) from an Eligible Institution
is received by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or letter, telegram
or facsimile transmission to similar effect (as provided below) by an Eligible
Institution will be made only against submission of a duly signed Letter of
Transmittal (and any other required documents) and deposit of the tendered Old
Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Old Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any or all tenders not in proper
form or the acceptance for
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exchange of which may, in the opinion of the Company's counsel, be unlawful.
The Company also reserves the absolute right to waive any of the conditions of
the Exchange Offer or any defect or irregularity in the tender of any Old
Notes. None of the Company, the Exchange Agent or any other person will be
under any duty to give notification of any defects or irregularities in tenders
or incur any liability for failure to give any such notification. Any Old Notes
received by the Exchange Agent that are not validly tendered and as to which
the defects or irregularities have not been cured or waived, or if Old Notes
are submitted in principal amount greater than the principal amount of Old
Notes being tendered by such tendering holder, such unaccepted or non-exchanged
Old Notes will be returned by the Exchange Agent to the tendering holder,
unless otherwise provided in the Letter of Transmittal, as soon as practicable
following the Expiration Date.
In addition, the Company reserves the right in its sole discretion (a)
to purchase or make offers for any Old Notes that remain outstanding subsequent
to the Expiration Date and (b) to the extent permitted by applicable law, to
purchase Old Notes in the open market, in privately negotiated transactions or
otherwise. The terms of any such purchases or offers will differ from the terms
of the Exchange Offer.
Guaranteed Delivery Procedures. If the holder desires to accept the
Exchange Offer and time will not permit a Letter of Transmittal or Old Notes to
reach the Exchange Agent before the Expiration Date or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender may be
effected if the Exchange Agent has received at its office, on or prior to the
Expiration Date, a letter, telegram or facsimile transmission from an Eligible
Institution setting forth the name and address of the tendering holder, the
name(s) in which the Old Notes are registered and the certificate number(s) of
the Old Notes to be tendered, and stating that the tender is being made thereby
and guaranteeing that, within three New York Stock Exchange trading days after
the date of execution of such letter, telegram or facsimile transmission by the
Eligible Institution, such Old Notes, in proper form for transfer (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at DTC), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Old Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly competed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of a Notice of Guaranteed Delivery which may be used by Eligible
Institutions for the purposes described in this paragraph are available from the
Exchange Agent.
Terms and Conditions of the Letter of Transmittal. The Letter of
Transmittal contains, among other things, the following terms and conditions,
which are part of the Exchange Offer.
The party tendering Old Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old Notes to the Company and irrevocably
constitutes and appoints the Exchange Agent as the Transferor's agent and
attorney-in-fact to cause the Old Notes to be assigned, transferred and
exchanged. The Transferor represents and warrants that it has full power and
authority to tender, exchange, assign and transfer the Old Notes and to acquire
New Notes issuable upon the exchange of such tendered Old Notes, and that, when
the same are accepted for exchange, the Company will acquire good and
unencumbered title to the tendered Old Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Company to be necessary or desirable to
complete the exchange, assignment and transfer of tendered Old Notes or to
transfer ownership of such Old Notes on the account books maintained by DTC. All
authority conferred by the Transferor will survive the death, bankruptcy or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, personal representatives, executors, administrators,
successors, assigns, trustees in bankruptcy and other legal representatives of
such Transferor.
By executing a Letter of Transmittal, each holder will make to the
Company the representations set forth above under the heading "-- Purpose and
Effect of the Exchange Offer."
Withdrawal of Tenders of Old Notes. Except as otherwise provided
herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
27
<PAGE> 33
To withdraw a tender of Old Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 p.m., New York City time, on
the Expiration Date. Any such notice of withdrawal must: (i) specify the name of
the person having deposited the Old Notes to be withdrawn (the "Depositor");
(ii) identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes); (iii) contain a statement that
such holder is withdrawing his election to have such Old Notes exchanged; (iv)
be signed by the holder in the same manner as the original signature on the
Letter of Transmittal by which such Old Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee with respect to the Old Notes register the
transfer of such Old Notes in the name of the person withdrawing the tender; and
(v) specify the name in which any such Old Notes are to be registered, if
different from that of the Depositor. If Old Notes have been tendered pursuant
to the procedure for book-entry transfer, any notice of withdrawal must specify
the name and number of the account at the book-entry transfer facility. All
questions as to the validity, form and eligibility (including time of receipt)
of such notices will be determined by the Company, whose determination shall be
final and binding on all parties. Any Old Notes so withdrawn will be deemed not
to have been validly tendered for purposes of the Exchange Offer, and no New
Notes will be issued with respect thereto unless the Old Notes so withdrawn are
validly retendered. Any Old Notes which have been tendered but which are not
accepted for exchange will be returned to the holder thereof without cost to
such holder as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Old Notes" at any time prior to the Expiration Date.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, or any extension
of the Exchange Offer, the Company shall not be required to accept for exchange,
or exchange New Notes for, any Old Notes, and may terminate the Exchange Offer
as provided herein before the acceptance of such Old Notes, if:
(a) any statute, rule or regulation shall have been enacted,
or any action shall have been taken by any court or governmental
authority which, in the reasonable judgment of the Company, would
prohibit, restrict or otherwise render illegal consummation of the
Exchange Offer; or
(b) any change, or any development involving a prospective
change, in the business or financial affairs of the Company or any of
its subsidiaries has occurred which, in the sole judgment of the
Company, might materially impair the ability of the Company to proceed
with the Exchange Offer or materially impair the contemplated benefits
of the Exchange Offer to the Company; or
(c) there shall occur a change in the current interpretations
by the staff of the Commission which, in the Company's reasonable
judgment, might materially impair the Company's ability to proceed with
the Exchange Offer.
If the Company determines in its sole discretion that any of the above
conditions are not satisfied, the Company may: (i) refuse to accept any Old
Notes and return all tendered Old Notes to the tendering holders; (ii) extend
the Exchange Offer and retain all Old Notes tendered prior to the Expiration
Date, subject, however, to the right of holders to withdraw such Old Notes (see
"-- Terms of the Exchange Offer -- Withdrawal of Tenders of Old Notes"); or
(iii) waive such unsatisfied conditions with respect to the Exchange Offer and
accept all validly tendered Old Notes which have not been withdrawn. If such
waiver constitutes a material change to the Exchange Offer, the Company will
promptly disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders, and the Company will extend the Exchange
Offer for a period of time, depending upon the significance of the waiver and
the manner of disclosure to the registered holders, if the Exchange Offer would
otherwise expire during such period.
28
<PAGE> 34
EXCHANGE AGENT
Bankers Trust Company has been appointed as Exchange Agent for the
Exchange Offer. Questions and requests for assistance, requests for additional
copies of this Prospectus or of the Letter of Transmittal and requests for
Notices of Guaranteed Delivery should be directed to the Exchange Agent
addressed as follows:
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT COURIER:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Group
Nashville, Tennessee 37229-2737 123 Washington Street, 1st Floor 648 Grassmere Park Road
(registered or certified New York, New York 10006 Nashville, Tennessee 37211
mail recommended)
</TABLE>
FACSIMILE TRANSMISSION:
(615) 835-3701
CONFIRM BY TELEPHONE:
(615) 835-3572
FOR INFORMATION WITH RESPECT TO THE EXCHANGE OFFER,
CALL THE EXCHANGE AGENT:
(800) 735-7777
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telecopy, telephone or in person by officers and regular
employees of the Company and its affiliates. No additional compensation will be
paid to any such officers and employees for engaging in soliciting tenders.
The Company has not retained any dealer-manager or other soliciting
agent in connection with the Exchange Offer and will not make any payments to
brokers, dealers or others soliciting acceptance of the Exchange Offer. The
Company, however, will pay the Exchange Agent reasonable and customary fees for
its services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith. The Company may also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this Prospectus, the Letter of
Transmittal and related documents to the beneficial owners of the Old Notes and
in handling or forwarding tenders for exchange.
The expenses to be incurred in connection with the Exchange Offer will
be paid by the Company. Such expenses include fees and expenses of the Exchange
Agent and transfer agent and registrar, accounting and legal fees and printing
costs, among others.
The Company will pay all transfer taxes, if any, applicable to the
exchange of the Old Notes pursuant to the Exchange Offer. If, however, New
Notes, or Old Notes for principal amounts not tendered or accepted for exchange,
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Old Notes tendered or if a transfer tax is
imposed for any reason other than the exchange of the Old Notes pursuant to the
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Letter of Transmittal, the amount of such transfer
taxes will be billed directly to such tendering holder.
29
<PAGE> 35
CONSEQUENCES OF FAILURE TO EXCHANGE
The Old Notes that are not exchanged for New Notes pursuant to the
Exchange Offer will remain restricted securities within the meaning of Rule 144
of the Securities Act. Accordingly, such Old Notes may be resold only: (i) to
the Company or any subsidiary thereof; (ii) to a QIB in compliance with Rule
144A; (iii) to an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act) that, prior to such
transfer, furnishes to the Trustee a signed letter containing certain
representations and agreements relating to the restrictions on transfer of the
Old Notes (the form of which letter can be obtained from the Trustee) and, if
such transfer is in respect of an aggregate principal amount of Old Notes at the
time of transfer of less than $100,000, an opinion of counsel acceptable to the
Company that such transfer is in compliance with the Securities Act; (iv)
outside the United States in compliance with Rule 904 under the Securities Act;
(v) pursuant to the exemption from registration provided by Rule 144 under the
Securities Act (if available); or (vi) pursuant to an effective registration
statement under the Securities Act. The liquidity of the Old Notes could be
adversely affected by the Exchange Offer. Following the consummation of the
Exchange Offer, holders of the Old Notes will have no further registration
rights under the Registration Rights Agreement and will not be entitled to the
contingent increase in the interest rate provided for in the Old Notes.
ACCOUNTING TREATMENT
The New Notes would be recorded at the same carrying value as the Old
Notes, as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company. The costs of the Exchange Offer and the unamortized
expenses related to the issuance of the Old Notes will be amortized over the
term of the New Notes.
30
<PAGE> 36
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the New
Notes offered hereby. In consideration for issuing the New Notes as contemplated
in this Prospectus, the Company will receive in exchange Old Notes in like
principal amount, the term and form of which are identical in all material
respects to the New Notes. The Old Notes surrendered in exchange for New Notes
will be retired and canceled and cannot be reissued. Accordingly, issuance of
the New Notes will not result in any increase in the indebtedness of the
Company. The Company used approximately $89.6 million of the net proceeds from
the Offering to purchase the Pledged Securities, consisting of U.S. government
securities, to secure and fund the first six scheduled payments of interest on
the Notes. The Company intends to use the net proceeds from the Offering to
partially finance the development, construction and operating costs and certain
acquisition expenses associated with the Company's PCS System and the completion
of the digital upgrade of the Company's cellular system.
31
<PAGE> 37
CAPITALIZATION
The following table sets forth the historical cash and consolidated
capitalization of the Company as of March 31, 1997 and as adjusted to give
effect to the Transactions. This table should be read in conjunction with "Use
of Proceeds," "Selected Historical Financial Information," "Pro Forma Financial
Information," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "The Maine Disposition," "The Preferred Stock Sales" and
the Company's consolidated financial statements and notes thereto included
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
-------------------------------
ACTUAL AS ADJUSTED
--------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS......................... $ 207,511 $ 500,217
========= ===========
RESTRICTED CASH FOR PAYMENT OF INTEREST(A)................................ $ -- $ 89,618
========= ===========
CASH HELD IN ESCROW(B).................................................... $ -- $ 5,405
========= ===========
CURRENT PORTION OF LONG-TERM DEBT......................................... $ 112 $ 112
LONG-TERM DEBT:
February 1996 Notes..................................................... 223,080 223,080
April 1996 Notes........................................................ 223,738 223,738
Notes................................................................... -- 300,000
Vendor Financing Agreement.............................................. 103,833 103,833
Other................................................................... 715 325
--------- -----------
Total long-term debt.................................................. 551,366 850,976
--------- -----------
STOCKHOLDERS' EQUITY:
Preferred Stock -- Series A, $.01 par value; 100,000 issued
and outstanding; convertible.......................................... 1 1
Preferred Stock -- Series B, $.01 par value; 100,000 issued
and outstanding; convertible.......................................... 1 1
Preferred Stock -- Series C, $.01 par value; 50,000 issued
and outstanding; convertible.......................................... -- 1
Preferred Stock -- Series D, $.01 par value; 50,000 issued
and outstanding; convertible.......................................... -- 1
Common Stock, $.01 par value, 55,000,000 shares authorized
and 26,864,511 shares issued and outstanding(c)....................... 269 269
Additional paid-in capital.............................................. 430,058 474,831
Accumulated deficit..................................................... (52,332) (8,657)
Deferred compensation................................................... (165) (165)
Treasury stock.......................................................... (345) (345)
--------- -----------
Total stockholders' equity............................................ 377,487 465,937
--------- -----------
Total capitalization............................................ $ 928,965 $ 1,317,025
========= ===========
</TABLE>
- --------------------
(a) Reflects the estimated portion of the net proceeds from the Offering to
be used to purchase Pledged Securities to secure the first six
scheduled interest payments on the Notes. See "Description of the Notes
-- Security."
(b) Reflects the $5.4 million of proceeds from the Maine Disposition that
is being held in escrow for indemnification or purchase price
adjustment obligations.
(c) Includes 35,000 shares outstanding as of March 31, 1997 under the
Company's 1995 Employee Restricted Stock Plan, but excludes 2,374,797
shares of Common Stock issuable upon exercise of stock options
outstanding as of March 31, 1997. See "Management." Also excludes: (i)
the 1,143,904 shares issuable upon exercise of the Warrants; (ii) the
9,090,900 shares of Common Stock issuable upon conversion of the Series
A Convertible Preferred Stock and Series B Convertible Preferred Stock;
and (iii) the 3,529,412 shares of Common Stock issuable upon conversion
of the Series C Convertible Preferred Stock and Series D Convertible
Preferred Stock. See "The Preferred Stock Sales."
32
<PAGE> 38
SELECTED HISTORICAL FINANCIAL INFORMATION
The following table sets forth certain selected historical financial
information for the Company as of and for each of the years in the five-year
period ended December 31, 1996 and as of and for the three months ended March
31, 1997 and 1996. The financial information as of and for each of the years in
the five-year period ended December 31, 1996 was derived from the consolidated
financial statements and notes thereto of the Company, which have been audited
by Arthur Andersen LLP, independent public accountants. The financial
information as of and for the three months ended March 31, 1997 and 1996 was
derived from the unaudited financial statements of the Company. In the opinion
of management, the unaudited financial statements include all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth herein. 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 "Pro Forma Financial Information," "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 Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED DECEMBER 31,
------------------------ ----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Service revenues ..................... $ 14,084 $ 6,996 $ 31,875 $ 25,384 $ 18,903 $ 8,228 $ 6,235
Equipment sales ...................... 5,025 854 7,250 3,928 2,859 1,121 925
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total revenues and sales ............ 19,109 7,850 39,125 29,312 21,762 9,349 7,160
----------- ----------- ----------- ----------- ----------- ----------- -----------
Cost of services ..................... 5,428 684 5,811 2,394 1,921 574 442
Cost of equipment sales .............. 11,987 694 11,653 3,127 2,391 1,010 828
Operations expenses .................. 3,809 1,204 9,927 3,596 2,722 1,333 1,214
Selling and marketing ................ 5,237 1,274 13,301 4,280 3,405 1,353 1,187
General and administrative ........... 7,680 1,810 16,963 4,218 3,651 1,562 1,379
Depreciation ......................... 8,340 731 5,887 2,741 2,130 953 832
Amortization ......................... 1,178 881 4,214 2,360 1,543 890 735
----------- ----------- ----------- ----------- ----------- ----------- -----------
Total operating expenses ............ 43,659 7,278 67,756 22,716 17,763 7,675 6,617
----------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income (loss) .............. (24,550) 572 (28,631) 6,596 3,999 1,674 543
Interest (income) expense(a) ......... 4,543 (739) (3,175) 1,657 635 46 131
Miscellaneous (income) expense ....... 473 303 1,226 (295) (48) 48 260
----------- ----------- ----------- ----------- ----------- ----------- -----------
Income (loss) before income taxes .... (29,566) 1,008 (26,682) 5,234 3,412 1,580 152
Income tax (benefit) expense ......... -- 472 (1,654) 2,230 1,535 567 52
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) before
cumulative effect ................... (29,566) 536 (25,028) 3,004 1,877 1,013 100
Cumulative effect of change in
accounting principle, net of tax(b) . -- (2,583) (2,583) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) .................... $ (29,566) $ (2,047) $ (27,611) $ 3,004 $ 1,877 $ 1,013 $ 100
=========== =========== =========== =========== =========== =========== ===========
Earnings per share:
Net income (loss) before cumulative
effect of change
in accounting principle ............. $ (1.10) $ .03 $ (1.00) $ .29 $ .19 $ .16 $ .02
Cumulative effect of change in
accounting principle, net of tax(b) . -- (.13) (.10) -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per share .......... $ (1.10) $ (.10) $ (1.10) $ .29 $ .19 $ .16 $ .02
=========== =========== =========== =========== =========== =========== ===========
Average common and common
equivalent shares outstanding ....... 26,812,000 19,899,000 25,087,000 10,281,000 9,765,000 6,317,000 6,289,000
OTHER FINANCIAL AND OPERATING DATA:
EBITDA(c) ............................ $ (12,244) $ 4,193 $ (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 ................. $ 36,209 $ 10,874 $ 233,551 $ 7,661 $ 2,866 $ 1,105 $ 921
Cellular subscribers at end
of period(e) ........................ 49,731 40,403 47,617 38,582 28,624 10,590 7,447
Net cellular population
equivalents(f) ...................... 737,800 737,800 737,800 732,900 728,200 281,800 277,400
PCS Subscribers at end of period ..... 34,886 -- 14,892 -- -- -- --
Net PCS population equivalents(f) .... 24,293,000 17,460,000 17,460,000 -- -- -- --
</TABLE>
33
<PAGE> 39
<TABLE>
<CAPTION>
AT DECEMBER 31,
AT MARCH 31, -----------------------------------------------------------
1997 1996 1995 1994 1993 1992
------------ --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ............ $ 200,646 $ 256,349 $ 977 $ 2,710 $ 547 $ 908
Property and equipment, net 284,713 251,269 18,066 13,262 5,545 5,394
Licenses, goodwill and other
intangibles, net .......... 429,085 402,321 24,904 23,903 -- --
Total assets ............... 973,094 947,117 74,330 50,812 10,517 8,721
Long-term obligations ...... 551,366 504,065 29,411 11,030 2,019 2,194
Retained earnings
(accumulated deficit) ..... (52,332) (22,766) 4,845 1,841 (36) (1,048)
Stockholders' equity ....... 377,487 407,007 36,674 33,374 5,983 4,960
</TABLE>
- --------------------
(a) The Company had interest income of $3.3 million and $2.3 million for
the three months ended March 31, 1997 and 1996, respectively, and $17.3
million for the year ended December 31, 1996. The Company had no
interest income for the years ended December 31, 1995, 1994, 1993 and
1992. Excludes capitalized interest of $6.7 million and $2.7 million
for the three months ended March 31, 1997 and 1996, respectively, and
$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." Accordingly, management expects that
a majority of the interest on the February 1996 Notes, the April 1996
Notes, the Vendor Financing Agreement and the Notes will be capitalized
during the construction of the PCS System. See "Pro Forma Financial
Information."
(b) During 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 from continuing operations 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) Earnings were insufficient to cover fixed charges by $36.3 million and
$2.2 million for the three months ended March 31, 1997 and 1996,
respectively, and by $56.2 million for the year ended December 31,
1996. 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, 25,456,
21,320 and 26,486 subscribers in the State of Maine for the years ended
December 31, 1994, 1995 and 1996 and for the three months ended March
31, 1996 and 1997, respectively. See "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. For the
years ended December 31, 1994, 1995 and 1996 and the three months ended
March 31, 1996 and 1997, Net Cellular Population Equivalents include
441,900, 442,000, 442,200, 442,000 and 442,200 population equivalents,
respectively, from the Company's Maine market areas. See "The Maine
Disposition."
34
<PAGE> 40
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
statements have been prepared to give effect to the Transactions, the 1996
Offerings and the Powertel Combination. The accompanying unaudited pro forma
condensed consolidated balance sheet as of March 31, 1997 has been prepared as
if the Transactions were consummated as of that date. The accompanying unaudited
pro forma condensed consolidated statements of operations of the Company for the
year ended December 31, 1996 give effect to the Transactions, the 1996 Offerings
and the Powertel Combination as if they occurred at January 1, 1996. The
accompanying unaudited pro forma condensed consolidated statements of operations
for the three months ended March 31, 1997 give effect to the Transactions as if
they occurred at January 1, 1996. The pro forma adjustments are based upon
available information and certain assumptions that the Company believes are
reasonable under the circumstances.
The unaudited pro forma condensed consolidated financial statements and
notes thereto should be read in conjunction with "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "The Maine Disposition," "The Preferred Stock Sales," "Certain
Transactions," the historical financial statements of Powertel and notes thereto
and other financial and operating information included elsewhere in this
Prospectus. These unaudited pro forma condensed consolidated financial
statements and notes thereto are provided for informational purposes only and do
not purport to be indicative of the results that would have actually been
obtained had the Transactions, the 1996 Offerings and the Powertel Combination
been completed on the dates indicated or that may be expected to occur in the
future.
35
<PAGE> 41
POWERTEL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------------
POWERTEL, INC. MAINE ALL OTHER
HISTORICAL DISPOSITION(a) TRANSACTIONS PRO FORMA
-------------- -------------- ------------ ----------
(DOLLARS IN THOUSANDS)
ASSETS
<S> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents................. $ 207,511 $ 71,799 $ 201,132 (b) $ 500,217
(25,000)(c)
44,775 (d)
Restricted cash for payment of interest... -- -- 28,365 (b) 28,365
Cash held in escrow....................... -- 5,405 -- 5,405
Accounts receivable, net.................. 13,131 (1,999) -- 11,132
Inventories............................... 19,372 (415) -- 18,957
Prepaid and other......................... 2,271 (166) -- 2,105
--------- --------- --------- ----------
242,285 74,624 249,272 566,181
--------- --------- --------- ----------
PROPERTY AND EQUIPMENT, AT COST.............. 303,035 (16,624) -- 286,411
Less accumulated depreciation............. (18,322) 3,604 -- (14,718)
--------- --------- --------- ----------
284,713 (13,020) -- 271,693
--------- --------- --------- ----------
OTHER ASSETS:
Restricted cash for payment of interest... -- -- 61,253 (b) 61,253
Licenses, net of amortization............. 406,567 -- -- 406,567
Goodwill, net of amortization............. 22,518 (22,518) -- --
Deferred charges and other................ 17,011 (479) 9,250 (b) 25,782
--------- --------- --------- ----------
446,096 (22,997) 70,503 493,602
--------- --------- --------- ----------
Total assets........................... $ 973,094 $ 38,607 $ 319,775 $1,331,476
========= ========= ========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................... $ 28,158 $ (498) $ (25,000)(c) $ 2,660
Accrued expenses.......................... 11,361 (1,228) -- 10,133
Advance billings and customer deposits.... 2,008 (350) -- 1,658
Current portion of long-term obligations.. 112 -- -- 112
--------- --------- --------- ----------
41,639 (2,076) (25,000) 14,563
--------- --------- --------- ----------
LONG-TERM OBLIGATIONS:
February 1996 Notes....................... 223,080 -- -- 223,080
April 1996 Notes.......................... 223,738 -- -- 223,738
Notes..................................... -- -- 300,000 (b) 300,000
Vendor Financing Agreement................ 103,833 -- -- 103,833
Other..................................... 715 (390) -- 325
--------- --------- --------- ----------
551,366 (390) 300,000 850,976
--------- --------- --------- ----------
MINORITY INTEREST IN SUBSIDIARY.............. 2,602 (2,602) -- --
--------- --------- --------- ----------
STOCKHOLDERS' EQUITY:
Preferred stock........................... 2 -- 2 (d) 4
Common stock.............................. 269 -- -- 269
Paid-in capital........................... 430,058 -- 44,773 (d) 474,831
Retained earnings (accumulated deficit)... (52,332) 43,675 -- (8,657)
Deferred compensation..................... (165) -- -- (165)
Treasury stock............................ (345) -- -- (345)
--------- --------- --------- ----------
377,487 43,675 44,775 465,937
--------- --------- --------- ----------
Total liabilities and stockholders'
equity................................. $ 973,094 $ 38,607 $ 319,775 $1,331,476
========= ========= ========= ==========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial
statements are an integral part of these statements.
36
<PAGE> 42
POWERTEL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------
POWERTEL,
INC. MAINE ALL OTHER
HISTORICAL DISPOSITION(e) TRANSACTIONS PRO FORMA
----------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUE AND SALES:
Service ............................ $ 14,084 $ (3,407) $ 10,677
Equipment .......................... 5,025 (88) 4,937
----------- ----------- -----------
Total revenue and sales ......... 19,109 (3,495) 15,614
----------- ----------- -----------
OPERATING EXPENSES:
Cost of services ................... 5,428 (549) 4,879
Cost of equipment sold ............. 11,987 (385) 11,602
Operations ......................... 3,809 (507) 3,302
Selling and marketing .............. 5,237 (675) 4,562
General and administrative ......... 7,680 (442) 7,238
Depreciation ....................... 8,340 (491) 7,849
Amortization ....................... 1,178 (164) 1,014 (f)
----------- ----------- -----------
Total operating expenses ........ 43,659 (3,213) 40,446
----------- ----------- -----------
OPERATING INCOME (LOSS) ............... (24,550) (282) (24,832)
----------- ----------- -----------
OTHER EXPENSES (INCOME):
Interest (income) expense, net ..... 4,543 (g) $ 6,384 (g) 10,927
Minority interest .................. (113) 113 --
Other .............................. 586 586
----------- ----------- ----------- -----------
5,016 113 6,384 11,513
----------- ----------- ----------- -----------
Net income (loss) ..................... $ (29,566) $ (395) $ (6,384) $ (36,345)
=========== =========== =========== ===========
EARNINGS PER SHARE:
Net loss per share ................. $ (1.10) $ (1.36)
=========== ===========
Average common and common equivalent
shares outstanding .............. 26,812,000 26,812,000
=========== ===========
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial
statements are an integral part of these statements.
37
<PAGE> 43
POWERTEL, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
----------------------------------------------
POWERTEL, INC. POWERTEL PCS MAINE ALL OTHER
HISTORICAL PARTNERS, L.P.(h) DISPOSITION(e) TRANSACTIONS PRO FORMA
-------------- ----------------- -------------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUE AND SALES:
Service ................................... $ 31,875 $ (13,912) $ 17,963
Equipment ................................. 7,250 (2,172) 5,078
------------ ------------ ------------
Total revenue and sales ................. 39,125 (16,084) 23,041
------------ ------------ ------------
OPERATING EXPENSES:
Cost of services .......................... 5,811 (1,818) 3,993
Cost of equipment sold .................... 11,653 (1,787) 9,866
Operations ................................ 9,927 (2,039) 7,888
Selling and marketing ..................... 13,301 (2,473) 10,828
General and administrative ................ 16,963 $ 358 (1,621) 15,700
Depreciation .............................. 5,887 1 (1,709) 4,179
Amortization .............................. 4,214 -- (2,481) 1,733 (f)
------------ ------------ ------------ ------------
Total operating expenses ................ 67,756 359 (13,928) 54,187
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) .................... (28,631) (359) (2,156) (31,146)
------------ ------------ ------------ ------------
OTHER EXPENSES (INCOME):
Interest (income) expense,
net ..................................... (3,175)(g) (99) -- $13,827 (g) 10,553
Minority interest ......................... 474 -- 474 -- --
Other ..................................... 1,700 (34) -- -- 1,666
------------ ------------ ------------ ------------ ------------
(1,949) (133) 474 13,827 12,219
------------ ------------ ------------ ------------ ------------
Income (loss) before income taxes
and cumulative effect of change
in accounting principle .................. (26,682) (226) (2,630) (13,827) (43,365)
Income tax benefit ......................... (1,654) -- -- -- (1,654)
------------ ------------ ------------ ------------ ------------
Income (loss) before cumulative
effect of change in accounting
principle ................................ (25,028) (226) (2,630) (13,827) (41,711)
Cumulative effect of change in
accounting principle, net of tax ......... (2,583) -- 1,818 -- (765)
------------ ------------ ------------ ------------ ------------
Net income (loss) .......................... $ (27,611) $ (226) $ (812) $ (13,827) $ (42,476)
============ ============ ============ ============ ============
EARNINGS PER SHARE:
Loss before cumulative effect
of change in accounting
principle ............................... $ (1.00) $ (1.66)
Cumulative effect of change in
accounting principle, net of tax ......... (.10) (.03)
------------ ------------
Net loss per share ........................ $ (1.10) $ (1.69)
============ ============
Average common and common
equivalent shares outstanding ............ 25,087,000 25,087,000
============ ============
</TABLE>
The accompanying notes to unaudited pro forma consolidated financial
statements are an integral part of these statements.
38
<PAGE> 44
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(a) Reflects the $77.2 million proceeds from the Maine Disposition (which
includes $5.4 million that is being held in escrow for indemnification
or purchase price adjustment obligations) and the elimination of the
assets and liabilities related to the Company's Maine operations. The
selling price exceeded the net asset value of the Company's Maine
operations and, therefore, represents a gain to the Company of $43.7
million. The Company anticipates that net operating loss carryforwards,
as well as currently generated taxable losses will more than offset the
tax liability associated with this gain. Accordingly, no tax effect
related to the gain is reflected in the accompanying pro forma
financial statements. The Company's gain related to the Maine
Disposition, which is nonrecurring in nature, is not reflected on the
pro forma statement of operations as this statement is intended to
reflect the Company's ordinary operations.
(b) Reflects the issuance of $300.0 million principal amount of the Notes.
The net proceeds were approximately $290.8 million which is net of
issuance costs of $9.2 million. Such issuance costs will be amortized
using the effective interest method over the ten year life of the Notes
or $.9 million per annum. Approximately $89.6 million of the net
proceeds from the Offering was used to purchase Pledged Securities to
be held in a pledged account to secure the Notes until payment of the
first six scheduled interest payments on the Notes. See "Description of
the Notes -- Security."
(c) Reflects the remaining $25.0 million payment made by the Company to
complete the purchase of the licenses for the Kentucky/Tennessee BTAs.
The aggregate cost of the licenses was $31.2 million, of which at March
31, 1997 the Company had paid $6.2 million to the government as a
deposit. At March 31, 1997, "Licenses, net of amortization" included
the $31.2 million cost for the licenses for the Kentucky/Tennessee
BTAs.
(d) Reflects the issuance of 50,000 shares each of Series C Convertible
Preferred Stock and Series D Convertible Preferred Stock. The net
proceeds were $44.8 million, which is net of issuance costs of $.2
million.
(e) Reflects the elimination of the statement of operations items relating
to the Maine properties to be sold in the Maine Disposition.
(f) No pro forma adjustment has been made to amortize the licenses for the
Kentucky/Tennessee BTAs, as these properties have not yet been
constructed or placed in service. When placed in service, these
licenses will be amortized over 40 years resulting in amortization
expense of $.8 million per year.
(g) For the three months ended March 31, 1997 and the year ended December
31, 1996, interest income on a pro forma basis would have been $4.5
million and $22.2 million, respectively, which reflects an estimated
$1.3 million and $5.0 million, respectively, of interest income that
would have been earned on the Pledged Securities. See "Description of
the Notes-- Security." For the three months ended March 31, 1997 and
the year ended December 31, 1996, interest expense excludes capitalized
interest of $6.7 million and $29.0 million, respectively. Pro forma
interest excludes capitalized interest of $7.7 million and $55.8
million for the three months ended March 31, 1997 and the year ended
December 31, 1996, respectively. During the construction of the PCS
System, the cost of the PCS licenses and the cost related to
construction expenditures are considered to be assets qualifying for
interest capitalization under FASB Statement No. 34 "Capitalization of
Interest Cost." Accordingly, management expects that a majority of the
interest on the February 1996 Notes, the April Notes, the Vendor
Financing Agreement and the Notes will be capitalized during the
construction of the PCS System. Pro forma interest expense will not be
indicative of interest expense which will be recognized as additional
portions of the PCS System are placed in service.
(h) Reflects expenses related to the Powertel PCS Partners, L.P. prior to
the Powertel Combination.
39
<PAGE> 45
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Powertel provides PCS services in the southeastern United States under
the name "Powertel" and provides cellular telephone service in contiguous
portions of western Georgia and eastern Alabama under the name "InterCel." On
May 1, 1997, the Company sold substantially all the assets related to its
cellular operations in the State of Maine for approximately $77.2 million. See
"The Maine Disposition."
Powertel's PCS licenses 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 13 BTAs in Kentucky
and Tennessee. Powertel 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 15 markets in Alabama, Florida, Georgia, Mississippi
and Tennessee. In all of these markets, the Company was the first to offer PCS
services commercially. Powertel intends to continue to rapidly build out its PCS
network and to launch its PCS services. As of March 31, 1997, the Company had
approximately 35,000 PCS subscribers.
In the D/E/F Auctions, the Company acquired 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. The aggregate purchase price for
the licenses, which encompass an area of approximately 66,000 square miles with
a population of approximately 6.8 million people, was $31.2 million. With the
addition of the Kentucky/Tennessee BTAs, Powertel has one of the largest
contiguous PCS footprints in the southeastern United States. 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 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 security, personal convenience 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 to customers; and (iii) the depreciation of PCS equipment and
amortization of the PCS licenses, the Company incurred an operating loss of
$24.6 million and $28.6 million for the three months ended March 31, 1997 and
the year ended December 31, 1996, respectively. The Company expects to continue
subsidizing the cost of PCS handsets to customers for the foreseeable future and
expects that negative PCS equipment margin will continue to contribute
significantly to future operating results. The Company expects to incur
significant operating losses during the remainder of 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 an average monthly churn rate of 1.5%
40
<PAGE> 46
and 2.3%, respectively, for its cellular and PCS lines of business for the three
months ended March 31, 1997. 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 Cellular Markets' churn rate decreased to 1.9% from 2.1% in 1995.
The Company believes that it may experience an increase in its PCS churn rate
during the current year related to the disconnection of non-paying customers.
However, the Company intends to minimize the impact of such increase by
implementing a proactive customer retention program and focusing its efforts on
achieving consistently high levels of customer satisfaction.
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 a special 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 (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) for a $50
per month access charge (excluding toll and roaming charges, taxes and fees for
optional services). As of March 31, 1997, a substantial majority of the
Company's PCS subscribers were participants in this promotion.
The majority of the interest costs incurred during 1996 related to the
Unit Offering and the Debt Offering and 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 amortize over the life of the related assets from the time such
systems were placed in service. Additionally, the Company's depreciation and
amortization expenses have significantly increased as a result of the fixed
assets and PCS licenses related to PCS systems placed in service during the
fourth quarter of 1996 and the first quarter of 1997 and will continue to
increase as a result of systems to be placed in service during the remainder of
1997 and thereafter.
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 $.1 million in 1995 to $.3 million in 1996 and was $.1 million
for the three months ended March 31, 1997.
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.
41
<PAGE> 47
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>
THREE MONTHS ENDED MARCH 31,
---------------------------------------------------------------------------------------------------------
1997 1996
----------------------------------------------------- --------------------------------------------------
% OF % OF % OF % OF % OF
CELLULAR PCS COMBINED COMBINED CELLULAR COMBINED COMBINED
REVENUE/ REVENUE/ PCS AND REVENUE/ REVENUE/ PCS AND REVENUE/
CELLULAR SALES PCS(a) SALES CELLULAR SALES CELLULAR SALES PCS(a) CELLULAR SALES
-------- ------- -------- -------- -------- -------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SERVICE REVENUE
AND COST ANALYSIS:
Service revenue
Local customers --
Access revenue ......... $ 4,000 51.7% $ 4,540 71.5% $ 8,540 60.6% $ 3,428 49.0% $ -- $ 3,428 49.0%
Airtime revenue ........ 1,545 20.0 282 4.5 1,827 13.0 1,317 18.8 -- 1,317 18.8
Toll revenue ........... 218 2.8 673 10.6 891 6.3 166 2.4 -- 166 2.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
5,763 74.5 5,495 86.6 11,258 79.9 4,911 70.2 -- 4,911 70.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Roamers --
Access and airtime
revenue ............... 1,242 16.1 -- -- 1,242 8.8 1,503 21.5 -- 1,503 21.5
Toll revenue ........... 399 5.1 -- -- 399 2.9 413 5.9 -- 413 5.9
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
1,641 21.2 -- -- 1,641 11.7 1,916 27.4 -- 1,916 27.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Other service revenue .. 334 4.3 851 13.4 1,185 8.4 170 2.4 -- 170 2.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Total service revenue .. 7,738 100.0 6,346 100.0 14,084 100.0 6,997 100.0 -- 6,997 100.0
Cost of services ......... 1,069 13.8 4,359 68.7 5,428 38.5 684 9.8 -- 684 9.8
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Gross margin ........... $ 6,669 86.2% $ 1,987 31.3% $ 8,656 61.5% $ 6,313 90.2% $ -- $ 6,313 90.2%
======== ===== ======== ===== ======== ===== ======== ===== ======== ======== =====
EQUIPMENT SALES
AND COST ANALYSIS:
Equipment sales .......... $ 240 100.0% $ 4,785 100.0% $ 5,025 100.0% $ 853 100.0% $ -- $ 853 100.0%
Cost of equipment sales .. 840 350.0 11,147 233.0 11,987 238.5 694 81.4 -- 694 81.4
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Gross margin ........... $ (600) --% $ (6,362) --% $ (6,962) --% $ 159 18.6% $ -- $ 159 18.6%
======== ===== ======== ===== ======== ===== ======== ===== ======== ======== ======
OPERATING MARGIN ANALYSIS:
Total revenues ........... $ 7,978 100.0% $ 11,131 100.0% $ 19,109 100.0% $ 7,850 100.0% $ -- $ 7,850 100.0%
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Operating expense --
Cost of services and
equipment sales ........ 1,909 23.9 15,506 139.3 17,415 91.1 1,378 17.6 -- 1,378 17.6
Operations .............. 1,010 12.7 2,799 25.1 3,809 19.9 1,070 13.6 134 1,204 15.3
Selling and marketing ... 1,239 15.5 3,998 35.9 5,237 27.4 1,096 14.0 178 1,274 16.2
General and
administrative ......... 913 11.4 6,767 60.8 7,680 40.2 793 10.1 1,017 1,810 23.1
Depreciation ............ 951 11.9 7,389 66.4 8,340 43.7 709 9.0 22 731 9.3
Amortization ............ 178 2.3 1,000 9.0 1,178 6.2 881 11.2 -- 881 11.2
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Total operating
expenses .............. 6,200 77.7 37,459 336.5 43,659 228.5 5,927 75.5 1,351 7,278 92.7
-------- ----- -------- ----- -------- ----- -------- ----- -------- -------- -----
Operating income ......... $ 1,778 22.3% $(26,328) --% (24,550) -- $ 1,923 24.5% $ (1,351) 572 7.3
======== ===== ======== ===== ======== ===== ========
Interest expense
(income), net ........... 4,543 23.8 (739) --
Miscellaneous (income)
expense ................. 473 2.4 303 3.9
-------- ----- -------- -----
Income (loss) before
income taxes ............ (29,566) -- 1,008 12.8
Income tax provision ..... -- -- (472) --
-------- ----- -------- -----
Income (loss) before
cumulative effect ....... (29,566) -- 536 6.8
Cumulative effect of
change in accounting
principle, net of tax ... -- -- (2,583) --
-------- ----- -------- -----
Net income (loss) ........ $(29,566) --% $ (2,047) --%
======== ===== ======== =====
</TABLE>
- --------------------
(a) The Company did not commence PCS operations until the fourth quarter
1996.
42
<PAGE> 48
THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THREE MONTHS ENDED MARCH 31, 1996
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. On May 1, 1997, the
Company sold substantially all of its assets related to the Company's cellular
operations in the State of Maine (the "Maine Cellular Market"). See "The Maine
Disposition."
In October 1996, the Company began providing PCS services in
Jacksonville, Florida and Montgomery, Alabama. Throughout the remainder of 1996
and the first quarter of 1997, the Company launched PCS services in 14
additional markets within the Current PCS Markets and, as of March 31, 1997, had
approximately 35,000 subscribers.
Service revenue from local customers increased $6.3 million or 129.2%
for the three months ended March 31, 1997, as compared to the same period of
1996. Cellular service revenue from local customers increased $.9 million or
17.3%, primarily as a result of a 23.1% increase in the number of customers (to
49,731 at March 31, 1997 from 40,403 at March 31, 1996). This increase in
cellular subscribers is attributable to the success of the Company's marketing
efforts as well as the overall increase in nationwide cellular penetration
rates. PCS service revenue from local customers was $5.5 million for the three
months ended March 31, 1997. During the three months ended March 31, 1997, the
Company added 19,994 subscribers (an increase to 34,886 at March 31, 1997). The
addition of new PCS customers was primarily due to the recent service launch in
16 PCS markets coupled with the success of the Prestige Partners Promotion,
which was offered in all operational markets through January 18, 1997. The
Company's subscriber growth rate during the Prestige Partners Promotion may not
be indicative of subscriber growth rates in future periods.
The average monthly service revenue per local cellular subscriber
(excluding roaming revenue and equipment sales) decreased to $39.40 for the
three months ended March 31, 1997, from $41.42 for the same period of the prior
year. This decrease was due primarily to the addition of customers who tend to
use cellular service less frequently and a decrease in cellular pricing. The
average monthly service revenue per local PCS subscriber was $63.52 for the
three months ended March 31, 1997, which is substantially higher than cellular
due mainly to the $50 monthly access fee associated with the Prestige Partners
Promotion.
Roamer revenue (including roamer long distance), which was generated
solely from the Company's cellular business, decreased $.3 million, or 14.4%,
for the three months ended March 31, 1997, as compared to the same period of the
prior year. This decrease is attributable primarily to the amended agreement
with BellSouth Mobility, effective January 16, 1997, under which the parties
agreed to per-minute reductions to the rates charged to BellSouth Mobility
customers roaming in the Cellular Markets. The Company believes that this
amended agreement may result in decreased roaming revenues in future periods.
Cost of services includes direct cell site costs (e.g. property taxes,
site lease costs and electric utilities) and the cost of: (i) interconnection
with LEC facilities; (ii) cellular roaming validation (provided by a third-party
clearinghouse); (iii) long distance toll services; (iv) cellular cloning and
fraud; and (v) supplementary services (such as voice mail). For the three months
ended March 31, 1997, cost of services increased $4.7 million, or 693.6%, as
compared to the same period of 1996 and was 38.5% of total service revenue,
compared to 9.8% for the same period in 1996. This increase is primarily
attributable to costs associated with operating and maintaining the expanding
PCS network, including costs of interconnection and transport and cell site
leases, taxes and utilities. The Company expects cost of services to decline as
a percentage of total service revenue as the Company continues to build its
customer base.
To date, wireless telecommunications operators have been required to
pay fees to the LECs for the interconnection to their networks. 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 has recently entered into interconnection agreements for its cellular
and PCS operations with BellSouth Telecommunications Corporation, the local
exchange subsidiary of BellSouth Corporation ("BellSouth"), the LEC with which
the Company primarily
43
<PAGE> 49
interconnects in its service territory. Effective as of April 1, 1997, the
mutual and reciprocal interconnection rates under these agreements range from
$.005644 to $.01586 per minute. These rates represent a significant decrease
from the previous rates paid by the Company to BellSouth of approximately $.022
per minute.
The Company generated a negative cellular equipment margin of 250.0% on
$.2 million of sales for the three months ended March 31, 1997, as compared to a
positive margin of 18.6% on $.9 million of sales for the same period of 1996.
This decrease is due to a change in the Company's method of accounting for
certain promotional costs (primarily equipment credits) in 1996. Under the new
method of accounting, all cellular equipment subsidies are expensed as incurred.
Such subsidies were deferred and amortized over the life of the related cellular
contract in prior periods. For its PCS operations, the Company generated a
negative equipment margin of 133.0% on $4.8 million of sales for the three
months ended March 31, 1997 as a result of the Company's decision to subsidize
the cost of PCS handsets. The Company expects to continue subsidizing the cost
of PCS and cellular 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 $3.8 million for the three months ended March 31, 1997,
which represented an increase of $2.6 million, or 216.4%, from the same period
of 1996. Cellular operations costs totaled $1.0 million for the three months
ended March 31, 1997, which represented a 5.6% decrease from the same period of
1996. Cellular operations costs as a percentage of total cellular revenue
improved to 12.7% for the three months ended March 31, 1997 as compared to 13.6%
for the same period of 1996. PCS operations costs totaled $2.8 million for the
three months ended March 31, 1997 and were comprised primarily of salaries and
benefits, bad debt provisions and credit and collection costs.
Selling and marketing costs were $5.2 million for the three months
ended March 31, 1997, an increase of $4.0 million, or 311.1%, as compared to the
same period of the prior year. Substantially all of this increase is
attributable to the PCS advertising campaign associated with the Prestige
Partners Promotion, as well as the costs of all direct and indirect sales
channels, including commissions incurred as the result of the increase in PCS
subscribers.
General and administrative costs ("G&A") were $7.7 million for the
three months ended March 31, 1997, an increase of $5.9 million, or 324.3%, from
the same period of 1996. PCS G&A costs totaled $6.8 million for the three months
ended March 31, 1997 and were comprised primarily of costs (excluding
depreciation) associated with the corporate and regional facilities.
Depreciation and amortization for the three months ended March 31, 1997
totaled $9.5 million, as compared to $1.6 million for the same period of 1996,
and consist principally of the depreciation of the cellular and PCS networks and
the amortization of PCS licenses. Substantially all of the increase of $7.9
million in depreciation and amortization for the three months ended March 31,
1997 is due to the PCS licenses and the PCS System, portions of which were
placed in service in the fourth quarter of 1996 and the first quarter of 1997.
The Company anticipates these costs will continue to increase in future periods
as additional portions of the PCS System are completed and placed in service.
Net consolidated interest expense totaled $4.5 million for the three
months ended March 31, 1997, as compared to net interest income of $.7 million
for the same period of 1996. Interest income earned during such periods was $3.3
million and $2.3 million, respectively. Additionally, approximately $6.7 million
and $2.7 million of interest expense was capitalized during the three months
ended March 31, 1997 and 1996, respectively, as the Company continued to
construct the PCS System.
The effective income tax rates for the three months ended March 31,
1997 and 1996 were 0% and 46.8%, respectively. The decrease between periods is
primarily attributable to the deferred tax asset valuation allowance required as
of March 31, 1997 ($23.0 million). The Company generated a $29.6 million loss
from continuing operations during the first quarter of 1997 and expects to
continue to incur significant operating losses throughout the remainder of 1997
and beyond. The tax benefit of these operating losses will not be recognized
until it is more likely than not that such benefit is realizable.
44
<PAGE> 50
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>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1996 1995 1994
---------------------------------------------------- ------------------- --------------------
% OF % OF
CELLULAR COMBINED COMBINED % OF % OF
REVENUE/ PCS 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 AND
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 and 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 AND
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) --% $ 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 and
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 and marketing ...... 4,637 13.4 8,664 13,301 34.0 4,280 14.6 3,405 15.6
General and administrative 2,940 8.4 14,023 16,963 43.4 4,218 14.4 3,651 16.8
Depreciation ............... 2,722 7.9 3,165 5,887 15.0 2,741 9.4 2,130 9.8
Amortization ............... 3,380 9.8 834 4,214 10.8 2,360 8.0 1,543 7.1
-------- ----- -------- -------- ----- -------- ----- -------- -----
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) -- 6,596 22.5 3,999 18.4
======== ===== ========
Interest expense (income),
net ........................ (3,175) -- 1,657 5.7 635 2.9
Miscellaneous (income)
expense .................... 1,226 3.1 (295) -- (48) --
-------- ----- -------- ----- -------- -----
Income before income taxes .. (26,682) -- 5,234 17.8 3,412 15.7
Income tax (provision)
benefit .................... 1,654 4.2 (2,230) -- (1,535) --
-------- ----- -------- ----- -------- -----
Income (loss) before
cumulative effect .......... (25,028) -- 3,004 10.2 1,877 8.6
Cumulative effect of change
in accounting principle,
net of tax ................. (2,583) -- -- -- -- --
-------- ----- -------- ----- -------- -----
Net income (loss) ........... $(27,611) --% $ 3,004 10.2% $ 1,877 8.6%
======== ===== ======== ===== ======== =====
</TABLE>
- --------------------
(a) The Company did not commence PCS operations until the fourth quarter
1996.
45
<PAGE> 51
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 sold
substantially all of the assets related to the Maine Cellular Market in May
1997. See "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 $.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 through 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 -- Cellular Roaming." 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 Cellular
Markets, for lower roaming rates. The Company believes that the increased
roaming traffic in its Cellular Markets was partially a result of this
agreement.
Cost of services includes direct cell site costs (e.g. property taxes,
site lease costs and electric utilities) and the cost of: (i) interconnection
with LEC facilities; (ii) cellular roaming validation (provided by a third-party
clearinghouse); (iii) long distance toll services; (iv) cellular cloning and
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. 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.
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). For its
PCS operations, the Company generated a negative equipment margin of 154.2% on
$3.4 million in sales in 1996, as a result of the Company's subsidization of the
cost of PCS handsets.
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%
46
<PAGE> 52
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 and marketing costs were $13.3 million for 1996. Cellular
selling and marketing costs totaled $4.6 million for the year, an increase of
$.4 million, or 8.3%, as compared to the prior year. PCS selling and marketing
costs totaled $8.7 million and were comprised of costs related to the commercial
launch of the Company's PCS services and the PCS advertising campaign associated
with the Prestige Partners Promotion, as well as the costs of all direct and
indirect sales channels, including commissions incurred as a result of the
addition of PCS subscribers.
G&A costs were $17.0 million for 1996. Cellular G&A totaled $2.9
million for the year, a decrease of $1.3 million, or 30.3%, as compared to the
prior year. Likewise, cellular G&A as a percentage of total revenue decreased to
8.4% from 14.4% 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. G&A
for the PCS business unit totaled $14.0 million for 1996 and were comprised
primarily of costs (excluding depreciation) associated with the corporate and
regional facilities.
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.
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 consolidated 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.
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) is the primary factor driving this growth. The substantial increase in new
customers reflects the success of the Company's marketing efforts. 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 $.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
47
<PAGE> 53
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 Cellular Markets, despite the Company's network being designed
in such a way that customers in the Cellular Markets can call the Atlanta,
Georgia and Birmingham and Montgomery, Alabama Local Access and Transport Areas
("LATAs") at local airtime rates (toll free).
Roamer revenue (including toll revenue) for 1995 increased $1.4
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 Cellular Markets 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 $.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 $.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 $.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 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.
48
<PAGE> 54
Selling and marketing costs were $4.3 million in 1995 as compared to
$3.4 million in 1994. The increase was primarily attributable to increased
commissions expense due to the increase in new customers and additional
operating costs associated with the opening of three new retail locations.
G&A costs were $4.2 million for the year ended December 31, 1995, an
increase of $.6 million, or 15.6%, as compared to 1994. The increase was
attributable to several factors, including increases in billing costs due to the
increased subscriber base and increases in employee related costs due to the
increase in total employees. G&A as a percentage of revenue decreased from 16.8%
for 1994 to 14.4% for 1995. During 1995, the Company benefitted from economies
of scale with respect to certain G&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 Cellular Markets 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 Cellular Markets. 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 associated
with the PCS System buildout and for information technology and the support of
the PCS business, are estimated to be approximately $280.0 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 ($30.0 million in 1997 and $120.0 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 55% of the population
within the PCS Markets. The initial coverage is expected to 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.
49
<PAGE> 55
On May 1, 1997, the Company sold substantially all of its Maine
cellular assets for an aggregate purchase price of $77.2 million (which includes
$5.4 million that is being held in escrow for indemnification and purchase price
adjustment obligations). See "The Maine Disposition."
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 nonvoting Series A Convertible Preferred Stock from the Company for an
aggregate purchase price of $75.7 million and pursuant to a Stock Purchase
Agreement dated as of March 4, 1996 between the Company and SCANA, SCANA
purchased 100,000 shares of nonvoting Series B Convertible Preferred Stock from
the Company for an aggregate purchase price of $75.7 million (collectively, 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 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
the 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 March 31,
1997, approximately $103.8 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 March 31, 1997. See
"Description of Certain Indebtedness -- The Vendor Financing Agreement."
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.
The Company believes that the net proceeds from the Offering, together
with the net proceeds from the Preferred Stock Sales, cash on hand (including
proceeds from the Maine Disposition) and borrowings under the Vendor Financing
Agreement and additional vendor financing, which the Company expects to be
available, 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. 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 capital. Sources
50
<PAGE> 56
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 business. 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 the net proceeds from the Maine Disposition and the remaining net
proceeds from 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 that may be contained in
any future financing arrangements. See "Description of Certain Indebtedness" and
"Description of the Notes." 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. See "Risk Factors -- Priority of Secured Debt;
Structural Subordination" and "-- Significant Capital Requirements."
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. However, at March 31, 1997, on a pro
forma basis after giving effect to the Transactions, the Company would have had
$851.1 million of indebtedness outstanding, and the accretion of original issue
discount on the April 1996 Notes and the February 1996 Notes will cause an
increase in the Company's liabilities from March 31, 1997 of $266.2 million
($129.9 million by February 1, 2001 with respect to the February 1996 Notes and
$136.3 million by May 1, 2001 with respect to the April 1996 Notes). Management
believes that cash flow from operations may be insufficient to repay the April
1996 Notes, the February 1996 Notes and the Notes 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. See "Risk Factors -- Ability to Service Debt; Restrictive Covenants;
Refinancing Risks."
During the three months ended March 31, 1997, the Company used net cash
of $48.7 million in operating activities as compared to net cash provided from
operating activities of $3.1 million for the same period of 1996. Included in
net cash used in operating activities for the three months ended March 31, 1997
was $29.6 million of net loss, $6.3 million of bond accretion on the February
1996 Notes and the April 1996 Notes, $9.5 million of depreciation and
amortization and $35.2 million related to changes in assets and liabilities.
During 1996, the Company used net cash of $15.3 million in 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 $.4
million related to the evaluation and formation of strategies to obtain PCS
licenses. These costs were reimbursed by Powertel PCS Partners, L.P. during
1995. Additionally, the Company incurred $3.7 million of such expenses during
1995 which were reimbursed by Powertel on a monthly basis.
Cash provided by investing activities was $36.2 million for the three
months ended March 31, 1997, as compared to cash used of $24.9 million for the
same period of 1996. For investing activities for the three months ended March
31, 1997, the Company incurred capital expenditures totaling $36.2 million
(primarily related to the buildout of the PCS System and support systems) and
other license costs (primarily microwave relocation expenditures) of $3.3
million. These uses of capital were more than offset by the liquidation of
short-term investments totaling $75.7 million. 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
system, 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
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<PAGE> 57
related to the acquisition of Powertel PCS Partners, L.P. 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
$7.7 million (the majority of which related to the purchase and installation of
a new digital switch for the Cellular Markets) and an investment in Powertel PCS
Partners, L.P. of $17.0 million (to fund Powertel'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, which consisted primarily of
additional borrowings of $34.3 million under the Vendor Financing Agreement,
amounted to $34.5 million for the three months ended March 31, 1997 compared to
$276.6 million for the same period of 1996, during which the Company completed
debt and equity offerings which provided $304.4 million in net proceeds. 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, 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128 ("FAS 128"), "Earnings Per
Share," which becomes effective for fiscal years ending after December 15, 1997.
FAS 128 changes certain reporting and disclosure requirements for earnings per
share and will require restatement of all prior period earnings per share
amounts.
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 Prospectus for a pro forma disclosure as if the provisions of
FAS 123 had been applied.
In March 1995, the 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.
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<PAGE> 58
BUSINESS
Powertel provides PCS services in the southeastern United States under
the name "Powertel" and provides cellular telephone service in contiguous
portions of western Georgia and eastern Alabama under the name "InterCel."
Powertel'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 MTAs of Atlanta,
Georgia; Jacksonville, Florida; Memphis, Tennessee/Jackson, Mississippi; and
Birmingham, Alabama and licenses to serve the Kentucky/Tennessee BTAs which the
Company acquired in the D/E/F Auctions.
In the D/E/F Auctions, the Company acquired 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. The aggregate purchase price for
these licenses, which encompass an area of approximately 66,000 square miles
with a population of approximately 6.8 million people, was $31.2 million. With
the addition of the Kentucky/Tennessee BTAs, Powertel has one of the largest
contiguous PCS footprints in the southeastern United States. The Company expects
its expanded PCS footprint to provide a competitive advantage in attracting new
PCS customers in its markets.
Powertel 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 15 cities: Brunswick, Georgia; Memphis and Jackson,
Tennessee; Florence, Anniston, Gadsden, Birmingham, Huntsville, Tuscaloosa and
Dothan, Alabama; Jackson and Tupelo, Mississippi; and Gainesville, Panama City
and Tallahassee, Florida. In all of these markets, the Company was the first to
offer PCS services commercially. Powertel intends to continue to rapidly build
out its PCS network and to launch its PCS services. As of March 31, 1997, the
Company had approximately 35,000 PCS subscribers.
Powertel intends to become a leading provider of wireless
telecommunications services in the southeastern United States by: (i) expanding
its market presence and subscriber base by offering significant value to its
customers; (ii) aggressively and creatively marketing a broad range of wireless
telecommunications services; and (iii) increasing cash flow margins by achieving
economies of scale and operating efficiencies and effectively implementing
technological advances. The Company believes that the market for wireless
telecommunications services will expand significantly as equipment costs and
service rates continue to decline, equipment becomes more convenient and
functional and wireless services become more diverse. The Company believes that
by expanding its presence in the southeastern United States it will be well
positioned to capitalize on this market opportunity and on the region's positive
demographics. The Company intends to build upon the extensive experience of its
management team in the telecommunications industry, the Company's experience and
reputation in the southeastern cellular market and its relationships with other
telecommunications providers to create a broad regional wireless
telecommunications company. The Company intends to continue to be among the
first PCS operators in its service areas to market advanced digital PCS wireless
systems with increased capacity, improved quality and greater functionality than
traditional analog cellular systems.
THE WIRELESS TELECOMMUNICATIONS INDUSTRY
Overview. Wireless telecommunications networks use a variety of radio
frequencies to transmit voice and data in place of, or in addition to, standard
landline telephone networks. Wireless telecommunications technologies include
one-way radio applications, such as paging or beeper services, and two-way radio
applications, such as cellular telephone and specialized mobile radio ("SMR")
networks. Each application operates on a distinct radio frequency block.
Since its initial introduction in 1983, commercial cellular telephone
service has grown dramatically and now dominates the wireless telecommunications
market. Service revenues for the wireless telephone industry set an annual
record of over $23.6 billion during 1996 (an increase from approximately $482
million in 1985).
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The number of wireless telephone subscribers nationwide has grown from
approximately 680,000 in 1986 to an estimated 44 million at December 31, 1996.
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. The number of
wireless telephone subscribers has grown at a compound annual rate of 40% over
the last three years. The PCIA estimates that the number of cellular and PCS
wireless service subscribers will reach 84.5 million by the year 2000 and that
PCS subscribers will account for approximately 23.1 million of such subscribers.
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 office" applications (including facsimile, electronic mail and
connecting notebook computers with computer/data networks).
While digital technology serves generally to reduce transmission
interference relative to analog technology, limitations in the 8 Kb cellular
digital handsets initially deployed in cellular systems by most digital wireless
operators also caused a perceptible decline in transmission quality. This gap in
transmission quality proved to be a barrier to cellular operators seeking to
switch their customers from analog to digital service. PCS providers are
currently utilizing 13 Kb digital handsets. These handsets offer digital
transmission quality comparable to, if not better than, current analog cellular
handsets. Enhanced 13 Kb handsets for GSM systems have recently become
available, and PCS providers, including the Company, are currently upgrading
their systems to fully support the enhanced handsets to allow users of these
handsets to obtain improved voice quality.
The Company believes the growth of the consumer market for wireless
telecommunications will accelerate due to anticipated declines in costs of
service, increased function versatility, and increased awareness of the
productivity, convenience and safety benefits associated with such services. The
Company also believes the rapid growth of notebook computers and personal
digital assistants, combined with emerging software applications for wireless
delivery of electronic mail, fax and database searching, will further stimulate
demand for wireless service. Moreover, the Company expects to see an increased
demand for local residential or fixed wireless telecommunications services as a
replacement to wireline products. AT&T Wireless, which holds PCS licenses
encompassing approximately 93% of the U.S. population, has reportedly developed
wireless technology that would allow AT&T to compete with LECs. This proprietary
technology reportedly will route calls to and from subscribers' landline or
mobile telephones over AT&T's wireless network, thereby bypassing LECs. The
Company intends to continue to monitor the demand for wireline replacement
services and to supplement its current wireless service offerings in the future
as appropriate to address a portion of this market segment.
Operation of Wireless Systems. Two-way wireless service areas are
divided into multiple regions called "cells," each of which contains a base
station system consisting of a low-power transmitter, a receiver and signaling
equipment. The cells are typically configured on a grid in a honeycomb-like
pattern, although terrain factors (including natural and man-made obstructions)
and signal coverage patterns may result in irregularly shaped cells and overlaps
or gaps in coverage. Cellular system cells generally have a radius ranging from
two miles to 25 miles. PCS system cells generally have a radius ranging from
one-quarter mile to eight miles, depending on the PCS technology being used,
antenna type and configuration, local capacity requirements and terrain. The
base station system in each cell is connected by microwave, fiber optic cable or
telephone wires to a mobile switching center, which uses computers to control
the operation of the wireless telephone system for its entire service area. The
mobile switching center controls the transfer of calls from cell to cell as a
subscriber's handset travels, manages call delivery to handsets, allocates calls
among the cells within the system
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and connects calls to the local landline telephone system or to a long distance
telephone carrier. Wireless service providers have interconnection agreements
with various local exchange carriers and interexchange carriers, thereby
integrating the wireless telephone system with landline telecommunications
systems. Because two-way wireless systems are fully interconnected with landline
telephone networks and long distance networks, subscribers can receive and
originate both local and long distance calls from their wireless telephones.
The signal strength of a transmission between a handset and a base
station system declines as the handset moves away from the base station, so the
mobile switching center and the base stations systems monitor the signal
strength of calls in progress. When the signal strength of a call declines to a
predetermined level, the mobile switching center may "hand off" the call to
another base station that can establish a stronger signal with the handset. If a
handset leaves the service area of the wireless service provider, the call is
disconnected unless an appropriate technical interface is established to hand
off the call to an adjacent system.
Operators of wireless systems frequently agree to provide service to
subscribers from other compatible systems who are temporarily located in or
traveling through the service area. Such subscribers are called "roamers."
Agreements among system operators allocate revenues received from roamers. With
automatic roaming, wireless subscribers are preregistered in certain systems
outside their service area and receive service automatically while they are
roaming, without having to notify the switching office. Other roaming features
permit calls to a subscriber to "follow" the subscriber into different systems,
so that the subscriber will continue to receive calls in a different system just
as if the subscriber were within his or her service area.
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 the 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." 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 many
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 LECs
for interconnection to their networks or toll charges based on standard or
negotiated rates. 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
such carrier's network. See "-- Regulation of Wireless Telecommunications
Systems." The Company recently entered into interconnection agreements for its
cellular and PCS operations with BellSouth, the LEC with which the Company
primarily interconnects in its service territory. Effective April 1, 1997, the
mutual and reciprocal interconnection rates under these agreements range from
$.005644 to $.01586 per minute. These rates represent a significant decrease
from the previous rates paid by the Company to BellSouth of approximately $.022
per minute. 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. 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 CDMA). While the FCC has mandated that licensed
cellular systems in the United States must utilize compatible analog signaling
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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 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. See "Risk Factors
- -- Risks Relating to Selection of PCS Digital Protocol."
PCS OPERATIONS
Overview. The Company provides PCS services in the southeastern United
States under the name "Powertel." The Company has licenses to provide PCS
services in contiguous portions of 12 southeastern states. The Company believes
that by expanding its presence in the southeastern United States through the
acquisition of the licenses for the Kentucky/Tennessee BTAs, it will be able to
build upon its experience and reputation in its southeastern cellular markets,
benefit from the region's positive demographics and capitalize on its
relationships with other telecommunications providers in the southeast.
PCS Markets. The Company holds licenses to provide PCS to the
Birmingham, Alabama MTA; the Jacksonville, Florida MTA; the Memphis,
Tennessee/Jackson, Mississippi MTA; the Atlanta MTA; and the Kentucky/Tennessee
BTAs. The PCS Markets encompass approximately 246,000 contiguous square miles in
Alabama, Arkansas, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana,
Mississippi, Missouri, South Carolina and Tennessee. Approximately 24.3 million
people and over 10,250 miles of highway are located in the Company's PCS
Markets. As of March 31, 1997, the Company had approximately 35,000 PCS
subscribers in 16 markets in Alabama, Florida, Georgia, Mississippi and
Tennessee.
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The following table sets forth certain information regarding the
Company's PCS Markets:
PCS MARKET AREA INFORMATION
<TABLE>
<CAPTION>
Estimated
Annual Annual Estimated
License Populatio Population Retail Sales Highway
Net Population Cost per Square Growth Growth Growth 1993-98 Miles
PCS Markets Equivalents(a) POP(b) Miles(c) 1980-90(d) 1993-98(c) (%)(c) (c)
- ----------- -------------- -------- -------- -------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Jacksonville, Florida MTA(e).. 2,531,000 $ 19.03 28,880 1.9% 1.5% 7.1% 1,080
Memphis, Tennessee/Jackson,
Mississippi MTA(e)........... 3,617,000 12.50 54,070 .1 .8 6.5 1,638
Birmingham, Alabama MTA(e).... 3,441,000 10.74 38,964 .4 .9 6.2 1,518
Atlanta MTA(e)................ 7,871,000 24.85 58,116 1.6 2.3 7.2 3,034
Kentucky/Tennessee BTAs(f).... 6,833,000 4.57 65,767 .4 1.1 6.9 3,009
---------- -------- ------- --- --- --- ------
Total/Weighted Average...... 24,293,000 $ 14.70 245,797 .9% 1.5% 6.9% 10,279
========== ======== ======= === === === ======
</TABLE>
- ---------------------
(a) Net Population Equivalents means the estimated population of the
licensed market area multiplied by 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 the PCS
licenses.
(b) License Cost Per POP for the Jacksonville, Florida MTA, the Memphis,
Tennessee/Jackson, Mississippi MTA, and the Birmingham, Alabama MTA
represents the portion of the purchase price paid by the Company for
Powertel allocated to the PCS licenses for such MTAs. The allocation
between the three markets is based on the relative prices paid for the
licenses by Powertel. License Cost Per POP for the Atlanta MTA
represents the price per POP to be paid by the Company to GTE Mobilnet
in the Atlanta MTA Acquisition.
(c) Source: 1995 PCS Atlas and Databook, Paul Kagan Associates, Inc.
(d) Annual Population Growth is computed from information contained in the
1990 U.S. Census.
(e) Represents either the 30 MHz "A" block license or "B" block license in
each MTA.
(f) Represents both the 10 MHz "D" block and 10 MHz "E" block licenses in
12 of the Kentucky/Tennessee BTAs and the 10 MHz "E" block license
in the Knoxville, Tennessee BTA.
The success of the Company's PCS operations will depend, in part, on
the Company's ability to be among the first in its markets to provide its
customers with integrated service offerings at competitive rates. The Company
believes it can become a low-cost provider of PCS and expand its market presence
by generating operating economies of scale through contiguous market areas,
distinguishing its products from those of its cellular competitors, and focusing
on customer acquisition and retention, as it has done in its cellular business.
PCS Services. The Company operates a fully digital, GSM-based PCS
system. See "-- PCS System" below. GSM technology enables the Company to offer
new and enhanced services and features, including the following:
- Secure Communications. Sophisticated encryption algorithms
provide increased call security, encouraging users to make
private, professional and personal calls that they might
otherwise have made only on landline telephones.
- Sophisticated Call Management. The Company's PCS System offers
call screening, routing and forwarding, caller I.D., caller
I.D. blocking, message waiting, call hold, call transfer and
selective call screening, rejection and forwarding.
- Enhanced Battery Performance. PCS handsets consume, on the
average, less power than cellular handsets. In contrast to
cellular handsets which transmit at a constant rate of power,
PCS handsets are able to determine the distance between a
handset and a cell site and vary the wattage of the handset
accordingly. This extends the amount of time a battery can be
used without having to be recharged.
- Single Number Service. This service will provide subscribers
with a convenient way to transfer all incoming calls between
primary landline and wireless locations automatically. When a
subscriber's handset is activated, the network will route all
incoming calls to the subscriber's wireless number. When the
handset is deactivated, all calls will be directed to the
subscriber's primary landline location. "Find Me" service will
enable subscribers to direct their incoming
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calls to one of several alternative locations (landline
telephone, paging system handset, mailbox, etc.) on an ongoing
basis. The Company expects to have the capability to offer
single number service in late 1997.
- Enhanced Wireless Data Transmission. Digital networks are
capable of simultaneous voice and data communications. The
Company currently offers basic enhanced wireless data
transmission services, such as alphanumeric short messaging
service. The Company believes that, as data transmission
technologies develop, a number of additional potential uses
for such services will emerge, including enhanced "mobile
office" applications, access to stock quote services,
transmission of text such as maps and manuals, transmission of
photographs, connections of wireless point-of-sale terminals
to host computers, monitoring of alarm systems, automation of
meter reading and monitoring of status and inventory levels of
vending machines.
- SIM Card. Credit card-sized Subscriber Identity Module ("SIM")
cards, programmed with the user's billing information and a
specified service package, allows subscribers to open Powertel
accounts and obtain PCS connectivity automatically through an
over-the-air activation process simply by inserting their SIM
cards into compatible PCS handsets and pressing any key on the
handset. A customer may also request and receive any
alteration or upgrade remotely through the same over-the-air
process. Once roaming agreements between the Company and
international PCS providers are in place, subscribers will
also be able to roam internationally anywhere GSM is deployed
by using their SIM cards with handsets compatible with the
local system. As of May 15, 1997, the Company had entered into
roaming agreements with 13 international GSM-based wireless
providers, and the Company expects that subscribers will be
able to roam internationally by using SIM cards in certain
markets by late 1997.
The Company intends to extend its current offerings of wireless
telecommunications services, which generally consist of wireline enhancement
services that supplement the customer's landline telephone, 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.
PCS Roaming. 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. In addition, the
Company has reciprocal roaming agreements in place with Aerial Communications,
Inc. ("Aerial Communications"), Airadigm Communications Inc. ("Airadigm"),
American Personal Communications, Inc., BellSouth Mobility DCS, the PCS
subsidiary of BellSouth Corporation ("BellSouth Mobility DCS"), Microcell
Connexions Inc., Omnipoint Communications, Inc., Pacific Bell Mobile Services
Corp. and Western Wireless Corporation and, after a period of technical testing,
expects to begin offering its customers roaming capabilities by the third
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.
Several other PCS licensees (including winning bidders in the D/E/F
Auctions) have announced that they intend to deploy GSM-based PCS systems.
Together, PCS licensees (including Powertel) that have constructed, or announced
their intention to construct, GSM-based PCS systems cover markets containing
approximately 260 million persons, or approximately 98% of the U.S. population.
However, one of the GSM licensees, Pocket, which recently filed for
reorganization under Chapter 11 of the United States Bankruptcy Code, has
licenses in markets containing approximately 35 million people. There can be no
assurance that all of these licensees will deploy GSM-based PCS systems. Three
of these licensees (BellSouth Mobility DCS, Aerial Communications and DigiPH
Communications, Inc.) 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. BellSouth Mobility DCS
is currently providing PCS service in multiple markets in North and South
Carolina, and the Company is currently conducting certain tests prior to
implementing roaming service to and from such markets.
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The Company's subscribers will not be able to roam in markets without at least
one PCS licensee using the GSM protocol unless the subscriber uses a dual-mode
telephone that would permit the subscriber to use the existing analog cellular
wireless system in such other market. Such dual-mode phones are not expected to
be available until late 1997 and are expected to be heavier and cost more than
single-mode phones. See "Risk Factors -- Risks Relating to Selection of PCS
Digital Protocol."
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 fully introduced to its service offerings,
that they completely 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) 16
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. In addition to traditional distribution
channels, the Company will consider marketing its PCS products and services
through nontraditional distribution channels, including the internet,
telemarketing and direct mail. The Company supports its marketing activities
with local and regional advertising.
The Company's direct and retail store PCS sales force currently
consists of approximately 160 employees. The Company's sales employees
understand the Company's PCS system, products and services, so that they, in
turn, can provide extensive information to prospective customers. Sales
commissions generally are linked both to subscriber revenue and subscriber
retention. The Company expects that it will increase its PCS sales force to
approximately 300 employees by the end of 1997.
The Company also negotiates volume discounts from vendors of PCS
telephone equipment and passes on a substantial portion of the discount on, and
further subsidizes the cost of, such telephone equipment to its subscribers and
sales agents. 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. A high volume caller might find an option with a
higher monthly access charge and lower per-minute charges to be most
advantageous. A lower volume user might choose a different package, featuring a
lower access fee and higher per-minute charges. Voicemail, caller ID, caller ID
blocking, call waiting and numeric messaging are included in a customer's
monthly access fee. The Company currently charges a $.10 per minute toll charge
for all long distance calls terminating within the Current PCS Markets and a
$.15 per minute toll charge for all calls terminating outside of 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 recently conducted a promotional offering whereby
customers could purchase unlimited local airtime through 1997 for $50 per month.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Overview."
The Company offers over-the-air activation whereby a customer can
initiate service by purchasing a handset from any of the Company's distribution
channels 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 -- Overview."
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In marketing its PCS services, the Company emphasizes the enhanced
features and favorable pricing of its PCS System. The Company also promotes the
improved call security of its PCS System, which the Company believes encourages
users to make confidential calls that they might not otherwise make on an analog
cellular telephone. The Company anticipates offering certain bundled services
with other service providers in the future, such as long-distance, cable
television, and internet access companies. The Company's ability to offer
bundled services has increased as a result of requirements imposed on incumbent
LECs by the 1996 Telecommunications Act. Incumbent LECs will be required to
provide other telecommunications carriers like the Company with access to
unbundled network elements at any technically feasible point, on reasonable
terms and conditions. In addition, the Company and other wireless operators will
be entitled to purchase LEC retail services at wholesale rates. Further, the
LECs' rates for interconnection must be just, reasonable and cost-based.
Initially, the Company is concentrating its PCS marketing efforts on
the following several key types of customers:
- large, communications-intensive corporate accounts, currently
using or considering cellular or private radio systems, that
would benefit from integrated mobile telephone, short
messaging and wireless data transmission capabilities;
- high-mobility customers using or considering cellular
telephones who would benefit from the enhanced features and
services available on the Company's PCS System and from the
Company's large and contiguous discounted rate footprint, its
customer service and its competitive pricing; and
- low-mobility customers attracted to PCS as an alternative to
their landline telephones or as a second telephone "line" in
their homes.
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 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.
PCS System. The Company's PCS System utilizes the GSM digital protocol.
The Company chose GSM because it: (i) has been operating successfully in
European and other countries for approximately 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 station
systems, thereby allowing the Company to purchase equipment from a variety of
vendors, improving the Company's ability to reduce equipment costs.
The GSM protocol has been up-banded from the 1.8 GHz frequency now used
by cellular operators in Europe to the 1.9 GHz frequency allocated for PCS in
the United States and has been adapted to interface with the U.S. landline
telephone switching network. However, in order to provide voice transmission
quality comparable to that currently offered by landline systems, the 13 Kb
vocoders, which are part of the GSM handsets, are being upgraded to enhanced 13
Kb vocoders. The Company is in the process of upgrading its mobile switching
center software to fully support the enhanced 13 Kb vocoders which are
commercially available today in many GSM handsets.
Currently, the Company offers PCS service in markets containing
approximately 30% of the population in the Current PCS Markets. 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.
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Smaller, low-power sites provide enhanced coverage and supplemental capacity in
heavy usage areas. Upon completion of the initial buildout in its Current PCS
Markets (excluding Albany, Georgia and Chattanooga, Tennessee), the Company
expects to offer service in markets containing approximately 60% of the
population within the Current PCS Markets. The initial coverage is expected to
extend across 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 the major highway corridors connecting those
areas. The Company expects to complete the initial buildout of the Current PCS
Markets (excluding Albany, Georgia and Chattanooga, Tennessee) by late 1997 and
the Albany, Georgia and Chattanooga, Tennessee metropolitan areas in 1998.
Thereafter, based on customer demand and competitive factors, Powertel intends
to continue to build out its Current PCS System to enhance and expand its
coverage.
The Company is currently acquiring sites and rapidly building its
system in the Atlanta, Georgia MTA. The Company is completing the system design
and coverage phase of its initial buildout of the Kentucky/Tennessee BTAs and
expects to begin selecting and acquiring sites for its transmitters in these
markets in the third quarter of 1997. Sites will be selected on the basis of
their coverage of targeted customers, cost to construct the site and on
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 twelve 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 Kentucky/Tennessee PCS System will
require construction and equipment procurement, installation and testing.
One of the Company's objectives is to reduce the risk of delays during
the buildout schedule while maintaining the integrity of the system design. In
particular, during the initial implementation, the Company attempts to locate
sites for its towers and base stations where zoning approvals and other
necessary permits are likely to be obtained easily. Siting on government
property has been facilitated somewhat by the 1996 Telecommunications Act, which
requires the President to prescribe procedures by which Federal departments and
agencies may make Federal property, rights-of-way and easements available on a
fair, reasonable and non-discriminatory basis for the placement of
spectrum-based services. In addition, the 1996 Telecommunications Act requires
the FCC to provide technical support to states to encourage them to make state
property, rights-of-way and easements available for such purposes. The 1996
Telecommunications Act further mandates that state and local governments may not
deny requests for facilities siting, construction or modification based on the
environmental effects of RF emissions, so long as the facilities comply with the
FCC's emissions standards. However, some zoning delays due to government
monitoring remain nonetheless. The use of existing towers and other facilities
occupied by other telecommunications service providers and utility companies is
expected to facilitate the buildout process for the Company. Powertel has
entered into agreements with other telecommunications and utility companies to
enable Powertel to install PCS base stations and other equipment on the
companies' existing towers in the Current PCS Markets. The Company also pursues
access to multiple sites concurrently to provide contingencies in case of permit
denials and to use, where possible, pre-fabricated buildings with equipment
pre-installed, or outdoor equipment cabinets (which eliminates the need for
equipment buildings in some instances). See "Risk Factors -- Necessity of Zoning
Approvals."
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.
The infrastructure of a PCS system generally consists of digital
switches, base station transmitters and receivers, and related equipment.
Additional costs are attributable to site acquisition and preparation and
installation services. The Company has entered into an equipment purchase
agreement and a Vendor Financing Agreement with Ericsson. See "Risk Factors --
PCS System Implementation Risks; Operational Risks,"
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"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources" and "Description of Certain
Indebtedness -- The Vendor Financing Agreement."
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 31, 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
the 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 has 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 has increased capacity in certain markets in its PCS System
due to the response to its recent Prestige Partners Promotion. See "Risk Factors
- -- PCS System Implementation Risks; Operational Risks." In general, system
capacity has been 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, in some cases, lower-powered
transmitters and towers with lower elevations. Additionally, the Company has
recently upgraded its Ericsson switching equipment to Ericsson's Release 2
Software which enabled increased network capacity and expects to upgrade to
Ericsson's Release 3 Software in the near future. 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.
Management Services. The Company may enter into agreements to provide
management services to entities that obtain BTA licenses in areas that
geographically complement the Company's existing wireless service area.
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Cellular Operations
Cellular Markets. The Cellular Markets consist of contiguous portions
of four RSAs in western Georgia and eastern Alabama. The Cellular Markets have a
population of approximately 296,000 persons and encompass 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
Cellular Markets).
While competition is significant, the Company believes that the
Cellular Markets, a unique combination of parts of four RSAs in which no other
single wireless operator presently offers service, provide 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.
Set forth in the table below is certain operating information
concerning the Cellular Markets:
<TABLE>
<CAPTION>
POWERTEL'S CELLULAR MARKETS OPERATING INFORMATION
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED ---------------------------------------------------------
MARCH 31, 1997 1996 1995 1994 1993 1992
-------------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Net Population Equivalent(a)....... 295,600 295,600 290,900 286,300 281,800 277,400
Total Number of Subscribers(b)..... 23,245 22,161 18,294 14,408 10,590 7,447
Market Penetration(b).............. 7.9% 7.5% 6.3% 5.0% 3.8% 2.7%
Monthly Average Revenue Per
Subscriber....................... $41.49 $41.23 $43.20 $45.20 $47.77 $49.64
Monthly Average Churn Rate(c)...... 1.9% 1.9% 2.1% 1.8% 1.3% 1.1%
</TABLE>
- -------------------------
(a) Net Population Equivalents means the estimated population of the
license market area multiplied by percentage ownership of the license.
The Company owns 100% of each of its cellular licenses. The estimated
population is based on the 1996 Paul Kagan Associates, Inc.
Cellular/PCS POP Book.
(b) Data is as of the end of the period.
(c) Monthly Average Churn Rate means number of subscriber cancellations per
month, as a percentage of the average total subscribers in such month.
Monthly Average Churn Rate is stated for the last month of each period.
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 customer retention process has resulted in a decreased churn rate in
the Cellular Markets.
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 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 Company's Cellular
Markets is inferior to that provided by analog systems.
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The Company is currently marketing its digital service in a limited manner. Once
improved handset equipment is available, which is expected in late 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 who do not transfer to digital service and will be able to capture
roaming revenues from users of both analog and digital service.
Cellular Roaming. 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 the Company's Cellular Markets.
Cellular Customer Service. The Company believes superior customer
service is integral to its success in the Cellular Markets. 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 markets its
cellular service offerings primarily through: (i) its direct sales force; (ii)
four Company-operated cellular retail stores and two 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 21 cellular employees. The Company's sales
employees understand the Company's cellular system, products and services, so
that they, in turn, can provide information to customers. Sales commissions
generally are linked to both subscriber revenue and subscriber retention.
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
a credit against the customer's cellular service charges. Subscribers who do not
fulfill their obligations under the service contracts are obligated to repay the
full original credit amount.
The Company seeks to increase customer value by continuously updating
and expanding its pricing package options. The Company offers numerous pricing
package options tailored to fit the needs of different subscribers such as the
Corporate Plans for corporate users, the Professional and Frequent Caller Plans
for active users, and the Economy Plan for infrequent users. The Company offers
"Family Plan" and "Extra Plan" service to its cellular users. Under these plans,
a family may receive monthly access to more than one cellular number without
receiving multiple bills. Additional cellular numbers may be added at a reduced
rate, and the family members may share their unbilled airtime allowances.
Cellular System. The main switching office for the Cellular Markets is
located in Huguley, Alabama. The Company's cellular system in the Cellular
Markets consists of 17 cell sites.
All 17 of the Company's existing cell sites 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
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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 in the Cellular Markets. The Company plans to add
approximately seven new cell sites during the next two years in order to
accommodate anticipated subscriber and usage growth and to equalize transmission
quality throughout the Cellular Markets.
The Company recently converted its cellular system to a
state-of-the-art dual-mode analog/TDMA digital system. 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 in 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 CDMA equipment at the cell sites and 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. In order to encourage usage of
its digital cellular system and to retain cellular subscribers, 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.
Maine Disposition. In May 1997, the Company sold its cellular
operations in the State of Maine to Rural Cellular Corporation ("Rural
Cellular") for an aggregate price of $77.2 million (which includes $5.4 million
that is being held in escrow for indemnification or purchase price adjustment
obligations). The Company acquired its Maine cellular operations in 1994 for
$36.4 million. As of December 31, 1996, the Company had increased the Maine
subscriber base at a compound annual rate of approximately 39% from 1994. The
growth rate in the Maine Cellular Market exceeded that of the Company's Cellular
Markets due generally to a market penetration in the Maine Cellular Market that
was lower at the time of the Company's acquisition of Unity Cellular Systems,
Inc., its Maine cellular subsidiary ("Unicel"), than that in the Cellular
Markets 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 Maine market population).
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 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
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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 and global satellite networks. 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
operates digital mobile networks in most major U.S. markets, including in the
Atlanta market. Another ESMR operator, Southern Communications, has begun to
offer ESMR service in Georgia, Alabama, northern Florida and southeastern
Mississippi.
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
recently concluded an auction for 30 MHz of spectrum located in the 2.3 GHz
band, known as WCS. These licenses were auctioned in 5 MHz and 10 MHz blocks 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
the FCC has indicated will make the use of WCS spectrums for mobile applications
"prohibitively expensive" and "technologically infeasible." The FCC has recently
announced that it will auction two local multipoint distribution service
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 easy 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.
Among the statutory provisions are requirements that telecommunications
providers interconnect with each other and employ common technical standards and
features. Further, if customers complain about lack of access to telephone toll
service (long distance) providers of their choice, the FCC may require
unblocking access to such providers through a code or similar mechanism.
Additionally, LECs must offer: (i) access to unbundled network elements at any
technically feasible point, on reasonable terms and conditions; (ii) retail
services for resale at wholesale rates; and (iii) access to their poles, ducts,
conduits, and rights-of-way, on rates, terms, and conditions that are just and
reasonable. Incumbent LECs also must make available: (i) interconnection and
unbundled access at any technically feasible point; (ii) nondiscriminatory
access to poles and conduits; (iii) unbundled local loops, switching and
transport; (iv) (for competing providers of telephone exchange or toll services)
dialing parity and nondiscriminatory access to telephone numbers and directory
and operator services; and (v) number portability, to the extent feasible.
Further, the FCC now requires LECs to share certain infrastructure and
information with certain requesting carriers. See "-- Regulation of Wireless
Telecommunications Systems." While these changes are expected to help the
Company gain access to and interconnection with wireline facilities and wireless
networks, other service providers may take advantage of the interconnection duty
to require the Company to open its facilities for carriage of their customer
traffic. In
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addition, although wireless service providers such as the Company are not now
classified as LECs, the FCC may change that definition in the future. If such a
time arises, the Company would likely become subject to LEC duties including the
foregoing obligations.
The 1996 Telecommunications Act also permits regional Bell operating
companies ("RBOCs") and their affiliates to provide commercial mobile services
between a 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.
The Company expects to compete with other communications technologies
that now exist, such as conventional mobile telephone service, ESMR systems and
paging services, and with cellular and PCS resellers. In the future, cellular
service and PCS will also compete more directly with traditional landline
telephone service providers and with cable operators who expand into the
offering of traditional communications services over their cable systems. In
addition, the Company may face competition from technologies that may be
introduced in the future.
The Company anticipates that market prices for two-way wireless
services generally will decline in the future based upon increased competition.
The Company competes to attract and retain 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.
PCS Markets. The Company's PCS business will directly compete with many
other PCS providers, including PrimeCo, Sprint PCS and AT&T Wireless, in its PCS
Markets. 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. The Company also expects that existing
wireless 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 wireless competitors include AT&T Wireless, BellSouth Mobility,
GTE Mobile, Alltel and Palmer. 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, each of which obtained 10 MHz
licenses in many of the same BTA's in which the Company holds licenses. See
"Risk Factors -- Competition."
PCS licensees choosing IS-136 technology, including AT&T Wireless, are
expected to cover territories covering 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 will 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 "Risk Factors -- Risks Relating to Selection of PCS Digital
Protocol" and "-- PCS Operations -- PCS System."
Handsets used for GSM-based PCS systems will not be automatically
compatible with cellular systems, and vice versa. The Company expects dual-mode
phones to be available in late 1997, which will permit subscribers to roam by
using the existing cellular wireless system in other markets. Until then, this
lack of interoperability may impede the Company's ability to attract current
cellular subscribers or potential new wireless communication subscribers that
desire the ability to access different service providers outside of the
Company's markets.
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The retail price of the Company's PCS handsets initially have not been
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 are
generally 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 are 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, resellers and one or more ESMR providers. 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. See
"Risk Factors -- Competition."
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 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 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
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 for five years.
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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. The D/E/F Auctions were completed by the FCC on
January 14, 1997. The Company recently submitted its final payment for the
licenses for the Kentucky/Tennessee BTAs.
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 service with 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 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 31, 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 Cellular Markets), licensees must file
applications for renewal of licenses to obtain 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
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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 grant a preference, or "renewal
expectancy," to the existing cellular licensee upon a showing that it has (i)
provided "substantial" service during its past license term and (ii)
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 Third
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.
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.
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
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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 $.002 to $.004 per
minute for switching and end office termination and a default price ceiling of
$.0015 per minute for tandem switching and termination for these 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 local exchange
carriers, 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 $.03 to $.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 and mutual
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 re-negotiate any existing
interconnection arrangements which provide for non-reciprocal compensation for
local telecommunications traffic with any local exchange carrier; 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 local exchange carrier's defined local calling area. The
Eighth Circuit heard oral argument 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.
Universal Service Reform. The FCC has recently adopted a plan for the
implementation of universal service reform. While the plan does not impose a
surcharge on wireless customers in order to meet universal service funding
goals, the FCC adopted a competitively neutral contribution mechanism based on
end-user telecommunications revenues. The FCC has not yet adopted a method for
determining what percentage of revenues each carrier should contribute, but the
FCC has stated that it agrees with a previous finding of the Federal-State Joint
Board, established pursuant to the 1996 Telecommunications Act, that the 1996
Telecommunications Act does not preclude states from requiring CMRS providers,
such as the Company, to contribute to state support mechanisms. See "Risk
Factors -- Government Regulation."
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.
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
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height and power of base station transmitting facilities and the type of
signals they emit must fall within specified parameters. Also, under the 1996
Telecommunications Act, wireless equipment 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 SMR spectrum that an investor may aggregate in a given
geographic area to 45 MHz. The Company's ability to invest in wireless services
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 spectrum aggregate 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 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. See "Risk Factors
- --Necessity of Zoning Approvals."
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.
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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 calls from a PCS handset (without call validation), including
those from callers with speech or hearing disabilities, with the 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 to 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 May 1, 1997, the Company had approximately 550 employees,
including approximately 540 full-time employees. 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.
PROPERTIES
The Company maintains its corporate headquarters in West Point,
Georgia and 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 Cellular Markets, 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 are leased.
As part of its cellular system, the Company owns a switch facility in
Huguley, Alabama and maintains 17 tower sites. The Company has a long-term
lease 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 microwave two-way
radio transmitter.
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 Atlanta MTA leases two separate switching facilities, both
of which are located in the city of Atlanta but in separate locations. The
Memphis MTA leases additional space in Jackson, Mississippi to accommodate its
sales and operations personnel. The Birmingham, Memphis, Jacksonville and
Atlanta MTAs currently lease warehouse space for network equipment and cell
site equipment related to the buildout of the
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PCS System in each respective MTA. The Kentucky/Tennessee BTAs will lease
similar warehouse space as the Company builds out those areas of its PCS
System.
The Company believes that all of its properties are well maintained.
PRINCIPAL EXECUTIVE OFFICES
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.
LEGAL MATTERS
The Company, through its subsidiary Powertel/Birmingham, was served
with a complaint filed on April 4, 1997 by American Page One, Inc. d/b/a
American Mobile Wireless Communications in the Circuit Court of Macon County,
Alabama. Plaintiff claims that Powertel/Birmingham has breached its agency
contract and has committed other torts with respect to Plaintiff by failing to
accurately track Plaintiff's account with respect to inventory invoicing and
commissions, failing to pay timely commissions, failing to provide services to
Plaintiff's customers in a competent and accurate manner, billing Plaintiff's
customers inaccurately and in excessive amounts, and making false
representations with regard to its customer service and operational
capabilities. Plaintiff is seeking unspecified damages. While the Company
believes that the claims are without merit and intends to vigorously defend
itself, there can be no assurance that these claims or the loss of its agency
relationship with Plaintiff will not result in a loss of customers acquired
from such agency relationship or otherwise have a material adverse effect on
the Company's business, financial condition and results of operations.
The Company recently received a Demand from the Antitrust Division
requiring the Company to produce certain documents and answer certain
interrogatories in connection with the Antitrust Division's investigation of
possible bid rigging and market allocation for licenses auctioned by the FCC
for broadband PCS frequency blocks. The Company intends to cooperate fully with
the Antitrust Division's requests. See "Risk Factors -- Litigation."
The Company is also a party to routine filings and customary
regulatory proceedings with the FCC relating to its operations.
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COMPANY ORGANIZATION
The organization of the Company is as follows:
[Chart which sets forth the organizational
structure of the Company.]
* The Company currently intends to create one or more separate subsidiaries of
Powertel PCS, Inc. to hold the licenses for, and to operate the PCS System to
be built in, the Kentucky/Tennessee BTAs.
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THE MAINE DISPOSITION
Pursuant to an asset purchase agreement (the "Unicel Agreement") by
and among Rural Cellular, Unicel, Powertel Licenses, Inc. and the Company,
Rural Cellular purchased and assumed from Unicel and Powertel Licenses, and
Unicel and Powertel Licenses respectively sold and assigned to Rural Cellular:
(i) substantially all of the assets and rights of Unicel, including its
partnership interest in a partnership which is licensed to provide cellular
service in Maine RSA 2; and (ii) the FCC licenses held by Powertel 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 Powertel Licenses
are wholly-owned subsidiaries of the Company. This transaction constituted the
sale of all of the Company's cellular telephone operations in the State of
Maine.
The purchase price for the assets sold pursuant to the Unicel
Agreement was approximately $77.2 million (the "Purchase Price") (which
includes $5.4 million that is being held in escrow for indemnification or
purchase price adjustment obligations). In addition to the Purchase Price,
Rural Cellular reimbursed Powertel in cash at the closing of the Maine
Disposition for approximately $250,000 in capital expenditures made prior to
the closing.
THE PREFERRED STOCK SALES
Pursuant to a Stock Purchase Agreement dated as of May 23, 1997
between the Company and Huff (the "Huff Stock Purchase Agreement"), which sets
forth the terms and conditions for the Huff Preferred Stock Sale, and the Stock
Purchase Agreement dated as of May 23, 1997 between the Company and SCANA (the
"SCANA Stock Purchase Agreement" and, together with the Huff Stock Purchase
Agreement, the "Stock Purchase Agreements"), which sets forth the terms and
conditions for the SCANA Preferred Stock Sale, Powertel sold 50,000 shares of
Series C Convertible Preferred Stock for $22.5 million in cash to Huff and
50,000 shares of Series D Convertible Preferred Stock for $22.5 million in cash
to SCANA. The net proceeds received by Powertel in this transaction were
approximately $44.8 million in cash.
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 Common Stock and other junior stock of $450 per
share plus declared and unpaid dividends in connection with 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 June 5, 2002 and on June 10, 2002, respectively, 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 on December 5, 1998 and on
March 14, 2002, respectively, at the option of the holder, into Common Stock at
a conversion price of $12.75, subject to adjustment.
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. Powertel has agreed
to indemnify Huff and SCANA, and Huff and SCANA have agreed to indemnify
Powertel, 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.
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Resale Restrictions. Each of Huff and SCANA has agreed, among other
things, that except for limited exceptions it 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 until June 5, 1998 and June 10,
1998, respectively, without the prior written consent of the Company.
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.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
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 July 15, 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.................... 48 President, Chief Executive Officer and Director 1998
Fred G. Astor, Jr................. 45 Executive Vice President and Chief Financial Officer --
Edward C. Horner.................. 46 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 --
Michael P. Tatom.................. 44 Executive Vice President -- PCS --
Maurice P. O'Connor............... 46 Director 1999
Donald W. Burton.................. 53 Director 1999
Bert G. Clifford.................. 77 Director 1999
O. Gene Gabbard................... 57 Director 2000
Lawrence M. Gressette, Jr......... 65 Director 1998
William H. Scott, III............. 49 Director and Secretary 2000
William B. Timmerman.............. 50 Director 2000
Donald W. Weber................... 60 Director 2000
</TABLE>
CAMPBELL B. LANIER, III has served as Chairman of the Board of
Directors of the Company since its inception in April 1991 and was Chief
Executive Officer of the Company from its inception to September 1993. Mr.
Lanier serves as Chairman of the Board and Chief Executive Officer of ITC
Holding and has served as a director of ITC Holding since its inception in 1985
through a predecessor company. In addition, Mr. Lanier served as a director and
President of Interstate Cellular, Inc. since its inception in 1989 until its
dissolution in June 1995, and he also is an officer and director of several ITC
Holding subsidiaries. Since 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 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 Funds II and III since 1988.
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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
metropolitan service area, as well as voice and digital paging services.
FRED G. ASTOR, JR. has been Chief Financial Officer of the Company
since May 1991, served as Treasurer of the Company from May 1991 until May
1995, and was Vice President of the Company from May 1991 until May 1995, when
he was named Executive Vice President. Mr. Astor worked for Contel Corporation
("Contel"), a telecommunications company 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 ("GE Capital"). In January 1990, he joined
Telecom as its Vice President -- Finance/Southern Division, and he served in
that capacity until Telecom's merger with MCI was consummated. In November
1990, Mr. Astor accepted a position with ProAir Services, L.P. as Vice
President --Finance. He served as that company's Chief Financial Officer until
accepting his current position with the Company.
EDWARD C. HORNER joined the Company as Executive Vice President and
Chief Operating Officer in May 1996. Prior to joining Powertel, 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 GTE Telephone Operations,
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Mr. Dir worked with Kiesling and Associates, a certified public accounting firm,
providing accounting and management services to telecommunications clients.
MICHAEL P. TATOM joined the Company in February 1995 as Director of
Sales. Since May 1995, he has served as Vice President and General Manager of
the Company's southern cellular division and, in March 1997, was named
Executive Vice President and General Manager for the Company's PCS properties
in Kentucky. From 1990 to 1995, Mr. Tatom served as Branch Manager and General
Manager of the Small Business Division of AT&T Corp.
MAURICE P. O'CONNOR was appointed a Director and Vice President of
the Company in 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 is currently the Vice President and General Manager of MRCC, Inc., a
position that he has held since the consummation of the Maine Disposition in
May 1997. 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.
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. Mr. Gressette serves 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, and The Liberty
Corporation, a holding company of Liberty Life Insurance Co. and Cosmos
Broadcasting Corp.
WILLIAM H. SCOTT, III served as Vice Chairman of the Board of
Directors of the Company from its inception in April 1991 until February 7,
1996 and was reappointed as a Director and Secretary 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
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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.
Mr. Timmerman serves as Chairman, Chief Executive Officer and President of
SCANA and as Chairman and Chief Executive Officer of each of SCANA's
subsidiaries. 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.
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
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.
CERTAIN 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 May 15, 1997, ITC Holding owned approximately 27.3% of the
outstanding Common Stock of the Company. ITC Holding, through certain of its
subsidiaries, from time to time provides the Company with various services,
consisting principally of administrative and staff services, technical services
and access services (switch technicians and maintenance) and facilities for the
Company's switching office. The amount paid by the Company to ITC Holding for
such services during the three months ended March 31, 1997 was $.1 million.
The Company will periodically have outstanding affiliated receivables and
payables related to timing of payments for such administrative services.
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 $.5 million to IFN during
the three months ended March 31, 1997. In addition, the Company has 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. The Company has also entered into an agreement with InterQuest, Inc., a
subsidiary of IFN, for the provision of operator and directory assistance
services branded with the "Powertel" name. The Company paid $55,491 to
InterQuest during the three months ended March 31, 1997. 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 $.2 million to DeltaCom during the three months ended March 31,
1997.
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.
OTHER TRANSACTIONS
As of May 15, 1997, SCANA owned approximately 16.7% 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 purchased
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 $.7 million during the three months ended March 31, 1997. See
"The Preferred Stock Sales."
As of May 15, 1997, Huff owned approximately 7.7% of the outstanding
Common Stock of the Company. Pursuant to the Huff Stock Purchase Agreement,
Huff purchased 50,000 shares of Series C Convertible Preferred Stock for
$22.5 million. See "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 from
Ericsson were $39.7 million for the three months ended March 31, 1997. In
addition, Ericsson provides the Company with financing for such purchases under
the Vendor Financing Agreement. See "Description of Certain Indebtedness."
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DESCRIPTION OF CERTAIN INDEBTEDNESS
APRIL 1996 NOTES
The Company issued $360.0 million aggregate principal amount at
maturity of the April 1996 Notes under an indenture (the "April 1996 Notes
Indenture") between the Company and Bankers Trust Company, trustee (the "April
1996 Notes Trustee") in the Debt Offering.
The April 1996 Notes are unsecured obligations of the Company ranking
pari passu in right of payment with the Company's other unsecured
unsubordinated indebtedness, including, among other things, the Notes, the
February 1996 Notes and the Vendor Financing Agreement, and senior in right of
payment to all subordinated indebtedness of the Company. The April 1996 Notes
are effectively subordinated to the Vendor Financing Agreement to the extent
the Vendor Financing Agreement is secured or the indebtedness thereunder is
incurred by subsidiaries of the Company.
The April 1996 Notes are redeemable at the option of the Company, in
whole or in part, at any time on or after May 1, 2001, 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, prior to May 1, 1999, up to 25% of the aggregate principal amount
at maturity of the April 1996 Notes are redeemable at 112% of their accreted
value from the proceeds of public equity offerings provided that at least
$270.0 million principal amount at maturity remains outstanding after any such
redemption.
The April 1996 Notes Indenture contains certain restrictive covenants,
including among others, limitations on the ability of the Company to incur
indebtedness, pay dividends, prepay subordinated indebtedness, repurchase
capital stock, make investments, engage in transactions with stockholders and
affiliates, create liens, sell assets and engage in mergers and consolidations,
and certain events of default, which are substantially similar to those
relating to the February 1996 Notes and the Notes. See "-- February 1996 Notes"
and "Description of the Notes."
FEBRUARY 1996 NOTES
The Company issued $357.5 aggregate principal amount at maturity of
the February 1996 Notes under an indenture (the "February 1996 Notes
Indenture") between the Company and Bankers Trust Company, trustee (the
"February 1996 Notes Trustee") in connection with its sale of 35,747 Units in
the Unit Offering. Each Unit consisted of ten February 1996 Notes and 32
Warrants.
The February 1996 Notes are unsecured obligations of the Company
ranking pari passu in right of payment with the Company's other unsecured
unsubordinated indebtedness, including, among other things, the Notes, the
April 1996 Notes and the Vendor Financing Agreement, and senior in right of
payment to all subordinated indebtedness of the Company. The February 1996
Notes are effectively subordinated to the Vendor Financing Agreement to the
extent the Vendor Financing Agreement is secured or the indebtedness thereunder
is incurred by subsidiaries of the Company.
The February 1996 Notes are redeemable at the option of the Company,
in whole or in part, at any time on or after February 1, 2001, 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, prior to February 1, 1999, up to 25% of the aggregate
principal amount at maturity of the February 1996 Notes are redeemable at 112%
of their accreted value from the proceeds of public equity offerings provided
that at least $268.1 million principal amount at maturity remains outstanding
after any such redemption.
The February 1996 Notes Indenture contains certain restrictive
covenants, including among others, limitations on the ability of the Company to
incur indebtedness, pay dividends, prepay subordinated indebtedness, repurchase
capital stock, make investments, engage in transactions with stockholders and
affiliates, create liens,
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sell assets and engage in mergers and consolidations, and certain events of
default, which are substantially similar to those relating to the April 1996
Notes and the Notes. See "-- April 1996 Notes" and "Description of the Notes."
THE VENDOR FINANCING AGREEMENT
Powertel PCS, Inc., a wholly owned subsidiary of the Company
("Powertel PCS"), entered into an Equipment Purchase Agreement dated as of
March 4, 1996 with Ericsson for the purchase of PCS equipment and services and
a Vendor Financing Agreement with Ericsson to finance up to $125.0 million of
such purchase. On October 31, 1996, March 31, 1997 and June 26, 1997, Powertel
PCS and Ericsson entered into amendments to the Vendor Financing Agreement
which increased the amount of vendor financing to $165.0 million and amended
certain other provisions of the Vendor Financing Agreement. The following
summary of certain material provisions of the Vendor Financing Agreement and
the Equipment Purchase Agreement, as amended, does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the Vendor
Financing Agreement and the Equipment Purchase Agreement.
Under the Equipment Purchase Agreement, Powertel PCS agreed to
purchase, and Ericsson agreed to sell, certain equipment, software and
installation services required for the initial buildout and operation of the
PCS System (in each case subject to the terms and conditions of the Equipment
Purchase Agreement). Powertel PCS has agreed to: (i) purchase its first $75.0
million worth of PCS equipment, software and/or services for the Atlanta MTA
from Ericsson; and (ii) for a term of three years, utilize Ericsson as its
exclusive provider of PCS 1900 equipment for the Current PCS System.
The term of exclusivity will run independently for each MTA and will
commence six months prior to the date the Company first uses the PCS 1900
equipment to provide In Revenue Service (as defined in the Equipment Purchase
Agreement) for such MTA. Powertel PCS's grant of exclusivity is conditioned
upon: (i) Ericsson's continuing to provide sufficient quantities of PCS 1900
equipment to meet the Company's needs in the Current PCS Markets; (ii)
Ericsson's ability to provide commercial service for the Atlanta MTA by June 1,
1997; and (iii) Ericsson's continuing to provide "state-of-the-art" equipment.
Under the Vendor Financing Agreement, Ericsson has agreed to provide
financing to Powertel PCS for the cost of equipment, software and installation
services acquired by Powertel PCS under the Equipment Purchase Agreement for
the Current PCS System (subject to the terms and conditions of the Vendor
Financing Agreement). All advances under the five-year line of credit
established by the Vendor Financing Agreement made during any calendar year
will accrue interest at a spread (not exceeding 5%) above LIBOR or, under
certain circumstances, at a spread (not exceeding 3%) over Citibank N.A.'s
prime rate, payable quarterly in arrears at the end of each calendar quarter,
during the remainder of such calendar year and for three succeeding years;
thereafter, the principal amount will amortize and be repaid (together with
interest accrued thereon), in equal quarterly installments. A significant
amount of such indebtedness may mature prior to the Notes. See "Risk Factors --
Ability to Service Debt; Restrictive Covenants; Refinancing Risks." In
addition, the Company will be required to repay indebtedness outstanding under
the Vendor Financing Agreement in connection with certain sales of assets other
than in the ordinary course of business, including proceeds from the sale of
PCS licenses.
The Vendor Financing Agreement contains a number of covenants
including, among others, covenants limiting the License Subsidiaries' (as
defined below) ability to incur debt and covenants requiring Powertel to
provide financial and other information. In addition, the Company is required
to maintain certain financial ratios, including requirements that: (i) the
Company earn minimum quarterly consolidated PCS revenues ranging from $8.4
million for the quarter ending June 30, 1997 to $195.0 million for the quarter
ending December 31, 2005; (ii) the Company maintain a minimum amount of
consolidated assets minus consolidated liabilities; (iii) the Company maintain
a minimum number of subscribers ranging from 38,000 for the quarter ending June
30, 1997 to 600,000 for the quarter ending December 31, 2000 and maintaining
this subscriber level through December 31, 2005; (iv) the Company maintain a
minimum ratio of annualized consolidated EBITDA to consolidated debt service
(defined as scheduled principal payments plus cash interest expense) of .90 to
1 for the quarters ending December 31, 2001 and March 31, 2002, 1 to 1 for the
quarters ending June 30, 2002 through December 31,
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2002, 1.1 to 1 for the quarter ending March 31, 2003, 1.15 to 1 for the quarter
ending June 30, 2003, 1.2 to 1 for the quarter ending September 30, 2003, and
1.25 to 1 for the quarters ending December 31, 2003 through December 31, 2004;
(v) the Company must maintain a maximum ratio of consolidated debt to
annualized consolidated EBITDA of 16 to 1 for the quarter ending December 31,
2000 decreasing to 4 to 1 for the quarters ending December 31, 2004 through
December 31, 2005; and (vi) the Company must not permit its cumulative capital
expenditures from the period beginning January 1, 1999 to exceed $796.0 million
at December 31, 1999, increasing to approximately $1.2 billion by December 31,
2005. The Vendor Financing Agreement also includes customary events of default,
including a default for a change in control of the Company.
Powertel PCS'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 Powertel Jacksonville Licenses, Inc., Powertel
Memphis Licenses, Inc., Powertel Birmingham Licenses, Inc. and Powertel Atlanta
Licenses, Inc. (the "License Subsidiaries"). Repayment of Powertel PCS's
obligations under the Vendor Financing Agreement is guaranteed by Powertel, the
License Subsidiaries, and Powertel/Jacksonville, Inc., Powertel/Memphis, Inc.,
Powertel/Birmingham, Inc. and Powertel/Atlanta, Inc.
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DESCRIPTION OF THE NOTES
The Old Notes were issued under an Indenture, dated as of June 10,
1997 (the "Indenture"), between the Company and Bankers Trust Company, as
trustee (the "Trustee"). The New Notes will be issued under the Indenture,
which will be qualified under the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"), upon the effectiveness of the Registration Statement of
which this Prospectus is a part. The form and terms of the New Notes are
identical in all material respects to the form and terms of the Old Notes
except that the New Notes will be registered under the Securities Act and,
therefore, will not bear legends restricting transfer thereof. Upon the
consummation of the Exchange Offer, holders of Notes will not be entitled to
registration rights under, or the contingent increase in interest rate provided
pursuant to, the Old Notes. The New Notes will evidence the same debt as the
Old Notes and will be treated as a single class under the Indenture with any
Old Notes that remain outstanding. The Old Notes and New Notes are herein
collectively referred to as the "Notes."
The terms of the Notes include those stated in the Indenture and those
made part of the Indenture by reference to the Trust Indenture Act as in effect
on the date of the Indenture. The Notes are subject to all such terms and
reference is made to the Indenture and the Trust Indenture Act for a statement
thereof. A copy of the Indenture has been filed with the Commission as an
exhibit to the Registration Statement of which this Prospectus is a part. The
following summary, which describes certain provisions of the Indenture and the
Notes, does not purport to be complete and is subject to, and is qualified in
its entirety by reference to all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act. For definitions of certain capitalized terms used in the
following summary, see "-- Certain Definitions."
GENERAL
The Notes will be unsecured (except to the extent described under
"-- Security" below) senior obligations of the Company, initially limited to
$300,000,000 aggregate principal amount, and will mature on June 1, 2007. Each
Note will bear interest at 11 1/8% per annum from June 10, 1997 or from the most
recent Interest Payment Date to which interest has been paid or provided for,
payable semiannually (to Holders of record at the close of business on the May
15 or November 15 immediately preceding the Interest Payment Date) on June 1
and December 1 of each year, commencing December 1, 1997. Interest will be
computed on the basis of a 360-day year of twelve 30-day months.
Principal of, premium, if any, and interest on the Notes will be
payable at the office or agency of the Company in the Borough of Manhattan, the
City of New York (which initially will be the corporate trust office of the
Trustee at 4 Albany Street, New York, New York 10006, Attention: Corporate
Trust and Agency Group); provided that, at the option of the Company, payment
of interest may be made by check mailed to the address of the Holder as such
address appears in the Security Register.
The Notes will be issued only in registered form, without coupons, in
denominations of $1,000 and integral multiples thereof. See "-- Book-Entry;
Delivery and Form." No service charge will be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any transfer tax or other similar governmental charge
payable in connection therewith.
Subject to the covenants described below under "Covenants" and
applicable laws, the Company may issue additional Notes under the Indenture.
The Notes and any additional Notes subsequently issued would be treated as a
single class for all purposes under the Indenture.
SINKING FUND
The Notes will not be subject to any sinking fund or mandatory
redemption.
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OPTIONAL REDEMPTION
The Notes will be redeemable, at the Company's option, in whole or in
part, at any time or from time to time, on or after June 1, 2002 and prior to
maturity, upon not less than 30 nor more than 60 days' prior notice mailed by
first class mail to each Holder's last address as it appears in the Security
Register, at the redemption prices (expressed in percentages of principal
amount) set forth below, plus accrued and unpaid interest to the redemption
date (subject to the right of Holders of record on the relevant regular record
date that is prior to the redemption date to receive interest due on an
interest payment date), if redeemed during the 12-month period commencing June
1, of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
---- ----------------
<S> <C>
2002............................................ 105.56250%
2003............................................ 102.78125
2004 and thereafter............................. 100.00000
</TABLE>
In addition, at any time prior to June 1, 2000, the Company may redeem
up to 35% of the principal amount of the Notes with the proceeds of one or more
Public Equity Offerings, at any time as a whole or from time to time in part,
at a redemption price (expressed as a percentage of principal amount) of
111.125%; provided that after any such redemption at least $195.0 million
aggregate principal amount of Notes remains outstanding.
If less than all of the Notes are to be redeemed at any time, the
Trustee will select the Notes, or portions thereof, for redemption in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed or, if the Notes are not listed on a
national securities exchange, on a pro rata basis, by lot or by such other
method as the Trustee in its sole discretion shall deem to be fair and
appropriate; provided that no Note of $1,000 in principal amount or less shall
be redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal
amount thereof to be redeemed. A new Note in principal amount equal to the
unredeemed portion thereof will be issued in the name of the Holder thereof
upon cancellation of the original Note.
SECURITY
On the Closing Date, the Company purchased and pledged to the Trustee
as security for the benefit of the Holders of the Notes the Pledged Securities
in such amount as will be sufficient upon receipt of scheduled interest and
principal payments of such securities to provide for payment in full of the
first six scheduled interest payments due on the Notes. The Company used
approximately $89.6 million of the net proceeds of the Offering to acquire the
Pledged Securities.
The Pledged Securities were pledged by the Company to the Trustee for
the benefit of the Holders of the Notes pursuant to the Pledge Agreement and
are held by the Trustee in the Pledge Account. Pursuant to the Pledge
Agreement, immediately prior to an Interest Payment Date, the Company may
either deposit with the Trustee from funds otherwise available to the Company
cash sufficient to pay the interest scheduled to be paid on such date or the
Company may direct the Trustee to release from the Pledge Account proceeds
sufficient to pay interest then due on the Notes. In the event the Company
exercises the former option, the Company may direct the Trustee to release a
like amount of proceeds from the Pledge Account. A failure to pay interest on
the Notes in a timely manner through the first six scheduled interest payment
dates will constitute an immediate Event of Default under the Indenture, with
no grace or cure period. The Pledged Securities and Pledge Account also secure
the repayment of the principal amount and premium on the Notes.
Under the Pledge Agreement, once the Company makes the first six
scheduled interest payments on the Notes, all of the remaining Pledged
Securities, if any, will be released from the Pledge Account and thereafter the
Notes will be unsecured.
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RANKING
The Indebtedness evidenced by the Notes will rank pari passu in right
of payment with all existing and future unsubordinated indebtedness of the
Company and senior in right of payment to all existing and future subordinated
indebtedness of the Company. After giving pro forma effect to the Transactions
and the application of the net proceeds thereof, as of March 31, 1997, the
Company would have had $551.1 million of indebtedness outstanding other than
the Notes and at such date would have approximately $61.2 million of
availability under the Vendor Financing Agreement for purchases of PCS
equipment and services. The Company is permitted to incur additional
indebtedness to finance the acquisition of inventory or equipment and up to
$25.0 million of indebtedness under one or more commercial bank facilities. The
Company is permitted under the Indenture to secure such indebtedness. The Notes
will be effectively subordinated to such security interests to the extent of
such security interests. In addition, all existing and future liabilities
(including trade payables) of the Company's subsidiaries will be effectively
senior to the Notes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in
the covenants and other provisions of the Indenture. Reference is made to the
Indenture for the definition of any other capitalized term used herein for
which no definition is provided.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person (other than the
Company or any of its Restricted Subsidiaries) has a joint interest and the net
income of any Unrestricted Subsidiary, except to the extent of the amount of
dividends or other distributions actually paid to the Company or any of its
Restricted Subsidiaries by such other Person or such Unrestricted Subsidiary
during such period; (ii) solely for the purposes of calculating the amount of
Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of the "Limitation on Restricted Payments" covenant described below
(and in such case, except to the extent includable pursuant to clause (i)
above), the net income (or loss) of any Person accrued prior to the date it
becomes a Restricted Subsidiary or is merged into or consolidated with the
Company or any of its Restricted Subsidiaries or all or substantially all of
the property and assets of such Person are acquired by the Company or any of
its Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary
to the extent that the declaration or payment of dividends or similar
distributions by such Restricted Subsidiary of such net income is not at the
time permitted by the operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to such Restricted Subsidiary; (iv) any gains or losses (on an
after-tax basis) attributable to Asset Sales; (v) except for purposes of
calculating the amount of Restricted Payments that may be made pursuant to
clause (C) of the first paragraph of the "Limitation on Restricted Payments"
covenant described below, any amount paid or accrued as dividends on Preferred
Stock (other than accrued dividends which, pursuant to the terms of the
Preferred Stock, will not be payable prior to the first anniversary after the
Stated Maturity of the Notes) of the Company or any Restricted Subsidiary owned
by Persons other than the Company and any of its Restricted Subsidiaries; and
(vi) all extraordinary gains and extraordinary losses.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Asset Acquisition" means (i) an investment by the Company or any of
its Restricted Subsidiaries in any other Person pursuant to which such Person
shall become a Restricted Subsidiary of the Company or shall be merged into or
consolidated with the Company or any of its Restricted Subsidiaries; provided
that such
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Person's primary business is related, ancillary or complementary to the
businesses of the Company and its Restricted Subsidiaries on the date of such
investment or (ii) an acquisition by the Company or any of its Restricted
Subsidiaries of the property and assets of any Person other than the Company or
any of its Restricted Subsidiaries that constitute substantially all of a
division or line of business of such Person; provided that the property and
assets acquired are related, ancillary or complementary to the businesses of
the Company and its Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the Company
or any of its Restricted Subsidiaries (other than to the Company or another
Restricted Subsidiary of the Company) of (i) all or substantially all of the
Capital Stock of any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute a division or line of business
of the Company or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition (including
by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any
Restricted Subsidiary, (ii) all or substantially all of the property and assets
of an operating unit or business of the Company or any of its Restricted
Subsidiaries or (iii) any other property and assets of the Company or any of
its Restricted Subsidiaries outside the ordinary course of business of the
Company or such Restricted Subsidiary and, in each case, that is not governed
by the provisions of the Indenture applicable to mergers, consolidations and
sales of all or substantially all of the assets of the Company; provided that
"Asset Sale" shall not include (i) sales or other dispositions of inventory,
receivables and other current assets, (ii) simultaneous exchanges by the
Company or any Restricted Subsidiary of property or equipment for other
property or equipment; provided that the property or equipment received by the
Company or such Restricted Subsidiary has at least substantially equal market
value to the Company or such Restricted Subsidiary (as determined by the Board
of Directors whose good faith determination shall be conclusive and evidenced
by a board resolution), provided that, after giving pro forma effect to such
exchange, the Consolidated Leverage Ratio shall be no greater than the
Consolidated Leverage Ratio immediately prior to such exchange or (iii) sales
or other dispositions of assets with a fair market value (as certified in an
officers' certificate) not in excess of $500,000.
"Average Life" means, at any date of determination with respect to any
debt security, the quotient obtained by dividing (i) the sum of the products of
(a) the number of years from such date of determination to the dates of each
successive scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participation or other equivalents (however designated, whether
voting or non-voting) in equity of such Person, whether now outstanding or
issued after the Closing Date, including, without limitation, all Common Stock
and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease of any
property (whether real, personal or mixed) of which the discounted present
value of the rental obligations of such Person as lessee, in conformity with
GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present value of
the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) a "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other
than the Existing Stockholders, becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total
voting power of the total Voting Stock of the Company on a fully diluted basis;
or (ii) individuals who at the beginning of any period of two consecutive
calendar years constituted the board of directors (together with any new
directors whose election by the board of directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the members of the Board of Directors then in office who either
were members of the board of directors at the beginning of such period or whose
election or
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nomination for election was previously so approved) cease for any reason to
constitute a majority of the members of board of directors then in office.
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Common Stock" means, with respect to any Person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's equity, other than Preferred Stock of
such Person, whether now outstanding or issued after the Closing Date,
including without limitation, all series and classes of such common stock.
"Consolidated EBITDA" means, for any period, the sum of the amounts
for such period of (i) Adjusted Consolidated Net Income, (ii) Consolidated
Interest Expense, (iii) income taxes, to the extent such amount was deducted in
calculating Adjusted Consolidated Net Income (other than income taxes (x)
(either positive or negative) attributable to extraordinary and non-recurring
gains or losses or sales of assets and (y) actually payable with respect to
such period), (iv) depreciation expense, to the extent such amount was deducted
in calculating Adjusted Consolidated Net Income, (v) amortization expense, to
the extent such amount was deducted in calculating Adjusted Consolidated Net
Income, and (vi) all other non-cash items reducing Adjusted Consolidated Net
Income (other than items that will require cash payments and for which an
accrual or reserve is, or is required by GAAP to be, made), less all non-cash
items increasing Adjusted Consolidated Net Income, all as determined on a
consolidated basis for the Company and its Restricted Subsidiaries in
conformity with GAAP; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to
the extent not otherwise reduced in accordance with GAAP) by an amount equal to
(A) the amount of the Adjusted Consolidated Net Income attributable to such
Restricted Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding Common Stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding Common
Stock of such Restricted Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the aggregate
amount of interest in respect of Indebtedness (including amortization of
original issue discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted Consolidated Net Income pursuant to clause (iii) of the
definition thereof (but only in the same proportion as the net income of such
Restricted Subsidiary is excluded from the calculation of Adjusted Consolidated
Net Income pursuant to clause (iii) of the definition thereof) and (ii) any
premiums, fees and expenses (and any amortization thereof) payable in
connection with the Transactions, all as determined on a consolidated basis
(without taking into account Unrestricted Subsidiaries) in conformity with
GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date, the
ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis as of the end of the four
fiscal quarters for which financial statements of the Company have been filed
with the Commission or have otherwise become publicly available immediately
prior to such Transaction Date (the "Reference Period") to (ii) the aggregate
amount of Consolidated EBITDA for such Reference Period. In making the
foregoing calculation, (A) Indebtedness and Consolidated EBITDA shall be
calculated after giving pro forma effect to (x) any Indebtedness (including, if
applicable, the Notes) Incurred during such Reference Period or subsequent to
the end of the Reference Period and on or prior to the Transaction Date, in
each case as if such Indebtedness had been Incurred, and the proceeds thereof
had been applied, on the first day of such Reference Period and (y) any
Indebtedness that was outstanding during such Reference Period or thereafter
but that is not outstanding or is to be repaid on the Transaction Date; (B) pro
forma effect shall be given to Asset Dispositions and Asset Acquisitions
(including giving pro forma effect to the application of proceeds of any Asset
Disposition) that
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occur during such Reference Period or thereafter and on or prior to the
Transaction Date as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; (C) pro forma effect shall be given to
asset dispositions and asset acquisitions (including giving pro forma effect to
the application of proceeds of any asset disposition) that have been made by
any Person that has become a Restricted Subsidiary or has been merged with or
into the Company or any Restricted Subsidiary during such Reference Period or
subsequent to such period and on or prior to the Transaction Date and that
would have constituted Asset Dispositions or Asset Acquisitions had such
transactions occurred when such Person was a Restricted Subsidiary as if such
asset dispositions or asset acquisitions were Asset Dispositions or Asset
Acquisitions that occurred on the first day of such Reference Period; provided
that to the extent that clause (B) or (C) of this sentence requires that pro
forma effect be given to an Asset Acquisition or Asset Disposition, such pro
forma calculation shall be based upon the four full fiscal quarters immediately
preceding the Transaction Date of the Person, or division or line of business
of the Person, that is acquired or disposed for which financial information is
available; and (D) the aggregate amount of Indebtedness outstanding as of the
end of the Reference Period will be deemed to include the total amount of funds
outstanding and/or available on the Transaction Date under any revolving credit
facilities of the Company or its Restricted Subsidiaries.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted
Subsidiaries filed with the Commission or otherwise publicly available, less
any amounts attributable to Redeemable Stock or any equity security convertible
into or exchangeable for Indebtedness, the cost of treasury stock and the
principal amount of any promissory notes receivable from the sale of the
Capital Stock of the Company or any of its Restricted Subsidiaries, each item
to be determined in conformity with GAAP (excluding the effects of foreign
currency exchange adjustments under Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 52).
"Currency Agreement" means any foreign exchange contract, currency
swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage of time
or both would be, an Event of Default.
"Existing Stockholders" means ITC Holding or SCANA and their
respective Affiliates at the time of determination.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of the Indenture, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession. All ratios and computations
based on GAAP contained in the Indenture shall be computed in conformity with
GAAP applied on a consistent basis, except that calculations made for purposes
of determining compliance with the terms of the covenants and with other
provisions of the Indenture shall be made without giving effect to (i) the
amortization of any expenses incurred in connection with the Transactions and
(ii) except as otherwise provided, the amortization of any amounts required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness of any other Person
and, without limiting the generality of the foregoing, any obligation, direct
or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such Indebtedness of
such other Person (whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for purposes of assuring in any other manner the obligee of
such Indebtedness of the payment thereof or to protect such obligee against
loss in respect thereof (in whole or in part); provided that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
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"Holder" means the registered holder of any Note.
"Incur" means, with respect to any Indebtedness, to incur, create,
issue, assume, Guarantee or otherwise become liable for or with respect to, or
become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date of
determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion of
such services, except Trade Payables, (v) all Capitalized Lease Obligations of
such Person, (vi) all Indebtedness of other Persons secured by a Lien on any
asset of such Person, whether or not such Indebtedness is assumed by such
Person; provided that the amount of such Indebtedness shall be the lesser of
(A) the fair market value of such asset at such date of determination and (B)
the amount of such Indebtedness, (vii) all Indebtedness of other Persons
Guaranteed by such Person to the extent such Indebtedness is Guaranteed by such
Person and (viii) to the extent not otherwise included in this definition,
obligations under Currency Agreements and Interest Rate Agreements. The amount
of Indebtedness of any Person at any date shall be the outstanding balance at
such date (or in the case of a revolving credit or other similar facility, the
total amount of funds outstanding and/or available on the date of
determination) of all unconditional obligations as described above and, with
respect to contingent obligations, the maximum liability upon the occurrence of
the contingency giving rise to the obligation, provided (A) that the amount
outstanding at any time of any Indebtedness issued with original issue discount
is the face amount of such Indebtedness less the unamortized portion of the
original issue discount of such Indebtedness at the time of its issuance as
determined in conformity with GAAP, (B) that money borrowed and set aside at
the time of the Incurrence of any Indebtedness in order to prefund the payment
of interest on such Indebtedness shall be deemed not to be "Indebtedness" and
(C) that Indebtedness shall not include any liability for federal, state, local
or other taxes.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.
"Investment" in any Person means any direct or indirect advance, loan
or other extension of credit (including, without limitation, by way of
Guarantee or similar arrangement; but excluding advances to customers in the
ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the
account or use of others), or any purchase or acquisition of Capital Stock,
bonds, notes, debentures or other similar instruments issued by, such Person
and shall include the designation of a Restricted Subsidiary as an Unrestricted
Subsidiary. For purposes of the definition of "Unrestricted Subsidiary" and the
"Limitation on Restricted Payments" covenant described below, (i) "Investment"
shall include the fair market value of the assets (net of liabilities) of any
Restricted Subsidiary of the Company at the time that such Restricted
Subsidiary of the Company is designated an Unrestricted Subsidiary and shall
exclude the fair market value of the assets (net of liabilities) of any
Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company and (ii) any property
transferred to or from any Person shall be valued at its fair market value at
the time of such transfer, in each case as determined by the Board of Directors
in good faith.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including, without limitation, any conditional sale
or other title retention agreement or lease in the nature thereof, any sale
with recourse against the seller or any Affiliate of the seller, or any
agreement to give any security interest).
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"Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
proceeds of such Asset Sale in the form of cash or cash equivalents, including
payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company
and its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a
reserve against any liabilities associated with such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities,
liabilities related to environmental matters and liabilities under any
indemnification obligations associated with such Asset Sale, all as determined
in conformity with GAAP and (b) with respect to any issuance or sale of Capital
Stock, the proceeds of such issuance or sale in the form of cash or cash
equivalents, including payments in respect of deferred payment obligations (to
the extent corresponding to the principal, but not interest, component thereof)
when received in the form of cash or cash equivalents (except to the extent
such obligations are financed or sold with recourse to the Company or any
Restricted Subsidiary of the Company) and proceeds from the conversion of other
property received when converted to cash or cash equivalents, net of attorney's
fees, accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees incurred in connection
with such issuance or sale and net of taxes paid or payable as a result
thereof.
"Offer to Purchase" means an offer by the Company to purchase Notes
from the Holders commenced by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that
all Notes validly tendered will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase (which shall be a Business Day
no earlier than 30 days nor later than 60 days from the date such notice is
mailed) (the "Payment Date"); (iii) that any Note not tendered will continue to
accrue interest pursuant to its terms; (iv) that, unless the Company defaults
in the payment of the purchase price, any Note accepted for payment pursuant to
the Offer to Purchase shall cease to accrue interest on and after the Payment
Date; (v) that Holders electing to have a Note purchased pursuant to the Offer
to Purchase will be required to surrender the Note, together with the form
entitled "Option of the Holder to Elect Purchase" on the reverse side of the
Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
Payment Date; (vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal
amount of $1,000 or integral multiples thereof. On the Payment Date, the
Company shall (i) accept for payment on a pro rata basis Notes or portions
thereof tendered pursuant to an Offer to Purchase; (ii) deposit with the Paying
Agent money sufficient to pay the purchase price of all Notes or portions
thereof so accepted; and (iii) deliver, or cause to be delivered, to the
Trustee all Notes or portions thereof so accepted together with an Officers'
Certificate specifying the Notes or portions thereof accepted for payment by
the Company. The Paying Agent shall promptly mail to the Holders of Notes so
accepted payment in an amount equal to the purchase price, and the Trustee
shall promptly authenticate and mail to such Holders a new Note equal in
principal amount to any unpurchased portion of the Note surrendered; provided
that each Note purchased and each new Note issued shall be in a principal
amount of $1,000 or integral multiples thereof. The Company will publicly
announce the results of an Offer to Purchase as soon as practicable after the
Payment Date. The Trustee shall act as the Paying Agent for an Offer to
Purchase. The Company will comply with Rule 14e-1 under the Exchange Act and
any other securities laws and regulations thereunder to the extent such laws
and regulations are applicable, in the event that the Company is required to
repurchase Notes pursuant to an Offer to Purchase.
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"Permitted Investment" means (i) an Investment in the Company or a
Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investment; (ii) a Temporary Cash
Investment; (iii) commission, payroll, travel and similar advances to cover
matters that are expected at the time of such advances ultimately to be treated
as expenses in accordance with GAAP; and (iv) stock, obligations or securities
received in satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments, governmental
charges or claims that are being contested in good faith by appropriate legal
proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits
made in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security; (iv)
Liens incurred or deposits made to secure the performance of tenders, bids,
leases, statutory or regulatory obligations, bankers' acceptances, surety and
appeal bonds, government contracts, performance and return-of-money bonds and
other obligations of a similar nature incurred in the ordinary course of
business (exclusive of obligations for the payment of borrowed money); (v)
easements, rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with the "Limitation on Indebtedness" covenant
described below, (1) to finance the cost (including the cost of improvement or
construction) of the item of property or assets subject thereto and such Lien
is created prior to, at the time of or within six months after the later of the
acquisition, the completion of construction or the commencement of full
operation of such property or (2) to refinance any Indebtedness previously so
secured, (b) the principal amount of the Indebtedness secured by such Lien does
not exceed 100% of such cost and (c) any such Lien shall not extend to or cover
any property or assets other than such item of property or assets and any
improvements on such item; (vii) leases or subleases granted to others that do
not materially interfere with the ordinary course of business of the Company
and its Restricted Subsidiaries, taken as a whole; (viii) Liens encumbering
property or assets under construction arising from progress or partial payments
by a customer of the Company or its Restricted Subsidiaries relating to such
property or assets; (ix) any interest or title of a lessor in the property
subject to any Capitalized Lease or operating lease; (x) Liens arising from
filing Uniform Commercial Code financing statements regarding leases; (xi)
Liens on property of, or on shares of stock or Indebtedness of, any corporation
existing at the time such corporation becomes, or becomes a part of, any
Restricted Subsidiary; provided that such Liens do not extend to or cover any
property or assets of the Company or any Restricted Subsidiary other than the
property or assets acquired; (xii) Liens in favor of the Company or any
Restricted Subsidiary; (xiii) Liens arising from the rendering of a final
judgment or order against the Company or any Restricted Subsidiary of the
Company that does not give rise to an Event of Default; (xiv) Liens securing
reimbursement obligations with respect to letters of credit that encumber
documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (xvi) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are either within
the general parameters customary in the industry and incurred in the ordinary
course of business, in each case, securing Indebtedness under Interest Rate
Agreements and Currency Agreements and forward contracts, options, future
contracts, futures options or similar agreements or arrangements designed
solely to protect the Company or any of its Restricted Subsidiaries from
fluctuations in interest rates or the price of commodities; (xvii) Liens
arising out of conditional sale, title retention, consignment or similar
arrangements for the sale of goods entered into by the Company or any of its
Restricted Subsidiaries in the ordinary course of business in accordance with
the past practices of the Company and its Restricted Subsidiaries prior to the
Closing Date; and (xviii) Liens on or sales of receivables.
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"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities purchased by the Company with the net proceeds from the sale of the
Notes.
"Pledge Agreement" means the Collateral Pledge and Security Agreement,
dated June 10, 1997, made by the Company in favor of the Trustee, governing the
disbursement of funds from the Pledge Account, as such agreement may be
amended, restated, supplemented or otherwise modified from time to time.
"Pledged Securities" means the U.S. government securities purchased by
the Company and held in the Pledge Account in accordance with the Pledge
Agreement.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however
designated,whether voting or non-voting) of such Person's preferred or
preference equity, whether now outstanding or issued after the Closing Date,
including, without limitation, all series and classes of such preferred stock
or preference stock.
"Preferred Stock Sales" means the sale by the Company for $45.0
million, in the aggregate, of (a) 50,000 shares of its Series C Convertible
Preferred Stock, par value $.01 per share, to The Huff Alternative Income Fund,
L.P. pursuant to the Stock Purchase Agreement dated as of May 23, 1997 between
the Company and The Huff Alternative Income Fund, L.P. and (b) 50,000 shares of
its Series D Convertible Preferred Stock, par value $.01 per share, to SCANA
Communications, Inc., a wholly owned subsidiary of SCANA Corporation, pursuant
to the Stock Purchase Agreement dated as of May 23, 1997 between the Company
and SCANA Communications, Inc.
"Public Equity Offering" means an underwritten primary public offering
of Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
"Redeemable Stock" means any class or series of Capital Stock of any
Person that by its terms or otherwise is (i) required to be redeemed prior to
the Stated Maturity of the Notes, (ii) redeemable at the option of the holder
of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a
scheduled maturity prior to the Stated Maturity of the Notes; provided that any
Capital Stock that would not constitute Redeemable Stock but for provisions
thereof giving holders thereof the right to require such Person to repurchase
or redeem such Capital Stock upon the occurrence of an "asset sale" or "change
of control" occurring prior to the Stated Maturity of the Notes shall not
constitute Redeemable Stock if the "asset sale" or "change of control"
provisions applicable to such Capital Stock are no more favorable to the
holders of such Capital Stock than the provisions contained in "Limitation on
Asset Sales" and "Repurchase of Notes upon a Change of Control" covenants
described below and such Capital Stock specifically provides that such Person
will not repurchase or redeem any such stock pursuant to such provision prior
to the Company's repurchase of such Notes as are required to be repurchased
pursuant to the "Limitation on Asset Sales" and "Repurchase of Notes upon a
Change of Control" covenants described below.
"Repurchase Offer" means a "Repurchase Offer" as defined in the
Warrants.
"Restricted Subsidiary" means any Subsidiary of the Company other
than an Unrestricted Subsidiary.
"Significant Subsidiary" means, at any date of determination, any
Restricted Subsidiary of the Company that, together with its Subsidiaries, (i)
for the most recent fiscal year of the Company, accounted for more than 10% of
the consolidated revenues of the Company and its Restricted Subsidiaries or
(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"Stated Maturity" means, (i) with respect to any debt security, the
date specified in such debt security as the fixed date on which the final
installment of principal of such debt security is due and payable and
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(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date
on which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than 50% of the outstanding
Voting Stock is owned, directly or indirectly, by such Person and one or more
other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i) direct
obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of
America or any agency thereof, (ii) time deposit accounts, certificates of
deposit and money market deposits maturing within 180 days of the date of
acquisition thereof issued by a bank or trust company which is organized under
the laws of the United States of America, any state thereof or any foreign
country recognized by the United States, and which bank or trust company has
capital, surplus and undivided profits aggregating in excess of $50.0 million
(or the foreign currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at least one
nationally recognized statistical rating organization (as defined in Rule 436
under the Securities Act) or any money-market fund sponsored by a registered
broker dealer or mutual fund distributor, (iii) repurchase obligations with a
term of not more than 30 days for underlying securities of the types described
in clause (i) above entered into with a bank meeting the qualifications
described in clause (ii) above, (iv) commercial paper, maturing not more than
90 days after the date of acquisition, issued by a corporation (other than an
Affiliate of the Company) organized and in existence under the laws of the
United States of America, any state thereof or any foreign country recognized
by the United States of America with a rating at the time as of which any
investment therein is made of "P-1" (or higher) according to Moody's Investors
Service, Inc. or "A-1" (or higher) according to Standard & Poor's Ratings
Service, and (v) securities with maturities of six months or less from the date
of acquisition issued or fully and unconditionally guaranteed by any state,
commonwealth or territory of the United States of America, or by any political
subdivision or taxing authority thereof, and rated at least "A" by Standard &
Poor's Ratings Service or Moody's Investors Service, Inc.
"Trade Payables" means any accounts payable or any other indebtedness
or monetary obligation to trade creditors created, assumed or Guaranteed by the
Company or any of its Restricted Subsidiaries arising in the ordinary course of
business in connection with the acquisition of goods or services.
"Transaction Date" means, with respect to the Incurrence of any
Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted
Payment, the date such Restricted Payment is to be made.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below and (ii) any Subsidiary of
an Unrestricted Subsidiary. The Board of Directors may designate any Restricted
Subsidiary of the Company (including any newly acquired or newly formed
Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if
such Subsidiary has assets greater than $1,000, that such designation would be
permitted under the "Limitation on Restricted Payments" covenant described
below. The Board of Directors may designate any Unrestricted Subsidiary to be a
Restricted Subsidiary of the Company; provided that immediately after giving
effect to such designation (x) the Company could Incur $1.00 of additional
Indebtedness under the first paragraph of the "Limitation on Indebtedness"
covenant described below and (y) no Default or Event of Default shall have
occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the Board Resolution giving effect to such designation and an Officers'
Certificate certifying that such designation complied with the foregoing
provisions.
"Voting Stock" means with respect to any Person, Capital Stock of any
class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
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"Warrants" means the Warrants to purchase 1,143,904 shares of the
Company's Common Stock at an exercise price of $18.15 per share, subject to
adjustment, issued pursuant to the Warrant Agreement dated as of February 7,
1996 between the Company and Bankers Trust Company, as warrant agent.
"Wholly Owned" means, with respect to any Subsidiary of any Person,
the ownership of all of the outstanding Capital Stock of such Subsidiary (other
than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Indebtedness
(a) The Company will not, and will not permit any of its Restricted
Subsidiaries to, Incur any Indebtedness (other than the Notes and Indebtedness
existing on the Closing Date); provided that the Company may Incur Indebtedness
if, after giving effect to the Incurrence of such Indebtedness and the receipt
and application of the proceeds thereof, the Consolidated Leverage Ratio would
be less than or equal to 5 to 1.
Notwithstanding the foregoing, the Company, and (except as specified
below) any Restricted Subsidiary, may Incur each and all of the following: (i)
Indebtedness under one or more revolving credit or working capital facilities
in an aggregate principal amount outstanding or available at any time not to
exceed $25 million, less any amount of Indebtedness permanently repaid as
provided under the "Limitation on Asset Sales" covenant described below; (ii)
Indebtedness owed to the Company or any of its Wholly Owned Restricted
Subsidiaries; provided that any subsequent issuance or transfer of any Capital
Stock which results in any such Wholly Owned Restricted Subsidiary ceasing to
be a Wholly Owned Restricted Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or another Wholly Owned Restricted
Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such
Indebtedness; (iii) Indebtedness issued in exchange for, or the net proceeds of
which are used to refinance or refund, then outstanding Indebtedness, other
than Indebtedness Incurred under clause (i), (ii), (iv) or (vii) of this
paragraph, and any refinancings thereof in an amount not to exceed the amount
so refinanced or refunded (plus premiums, accrued interest, fees and expenses);
provided that Indebtedness the proceeds of which are used to refinance or
refund the Notes or Indebtedness that is pari passu with, or subordinated in
right of payment to, the Notes shall only be permitted under this clause (iii)
if (A) in case the Notes are refinanced in part or the Indebtedness to be
refinanced is pari passu with the Notes, such new Indebtedness, by its terms or
by the terms of any agreement or instrument pursuant to which such new
Indebtedness is outstanding, is expressly made pari passu with, or subordinate
in right of payment to, the remaining Notes, (B) in case the Indebtedness to be
refinanced is subordinated in right of payment to the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or instrument
pursuant to which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to the
extent that the Indebtedness to be refinanced is subordinated to the Notes and
(C) such new Indebtedness, determined as of the date of Incurrence of such new
Indebtedness, does not mature prior to the Stated Maturity of the Indebtedness
to be refinanced or refunded, and the Average Life of such new Indebtedness is
at least equal to the remaining Average Life of the Indebtedness to be
refinanced or refunded; and provided further that in no event may Indebtedness
of the Company be refinanced by means of any Indebtedness of any Restricted
Subsidiary of the Company pursuant to this clause (iii); (iv) Indebtedness (A)
in respect of performance, surety or appeal bonds provided in the ordinary
course of business, (B) under Currency Agreements and Interest Rate Agreements;
provided that such agreements do not increase the Indebtedness of the obligor
outstanding at any time other than as a result of fluctuations in foreign
currency exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; or (C) arising from agreements providing for
indemnification, adjustment of purchase price or similar obligations, or from
Guarantees or letters of credit, surety bonds or performance bonds securing any
obligations of the Company or any of its Restricted Subsidiaries pursuant to
such agreements, in each case Incurred in connection with the disposition of
any business, assets or Restricted Subsidiary of the Company (other than
Guarantees of
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Indebtedness Incurred by any Person acquiring all or any portion of such
business, assets or Restricted Subsidiary of the Company for the purpose of
financing such acquisition), in a principal amount not to exceed the gross
proceeds actually received by the Company or any Restricted Subsidiary in
connection with such disposition; (v) Indebtedness Incurred to finance the cost
(including the cost of design, development, construction, installation or
integration) of inventory or equipment acquired by the Company or a Wholly Owned
Restricted Subsidiary after the Closing Date; (vi) Indebtedness of the Company
not to exceed, at any one time outstanding, two times the Net Cash Proceeds
received by the Company after the Closing Date from the issuance and sale of its
Capital Stock (other than (x) Redeemable Stock, (y) Preferred Stock that
provides for the payment of dividends in cash and (z) Capital Stock issued in
connection with the Preferred Stock Sales) to a Person that is not a Subsidiary
of the Company, less the amount of any Investments made pursuant to clause (vii)
of the second paragraph of the "Limitation on Restricted Payments" covenant;
provided that such Indebtedness does not mature prior to the Stated Maturity of
the Notes and has an Average Life longer than the Notes; and (vii) Indebtedness
(in addition to Indebtedness permitted under clauses (i) through (vi) above) in
an aggregate principal amount outstanding at any time not to exceed $50 million,
less any amount of such Indebtedness permanently repaid as provided under the
"Limitation on Asset Sales" covenant described below.
(b) Notwithstanding any other provision of this "Limitation on
Indebtedness" covenant, the maximum amount of Indebtedness that the Company or a
Restricted Subsidiary may Incur pursuant to this "Limitation on Indebtedness"
covenant shall not be deemed to be exceeded due solely to the result of
fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of Indebtedness
under this "Limitation on Indebtedness" covenant, (1) Guarantees, Liens or
obligations with respect to letters of credit supporting Indebtedness otherwise
included in the determination of such particular amount shall not be included
and (2) any Liens granted pursuant to the equal and ratable provisions referred
to in the "Limitation on Liens" covenant described below shall not be treated as
Indebtedness. For purposes of determining compliance with this "Limitation on
Indebtedness" covenant, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
Limitation on Restricted Payments
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, (i) declare or pay any dividend or make any distribution
on its Capital Stock (other than dividends or distributions payable solely in
shares of its or such Restricted Subsidiary's Capital Stock (other than
Redeemable Stock) of the same class held by such holders or in options, warrants
or other rights to acquire such shares of Capital Stock) held by Persons other
than the Company or any of its Wholly Owned Restricted Subsidiaries, (ii)
purchase, redeem, retire or otherwise acquire for value any shares of Capital
Stock of (A) the Company or an Unrestricted Subsidiary (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Person or (B) a Restricted Subsidiary of the Company (including options,
warrants or other rights to acquire such shares of Capital Stock) held by any
Affiliate of the Company (other than a Wholly Owned Restricted Subsidiary) or
any holder (or any Affiliate of such holder) of 5% or more of the Capital Stock
of the Company, (iii) make any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or other acquisition
or retirement for value, of Indebtedness of the Company that is subordinated in
right of payment to the Notes or (iv) make any Investment, other than a
Permitted Investment, in any Person (such payments or any other actions
described in clauses (i) through (iv) being collectively "Restricted Payments")
if, at the time of, and after giving effect to, the proposed Restricted Payment:
(A) a Default or Event of Default shall have occurred and be continuing, (B) the
Company could not Incur at least $1.00 of Indebtedness under the first paragraph
of the "Limitation on Indebtedness" covenant or (C) the aggregate amount
expended for all Restricted Payments (the amount so expended, if other than in
cash, to be determined in good faith by the Board of Directors, whose
determination shall be conclusive and evidenced by a Board Resolution) after the
date of the Indenture shall exceed the sum of (1) 50% of the aggregate amount of
the Adjusted Consolidated Net Income (or, if the Adjusted Consolidated Net
Income is a loss, minus 100%
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of the amount of such loss) (determined by excluding income resulting from
transfers of assets by the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary) accrued on a cumulative basis during the period (taken as one
accounting period) beginning on the first day of the fiscal quarter immediately
following the Closing Date and ending on the last day of the last fiscal quarter
preceding the Transaction Date plus (2) the aggregate Net Cash Proceeds received
by the Company after the Closing Date from the issuance and sale permitted by
the Indenture of its Capital Stock (other than Redeemable Stock) to a Person who
is not a Subsidiary of the Company, or from the issuance to a Person who is not
a Subsidiary of the Company of any options, warrants or other rights to acquire
Capital Stock of the Company (in each case, exclusive of any Redeemable Stock or
any options, warrants or other rights that are redeemable at the option of the
holder, or are required to be redeemed, prior to the Stated Maturity of the
Notes) plus (3) an amount equal to the net reduction in Investments (other than
reductions in Permitted Investments) in any Person resulting from payments of
interest on Indebtedness, dividends, repayments of loans or advances, or other
transfers of assets, in each case to the Company or any Restricted Subsidiary or
from the Net Cash Proceeds from the sale of any such Investment (except, in each
case, to the extent any such payment or proceeds is included in the calculation
of Adjusted Consolidated Net Income), or from redesignations of Unrestricted
Subsidiaries as Restricted Subsidiaries (valued in each case as provided in the
definition of "Investments"), not to exceed the amount of Investments previously
made by the Company and any Restricted Subsidiary in such Person.
The foregoing provision shall not be violated by reason of: (i) the
payment of any dividend within 60 days after the date of declaration thereof if,
at said date of declaration, such payment would comply with the foregoing
paragraph; (ii) the redemption, repurchase, defeasance or other acquisition or
retirement for value of Indebtedness that is subordinated in right of payment to
the Notes including premium, if any, and accrued and unpaid interest, with the
proceeds of, or in exchange for, Indebtedness Incurred under clause (iii) of the
second paragraph of part (a) of the "Limitation on Indebtedness" covenant; (iii)
the repurchase, redemption or other acquisition of Capital Stock of the Company
in exchange for, or out of the proceeds of a substantially concurrent offering
of, shares of Capital Stock (other than Redeemable Stock) of the Company; (iv)
the acquisition of Indebtedness of the Company which is subordinated in right of
payment to the Notes in exchange for, or out of the proceeds of, a substantially
concurrent offering of, shares of the Capital Stock of the Company (other than
Redeemable Stock); (v) payments or distributions to dissenting stockholders
pursuant to applicable law in connection with a consolidation, merger or
transfer of assets that complies with the provisions of the Indenture applicable
to mergers, consolidations and transfers of all or substantially all of the
property and assets of the Company; (vi) Investments in an aggregate amount not
to exceed $25 million, in any Person the primary business of which is related,
ancillary or complementary to the businesses of the Company and its Restricted
Subsidiaries on the date of such Investments; (vii) Investments in an aggregate
amount not to exceed the Net Cash Proceeds received by the Company after the
Closing Date from the issuance and sale of its Capital Stock (other than (x)
Redeemable Stock, (y) Preferred Stock that provides for the payment of dividends
in cash and (z) Capital Stock issued in connection with the Preferred Stock
Sales) to a Person that is not a Subsidiary of the Company; provided that the
Investment is made within 12 months after such sale of Capital Stock; (viii) the
purchase, redemption, acquisition, cancellation or other retirement for value of
shares of Capital Stock of the Company to the extent necessary, in the judgment
of the Board of Directors of the Company, to prevent the loss or secure the
renewal or reinstatement of any license or franchise held by the Company or any
Restricted Subsidiary from any governmental agency; and (ix) the repurchase of
the Warrants pursuant to a Repurchase Offer; provided that, except in the case
of clauses (i) and (iv), no Default or Event of Default shall have occurred and
be continuing or occur as a consequence of the actions or payments set forth
therein.
Each Restricted Payment permitted pursuant to the preceding paragraph
(other than the Restricted Payment referred to in clause (ii) thereof and an
exchange of Capital Stock for Capital Stock or Indebtedness referred to in
clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii), (iv) and (vii), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
"Limitation on Restricted Payments" covenant have been met with respect to any
subsequent Restricted Payments. In the event the proceeds of an issuance of
Capital Stock of the Company are used for the redemption, repurchase or other
acquisition of the Notes, or Indebtedness that is pari passu with
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the Notes, then the Net Cash Proceeds of such issuance shall be included in
clause (C) of the first paragraph of this "Limitation on Restricted Payments"
covenant only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness.
Limitation on Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
The Company will not, and will not permit any Restricted Subsidiary to,
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions permitted by
applicable law on any Capital Stock of such Restricted Subsidiary owned by the
Company or any other Restricted Subsidiary, (ii) pay any Indebtedness owed to
the Company or any other Restricted Subsidiary, (iii) make loans or advances to
the Company or any other Restricted Subsidiary or (iv) transfer any of its
property or assets to the Company or any other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances or
restrictions: (i) existing on the Closing Date in the Indenture or any other
agreements in effect on the Closing Date, and any extensions, refinancings,
renewals or replacements of such agreements; provided that the encumbrances and
restrictions in any such extensions, refinancings, renewals or replacements are
no less favorable in any material respect to the Holders than those encumbrances
or restrictions that are then in effect and that are being extended, refinanced,
renewed or replaced; (ii) existing under or by reason of applicable law; (iii)
existing with respect to any Person or the property or assets of such Person
acquired by the Company or any Restricted Subsidiary and existing at the time of
such acquisition, which encumbrances or restrictions are not applicable to any
Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired; (iv) in the case of clause (iv)
of the first paragraph of this "Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries" covenant, (A) that restrict in a
customary manner the subletting, assignment or transfer of any property or asset
that is a lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer, option or
right with respect to, or Lien on, any property or assets of the Company or any
Restricted Subsidiary not otherwise prohibited by the Indenture or (C) arising
or agreed to in the ordinary course of business, not relating to any
Indebtedness, and that do not, individually or in the aggregate, detract from
the value of property or assets of the Company or any Restricted Subsidiary in
any manner material to the Company or any Restricted Subsidiary; or (v) with
respect to a Restricted Subsidiary and imposed pursuant to an agreement that has
been entered into for the sale or disposition of all or substantially all of the
Capital Stock of, or property and assets of, such Restricted Subsidiary. Nothing
contained in this "Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries" covenant shall prevent the Company or any
Restricted Subsidiary from (1) creating, incurring, assuming or suffering to
exist any Liens otherwise permitted in the "Limitation on Liens" covenant or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
Limitation on the Issuance and Sale of Capital Stock of Restricted
Subsidiaries
The Company will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (i) to the Company or a Wholly
Owned Restricted Subsidiary, (ii) issuances or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law, (iii) if, immediately after giving effect to such
issuance or sale, neither the Company nor any of its Subsidiaries owns any
shares of Capital Stock of such Restricted Subsidiary (including options,
warrants or other rights to purchase shares of such Capital Stock) or (iv) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under the "Limitation on Restricted Payments" covenant
if made on the date of such issuance or sale.
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Limitation on Issuances of Guarantees by Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee any Indebtedness of the Company which is pari passu
with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to the Indenture providing for a Guarantee
(a "Subsidiary Guarantee") of payment of the Notes by such Restricted Subsidiary
and (ii) such Restricted Subsidiary waives and will not in any manner whatsoever
claim or take the benefit or advantage of, any rights of reimbursement,
indemnity or subrogation or any other rights against the Company or any other
Restricted Subsidiary as a result of any payment by such Restricted Subsidiary
under its Subsidiary Guarantee; provided that this paragraph shall not be
applicable to any Guarantee of any Restricted Subsidiary that (x) Guarantees the
Indebtedness Incurred under clause (i) of the second paragraph of the
"Limitation on Indebtedness" covenant, (y) existed at the time such Person
became a Restricted Subsidiary and (z) was not Incurred in connection with, or
in contemplation of, such Person becoming a Restricted Subsidiary. If the
Guaranteed Indebtedness is (A) pari passu with the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be pari passu with, or subordinated to, the
Subsidiary Guarantee or (B) subordinated to the Notes, then the Guarantee of
such Guaranteed Indebtedness shall be subordinated to the Subsidiary Guarantee
at least to the extent that the Guaranteed Indebtedness is subordinated to the
Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary shall provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person not an Affiliate of the Company, of all of the Company's and each
Restricted Subsidiary's Capital Stock in, or all or substantially all the assets
of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indenture) or (ii) the release or discharge of the Guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such Guarantee.
Limitation on Transactions with Stockholders and Affiliates
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the rendering of any service) with any holder (or any Affiliate of such
holder) of 5% or more of any class of Capital Stock of the Company or with any
Affiliate of the Company or any Restricted Subsidiary, except upon fair and
reasonable terms no less favorable to the Company or such Restricted Subsidiary
than could be obtained, at the time of such transaction or at the time of the
execution of the agreement providing therefor, in a comparable arm's-length
transaction with a Person that is not such a holder or an Affiliate.
The foregoing limitation does not limit, and shall not apply to: (i)
transactions (A) approved by a majority of the disinterested members of the
Board of Directors or (B) for which the Company or a Restricted Subsidiary
delivers to the Trustee a written opinion of a nationally recognized investment
banking firm stating that the transaction is fair to the Company or such
Restricted Subsidiary from a financial point of view; (ii) any transaction
between the Company and any of its Wholly Owned Restricted Subsidiaries or
between Wholly Owned Restricted Subsidiaries; (iii) the payment of reasonable
and customary regular fees to directors of the Company who are not employees of
the Company; (iv) any payments or other transactions pursuant to any tax-sharing
agreement between the Company and any other Person with which the Company files
a consolidated tax return or with which the Company is part of a consolidated
group for tax purposes; or (v) any Restricted Payments not prohibited by the
"Limitation on Restricted Payments" covenant. Notwithstanding the foregoing, any
transaction covered by the first paragraph of this "Limitation on Transactions
with Stockholders and Affiliates" covenant and not covered by clauses (ii)
through (iv) of this paragraph, the aggregate amount of which exceeds $1.0
million in value, must be approved or determined to be fair in the manner
provided for in clause (i)(A) or (B) above.
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Limitation on Liens
The Company will not, and will not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on any of its assets or
properties of any character, or any shares of Capital Stock or Indebtedness of
any Restricted Subsidiary, without making effective provision for all of the
Notes and all other amounts due under the Indenture to be directly secured
equally and ratably with (or, if the obligation or liability to be secured by
such Lien is subordinated in right of payment to the Notes, prior to) the
obligation or liability secured by such Lien.
The foregoing limitation does not apply to: (i) Liens existing on the
Closing Date; (ii) Liens granted after the Closing Date on any assets or Capital
Stock of the Company or its Restricted Subsidiaries created in favor of the
Holders; (iii) Liens with respect to the assets of a Restricted Subsidiary
granted by such Restricted Subsidiary to the Company or a Wholly Owned
Restricted Subsidiary to secure Indebtedness owing to the Company or such other
Restricted Subsidiary; (iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under clause
(iii) of the second paragraph of the "Limitation on Indebtedness" covenant;
provided that such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets securing
the Indebtedness being refinanced; (v) Liens securing obligations under
commercial bank facilities under clause (i) of the second paragraph of the
"Limitation on Indebtedness" covenant; provided that the aggregate amount of
Indebtedness secured by any such Liens shall not at any time exceed the amount
of Indebtedness permitted to be Incurred under clause (i) of the second
paragraph of the "Limitation on Indebtedness" covenant; (vi) Liens securing
Indebtedness Incurred under clause (v) of the second paragraph of the
"Limitation on Indebtedness" covenant granted after the Closing Date on the
Capital Stock of any Restricted Subsidiary; provided the sole assets of such
Restricted Subsidiary consist of (x) licenses to provide personal communications
services, in the event the inventory or equipment acquired with such
Indebtedness relates to the Company's personal communications services business
or (y) licenses to provide cellular services, in the event the inventory or
equipment acquired with such Indebtedness relates to the Company's cellular
service business; or (vii) Permitted Liens.
Limitation on Sale-Leaseback Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any sale-leaseback transaction involving any of its assets or
properties whether now owned or hereafter acquired, whereby the Company or a
Restricted Subsidiary sells or transfers such assets or properties and then or
thereafter leases such assets or properties or any part thereof or any other
assets or properties which the Company or such Restricted Subsidiary, as the
case may be, intends to use for substantially the same purpose or purposes as
the assets or properties sold or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if: (i) the lease is for a period, including renewal rights, of not
in excess of three years; (ii) the lease secures or relates to industrial
revenue or pollution control bonds; (iii) the transaction is between the Company
and any Wholly Owned Restricted Subsidiary or between Wholly Owned Restricted
Subsidiaries; or (iv) the Company or such Restricted Subsidiary, within twelve
months after the sale or transfer of any assets or properties is completed,
applies an amount not less than the net proceeds received from such sale in
accordance with clause (A) or (B) of the first paragraph of the "Limitation on
Asset Sales" covenant described below.
Limitation on Asset Sales
The Company will not, and will not permit any Restricted Subsidiary to,
consummate any Asset Sale, unless (i) the consideration received by the Company
or such Restricted Subsidiary is at least equal to the fair market value of the
assets sold or disposed of and (ii) at least 75% of the consideration received
consists of cash or Temporary Cash Investments. In the event and to the extent
that the Net Cash Proceeds received by the Company or any of its Restricted
Subsidiaries from one or more Asset Sales occurring on or after the Closing Date
in any period of 12 consecutive months exceed $5 million, then the Company shall
or shall cause the relevant Restricted Subsidiary to (i) within twelve months
after the date Net Cash Proceeds so received
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exceed $5 million (A) apply an amount equal to such excess Net Cash Proceeds to
permanently repay unsubordinated Indebtedness of the Company or any Restricted
Subsidiary providing a Subsidiary Guarantee pursuant to the "Limitation on
Issuances of Guarantees by Restricted Subsidiaries" covenant described above or
Indebtedness of any other Restricted Subsidiary, in each case owing to a Person
other than the Company or any of its Restricted Subsidiaries or (B) invest an
equal amount, or the amount not so applied pursuant to clause (A), (or enter
into a definitive agreement committing to so invest within twelve months after
the date of such agreement), in capital assets of a nature or type or that are
used in a business (or in a company having capital assets of a nature or type,
or engaged in a business) similar or related to the nature or type of the
property and assets of, or the business of, the Company and its Restricted
Subsidiaries existing on the date of such investment (as determined in good
faith by the Board of Directors, whose determination shall be conclusive and
evidenced by a Board Resolution) and (ii) apply (no later than the end of the
twelve-month period referred to in clause (i)) such excess Net Cash Proceeds (to
the extent not applied pursuant to clause (i)) as provided in the following
paragraph of this "Limitation on Asset Sales" covenant. The amount of such
excess Net Cash Proceeds required to be applied (or to be committed to be
applied) during such twelve-month period as set forth in clause (i) of the
preceding sentence and not applied as so required by the end of such period
shall constitute "Excess Proceeds."
If, as of the first day of any calendar month, the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
"Limitation on Asset Sales" covenant totals at least $5 million, the Company
must commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 100% of the principal amount of the Notes plus, in
each case, accrued interest to the Payment Date.
Commission Reports and Reports to Holders
The Company shall file with the Commission the annual, quarterly and
other reports and other information required by Section 13(a) or 15(d) of the
Exchange Act, regardless of whether such sections of the Exchange Act are
applicable to the Company, and shall mail or cause to be mailed copies of such
reports to Holders and the Trustee within 15 days after the date it would have
been required to file such reports with the Commission had it been subject to
such sections; provided, however, that the copies of such reports mailed to
Holders may omit exhibits, which the Company will supply to any Holder at such
Holder's request.
REPURCHASE OF NOTES UPON A CHANGE OF CONTROL
The Company shall commence, within 30 days of the occurrence of a
Change of Control, and consummate an Offer to Purchase for all Notes then
outstanding, at a purchase price equal to 101% of the principal amount thereof,
plus accrued interest to the Payment Date.
There can be no assurances that the Company will have sufficient funds
available at the time of any Change of Control to make any debt payment
(including repurchases of Notes) required by the foregoing covenant (as well as
may be contained in other securities of the Company, including the February 1996
Notes and the April 1996 Notes, which might be outstanding at the time). The
above covenant requiring the Company to repurchase the Notes will, unless
consents are obtained, require the Company to repay all indebtedness then
outstanding which by its terms would prohibit such Note repurchase, either prior
to or concurrently with such Note repurchase.
EVENTS OF DEFAULT
The following events will be defined as "Events of Default" in the
Indenture: (a) defaults in the payment of principal of (or premium, if any, on)
any Note when the same becomes due and payable at maturity, upon acceleration,
redemption or otherwise; (b) defaults in the payment of interest on any Note
when the same becomes due and payable, and such default continues for a period
of 30 days; provided that a failure to make any of the first six scheduled
interest payments on the Notes on the applicable Interest Payment Date will
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constitute an Event of Default with no grace or cure period; (c) defaults in the
performance or breach of the provisions of the Indenture applicable to mergers,
consolidations and transfers of all or substantially all of the property and
assets of the Company or the failure to make or consummate an Offer to Purchase
in accordance with the provisions of the "Limitation on Asset Sales" covenant or
the "Repurchase of Notes upon a Change of Control" covenant; (d) defaults in the
performance of or breaches any covenant or agreement of the Company in the
Indenture or under the Notes (other than a default specified in clause (a), (b)
or (c) above) and such default or breach continues for a period of 30
consecutive days after written notice by the Trustee or the Holders of 25% or
more in aggregate principal amount of the Notes; (e) there occurs with respect
to any issue or issues of Indebtedness of the Company or any Significant
Subsidiary having an outstanding principal amount of $5 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (I) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (II) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $5 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company or any Significant
Subsidiary and shall not be paid or discharged, and there shall be any period of
30 consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and not
paid or discharged against all such Persons to exceed $5 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in
the premises enters a decree or order for (A) relief in respect of the Company
or any Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and in effect for a period of 30 consecutive days;
(h) the Company or any Significant Subsidiary (A) commences a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consents to the entry of an order for relief in an
involuntary case under any such law, (B) consents to the appointment of or
taking possession by a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the benefit of
creditors; or (i) the Pledge Agreement shall cease to be in full force and
effect or enforceable in accordance with its terms, other than in accordance
with its terms.
If an Event of Default (other than an Event of Default specified in
clause (g) or (h) above that occurs with respect to the Company) occurs and is
continuing under the Indenture, the Trustee or the Holders of at least 25% in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company (and to the Trustee if such notice is given by the Holders), may,
and the Trustee at the request of such Holders shall, declare the principal of,
premium, if any, and accrued interest on the Notes to be immediately due and
payable. Upon a declaration of acceleration, such principal of, premium, if any,
and accrued interest shall be immediately due and payable. In the event of a
declaration of acceleration because an Event of Default set forth in clause (e)
above has occurred and is continuing, such declaration of acceleration shall be
automatically rescinded and annulled if the event of default triggering such
Event of Default pursuant to clause (e) shall be remedied or cured by the
Company or the relevant Significant Subsidiary or waived by the holders of the
relevant Indebtedness within 60 days after the declaration of acceleration with
respect thereto. If an Event of Default specified in clause (g) or (h) above
occurs with respect to the Company, the principal of, premium, if any, and
accrued interest on the Notes then outstanding shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder. The Holders of at least a majority in principal
amount of the outstanding Notes by written notice to the Company and to the
Trustee, may waive all past defaults and rescind and annul a declaration of
acceleration and its consequences if (i) all existing Events of Default, other
than the nonpayment of the principal of, premium, if any, and interest on the
Notes that have become due solely by such declaration of acceleration, have been
cured or waived and (ii) the
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rescission would not conflict with any judgment or decree of a court of
competent jurisdiction. For information as to the waiver of defaults, see "--
Modification and Waiver."
The Holders of at least a majority in aggregate principal amount of the
outstanding Notes may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. However, the Trustee may refuse to follow any
direction that conflicts with law or the Indenture, that may involve the Trustee
in personal liability, or that the Trustee determines in good faith may be
unduly prejudicial to the rights of Holders of Notes not joining in the giving
of such direction and may take any other action it deems proper that is not
inconsistent with any such direction received from Holders of Notes. A Holder
may not pursue any remedy with respect to the Indenture or the Notes unless: (i)
the Holder gives the Trustee written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal amount of outstanding
Notes make a written request to the Trustee to pursue the remedy; (iii) such
Holder or Holders offer the Trustee indemnity satisfactory to the Trustee
against any costs, liability or expense; (iv) the Trustee does not comply with
the request within 60 days after receipt of the request and the offer of
indemnity; and (v) during such 60-day period, the Holders of a majority in
aggregate principal amount of the outstanding Notes do not give the Trustee a
direction that is inconsistent with the request. However, such limitations do
not apply to the right of any Holder of a Note to receive payment of the
principal of, premium, if any, or interest on, such Note or to bring suit for
the enforcement of any such payment, on or after the due date expressed in the
Notes, which right shall not be impaired or affected without the consent of the
Holder.
The Indenture will require certain officers of the Company to certify,
on or before a date not more than 90 days after the end of each fiscal year,
that a review has been conducted of the activities of the Company and its
Restricted Subsidiaries and the Company's and its Restricted Subsidiaries'
performance under the Indenture and that the Company has fulfilled all
obligations thereunder, or, if there has been a default in the fulfillment of
any such obligation, specifying each such default and the nature and status
thereof. The Company will also be obligated to notify the Trustee of any default
or defaults in the performance of any covenants or agreements under the
Indenture.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company shall not consolidate with, merge with or into, or sell,
convey, transfer, lease or otherwise dispose of all or substantially all of its
property and assets (as an entirety or substantially an entirety in one
transaction or a series of related transactions) to, any Person or permit any
Person to merge with or into the Company unless: (i) the Company shall be the
continuing Person, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or that acquired or leased
such property and assets of the Company shall be a corporation organized and
validly existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, all of the obligations of the Company on
all of the Notes and under the Indenture; (ii) immediately after giving effect
to such transaction, no Default or Event of Default shall have occurred and be
continuing; (iii) immediately after giving effect to such transaction on a pro
forma basis, the Company or any Person becoming the successor obligor of the
Notes shall have a Consolidated Net Worth equal to or greater than the
Consolidated Net Worth of the Company immediately prior to such transaction;
(iv) immediately after giving effect to such transaction on a pro forma basis
the Company, or any Person becoming the successor obligor of the Notes, as the
case may be, could Incur at least $1.00 of Indebtedness under the first
paragraph of the "Limitation on Indebtedness" covenant; provided, however, that
this clause (iv) shall not apply to a consolidation or merger with or into a
Wholly Owned Restricted Subsidiary with a positive net worth; provided that, in
connection with any such merger or consolidation, no consideration (other than
Common Stock in the surviving Person or the Company (or a Person that owns
directly or indirectly all of the Capital Stock of the surviving Person or the
Company immediately following such transaction)) shall be issued or distributed
to the stockholders of the Company; and (v) the Company delivers to the Trustee
an Officers' Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and Opinion of Counsel, in each case
stating that such consolidation, merger or transfer and such supplemental
indenture complies with this provision and that all conditions precedent
provided for herein relating to such transaction have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of
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the Board of Directors of the Company, whose determination shall be evidenced by
a Board Resolution, the principal purpose of such transaction is to change the
state of incorporation of the Company; and provided further that any such
transaction shall not have as one of its purposes the evasion of the foregoing
limitations.
DEFEASANCE
Defeasance and Discharge. The Indenture will provide that the Company
will be deemed to have paid and will be discharged from any and all obligations
in respect of the Notes on the 123rd day after the deposit referred to below,
and the provisions of the Indenture will no longer be in effect with respect to
the Notes (except for, among other matters, certain obligations to register the
transfer or exchange of the Notes, to replace stolen, lost or mutilated Notes,
to maintain paying agencies and to hold monies for payment in trust) if, among
other things, (A) the Company has deposited with the Trustee, in trust, money
and/or U.S. Government Obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide money
in an amount sufficient to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in accordance with
the terms of the Indenture and the Notes, (B) the Company has delivered to the
Trustee (i) either (x) an Opinion of Counsel to the effect that Holders will not
recognize income, gain or loss for federal income tax purposes as a result of
the Company's exercise of its option under this "Defeasance" provision and will
be subject to federal income tax on the same amount and in the same manner and
at the same times as would have been the case if such deposit, defeasance and
discharge had not occurred, which Opinion of Counsel must be based upon (and
accompanied by a copy of) a ruling of the Internal Revenue Service to the same
effect unless there has been a change in applicable federal income tax law after
the date of the Indenture such that a ruling is no longer required or (y) a
ruling directed to the Trustee received from the Internal Revenue Service to the
same effect as the aforementioned Opinion of Counsel and (ii) an Opinion of
Counsel to the effect that the creation of the defeasance trust does not violate
the Investment Company Act of 1940 and after the passage of 123 days following
the deposit, the trust fund will not be subject to the effect of Section 547 of
the United States Bankruptcy Code or Section 15 of the New York Debtor and
Creditor Law, (C) immediately after giving effect to such deposit on a pro forma
basis, no Event of Default, or event that after the giving of notice or lapse of
time or both would become an Event of Default, shall have occurred and be
continuing on the date of such deposit or during the period ending on the 123rd
day after the date of such deposit, and such deposit shall not result in a
breach or violation of, or constitute a default under, any other agreement or
instrument to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound, and (D) if at such time
the Notes are listed on a national securities exchange, the Company has
delivered to the Trustee an Opinion of Counsel to the effect that the Notes will
not be delisted as a result of such deposit, defeasance and discharge.
Defeasance of Certain Covenants and Certain Events of Default. The
Indenture further will provide that the provisions of the Indenture will no
longer be in effect with respect to clauses (iii) and (iv) under "Consolidation,
Merger and Sale of Assets" and all the covenants described herein under
"Covenants," clause (d) under "Events of Default" with respect to such covenants
and clauses (iii) and (iv) under "Consolidation, Merger and Sale of Assets," and
clauses (e) and (f) under "Events of Default" shall be deemed not to be Events
of Default, upon, among other things, the deposit with the Trustee, in trust, of
money and/or U.S. Government Obligations that through the payment of interest
and principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of the Indenture and the Notes, the satisfaction of
the provisions described in clauses (B)(ii), (C) and (D) of the preceding
paragraph and the delivery by the Company to the Trustee of an Opinion of
Counsel to the effect that, among other things, the Holders will not recognize
income, gain or loss for federal income tax purposes as a result of such deposit
and defeasance of certain covenants and Events of Default and will be subject to
federal income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
Defeasance and Certain Other Events of Default. In the event the
Company exercises its option to omit compliance with certain covenants and
provisions of the Indenture with respect to the Notes as described in the
immediately preceding paragraph and the Notes are declared due and payable
because of the occurrence of an
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<PAGE> 111
Event of Default that remains applicable, the amount of money and/or U.S.
Government Obligations on deposit with the Trustee will be sufficient to pay
amounts due on the Notes at the time of their Stated Maturity but may not be
sufficient to pay amounts due on the Notes at the time of the acceleration
resulting from such Event of Default. However, the Company will remain liable
for such payments.
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the Holders of not less than a
majority in aggregate principal amount of the outstanding Notes; provided,
however, that no such modification or amendment may, without the consent of each
Holder affected thereby, (i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note, (ii) reduce the principal of, or
premium, if any, or interest on, any Note, (iii) change the place or currency of
payment of principal of, or premium, if any, or interest on, any Note, (iv)
impair the right to institute suit for the enforcement of any payment on or
after the Stated Maturity (or, in the case of a redemption, on or after the
Redemption Date) of any Note, (v) reduce the above-stated percentage of
outstanding Notes the consent of whose Holders is necessary to modify or amend
the Indenture, (vi) waive a default in the payment of principal of, premium, if
any, or interest on the Notes or (vii) reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose Holders is necessary
for waiver of compliance with certain provisions of the Indenture or for waiver
of certain defaults.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the New Notes will initially be
represented by one or more permanent global Notes in definitive, fully
registered form without interest coupons (each a "Global Note") and will be
deposited with the Trustee as custodian for, and registered in the name of, a
nominee of DTC. Except in the limited circumstances described below under
"Certificated Notes," owners of beneficial interests in a Global Note will not
be entitled to receive physical delivery of Certificated Notes (as defined
below).
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC, or its nominee, is the registered owner or holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, and interest on, a Global Note will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
Neither the Company, the Trustee nor any Paying Agent will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Note or
for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any
payment of principal or interest in respect of a Global Note, will credit
participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
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<PAGE> 112
Transfers between participants in DTC will be effected in the ordinary
way in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken
by a holder of Notes (including the presentation of Notes for exchange as
described below) only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default under the Notes, DTC will exchange the applicable Global
Note for Certificated Notes, which it will distribute to its participants.
The Company understands that: DTC is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a clearing corporation within the meaning of the New York Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for its
participants and facilitate the clearance and settlement of securities
transactions between participants through electronic book-entry changes in
accounts of its participants, thereby eliminating the need for physical movement
of certificates and certain other organizations. Indirect access to the DTC
system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly ("indirect participants").
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of their respective obligation
under the rules and procedures governing their operations.
CERTIFICATED NOTES
If DTC is at any time unwilling or unable to continue as a depositary
for the Global Notes, and a successor depositary is not appointed by the Company
within 90 days, the Company will issue Certificated Notes in exchange for the
Global Note. Holders of an interest in a Global Note may receive a Certificated
Note in accordance with DTC's rules and procedures in addition to those provided
for under the Indenture.
NO PERSONAL LIABILITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS, DIRECTORS OR
EMPLOYEES
The Indenture provides that no recourse for the payment of the
principal of, premium, if any, or interest on any of the Notes or for any claim
based thereon or otherwise in respect thereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture, or in any of
the Notes or because of the creation of any Indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer, director, employee
or controlling person of the Company or of any successor Person thereof. Each
Holder, by accepting the Notes, waives and releases all such liability.
CONCERNING THE TRUSTEE
The Indenture provides that, except during the continuance of a
Default, the Trustee will not be liable, except for the performance of such
duties as are specifically set forth in such Indenture. If an Event of Default
has occurred and is continuing, the Trustee will use the same degree of care and
skill in its exercise as a prudent person would exercise under the circumstances
in the conduct of such person's own affairs.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claims,
as security or otherwise. The Trustee is permitted to engage in other
transactions; provided, however, that if it acquires any conflicting interest
under the Trust Indenture Act, it must eliminate such conflict or resign.
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<PAGE> 113
Bankers Trust Company acts as escrow agent in connection with the
Unicel Agreement and may perform other banking services for the Company in the
normal course of business. In addition, Bankers Trust Company acts as trustee
with respect to the April 1996 Notes and the February 1996 Notes.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary sets forth the material federal income tax
consequences of the acquisition, ownership and disposition of the New Notes. It
is based on the relevant provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), accompanying Treasury Regulations, published positions of
the Internal Revenue Service (the "Service"), legislative history, and judicial
decisions as in effect on the date hereof. The existing authorities, however,
are subject to change, and any changes could be applied retroactively and could
cause the tax consequences to vary substantially from those described below.
Furthermore, this summary does not discuss all aspects of federal income
taxation that may be relevant to a particular Holder because of the Holder's
personal investment circumstances or because of the Holder's classification
(such as an insurance company, a dealer in securities, a tax-exempt
organization, a financial institution or a foreign taxpayer) and resulting
special treatment under the federal income tax laws. The summary also does not
discuss aspects of state, local or foreign tax laws and is limited to Holders
who have held, and on the effective date of the Exchange Offer will hold, their
Notes as "capital assets," which would generally be property held for investment
purposes, within the meaning of Section 1221 of the Code, and will not be part
of a straddle, hedge or a conversion transaction within the meaning of Section
1258 of the Code.
THE NEW NOTES
Exchange For Registered Securities. The exchange by a Holder of an Old
Note for a New Note will not constitute a taxable exchange. Each New Note will
be treated as having been originally issued at the time the Old Note exchanged
therefor was originally issued.
Stated Interest. Each Holder of Notes must include as ordinary interest
income the interest attributable to such Notes at the time it accrues or is
received, in accordance with the Holder's accounting method for United States
federal income tax purposes.
Original Issue Discount. The Notes were not issued with original issue
discount for federal income tax purposes.
Sale, Exchange or Retirement. Upon the sale, exchange or retirement of
a Note, a Holder will recognize taxable gain or loss equal to the difference
between the amount realized on the sale, exchange or retirement (excluding, in
the case of a cash basis taxpayer, any amount attributable to accrued interest,
which is taxable as such) and such Holder's adjusted tax basis in such Note. A
Holder's adjusted tax basis in a Note will generally equal the cost of such Note
to such Holder, increased by any accrued interest and market discount previously
included in taxable income by the Holder, and reduced by any amortized bond
premium and any non-interest payments received by the Holder, and, in the case
of an accrual basis taxpayer, by any interest payments received by the Holder,
all with respect to such Note.
Subject to the exception discussed below for market discount, gain or
loss recognized on the sale, exchange or retirement of a Note generally will be
capital gain or loss and will be long-term capital gain or loss if at the time
of sale, exchange or retirement such Note as been held for more than one year.
Amortizable Bond Premium and Market Discount. If a Holder purchased a
Note for an amount that is greater than the amount payable at maturity, such
Holder will be considered to have purchased such Note with "bond premium." The
amount of bond premium is the excess of (i) the Holder's tax basis in such Note,
over (ii) the amount payable at maturity (or on an earlier call date if it
results in a smaller amortizable bond premium). Such Holder may elect (in
accordance with applicable Code provisions) to amortize such premium using a
constant yield method over the remaining term of such Note (or until an earlier
call date if it resulted
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<PAGE> 114
in a smaller amortizable bond premium) and to offset interest otherwise required
to be included in income in respect of such Note during any taxable year by the
amortized amount of such excess for such taxable year. Such election, once made,
is irrevocable (unless permission is received from the Service) and applies to
all taxable bonds held during the taxable year for which the election is made or
subsequently acquired.
If a Holder purchased a Note for an amount that is less than the stated
redemption price at maturity, such Holder will generally be considered to have
purchased such Note with "market discount." For this purpose, the stated
redemption price at maturity of a Note will equal its principal amount. Market
discount with respect to a Note is the excess of the stated redemption price at
maturity over the amount paid by the Holder for such Note. However, the amount
of market discount will be considered zero if it would otherwise be less than
1/4 of 1 percent of the stated redemption price of such Note at maturity
multiplied by the number of complete years to maturity (after the Holder
acquired such Note). If a Note is subject to the market discount rules, a Holder
will generally be required to (i) treat any gain realized with respect to such
Note as ordinary income to the extent market discount accrued during the period
such Holder held the Note, (ii) possibly treat any payment on such Note (other
than stated interest) as ordinary income to the extent market discount accrued
during the period such Holder held such Note, and (iii) defer the deduction of
all or a portion of the interest expense on any indebtedness incurred or
maintained by such Holder to purchase or carry such Note. If such Note is
disposed of in a nontaxable transaction (other than a nonrecognition transaction
described in Section 1276(c) of the Code), accrued market discount will be
includable as ordinary income to the Holder as if such Holder had sold such Note
at its then fair market value. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
such Note, unless the Holder irrevocably elects (on an instrument-by-instrument
basis) to accrue market discount on the basis of a constant interest rate. A
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or constant yield basis), in which case the rules described
above regarding the treatment of gain realized and the deferral of interest
deductions will not apply. An election to include market discount currently,
once made, will apply to all market discount obligations acquired by the Holder
on or after the first day of the first taxable year to which the election
applies, and may not be revoked without the consent of the Service.
Because of the complexity of the rules relating to bond premium and
market discount, Holders should consult their tax advisors as to the application
of these rules to their particular circumstances and as to the merit of making
any elections in connection therewith.
BACKUP WITHHOLDING AND INFORMATION REPORTING
The 31% "backup" withholding and information reporting requirements
apply to certain payments of principal, premium, if any, and interest on a debt
instrument and to proceeds of the sale or redemption of a debt instrument.
Certain Holders may be subject to backup withholding at a rate of 31% on any
payments made with respect to, and proceeds of disposition of, the Notes. Backup
withholding will apply only if the Holder fails to furnish its taxpayer
identification number (social security number or employer identification
number), to certify that such Holder is not subject to backup withholding, or
otherwise fails to comply with the applicable requirements of the backup
withholding rules. Any amount withheld under these backup withholding rules will
be creditable against the Holder's federal income tax liability. Certain Holders
(including, among others, corporations) are not subject to the backup
withholding and information reporting requirements.
PLAN OF DISTRIBUTION
Except as described below, (i) a broker-dealer may not participate in
the Exchange Offer in connection with a distribution of the New Notes, (ii) such
broker-dealer would be deemed an underwriter in connection with such
distribution and (iii) such broker-dealer would be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any secondary resale transactions. A broker-dealer may, however,
receive New Notes for its own account pursuant to the Exchange Offer in exchange
for Old Notes when such Old Notes were acquired as a result of market-making
activities or other trading activities. Each such broker-dealer must acknowledge
that it will deliver a prospectus meeting the requirements of the
109
<PAGE> 115
Securities Act in connection with any resale of such New Notes. This Prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer (other than an "affiliate" of the Company) in connection with
resales of such New Notes. The Company has agreed that for a period of 180 days
after the Exchange Date, it will make this Prospectus, as amended or
supplemented, available to any such broker-dealer for use in connection with any
such resale.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of the New Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For period of 180 days after the Exchange Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in a Letter of Transmittal. The Company has agreed to pay all expenses incident
to the Exchange Offer other than commissions or concessions of any brokers or
dealers and transfer taxes and will indemnify the holders of the Old Notes
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The New Notes will constitute a new issue of securities with no
established trading market. The Company does not intend to list the New Notes on
any national securities exchange or to seek approval for quotation through any
automated quotation system. The Company has been advised by the Placement Agents
that following completion of the Exchange Offer, the Placement Agents intend to
make a market in the New Notes. However, the Placement Agents are not obligated
to do so, and any market-making activities with respect to the New Notes may be
discontinued at any time without notice. Accordingly, no assurance can be given
that an active public or other market will develop for the New Notes or as to
the liquidity of or the trading market for the New Notes. If a trading market
does not develop or is not maintained, Holders of the New Notes may experience
difficulty in reselling the New Notes or may be unable to sell them at all. If a
market for the New Notes develops, any such market may cease to continue at any
time. If a public trading market develops for the New Notes, future trading
prices of the New Notes will depend on many factors, including, among other
things, prevailing interest rates, the Company's results of operations and the
market for similar securities and other factors, including the financial
conditions of the Company.
LEGAL MATTERS
Certain legal matters in connection with the Notes offered hereby are
being passed upon for the Company by Nelson Mullins Riley & Scarborough, L.L.P.,
Atlanta, Georgia.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1996
and 1995, and the consolidated statements of operations, cash flows and changes
in stockholders' equity for each of the three years in the period ended December
31, 1996 have been audited by Arthur Andersen LLP, independent certified public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance and upon the authority of such firm as experts in
accounting and auditing in giving said reports.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Exchange Act and, in accordance therewith, is required to file reports, proxy
statements and other information with the Securities and Exchange Commission
(the "SEC" or the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the Public Reference Section of the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies of the reports, proxy statements and other
information can be obtained from the Public Reference Section of the Commission,
Washington, D.C.20549, at prescribed rates. The Commission maintains a World
Wide Web site that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the Commission.
The address of the Commission's web site is http://www.sec.gov. The Common Stock
of the Company is traded on the Nasdaq Stock Market (Symbol: PTEL), and such
reports, proxy statements and other information concerning the Company also can
be inspected at the offices of Nasdaq Operations, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement on Form S-4 under the
Securities Act, and the rules and regulations promulgated thereunder, with
respect to the New Notes offered pursuant to the Exchange Offer. For the
purposes hereof, the term "Registration Statement" means the original
Registration Statement and any and all amendments thereto. In accordance with
the rules and regulations of the Commission, this Prospectus does not contain
all of the information set forth in the Registration Statement and the exhibits
and schedules thereto. For further information concerning the Company and the
New Notes offered in the Exchange Offer, reference is made to the Registration
Statement and the exhibits and schedules filed therewith, which may be examined
without charge at, or copies obtained upon payment of prescribed fees from, the
Commission and its regional offices at the locations listed above. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
The Indenture requires the Company to file with the Commission all
reports and other information required by Sections 13(a) or 15(d) of the
Exchange Act, regardless of whether such sections are applicable to the Company.
The Company will supply the Trustee under the Indenture and each holder of
Notes, without cost to such holder, copies of such reports and other
information.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents heretofore filed by the Company with the
Commission pursuant to the Exchange Act are incorporated by reference in this
Prospectus:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Current Report on Form 8-K dated January 8, 1997;
(c) Quarterly Report on Form 10-Q for the quarter ended March 31, 1997;
(d) Current Report on Form 8-K dated May 12, 1997; and
(e) Current Report on Form 8-K dated July 1, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the Exchange Offer shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such
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reports and documents. The Company will provide a copy of any or all of such
documents (exclusive of exhibits unless such exhibits are specifically
incorporated by reference therein), without charge, to each person to whom this
Prospectus is delivered, upon written or oral request to: Powertel, Inc., 1233
O.G. Skinner Drive, West Point, Georgia 31833 (telephone (706) 645-9958)
Attention: Jill F. Dorsey, Vice President -- General Counsel.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Prospectus to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
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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
Condensed Consolidated Balance Sheet for the Three Months
Ended March 31, 1997 (Unaudited).......................... F-23
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1997 and 1996 (Unaudited).... F-24
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 (Unaudited).... F-25
Notes to Condensed Consolidated Financial Statements
(Unaudited)............................................... F-26
</TABLE>
F-1
<PAGE> 119
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> 120
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> 121
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> 122
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> 123
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> 124
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> 125
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> 126
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> 127
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> 128
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> 129
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> 130
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> 131
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> 132
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> 133
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> 134
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> 135
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> 136
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 December 31, 1998, unless
terminated in accordance with the provisions therein, the Company is committed
F-19
<PAGE> 137
INTERCEL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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> 138
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> 139
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 cannot 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> 140
INTERCEL, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------
(DOLLARS IN THOUSANDS)
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and Cash Equivalents................................. $207,511
Short-Term Investments.................................... 0
Accounts Receivable, net of allowance for doubtful
accounts................................................ 13,131
Inventories............................................... 19,372
Prepaid Expenses and Other................................ 2,271
--------
242,285
--------
PROPERTY AND EQUIPMENT, AT COST:............................ 303,035
Less: Accumulated Depreciation............................ (18,322)
--------
284,713
--------
OTHER ASSETS:
Licenses, net............................................. 406,567
Goodwill, net............................................. 22,518
Deferred Offering Costs, net.............................. 13,377
Deferred Income Taxes..................................... 2,776
Deferred Charges and Other, net........................... 858
--------
446,096
--------
$973,094
========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable -- Trade................................. $ 28,158
Advance Billings and Customer Deposits.................... 2,008
Accrued Construction Costs................................ 2,211
Accrued Taxes Other than Income........................... 4,443
Accrued Other............................................. 4,707
Current Portion of Long-Term Obligations.................. 112
--------
41,639
--------
LONG-TERM OBLIGATIONS:
12% Senior Discount Notes due February 2006............... 223,080
12% Senior Discount Notes due May 2006.................... 223,738
Vendor Financing Agreement................................ 103,833
Other..................................................... 715
--------
551,366
--------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST IN SUBSIDIARY............................. 2,602
STOCKHOLDERS' EQUITY:
Series A Convertible Preferred Stock...................... 1
Series B Convertible Preferred Stock...................... 1
Common Stock.............................................. 269
Paid-in Capital........................................... 430,058
Accumulated Deficit....................................... (52,332)
Deferred Compensation..................................... (165)
Treasury Stock at cost.................................... (345)
--------
377,487
--------
$973,094
========
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
F-23
<PAGE> 141
INTERCEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1997 1996
-------- -------
(IN THOUSANDS, EXCEPT
PER SHARE DATA)
<S> <C> <C>
REVENUES AND SALES:
Monthly Access Revenue.................................... $ 8,540 $ 3,428
Airtime Revenue........................................... 1,827 1,317
Roaming Revenue........................................... 1,242 1,503
Toll Revenue.............................................. 1,290 578
Installation and Connection Revenue....................... 667 81
Other Revenue............................................. 518 89
-------- -------
Total Service Revenues................................. 14,084 6,996
Equipment Sales........................................... 5,025 854
-------- -------
Total Revenues and Sales............................... 19,109 7,850
-------- -------
OPERATING EXPENSES:
Cost of Services.......................................... 5,428 684
Cost of Equipment Sold.................................... 11,987 694
Operations................................................ 3,809 1,204
Selling and Marketing..................................... 5,237 1,274
General and Administrative................................ 7,680 1,810
Depreciation.............................................. 8,340 731
Amortization.............................................. 1,178 881
-------- -------
Total Operating Expenses............................... 43,659 7,278
-------- -------
OPERATING (LOSS) INCOME..................................... (24,550) 572
-------- -------
OTHER EXPENSE (INCOME):
Net Interest Expense (Income)............................. 4,543 (739)
Miscellaneous Expense..................................... 473 303
-------- -------
Total Other Expense (Income)........................... 5,016 (436)
-------- -------
(LOSS) INCOME BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE............................ (29,566) 1,008
INCOME TAX (PROVISION) BENEFIT............................ 0 (472)
-------- -------
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE...................................... (29,566) 536
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......... 0 (2,583)
-------- -------
NET LOSS............................................... $(29,566) $(2,047)
======== =======
PER SHARE DATA:
(LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE...................................... $ (1.10) $ 0.03
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE......... 0 (0.13)
-------- -------
NET LOSS PER COMMON SHARE................................... $ (1.10) $ (0.10)
======== =======
AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING..... 26,812 19,899
======== =======
</TABLE>
The accompanying notes to condensed consolidated financial statements are
an integral part of these statements.
F-24
<PAGE> 142
INTERCEL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------
1997 1996
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS (USED IN) PROVIDED FROM OPERATING ACTIVITIES:
Net Loss.................................................... $(29,566) $ (2,047)
Adjustments to Reconcile Net Loss to Net Cash (Used In)
Provided From Operating Activities --
Minority Interest in Loss of Subsidiary................... (113) (79)
Cumulative Effect of Change in Accounting Principle....... 0 2,583
Loss on Equity Investment................................. 0 34
Depreciation and Amortization............................. 9,518 1,612
Bond Accretion............................................ 6,320 1,328
Amortization of Deferred Offering Costs................... 375 0
Deferred Compensation -- Restricted Stock................. 41 41
Deferred Taxes, Net....................................... 0 20
Changes in Assets and Liabilities:
Increase in Accounts Receivable......................... (4,903) (174)
(Increase) Decrease in Inventories...................... (11,567) 81
Decrease in Prepaid Expenses and Other.................. 10,371 125
Increase in Deferred Charges and Other.................. (31) (697)
Increase in Accounts Payable............................ 20,435 1,058
Decrease in Accrued Expenses............................ (50,207) (796)
Increase in Advance Billings and Customer Deposits...... 656 38
-------- --------
Net Cash (Used In) Provided From Operating Activities..... (48,671) 3,127
-------- --------
CASH FLOWS PROVIDED FROM (USED IN) INVESTING ACTIVITIES:
Capital Expenditures........................................ (36,209) (10,874)
Cash Acquired in Powertel Business Combination.............. 0 15,379
Short-Term Investments...................................... 75,659 (29,388)
Microwave Relocation Cost................................... (3,265) 0
-------- --------
Net Cash Provided From (Used In) Investing Activities..... 36,185 (24,883)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Stock, Net............................ 5 111,446
Proceeds from Issuance of Senior Notes, Net................. 0 192,998
Borrowings Under Vendor Financing Agreement................. 34,319 0
Repayments of Long-term Obligations......................... (6) (28,102)
Other....................................................... 154 224
-------- --------
Net Cash Provided From Financing Activities............... 34,472 276,566
-------- --------
NET INCREASE IN CASH........................................ 21,986 254,810
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 185,525 630
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $207,511 $255,440
======== ========
</TABLE>
The accompanying notes to condensed consolidated financial statements are an
integral part of these statements.
F-25
<PAGE> 143
INTERCEL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to Article 10 of Regulation
S-X. The accompanying unaudited condensed consolidated financial statements
reflect, in the opinion of management, all adjustments necessary to achieve a
fair statement of financial position and results for the interim periods
presented. All such adjustments are of a normal recurring nature. It is
suggested that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1996.
2. Certain prior year amounts have been reclassified to conform with the
current period presentation.
3. On May 1, 1997 (the "Closing Date"), pursuant to an Asset Purchase
Agreement dated as of December 23, 1996, Unity Cellular Systems, Inc. ("Unicel")
and Intercel Licenses, Inc. (the "Licensee"), each a wholly owned subsidiary of
the Company, sold and assigned (the "Maine Disposition") to MRCC, Inc., a wholly
owned subsidiary of Rural Cellular Corporation ("Rural Cellular"): (i)
substantially all of the assets and rights of Unicel, including Unicel's 51%
general partnership interest in the Northern Maine Cellular Partnership; and
(ii) the FCC licenses held by Licensee to provide cellular and microwave service
in the Bangor, Maine RSA and Maine RSA3 and to provide microwave service in
Maine RSA2. On the Closing Date, MRCC, Inc. paid the Seller $71.8 million in
cash and paid $5.4 million into escrow.
4. On May 5, 1997, the FCC officially granted the Company PCS licenses for
which the Company was the winning bidder in the D/E/F block auctions for 13
Basic Trading Areas covering approximately 6.8 million persons (according to
industry publications) located in Kentucky, Tennessee, Illinois and Indiana for
a purchase price of $31.2 million, of which $6.2 million had previously been
paid by the Company. On May 12, 1997, the Company paid the remaining $25
million.
5. During the first quarter 1996, the Company changed its method of
accounting for costs incurred in connection with certain promotional programs
under which the Company's cellular customers received 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.
F-26
<PAGE> 144
[POWERTEL LOGO]
<PAGE> 145
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law (the "Delaware Law") permits a
corporation to exonerate its directors from personal liability to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty, other than: (i) for any breach of the duty of loyalty to the corporation
or its stockholders; (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law; (iii) for willful
or negligent violations of provisions regarding the unlawful payment of
dividends or unlawful stock repurchases or redemptions; or (iv) for any
transaction from which the person derived an improper personal benefit. This
provision pertains only to breaches of duty by directors in their capacity as
directors (and not in any other corporate capacity, such as officers) and limits
liability only for breaches of fiduciary duties under the Delaware Law (and not
for violation of other laws, such as the federal securities laws). The Company's
Third Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation"), exonerates the Company's directors from monetary liability to
the extent permitted by this statutory provision.
The Certificate of Incorporation also provides that, except as
expressly prohibited by law, the Company shall indemnify any person who was or
is a party, or threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (whether civil, criminal, administrative,
or investigative) by reason of the fact that such person is or was a director or
officer of the Company (or is or was serving at the request of the Company as a
director or officer of another enterprise), against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests o the Company
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his or her conduct was unlawful. Such indemnification shall not be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Company, unless (and only to the extent that)
the Delaware Court of Chancery or the court in which such action or suit was
brought determines that, in view of all circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses that the Court
of Chancery or such other court shall deem proper. In addition, the Certificate
of Incorporation provides for mandatory advancement of expenses incurred by an
officer or director upon request, to the extent permitted by law. The Delaware
Law permits a corporation to advance expenses incurred by an officer or director
in defending any action, suit or proceeding upon receipt of an undertaking by or
on behalf of the director or officer to repay in the event that the director or
officer is ultimately determined not to be entitled to indemnification.
The Company maintains a liability insurance policy on behalf of all of
its directors and officers. Under this policy, directors and officers are
insured (and the Company is insured to the extent that it has properly
indemnified its directors and officers) against liability for claims incurred by
reason of their breach of duty, neglect, error, misstatement, misleading
statement, omission or act, in their capacities as directors and officers and
solely by reason of their status as directors and officers. However, directors
and officers are not insured against certain types of claims, including claims
that arise out of a gain of personal profit, a criminal or fraudulent act, the
filing of a registration statement, an offering by means of a prospectus, or an
underwriting agreement for the offer or sale of a security.
The Company has entered into indemnity agreements with certain of its
directors and executive officers. Indemnification of a director or officer under
an indemnity agreement would add several protections to those provided by
Delaware Law, the Certificate of Incorporation, and the Company's liability
insurance including the following: (i) the Company generally would be obligated
to advance litigation expenses to the indemnitee, subject to a later
determination that the indemnitee would not be permitted to receive such
indemnification under applicable law; (ii) to the extent permitted by law, the
indemnitee generally would be entitled to indemnification unless the Company
affirmatively determined that the indemnitee had not met the applicable standard
of conduct;
II-1
<PAGE> 146
(iii) upon a change in control (as defined in the indemnity agreements) the
Company could only seek legal advice with respect to indemnification of the
indemnitee from a special independent counsel selected by the indemnitee, and
only the special independent counsel would have the right to make a final
determination that the indemnitee has not met the requisite standard of conduct;
(iv) the period of time in which the Company could sue the indemnitee for an
action would be limited to two years from the date that the cause of action
accrued. The Company anticipates that the protections afforded by the indemnity
agreements will contribute to the Company's ability to attract and retain highly
qualified directors and executive officers.
The Delaware Law and Article 6 of the Certificate of Incorporation
specifically provide for the indemnification of directors and officers, and the
Delaware Law permits the adoption of indemnity agreements generally. The
enforceability of certain provisions of the indemnity agreements has not been
tested in court, however, and remains subject to considerations of state law and
public policy. The indemnity agreements were not implemented in response to any
pending or threatened litigation involving directors or officers.
Subject to the possibility of unenforceability referred to above, the
indemnity agreements constitute binding agreements of the Company, and the
Company would be unable to modify its indemnification policy unilaterally in a
way that is adverse to any party to an indemnity agreement. The Securities and
Exchange Commission ("Commission") takes the position that indemnification of
directors and executive officers against violations of the Securities Act is
against public policy and unenforceable. Accordingly, whenever an issuer
registers securities with the Commission it must execute an undertaking (a) to
submit to a court any such indemnification claim arising with respect to the
registered securities for a determination whether the clause is enforceable and
(b) to be bound by the court's decision. Accordingly, any claim made by a
director or executive officer of the Company for indemnification under an
indemnity agreement with respect to a claim subject to the Company's undertaking
to the Commission would have to be submitted to a court before final payment
thereunder would be made to the director or executive officer.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Page
Number EXHIBIT DESCRIPTION Number
- ------ ------------------- ------
<S> <C> <C> <C>
* 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 Registration Statement on Form S-1, File
No. 33-92618 (the "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.)........................................................
</TABLE>
II-2
<PAGE> 147
<TABLE>
<CAPTION>
Exhibit Page
Number Exhibit Description Number
- ------ ------------------- ------
<S> <C> <C> <C>
* 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 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. (Filed as Exhibit 4(f) to the Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996 Form 10-K")
and incorporated herein by reference.)...................................................................
* 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. (Filed as Exhibit 4(g) to 1996 Form 10-K and incorporated herein by reference.)..........
4(h) Indenture (including form of Note) dated June 10, 1997 between InterCel, Inc. and Bankers Trust
Company, as Trustee, relating to the 11 1/8% Senior Notes due 2007 of InterCel, Inc.....................
4(i) Registration Rights Agreement dated June 10, 1997 between InterCel, Inc. and Morgan Stanley & Co.
Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Oppenheimer & Co., Inc..............
4(j) Collateral Pledge and Security Agreement dated June 10, 1997 between InterCel, Inc.
and Bankers Trust Company, as Trustee....................................................................
4(k) Certificate of Amendment to the 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.............................................................
4(l) Amended 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(m) Amended 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.............................................................
+ 5(a) Opinion of Nelson Mullins Riley & Scarborough, L.L.P.
** 10(a) Stock Purchase Agreement dated May 23, 1997 between InterCel, Inc. and The Huff
Alternative Income Fund, L.P.............................................................................
** 10(b) Escrow Agreement dated June 5, 1997 between InterCel, Inc. and The Huff
Alternative Income Fund, L.P.............................................................................
** 10(c) Stock Purchase Agreement dated May 23, 1997 between InterCel, Inc. and SCANA
Communications, Inc......................................................................................
** 10(d) Escrow Agreement dated June 5, 1997 between InterCel, Inc. and SCANA
Communications, Inc......................................................................................
10(e) Amendment No. 2 dated March 31, 1997 to the Credit Agreement dated March 4,
1996 among Powertel, Inc., Ericsson Project Finance A.B., as Lender, and Ericsson
Inc., as Agent for the Lenders...........................................................................
10(f) Amendment No. 3 dated June 26, 1997 to the Credit Agreement dated March 4, 1996
among Powertel PCS, Inc., the Lenders set forth on the signature pages thereto and
Ericsson Inc., as Agent for the Lenders..................................................................
12 Statement regarding Computation of Ratio of Earnings to Fixed Charges.
23(a) Consent of Arthur Andersen LLP...........................................................................
+ 23(b) Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included as part of its
opinion filed as Exhibit 5(a))...........................................................................
24 Power of Attorney (included on signature page hereto).
25 Statement of Eligibility of Trustee on Form T-1..........................................................
99(a) Form of Letter of Transmittal for 11 1/8% Senior Notes Due 2007..........................................
</TABLE>
II-3
<PAGE> 148
<TABLE>
<CAPTION>
Exhibit
Number EXHIBIT DESCRIPTION
- ------ -------------------
<S> <C>
99(b) Form of Notice of Guaranteed Delivery for 11 1/8% Senior Notes Due 2007.
99(c) Guidelines for Certification of Taxpayer Identification Number on Substitute Form.
99(d) Powertel, Inc.'s Letter to Brokers.
99(e) Letter of Registered Holder to Beneficial Owner and Instruction of Beneficial Owner.
</TABLE>
- -------------------------------
* Previously filed.
** The Registrant agrees to furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon
request, as provided in Item 601(b)(2) of Regulation S-K.
+ To be filed by amendment.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filling of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-4
<PAGE> 149
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of West Point, State of
Georgia, on this 15th day of July, 1997.
POWERTEL, INC.
By:/s/ Allen E. Smith
-----------------------------------------
Allen E. Smith
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned directors and officers of Powertel, Inc., do hereby
severally constitute and appoint each of Allen E. Smith and Fred G. Astor, Jr.
our true and lawful attorney and agent, jointly and severally, to do any and all
acts and things in our names and on our behalf in our capacities as directors
and officers and to execute any and all instruments for us and in our names in
the capacities indicated below, which said attorney and agent, may deem
necessary or advisable to enable Powertel, Inc. to comply with the Securities
Act of 1933, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement on Form S-4, including specifically, but without limitation, power and
authority to sign for us or any of us, in our names in the capacities indicated
below, any and all amendments (including post-effective amendments) hereto; and
we do each hereby ratify and confirm all that said attorney and agent shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities set forth
below on this 15th day of July, 1997.
<TABLE>
<CAPTION>
SIGNATURES TITLE
<S> <C>
/s/ Allen E. Smith President, Chief Executive Officer and
- ------------------------------ Director (Principal executive officer)
Allen E. Smith
/s/ Fred G. Astor, Jr. Executive Vice President and Chief
- ------------------------------ Financial Officer (Principal financial officer
Fred G. Astor, Jr. and principal accounting officer)
/s/ Campbell B. Lanier, III Director and Chairman of the Board
- ------------------------------
Campbell B. Lanier, III
/s/ Donald W. Burton Director
- ------------------------------
Donald W. Burton
/s/ Bert G. Clifford Director
- ------------------------------
Bert G. Clifford
/s/ O. Gene Gabbard Director
- ------------------------------
O. Gene Gabbard
/s/ Lawrence M. Gressette, Jr. Director
- ------------------------------
Lawrence M. Gressette, Jr.
</TABLE>
<PAGE> 150
<TABLE>
<S> <C>
/s/ Maurice P. O'Connor Director
- ------------------------------
Maurice P. O'Connor
/s/ William H. Scott, III Director and Secretary
- ------------------------------
William H. Scott, III
/s/ William B. Timmerman Director
- ------------------------------
William B. Timmerman
/s/ Donald W. Weber Director
- ------------------------------
Donald W. Weber
</TABLE>
<PAGE> 151
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
Number Exhibit Description Number
- ----- ------------------- ------
<S> <C> <C>
* 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 Registration Statement on Form S-1, File
No. 33-92618 (the "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 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. (Filed as Exhibit 4(f) to the
Annual Report on Form 10-K for the year ended December 31, 1996 (the "1996
Form 10-K") and incorporated herein by reference)......................................
* 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. (Filed as Exhibit 4(g) to 1996
Form 10-K and incorporated herein by reference)........................................
4(h) Indenture (including form of Note) dated June 10, 1997 between InterCel, Inc.
and Bankers Trust Company, as Trustee, relating to the 11 1/8% Senior Notes due
2007 of InterCel, Inc..................................................................
4(i) Registration Rights Agreement dated June 10, 1997 between InterCel, Inc. and
Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Oppenheimer & Co., Inc................................................
** 4(j) Collateral Pledge and Security Agreement dated June 10, 1997 between InterCel,
Inc. and Bankers Trust Company, as Trustee.............................................
4(k) Certificate of Amendment to the 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.........
4(l) Amended 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(m) Amended 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...........................................
+ 5(a) Opinion of Nelson Mullins Riley & Scarborough, L.L.P...................................
** 10(a) Stock Purchase Agreement dated May 23, 1997 between InterCel, Inc. and The Huff
Alternative Income Fund, L.P...........................................................
</TABLE>
<PAGE> 152
<TABLE>
<CAPTION>
Exhibit Page
Number Exhibit Description Number
- ----- ------------------- ------
<S> <C> <C>
** 10(b) Escrow Agreement dated June 5, 1997 between InterCel, Inc. and The Huff
Alternative Income Fund, L.P...........................................................
** 10(c) Stock Purchase Agreement dated May 23, 1997 between InterCel, Inc. and
SCANA Communications, Inc..............................................................
** 10(d) Escrow Agreement dated June 5, 1997 between InterCel, Inc. and SCANA
Communications, Inc....................................................................
10(e) Amendment No. 2 dated March 31, 1997 to the Credit Agreement dated March 4,
1996 among Powertel, Inc., Ericsson Project Finance A.B., as Lender, and
Ericsson Inc., as Agent for the Lenders................................................
10(f) Amendment No. 3 dated June 26, 1997 to the Credit Agreement dated March 4,
1996 among Powertel PCS, Inc., the Lenders set forth on the signature pages
thereto and Ericsson Inc., as Agent for the Lenders....................................
12 Statement regarding Computation of Ratio of Earnings to Fixed Charges.
23(a) Consent of Arthur Andersen LLP.........................................................
+ 23(b) Consent of Nelson Mullins Riley & Scarborough, L.L.P. (included as part of its
opinion filed as Exhibit 5(a)).........................................................
24 Power of Attorney (included on signature page hereto)..................................
25 Statement of Eligibility of Trustee on Form T-1........................................
99(a) Form of Letter of Transmittal for 11 1/8% Senior Notes Due 2007........................
99(b) Form of Notice of Guaranteed Delivery for 11 1/8% Senior Notes Due 2007................
99(c) Guidelines for Certification of Taxpayer Identification Number on Substitute Form......
99(d) Powertel, Inc.'s Letter to Brokers.....................................................
99(e) Letter of Registered Holder to Beneficial Owner and Instruction of
Beneficial Owner.......................................................................
</TABLE>
- ---------------------------
* Previously filed.
** The Registrant agrees to furnish supplementally a copy of any omitted
schedule or exhibit to the Securities and Exchange Commission upon request,
as provided in Item 601(b)(2) of Regulation S-K.
+ To be filed by amendment.
<PAGE> 1
EXHIBIT 4(h)
================================================================================
INTERCEL, INC.,
Issuer
and
BANKERS TRUST COMPANY
Trustee
-------------------
Indenture
Dated as of June 10, 1997
-------------------
11 1/8% Senior Notes Due 2007
================================================================================
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Sections Indenture Sections
- ------------ ------------------
<S> <C>
Section 310(a)(1) ......................................... 7.09
(a)(2) ......................................... 7.09
(b) ............................................ 7.02; 7.07
Section 311(a) ............................................ 7.02
(b) ............................................ 7.02
Section 312(a) ............................................ 2.03
Section 313(a) ............................................ 7.05
(c) ............................................ 7.04; 7.05; 11.02
(d) ............................................ 7.05
Section 314(a) ............................................ 4.18; 7.04; 11.02
(a)(4) ......................................... 4.17; 11.02
(b) ............................................ 10.01
(c)(1) ......................................... 11.03
(c)(2) ......................................... 11.03
(d) ............................................ 10.01
(e) ............................................ 4.17; 11.04
Section 315(a) ............................................ 7.01
(b) ............................................ 7.04; 11.02
(c) ............................................ 7.01
(d) ............................................ 7.01
(e) ............................................ 6.11
Section 316(a)(1)(A) ...................................... 6.05
(a)(1)(B) ...................................... 6.04
(b) ............................................ 6.07
(c) ............................................ 9.03
Section 317(a)(1) ......................................... 6.08
(a)(2) ......................................... 6.09
(b) ............................................ 2.04
Section 318(a) ............................................ 11.01
(c) ............................................ 11.01
</TABLE>
Note: The Cross-Reference Table shall not for any purpose be deemed to be a
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS**
<TABLE>
<CAPTION>
Page
<S> <C>
RECITALS OF THE COMPANY
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.................................................... 1
SECTION 1.02. Incorporation by Reference of Trust Indenture Act.............. 20
SECTION 1.03. Rules of Construction.......................................... 20
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating................................................ 21
SECTION 2.02. Restrictive Legends............................................ 22
SECTION 2.03. Execution, Authentication and Denominations.................... 24
SECTION 2.04. Registrar and Paying Agent..................................... 25
SECTION 2.05. Paying Agent to Hold Money in Trust............................ 26
SECTION 2.06. Transfer and Exchange.......................................... 26
SECTION 2.07. Book-Entry Provisions for Global Notes......................... 27
SECTION 2.08. Special Transfer Provisions.................................... 29
SECTION 2.09. Replacement Notes.............................................. 32
SECTION 2.10. Outstanding Notes.............................................. 32
SECTION 2.11. Temporary Notes................................................ 33
SECTION 2.12. Cancellation................................................... 33
SECTION 2.13. CUSIP Numbers.................................................. 33
SECTION 2.14. Defaulted Interest............................................. 34
SECTION 2.15. Issuance of Additional Notes................................... 34
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption............................................ 34
SECTION 3.02. Notices to Trustee............................................. 35
SECTION 3.03. Selection of Notes to Be Redeemed.............................. 35
SECTION 3.04. Notice of Redemption........................................... 36
</TABLE>
- --------------------
** Note: The Table of Contents shall not for any purposes be deemed to be a part
of the Indenture.
i
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.05. Effect of Notice of Redemption................................. 37
SECTION 3.06. Deposit of Redemption Price.................................... 37
SECTION 3.07. Payment of Notes Called for Redemption......................... 37
SECTION 3.08. Notes Redeemed in Part......................................... 38
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes............................................... 38
SECTION 4.02. Maintenance of Office or Agency................................ 38
SECTION 4.03. Limitation on Indebtedness..................................... 39
SECTION 4.04. Limitation on Restricted Payments.............................. 41
SECTION 4.05. Limitation on Dividend and Other Payment Restrictions
Affecting Restricted Subsidiaries......................... 44
SECTION 4.06. Limitation on the Issuance and Sale of Capital Stock of
Restricted Subsidiaries................................... 45
SECTION 4.07. Limitation on Issuances of Guarantees by Restricted
Subsidiaries.............................................. 45
SECTION 4.08. Limitation on Transactions with Shareholders and Affiliates.... 46
SECTION 4.09. Limitation on Liens............................................ 47
SECTION 4.10. Limitation on Sale-Leaseback Transactions...................... 48
SECTION 4.11. Limitation on Asset Sales...................................... 48
SECTION 4.12. Repurchase of Notes upon a Change of Control................... 49
SECTION 4.13. Limitation on Use of Proceeds.................................. 49
SECTION 4.14. Existence...................................................... 49
SECTION 4.15. Payment of Taxes and Other Claims.............................. 50
SECTION 4.16. Maintenance of Properties and Insurance........................ 50
SECTION 4.17. Compliance Certificates........................................ 50
SECTION 4.18. Commission Reports and Reports to Holders...................... 51
SECTION 4.19. Waiver of Stay, Extension or Usury Laws........................ 51
SECTION 5.01. When Company May Merge, Etc.................................... 52
SECTION 5.02. Successor Substituted.......................................... 53
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default.............................................. 53
SECTION 6.02. Acceleration................................................... 55
SECTION 6.03. Other Remedies................................................. 56
SECTION 6.04. Waiver of Past Defaults........................................ 56
SECTION 6.05. Control by Majority............................................ 56
SECTION 6.06. Limitation on Suits............................................ 56
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 6.07. Rights of Holders to Receive Payment........................... 57
SECTION 6.08. Collection Suit by Trustee..................................... 57
SECTION 6.09. Trustee May File Proofs of Claim............................... 58
SECTION 6.10. Priorities..................................................... 58
SECTION 6.11. Undertaking for Costs.......................................... 59
SECTION 6.12. Restoration of Rights and Remedies............................. 59
SECTION 6.13. Rights and Remedies Cumulative................................. 59
SECTION 6.14. Delay or Omission Not Waiver................................... 59
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Rights of Trustee.............................................. 59
SECTION 7.02. Individual Rights of Trustee................................... 62
SECTION 7.03. Trustee's Disclaimer........................................... 62
SECTION 7.04. Notice of Default.............................................. 62
SECTION 7.05. Reports by Trustee to Holders.................................. 63
SECTION 7.06. Compensation and Indemnity..................................... 63
SECTION 7.07. Replacement of Trustee......................................... 64
SECTION 7.08. Successor Trustee by Merger, Etc............................... 65
SECTION 7.09. Eligibility.................................................... 65
SECTION 7.10. Money Held in Trust............................................ 66
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations........................... 66
SECTION 8.02. Defeasance and Discharge of Indenture.......................... 67
SECTION 8.03. Defeasance of Certain Obligations.............................. 69
SECTION 8.04. Application of Trust Money..................................... 71
SECTION 8.05. Repayment to Company........................................... 71
SECTION 8.06. Reinstatement.................................................. 71
ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders..................................... 72
SECTION 9.02. With Consent of Holders........................................ 72
SECTION 9.03. Revocation and Effect of Consent............................... 73
SECTION 9.04. Notation on or Exchange of Notes............................... 74
SECTION 9.05. Trustee to Sign Amendments, Etc................................ 74
SECTION 9.06. Conformity with Trust Indenture Act............................ 75
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE TEN
SECURITY
SECTION 10.01. Security....................................................... 75
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939.................................... 77
SECTION 11.02. Notices........................................................ 77
SECTION 11.03. Certificate and Opinion As to Conditions Precedent............. 78
SECTION 11.04. Statements Required in Certificate or Opinion.................. 79
SECTION 11.05. Acts of Holders................................................ 79
SECTION 11.06. Rules by Trustee, Paying Agent or Registrar.................... 80
SECTION 11.07. Payment Date Other Than a Business Day......................... 80
SECTION 11.08. Governing Law.................................................. 80
SECTION 11.09. No Adverse Interpretation of Other Agreements.................. 81
SECTION 11.10. No Recourse Against Others..................................... 81
SECTION 11.11. Successors..................................................... 81
SECTION 11.12. Duplicate Originals............................................ 81
SECTION 11.13. Separability................................................... 81
SECTION 11.14. Table of Contents, Headings, Etc............................... 81
ARTICLE TWELVE
MEETINGS OF HOLDERS
SECTION 12.01. Purposes for Which Meetings May Be Called...................... 82
SECTION 12.02. Manner of Calling Meetings..................................... 82
SECTION 12.03. Call of Meetings by the Company or Holders..................... 83
SECTION 12.04. Who May Attend and Vote at Meetings............................ 83
SECTION 12.05. Quorum; Action................................................. 83
SECTION 12.06. Regulations May Be Made by Trustee; Conduct of the
Meeting; Voting Rights; Adjournment....................... 84
SECTION 12.07. Voting at the Meeting and Record to Be Kept.................... 85
SECTION 12.08. Exercise of Rights of Trustee or Holders May Not Be
Hindered or Delayed by Call of Meeting.................... 85
SECTION 12.09. Procedures Not Exclusive....................................... 85
</TABLE>
iv
<PAGE> 7
SIGNATURES
EXHIBIT A Form of Note
EXHIBIT B Form of Certificate
EXHIBIT C Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Accredited Investors
EXHIBIT D Form of Certificate to Be Delivered in connection with Transfers
Pursuant to Regulation S
v
<PAGE> 8
INDENTURE, dated as of June 10, 1997, between INTERCEL, INC.,
a Delaware corporation, as Issuer (the "Company"), and Bankers Trust Company, a
New York banking corporation, as trustee (the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of
this Indenture to provide for the issuance initially of up to $300,000,000
aggregate principal amount of the Company's 11 1/8% Senior Notes Due 2007 (the
"Notes") issuable as provided in this Indenture. The Notes will be partially
secured pursuant to the terms of a Pledge Agreement (as defined herein) by
Pledged Securities as provided by Article Ten of this Indenture. All things
necessary to make this Indenture a valid agreement of the Company, in accordance
with its terms, have been done, and the Company has done all things necessary to
make the Notes, when executed by the Company and authenticated and delivered by
the Trustee hereunder and duly issued by the Company, the valid obligations of
the Company as hereinafter provided.
This Indenture is subject to, and shall be governed by, the
provisions of the Trust Indenture Act of 1939, as amended, that are required to
be a part of and to govern indentures qualified under the Trust Indenture Act of
1939, as amended.
AND THIS INDENTURE FURTHER WITNESSETH
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Adjusted Consolidated Net Income" means, for any period, the
aggregate net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined in conformity with GAAP; provided that the following
items shall be excluded in computing Adjusted Consolidated Net Income (without
duplication): (i) the net income of any Person (other than net income
attributable to a Restricted Subsidiary) in which any Person (other than the
Company or any of its Restricted Subsidiaries) has a joint interest and the net
income of any Unrestricted Subsidiary, except to the extent of the amount of
dividends or
<PAGE> 9
2
other distributions actually paid to the Company or any of its Restricted
Subsidiaries by such other Person or such Unrestricted Subsidiary during such
period; (ii) solely for the purposes of calculating the amount of Restricted
Payments that may be made pursuant to clause (C) of the first paragraph of
Section 4.04 (and in such case, except to the extent includable pursuant to
clause (i) above), the net income (or loss) of any Person accrued prior to the
date it becomes a Restricted Subsidiary or is merged into or consolidated with
the Company or any of its Restricted Subsidiaries or all or substantially all of
the property and assets of such Person are acquired by the Company or any of its
Restricted Subsidiaries; (iii) the net income of any Restricted Subsidiary to
the extent that the declaration or payment of dividends or similar distributions
by such Restricted Subsidiary of such net income is not at the time permitted by
the operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
such Restricted Subsidiary; (iv) any gains or losses (on an after-tax basis)
attributable to Asset Sales; (v) except for purposes of calculating the amount
of Restricted Payments that may be made pursuant to clause (C) of the first
paragraph of Section 4.04, any amount paid or accrued as dividends on Preferred
Stock (other than accrued dividends which, pursuant to the terms of the
Preferred Stock, will not be payable prior to the first anniversary after the
Stated Maturity of the Notes) of the Company or any Restricted Subsidiary owned
by Persons other than the Company and any of its Restricted Subsidiaries; and
(vi) all extraordinary gains and extraordinary losses.
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent" means any Registrar, Paying Agent, authenticating
agent or co-Registrar.
"Agent Members" has the meaning provided in Section 2.07(a).
"Asset Acquisition" means (i) an investment by the Company or
any of its Restricted Subsidiaries in any other Person pursuant to which such
Person shall become a Restricted Subsidiary of the Company or shall be merged
into or consolidated with the Company or any of its Restricted Subsidiaries;
provided that such Person's primary business is related, ancillary or
complementary to the businesses of the Company and its Restricted Subsidiaries
on the date of such investment or (ii) an acquisition by the Company or any of
its Restricted Subsidiaries of the property and assets of any Person other than
the Company or any of its Restricted Subsidiaries that constitute substantially
all of a division or line of
<PAGE> 10
3
business of such Person; provided that the property and assets acquired are
related, ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such acquisition.
"Asset Disposition" means the sale or other disposition by the
Company or any of its Restricted Subsidiaries (other than to the Company or
another Restricted Subsidiary of the Company) of (i) all or substantially all of
the Capital Stock of any Restricted Subsidiary of the Company or (ii) all or
substantially all of the assets that constitute a division or line of business
of the Company or any of its Restricted Subsidiaries.
"Asset Sale" means any sale, transfer or other disposition
(including by way of merger, consolidation or sale-leaseback transaction) in one
transaction or a series of related transactions by the Company or any of its
Restricted Subsidiaries to any Person other than the Company or any of its
Restricted Subsidiaries of (i) all or any of the Capital Stock of any Restricted
Subsidiary, (ii) all or substantially all of the property and assets of an
operating unit or business of the Company or any of its Restricted Subsidiaries
or (iii) any other property and assets of the Company or any of its Restricted
Subsidiaries outside the ordinary course of business of the Company or such
Restricted Subsidiary and, in each case, that is not governed by Article Five;
provided that "Asset Sale" shall not include (i) sales or other dispositions of
inventory, receivables and other current assets, (ii) simultaneous exchanges by
the Company or any Restricted Subsidiary of property or equipment for other
property or equipment; provided that the property or equipment received by the
Company or such Restricted Subsidiary has at least substantially equal market
value to the Company or such Restricted Subsidiary (as determined by the Board
of Directors whose good faith determination shall be conclusive and evidenced by
a Board Resolution), provided that, after giving pro forma effect to such
exchange, the Consolidated Leverage Ratio shall be no greater than the
Consolidated Leverage Ratio immediately prior to such exchange or (iii) sales or
other dispositions of assets with a fair market value (as certified in an
Officers' Certificate) not in excess of $500,000.
"Average Life" means, at any date of determination with
respect to any debt security, the quotient obtained by dividing (i) the sum of
the products of (a) the number of years from such date of determination to the
dates of each successive scheduled principal payment of such debt security and
(b) the amount of such principal payment by (ii) the sum of all such principal
payments.
"Board of Directors" means the Board of Directors of the
Company or any committee of such Board of Directors duly authorized to act under
this Indenture.
"Board Resolution" means a copy of a resolution, certified by
the Secretary of the Company to have been duly adopted by the Board of Directors
and to be in full force and effect on the date of such certification, and
delivered to the Trustee.
<PAGE> 11
4
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in The City of New York, or in the city of
the Corporate Trust Office of the Trustee, are authorized by law to close.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, participation or other equivalents (however designated,
whether voting or non-voting) in equity of such Person, whether now outstanding
or issued after the Closing Date, including, without limitation, all Common
Stock and Preferred Stock.
"Capitalized Lease" means, as applied to any Person, any lease
of any property (whether real, personal or mixed) of which the discounted
present value of the rental obligations of such Person as lessee, in conformity
with GAAP, is required to be capitalized on the balance sheet of such Person.
"Capitalized Lease Obligations" means the discounted present
value of the rental obligations under a Capitalized Lease.
"Change of Control" means such time as (i) a "person" or
"group" (within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act),
other than the Existing Stockholders, becomes the ultimate "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act) of more than 35% of the total
voting power of the total Voting Stock of the Company on a fully diluted basis;
or (ii) individuals who at the beginning of any period of two consecutive
calendar years constituted the Board of Directors (together with any new
directors whose election by the Board of Directors or whose nomination for
election by the Company's stockholders was approved by a vote of at least
two-thirds of the members of the Board of Directors then in office who either
were members of the Board of Directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason to constitute a majority of the members of Board of Directors then in
office.
"Closing Date" means the date on which the Notes are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the TIA, then the body performing
such duties at such time.
"Common Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated,
whether voting or non-voting) of such Person's equity, other than Preferred
Stock of such Person, whether now outstanding or issued after the Closing Date,
including without limitation, all series and classes of such common stock.
<PAGE> 12
5
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to Article Five of this Indenture and,
thereafter, means the successor.
"Company Order" means a written request or order signed in the
name of the Company (i) by its Chairman, a Vice Chairman, its President or a
Vice President and (ii) by its Treasurer, an Assistant Treasurer, its Secretary
or an Assistant Secretary and delivered to the Trustee; provided, however, that
such written request or order may be signed by any two of the Persons listed in
clause (i) above in lieu of being signed by one of such Persons listed in such
clause (i) and one of the officers listed in clause (ii) above.
"Consolidated EBITDA" means, for any period, the sum of the
amounts for such period of (i) Adjusted Consolidated Net Income, (ii)
Consolidated Interest Expense, (iii) income taxes, to the extent such amount was
deducted in calculating Adjusted Consolidated Net Income (other than income
taxes (x) (either positive or negative) attributable to extraordinary and
non-recurring gains or losses or sales of assets and (y) actually payable with
respect to such period), (iv) depreciation expense, to the extent such amount
was deducted in calculating Adjusted Consolidated Net Income, (v) amortization
expense, to the extent such amount was deducted in calculating Adjusted
Consolidated Net Income, and (vi) all other non-cash items reducing Adjusted
Consolidated Net Income (other than items that will require cash payments and
for which an accrual or reserve is, or is required by GAAP to be, made), less
all non-cash items increasing Adjusted Consolidated Net Income, all as
determined on a consolidated basis for the Company and its Restricted
Subsidiaries in conformity with GAAP; provided that, if any Restricted
Subsidiary is not a Wholly Owned Restricted Subsidiary, Consolidated EBITDA
shall be reduced (to the extent not otherwise reduced in accordance with GAAP)
by an amount equal to (A) the amount of the Adjusted Consolidated Net Income
attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1)
the number of shares of outstanding Common Stock of such Restricted Subsidiary
not owned on the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding Common
Stock of such Restricted Subsidiary on the last day of such period.
"Consolidated Interest Expense" means, for any period, the
aggregate amount of interest in respect of Indebtedness (including amortization
of original issue discount on any Indebtedness and the interest portion of any
deferred payment obligation, calculated in accordance with the effective
interest method of accounting; all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing; the net costs associated with Interest Rate Agreements; and
Indebtedness that is Guaranteed or secured by the Company or any of its
Restricted Subsidiaries) and all but the principal component of rentals in
respect of Capitalized Lease Obligations paid, accrued or scheduled to be paid
or to be accrued by the Company and its Restricted Subsidiaries during such
period; excluding, however, (i) any amount of such interest of any Restricted
Subsidiary if the net income of such Restricted Subsidiary is excluded in the
calculation of Adjusted
<PAGE> 13
6
Consolidated Net Income pursuant to clause (iii) of the definition thereof (but
only in the same proportion as the net income of such Restricted Subsidiary is
excluded from the calculation of Adjusted Consolidated Net Income pursuant to
clause (iii) of the definition thereof) and (ii) any premiums, fees and expenses
(and any amortization thereof) payable in connection with the Transactions, all
as determined on a consolidated basis (without taking into account Unrestricted
Subsidiaries) in conformity with GAAP.
"Consolidated Leverage Ratio" means, on any Transaction Date,
the ratio of (i) the aggregate amount of Indebtedness of the Company and its
Restricted Subsidiaries on a consolidated basis as of the end of the four fiscal
quarters for which financial statements of the Company have been filed with the
Commission or have otherwise become publicly available immediately prior to such
Transaction Date (the "Reference Period") to (ii) the aggregate amount of
Consolidated EBITDA for such Reference Period. In making the foregoing
calculation, (A) Indebtedness and Consolidated EBITDA shall be calculated after
giving pro forma effect to (x) any Indebtedness (including, if applicable, the
Notes) Incurred during such Reference Period or subsequent to the end of the
Reference Period and on or prior to the Transaction Date, in each case as if
such Indebtedness had been Incurred, and the proceeds thereof had been applied,
on the first day of such Reference Period and (y) any Indebtedness that was
outstanding during such Reference Period or thereafter but that is not
outstanding or is to be repaid on the Transaction Date; (B) pro forma effect
shall be given to Asset Dispositions and Asset Acquisitions (including giving
pro forma effect to the application of proceeds of any Asset Disposition) that
occur during such Reference Period or thereafter and on or prior to the
Transaction Date as if they had occurred and such proceeds had been applied on
the first day of such Reference Period; (C) pro forma effect shall be given to
asset dispositions and asset acquisitions (including giving pro forma effect to
the application of proceeds of any asset disposition) that have been made by any
Person that has become a Restricted Subsidiary or has been merged with or into
the Company or any Restricted Subsidiary during such Reference Period or
subsequent to such period and on or prior to the Transaction Date and that would
have constituted Asset Dispositions or Asset Acquisitions had such transactions
occurred when such Person was a Restricted Subsidiary as if such asset
dispositions or asset acquisitions were Asset Dispositions or Asset Acquisitions
that occurred on the first day of such Reference Period; provided that to the
extent that clause (B) or (C) of this sentence requires that pro forma effect be
given to an Asset Acquisition or Asset Disposition, such pro forma calculation
shall be based upon the four full fiscal quarters immediately preceding the
Transaction Date of the Person, or division or line of business of the Person,
that is acquired or disposed for which financial information is available; and
(D) the aggregate amount of Indebtedness outstanding as of the end of the
Reference Period will be deemed to include the total amount of funds outstanding
and/or available on the Transaction Date under any revolving credit facilities
of the Company or its Restricted Subsidiaries.
<PAGE> 14
7
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of the Company and its Restricted Subsidiaries
filed with the Commission or otherwise publicly available, less any amounts
attributable to Redeemable Stock or any equity security convertible into or
exchangeable for Indebtedness, the cost of treasury stock and the principal
amount of any promissory notes receivable from the sale of the Capital Stock of
the Company or any of its Restricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency exchange
adjustments under Financial Accounting Standards Board Statement of Financial
Accounting Standards No. 52).
"Corporate Trust Office" means the office of the Trustee at
which the corporate trust business of the Trustee shall, at any particular time,
be principally administered, which office is, at the date of this Indenture,
located at 4 Albany Street, New York, New York 10006, Attention: Corporate Trust
and Agency Group.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement.
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Depositary" means The Depository Trust Company, its nominees,
and their respective successors, until a successor Depositary shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Depositary" shall mean or include each Person who is then a Depositary
hereunder.
"Event of Default" has the meaning provided in Section 6.01.
"Excess Proceeds" has the meaning provided in Section 4.11.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exchange Notes" means any securities of the Company
containing terms identical to the Notes (except that such Exchange Notes shall
be registered under the Securities Act) that are issued and exchanged for the
Notes pursuant to the Registration Rights Agreement and this Indenture.
"Existing Stockholders" means ITC Holding or SCANA and their
respective Affiliates at the time of determination.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect as of the date of this Indenture,
including, without limitation, those
<PAGE> 15
8
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP applied on a consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants and with other provisions of this Indenture shall be
made without giving effect to (i) the amortization of any expenses incurred in
connection with the Transactions and (ii) except as otherwise provided, the
amortization of any amounts required or permitted by Accounting Principles Board
Opinion Nos. 16 and 17.
"Global Notes" has the meaning provided in Section 2.01.
"Guarantee" means any obligation, contingent or otherwise, of
any Person directly or indirectly guaranteeing any Indebtedness of any other
Person and, without limiting the generality of the foregoing, any obligation,
direct or indirect, contingent or otherwise, of such Person (i) to purchase or
pay (or advance or supply funds for the purchase or payment of) such
Indebtedness of such other Person (whether arising by virtue of partnership
arrangements, or by agreements to keep-well, to purchase assets, goods,
securities or services, to take-or-pay, or to maintain financial statement
conditions or otherwise) or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness of the payment thereof or to
protect such obligee against loss in respect thereof (in whole or in part);
provided that the term "Guarantee" shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Holder" or "Noteholder" means the registered holder of any
Note.
"Incur" means, with respect to any Indebtedness, to incur,
create, issue, assume, Guarantee or otherwise become liable for or with respect
to, or become responsible for, the payment of, contingently or otherwise, such
Indebtedness, including an Incurrence of Indebtedness by reason of the
acquisition of more than 50% of the Capital Stock of any Person; provided that
neither the accrual of interest nor the accretion of original issue discount
shall be considered an Incurrence of Indebtedness.
"Indebtedness" means, with respect to any Person at any date
of determination (without duplication), (i) all indebtedness of such Person for
borrowed money, (ii) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) all obligations of such
Person in respect of letters of credit or other similar instruments (including
reimbursement obligations with respect thereto), (iv) all obligations of such
Person to pay the deferred and unpaid purchase price of property or services,
which purchase price is due more than six months after the date of placing such
property in service
<PAGE> 16
9
or taking delivery and title thereto or the completion of such services, except
Trade Payables, (v) all Capitalized Lease Obligations of such Person, (vi) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; provided that the
amount of such Indebtedness shall be the lesser of (A) the fair market value of
such asset at such date of determination and (B) the amount of such
Indebtedness, (vii) all Indebtedness of other Persons Guaranteed by such Person
to the extent such Indebtedness is Guaranteed by such Person and (viii) to the
extent not otherwise included in this definition, obligations under Currency
Agreements and Interest Rate Agreements. The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date (or in the case
of a revolving credit or other similar facility, the total amount of funds
outstanding and/or available on the date of determination) of all unconditional
obligations as described above and, with respect to contingent obligations, the
maximum liability upon the occurrence of the contingency giving rise to the
obligation, provided (A) that the amount outstanding at any time of any
Indebtedness issued with original issue discount is the face amount of such
Indebtedness less the unamortized portion of the original issue discount of such
Indebtedness at the time of its issuance as determined in conformity with GAAP,
(B) that money borrowed and set aside at the time of the Incurrence of any
Indebtedness in order to prefund the payment of interest on such Indebtedness
shall be deemed not to be "Indebtedness" and (C) that Indebtedness shall not
include any liability for federal, state, local or other taxes.
"Indenture" means this Indenture as originally executed or as
it may be amended or supplemented from time to time by one or more indentures
supplemental to this Indenture entered into pursuant to the applicable
provisions of this Indenture.
"Institutional Accredited Investor" means an institution that
is an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3)
or (7) under the Securities Act.
"Interest Payment Date" means each semiannual interest payment
date on June 1 and December 1 of each year, commencing December 1, 1997.
"Interest Rate Agreement" means any interest rate protection
agreement, interest rate future agreement, interest rate option agreement,
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement, interest rate hedge agreement, option or future contract or other
similar agreement or arrangement.
"Investment" in any Person means any direct or indirect
advance, loan or other extension of credit (including, without limitation, by
way of Guarantee or similar arrangement; but excluding advances to customers in
the ordinary course of business that are, in conformity with GAAP, recorded as
accounts receivable on the balance sheet of the Company or its Restricted
Subsidiaries) or capital contribution to (by means of any transfer of cash or
other property to others or any payment for property or services for the account
or
<PAGE> 17
10
use of others), or any purchase or acquisition of Capital Stock, bonds, notes,
debentures or other similar instruments issued by, such Person and shall include
the designation of a Restricted Subsidiary as an Unrestricted Subsidiary. For
purposes of the definition of "Unrestricted Subsidiary" and Section 4.04, (i)
"Investment" shall include the fair market value of the assets (net of
liabilities) of any Restricted Subsidiary of the Company at the time that such
Restricted Subsidiary of the Company is designated an Unrestricted Subsidiary
and shall exclude the fair market value of the assets (net of liabilities) of
any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is
designated a Restricted Subsidiary of the Company and (ii) any property
transferred to or from any Person shall be valued at its fair market value at
the time of such transfer, in each case as determined by the Board of Directors
in good faith.
"ITC Holding" means ITC Holding Company.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including, without limitation, any
conditional sale or other title retention agreement or lease in the nature
thereof, any sale with recourse against the seller or any Affiliate of the
seller, or any agreement to give any security interest).
"Net Cash Proceeds" means, (a) with respect to any Asset Sale,
the proceeds of such Asset Sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of (i) brokerage commissions and
other fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Company and
its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Company or any Restricted Subsidiary of the Company as a reserve
against any liabilities associated with such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with GAAP and (b) with respect to any issuance or sale of Capital Stock, the
proceeds of such issuance or sale in the form of cash or cash equivalents,
including payments in respect of deferred payment obligations (to the extent
corresponding to the principal, but not interest, component thereof) when
received in the form of cash or cash equivalents (except to the extent such
obligations are financed or sold with recourse to the Company or any Restricted
Subsidiary
<PAGE> 18
11
of the Company) and proceeds from the conversion of other property received when
converted to cash or cash equivalents, net of attorney's fees, accountants'
fees, underwriters' or placement agents' fees, discounts or commissions and
brokerage, consultant and other fees incurred in connection with such issuance
or sale and net of taxes paid or payable as a result thereof.
"Non-U.S. Person" means a person who is not a "U.S. person"
(as defined in Regulation S).
"Note Register" has the meaning provided in Section 2.04.
"Notes" means any of the securities, as defined in the first
paragraph of the recitals hereof, that are authenticated and delivered under
this Indenture. For all purposes of this Indenture, the term "Notes" shall
include the Notes initially issued on the Closing Date, any Exchange Notes to be
issued and exchanged for any Notes pursuant to the Registration Rights Agreement
and this Indenture and any other Notes issued after the Closing Date under this
Indenture. For purposes of this Indenture, all Notes shall vote together as one
series of Notes under this Indenture.
"Offer to Purchase" means an offer by the Company to purchase
Notes from the Holders commenced by mailing a notice to the Trustee and each
Holder stating: (i) the covenant pursuant to which the offer is being made and
that all Notes validly tendered will be accepted for payment on a pro rata
basis; (ii) the purchase price and the date of purchase (which shall be a
Business Day no earlier than 30 days nor later than 60 days from the date such
notice is mailed) (the "Payment Date"); (iii) that any Note not tendered will
continue to accrue interest pursuant to its terms; (iv) that, unless the Company
defaults in the payment of the purchase price, any Note accepted for payment
pursuant to the Offer to Purchase shall cease to accrue interest on and after
the Payment Date; (v) that Holders electing to have a Note purchased pursuant to
the Offer to Purchase will be required to surrender the Note, together with the
form entitled "Option of the Holder to Elect Purchase" on the reverse side of
the Note completed, to the Paying Agent at the address specified in the notice
prior to the close of business on the Business Day immediately preceding the
Payment Date; (vi) that Holders will be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the third
Business Day immediately preceding the Payment Date, a telegram, facsimile
transmission or letter setting forth the name of such Holder, the principal
amount of Notes delivered for purchase and a statement that such Holder is
withdrawing his election to have such Notes purchased; and (vii) that Holders
whose Notes are being purchased only in part will be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered; provided
that each Note purchased and each new Note issued shall be in a principal amount
of $1,000 or integral multiples thereof. On the Payment Date, the Company shall
(i) accept for payment on a pro rata basis Notes or portions thereof tendered
pursuant to an Offer to Purchase; (ii) deposit with the Paying Agent money
<PAGE> 19
12
sufficient to pay the purchase price of all Notes or portions thereof so
accepted; and (iii) deliver, or cause to be delivered, to the Trustee all Notes
or portions thereof so accepted together with an Officers' Certificate
specifying the Notes or portions thereof accepted for payment by the Company.
The Paying Agent shall promptly mail to the Holders of Notes so accepted payment
in an amount equal to the purchase price, and the Trustee shall promptly
authenticate and mail to such Holders a new Note equal in principal amount to
any unpurchased portion of the Note surrendered; provided that each Note
purchased and each new Note issued shall be in a principal amount of $1,000 or
integral multiples thereof. The Company will publicly announce the results of an
Offer to Purchase as soon as practicable after the Payment Date. The Trustee
shall act as the Paying Agent for an Offer to Purchase. The Company will comply
with Rule 14e-1 under the Exchange Act and any other securities laws and
regulations thereunder to the extent such laws and regulations are applicable,
in the event that the Company is required to repurchase Notes pursuant to an
Offer to Purchase.
"Officer" means with respect to the Company, the Chairman of
the Board, the President, any Vice President, the Chief Financial Officer, the
Treasurer or any Assistant Treasurer, or the Secretary or any Assistant
Secretary.
"Officers' Certificate" means a certificate signed by two
Officers. Each Officers' Certificate (other than certificates provided pursuant
to TIA Section 314(a)(4)) shall include the statements provided for in TIA
Section 314(e).
"Offshore Global Note" has the meaning provided the Section
2.01.
"Offshore Physical Note" has the meaning provided the Section
2.01.
"Opinion of Counsel" means a written opinion signed by legal
counsel who is reasonably acceptable to the Trustee. Such counsel may be an
employee of or counsel to the Company or the Trustee. Each such Opinion of
Counsel shall include the statements provided for in TIA Section 314(e).
Opinions of Counsel required to be delivered may have qualifications customary
for opinions of the type required.
"Paying Agent" has the meaning provided in Section 2.04,
except that, for the purposes of Article Eight, the Paying Agent shall not be
the Company or a Subsidiary of the Company or an Affiliate of any of them. The
term "Paying Agent" includes any additional Paying Agent.
"Permitted Investment" means (i) an Investment in the Company
or a Restricted Subsidiary or a Person which will, upon the making of such
Investment, become a Restricted Subsidiary or be merged or consolidated with or
into or transfer or convey all or substantially all its assets to, the Company
or a Restricted Subsidiary; provided that such person's primary business is
related, ancillary or complementary to the businesses of the
<PAGE> 20
13
Company and its Restricted Subsidiaries on the date of such Investment; (ii) a
Temporary Cash Investment; (iii) commission, payroll, travel and similar
advances to cover matters that are expected at the time of such advances
ultimately to be treated as expenses in accordance with GAAP; and (iv) stock,
obligations or securities received in satisfaction of judgments.
"Permitted Liens" means (i) Liens for taxes, assessments,
governmental charges or claims that are being contested in good faith by
appropriate legal proceedings promptly instituted and diligently conducted and
for which a reserve or other appropriate provision, if any, as shall be required
in conformity with GAAP shall have been made; (ii) statutory Liens of landlords
and carriers, warehousemen, mechanics, suppliers, materialmen, repairmen or
other similar Liens arising in the ordinary course of business and with respect
to amounts not yet delinquent or being contested in good faith by appropriate
legal proceedings promptly instituted and diligently conducted and for which a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made; (iii) Liens incurred or deposits made
in the ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security; (iv) Liens incurred
or deposits made to secure the performance of tenders, bids, leases, statutory
or regulatory obligations, bankers' acceptances, surety and appeal bonds,
government contracts, performance and return-of-money bonds and other
obligations of a similar nature incurred in the ordinary course of business
(exclusive of obligations for the payment of borrowed money); (v) easements,
rights-of-way, municipal and zoning ordinances and similar charges,
encumbrances, title defects or other irregularities that do not materially
interfere with the ordinary course of business of the Company or any of its
Restricted Subsidiaries; (vi) Liens (including extensions and renewals thereof)
upon real or personal property acquired after the Closing Date; provided that
(a) such Lien is created solely for the purpose of securing Indebtedness
Incurred, in accordance with Section 4.03, (1) to finance the cost (including
the cost of improvement or construction) of the item of property or assets
subject thereto and such Lien is created prior to, at the time of or within six
months after the later of the acquisition, the completion of construction or the
commencement of full operation of such property or (2) to refinance any
Indebtedness previously so secured, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such cost and (c) any such Lien
shall not extend to or cover any property or assets other than such item of
property or assets and any improvements on such item; (vii) leases or subleases
granted to others that do not materially interfere with the ordinary course of
business of the Company and its Restricted Subsidiaries, taken as a whole;
(viii) Liens encumbering property or assets under construction arising from
progress or partial payments by a customer of the Company or its Restricted
Subsidiaries relating to such property or assets; (ix) any interest or title of
a lessor in the property subject to any Capitalized Lease or operating lease;
(x) Liens arising from filing Uniform Commercial Code financing statements
regarding leases; (xi) Liens on property of, or on shares of stock or
Indebtedness of, any corporation existing at the time such corporation becomes,
or becomes a part of, any Restricted Subsidiary; provided that such Liens do not
extend to or cover any property or assets of the Company or any
<PAGE> 21
14
Restricted Subsidiary other than the property or assets acquired; (xii) Liens in
favor of the Company or any Restricted Subsidiary; (xiii) Liens arising from the
rendering of a final judgment or order against the Company or any Restricted
Subsidiary of the Company that does not give rise to an Event of Default; (xiv)
Liens securing reimbursement obligations with respect to letters of credit that
encumber documents and other property relating to such letters of credit and the
products and proceeds thereof; (xv) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (xvi) Liens encumbering customary
initial deposits and margin deposits, and other Liens that are either within the
general parameters customary in the industry and incurred in the ordinary course
of business, in each case, securing Indebtedness under Interest Rate Agreements
and Currency Agreements and forward contracts, options, future contracts,
futures options or similar agreements or arrangements designed solely to protect
the Company or any of its Restricted Subsidiaries from fluctuations in interest
rates or the price of commodities; (xvii) Liens arising out of conditional sale,
title retention, consignment or similar arrangements for the sale of goods
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business in accordance with the past practices of the Company
and its Restricted Subsidiaries prior to the Closing Date; and (xviii) Liens on
or sales of receivables.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Physical Notes" has the meaning provided in Section 2.01.
"Pledge Account" means an account established with the Trustee
pursuant to the terms of the Pledge Agreement for the deposit of the Pledged
Securities to be purchased by the Company with a portion of the net proceeds
from the sale of the Notes.
"Pledge Agreement" means the Collateral Pledge and Security
Agreement, dated as of the Closing Date, made by the Company in favor of the
Trustee, governing the disbursement of funds from the Pledge Account, as such
agreement may be amended, restated, supplemented or otherwise modified from time
to time.
"Pledged Securities" means the U.S. government securities to
be purchased by the Company and held in the Pledge Account in accordance with
the Pledge Agreement.
"Preferred Stock" means, with respect to any Person, any and
all shares, interests, participations or other equivalents (however
designated,whether voting or non-voting) of such Person's preferred or
preference equity, whether now outstanding or issued after the Closing Date,
including, without limitation, all series and classes of such preferred stock or
preference stock.
<PAGE> 22
15
"Preferred Stock Sales" means the sale by the Company for
$45.0 million, in the aggregate, of (a) 50,000 shares of its Series C
Convertible Preferred Stock, par value $.01 per share, to The Huff Alternative
Income Fund, L.P. pursuant to the Stock Purchase Agreement dated as of May 23,
1997 between the Company and The Huff Alternative Income Fund, L.P. and (b)
50,000 shares of its Series D Convertible Preferred Stock, par value $.01 per
share, to SCANA Communications, Inc., a wholly owned subsidiary of SCANA
Corporation, pursuant to the Stock Purchase Agreement dated as of May 23, 1997
between the Company and SCANA Communications, Inc.
"principal" of a debt security, including the Notes, means the
principal amount due on the Stated Maturity as shown on such debt security.
"Private Placement Legend" means the legend initially set
forth on the Notes in the form set forth in Section 2.02.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Redeemable Stock" means any class or series of Capital Stock
of any Person that by its terms or otherwise is (i) required to be redeemed
prior to the Stated Maturity of the Notes, (ii) redeemable at the option of the
holder of such class or series of Capital Stock at any time prior to the Stated
Maturity of the Notes or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity prior to the Stated Maturity of the Notes; provided that any Capital
Stock that would not constitute Redeemable Stock but for provisions thereof
giving holders thereof the right to require such Person to repurchase or redeem
such Capital Stock upon the occurrence of an "asset sale" or "change of control"
occurring prior to the Stated Maturity of the Notes shall not constitute
Redeemable Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in Section 4.11 and Section 4.12 and
such Capital Stock specifically provides that such Person will not repurchase or
redeem any such stock pursuant to such provision prior to the Company's
repurchase of such Notes as are required to be repurchased pursuant to Section
4.11 and Section 4.12.
"Redemption Date", when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which such Note is to be redeemed pursuant to this
Indenture.
<PAGE> 23
16
"Registrar" has the meaning provided in Section 2.04.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of June 10, 1997, between the Company and Morgan Stanley &
Co., Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Oppenheimer & Co., Inc., and certain permitted assigns specified therein.
"Registration Statement" means the Registration Statement as
defined and described in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the May 15 or November 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Repurchase Offer" means a "Repurchase Offer" as defined in
the Warrants.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice chairman of the board of directors, the chairman
or any vice chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, any
assistant vice president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, the cashier, any assistant cashier, any trust officer
or assistant trust officer, the controller or any assistant controller or any
other officer of the Trustee customarily performing functions similar to those
performed by any of the above designated officers (including any officer within
the Corporate Trust and Agency Group (or any successor group) of the Trustee)
and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his or her knowledge of and
familiarity with the particular subject.
"Restricted Payments" has the meaning provided in Section
4.04.
"Restricted Subsidiary" means any Subsidiary of the Company
other than an Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"SCANA" means SCANA Corporation and any of its Affiliates,
including, without limitation, SCANA Communications, Inc.
"Securities Act" means the Securities Act of 1933, as amended.
<PAGE> 24
17
"Shelf Registration Statement" has the meaning provided in the
Registration Rights Agreement.
"Significant Subsidiary" means, at any date of determination,
any Restricted Subsidiary of the Company that, together with its Subsidiaries,
(i) for the most recent fiscal year of the Company, accounted for more than 10%
of the consolidated revenues of the Company and its Restricted Subsidiaries or
(ii) as of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, all as set
forth on the most recently available consolidated financial statements of the
Company for such fiscal year.
"Specified Date" means any Redemption Date, any Payment Date
for an Offer to Purchase pursuant to Section 4.11 or Section 4.12 or any date on
which the Notes are due and payable after an Event of Default.
"Stated Maturity" means, (i) with respect to any debt
security, the date specified in such debt security as the fixed date on which
the final installment of principal of such debt security is due and payable and
(ii) with respect to any scheduled installment of principal of or interest on
any debt security, the date specified in such debt security as the fixed date on
which such installment is due and payable.
"Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
outstanding Voting Stock is owned, directly or indirectly, by such Person and
one or more other Subsidiaries of such Person.
"Temporary Cash Investment" means any of the following: (i)
direct obligations of the United States of America or any agency thereof or
obligations fully and unconditionally guaranteed by the United States of America
or any agency thereof, (ii) time deposit accounts, certificates of deposit and
money market deposits maturing within 180 days of the date of acquisition
thereof issued by a bank or trust company which is organized under the laws of
the United States of America, any state thereof or any foreign country
recognized by the United States, and which bank or trust company has capital,
surplus and undivided profits aggregating in excess of $50.0 million (or the
foreign currency equivalent thereof) and has outstanding debt which is rated "A"
(or such similar equivalent rating) or higher by at least one nationally
recognized statistical rating organization (as defined in Rule 436 under the
Securities Act) or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor, (iii) repurchase obligations with a term of not more
than 30 days for underlying securities of the types described in clause (i)
above entered into with a bank meeting the qualifications described in clause
(ii) above, (iv) commercial paper, maturing not more than 90 days after the date
of acquisition, issued by a corporation (other than an Affiliate of the Company)
organized and in existence under the laws of the United States of America, any
state thereof or any foreign country recognized by the United States of
<PAGE> 25
18
America with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard & Poor's Ratings Service, and (v) securities with
maturities of six months or less from the date of acquisition issued or fully
and unconditionally guaranteed by any state, commonwealth or territory of the
United States of America, or by any political subdivision or taxing authority
thereof, and rated at least "A" by Standard & Poor's Ratings Service or Moody's
Investors Service, Inc.
"TIA" or "Trust Indenture Act" means the Trust Indenture Act
of 1939, as amended (15 U.S. Code Sections 77aaa-77bbb), as in effect on the
date this Indenture was executed, except as provided in Section 9.06.
"Trade Payables" means any accounts payable or any other
indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by the Company or any of its Restricted Subsidiaries arising in the
ordinary course of business in connection with the acquisition of goods or
services.
"Transaction Date" means, with respect to the Incurrence of
any Indebtedness by the Company or any of its Restricted Subsidiaries, the date
such Indebtedness is to be Incurred and, with respect to any Restricted Payment,
the date such Restricted Payment is to be made.
"Trustee" means the party named as such in the first paragraph
of this Indenture until a successor replaces it in accordance with the
provisions of Article Seven of this Indenture and thereafter means such
successor.
"Unrestricted Subsidiary" means (i) any Subsidiary of the
Company that at the time of determination shall be designated an Unrestricted
Subsidiary by the Board of Directors in the manner provided below and (ii) any
Subsidiary of an Unrestricted Subsidiary. The Board of Directors may designate
any Restricted Subsidiary of the Company (including any newly acquired or newly
formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such
Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property
of, the Company or any Restricted Subsidiary; provided that either (A) the
Subsidiary to be so designated has total assets of $1,000 or less or (B) if such
Subsidiary has assets greater than $1,000, that such designation would be
permitted under Section 4.04 . The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary of the Company; provided
that immediately after giving effect to such designation (x) the Company could
Incur $1.00 of additional Indebtedness under the first paragraph of Section 4.03
and (y) no Default or Event of Default shall have occurred and be continuing.
Any such designation by the Board of Directors shall be evidenced to the Trustee
by promptly filing with the Trustee a copy of the Board Resolution giving effect
to such
<PAGE> 26
19
designation and an Officers' Certificate certifying that such designation
complied with the foregoing provisions.
"U.S. Global Notes" has the meaning provided in Section 2.01.
"U.S. Government Obligations" means securities that are (i)
direct obligations of the United States of America for the payment of which its
full faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated Maturity of the Notes, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such U.S.
Government Obligation or a specific payment of interest on or principal of any
such U.S. Government Obligation held by such custodian for the account of the
holder of a depository receipt; provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of interest on
or principal of the U.S. Government Obligation evidenced by such depository
receipt.
"U.S. Physical Notes" has the meaning provided in Section
2.01.
"Voting Stock" means with respect to any Person, Capital Stock
of any class or kind ordinarily having the power to vote for the election of
directors, managers or other voting members of the governing body of such
Person.
"Warrants" means the Warrants to purchase 1,143,904 shares of
the Company's Common Stock at an exercise price of $18.15 per share, subject to
adjustment, issued pursuant to the Warrant Agreement dated as of February 7,
1996 between the Company and Bankers Trust Company, as warrant agent.
"United States Bankruptcy Code" means the Bankruptcy Reform
Act of 1978, as amended and as codified in Title 11 of the United States Code,
as amended from time to time hereafter, or any successor federal bankruptcy law.
"Wholly Owned" means, with respect to any Subsidiary of any
Person, the ownership of all of the outstanding Capital Stock of such Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable law) by such Person or one or more Wholly Owned
Subsidiaries of such Person.
<PAGE> 27
20
SECTION 1.02. Incorporation by Reference of Trust Indenture
Act. Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Notes;
"indenture security holder" means a Holder or a Noteholder;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the
Trustee; and
"obligor" on the indenture securities means the Company or any
other obligor on the Notes.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by a rule of the
Commission and not otherwise defined herein have the meanings assigned to them
therein.
SECTION 1.03. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) an accounting term not otherwise defined has the
meaning assigned to it in accordance with GAAP;
(iii) "or" is not exclusive;
(iv) words in the singular include the plural, and words
in the plural include the singular;
(v) provisions apply to successive events and
transactions;
(vi) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision;
(vii) all ratios and computations based on GAAP contained
in this Indenture shall be computed in accordance with the definition
of GAAP set forth in Section 1.01; and
<PAGE> 28
21
(viii) all references to Sections or Articles refer to
Sections or Articles of this Indenture unless otherwise indicated.
ARTICLE TWO
THE NOTES
SECTION 2.01. Form and Dating. The Notes and the Trustee's
certificate of authentication shall be substantially in the form annexed hereto
as Exhibit A. The Notes may have notations, legends or endorsements required by
law, stock exchange agreements to which the Company is subject or usage. The
Company shall approve the form of the Notes and any notation, legend or
endorsement on the Notes. Each Note shall be dated the date of its
authentication.
The terms and provisions contained in the form of the Notes
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Notes offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Notes in registered
form, substantially in the form set forth in Exhibit A (the "U.S. Global
Notes"), deposited with the Trustee, as custodian for the Depositary, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the U.S. Global Notes may from time
to time be increased or decreased by adjustments made on the records of the
Trustee, as custodian for the Depositary or its nominee, as hereinafter
provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Notes in registered form substantially in the form set forth in Exhibit A
(the "Offshore Global Notes") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Offshore Global
Notes may from time to time be increased or decreased by adjustments made on the
records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Notes offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Notes in
registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Notes"). Notes issued pursuant to Section 2.07 in exchange for
interests in the Offshore Global Notes shall be in the form of permanent
certificated Notes in registered form substantially in the form set forth in
Exhibit A (the "Offshore Physical Notes").
<PAGE> 29
22
The Offshore Physical Notes and U.S. Physical Notes are
sometimes collectively herein referred to as the "Physical Notes". The U.S.
Global Note and the Offshore Global Note are sometimes referred to herein as the
"Global Notes".
The definitive Notes shall be typed, printed, lithographed or
engraved or produced by any combination of these methods or may be produced in
any other manner permitted by the rules of any securities exchange on which the
Notes may be listed, all as determined by the Officers executing such Notes, as
evidenced by their execution of such Notes.
SECTION 2.02. Restrictive Legends. Unless and until a Note is
exchanged for an Exchange Note in connection with an effective Registration
Statement pursuant to the Registration Rights Agreement, (i) each U.S. Global
Note and each U.S. Physical Note shall bear the legend, set forth below on the
face thereof and (ii) each Offshore Physical Note and each Offshore Global Note
shall bear the legend set forth below on the face thereof until at least the
41st day after the Closing Date and receipt by the Company and the Trustee of a
certificate substantially in the form of Exhibit B hereto.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS
NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT ON THE DATE OF TRANSFER OF SUCH
NOTE RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO INTERCEL,
INC. OR ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER
IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO
SUCH TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM
THE TRUSTEE) AND IF SUCH
<PAGE> 30
23
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES OF
LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTABLE TO INTERCEL, INC.
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH
RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRUSTEE. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND INTERCEL, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.
THE INDENTURE CONTAINS A PROVISION REQUIRING THE TRUSTEE TO REFUSE TO
REGISTER ANY TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall also
bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY OR SUCH OTHER REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY OR
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.
OR TO SUCH
<PAGE> 31
24
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL NOTE
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
SET FORTH IN SECTION 2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Denominations.
Subject to Article Four, the aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is unlimited. The Notes shall
be executed by two Officers of the Company, by facsimile or manual signature, in
the name and on behalf of the Company.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee or authenticating agent authenticates the
Note, the Note shall be valid nevertheless.
A Note shall not be valid until the Trustee or authenticating
agent manually signs the certificate of authentication on the Note. The
signature shall be conclusive evidence that the Note has been authenticated
under this Indenture.
At any time and from time to time after the execution of this
Indenture, the Trustee or an authenticating agent shall upon receipt of a
Company Order authenticate for original issue Notes in the aggregate principal
amount specified in such Company Order; provided that the Trustee shall be
entitled to receive an Officers' Certificate and an Opinion of Counsel of the
Company that it may reasonably request in connection with such authentication of
Notes. Such Company Order shall specify the amount of Notes to be authenticated,
the date on which the original issue of Notes is to be authenticated and the
aggregate principal amount of Notes then authorized and in case of an issuance
of Notes pursuant to Section 2.15, shall certify that such issuance is in
compliance with Article Four.
The Trustee may appoint an authenticating agent to
authenticate Notes. If the appointment of such authenticating agent is not at
the discretion and for the convenience of the Trustee, then such authenticating
agent shall be compensated by the Company. An authenticating agent may
authenticate Notes whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
<PAGE> 32
25
authenticating agent. An authenticating agent has the same rights as an Agent to
deal with the Company or an Affiliate of the Company.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1,000 in principal amount and any integral
multiple thereof.
SECTION 2.04. Registrar and Paying Agent. The Company shall
maintain an office or agency where Notes may be presented for registration of
transfer or for exchange (the "Registrar"), an office or agency where Notes may
be presented for payment (the "Paying Agent") and an office or agency where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served, which shall be in the Borough of Manhattan, The City of
New York and, in the event the Notes are listed on the Luxembourg Stock
Exchange, in Luxembourg. The Company shall cause the Registrar to keep a
register of the Notes and of their transfer and exchange (the "Note Register").
The Note Register shall be in written form or any other form capable of being
converted into written form within a reasonable time. The Company may have one
or more co-Registrars and one or more additional Paying Agents.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture. The agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall give
prompt written notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent. If the Company fails to maintain a
Registrar, Paying Agent and/or agent for service of notices and demands, the
Trustee shall act as such Registrar, Paying Agent and/or agent for service of
notices and demands. The Company may remove any Agent upon written notice to
such Agent and the Trustee; provided that no such removal shall become effective
until (i) the acceptance of an appointment by a successor Agent to such Agent as
evidenced by an appropriate agency agreement entered into by the Company and
such successor Agent and delivered to the Trustee or (ii) notification to the
Trustee that the Trustee shall serve as such Agent until the appointment of a
successor Agent in accordance with clause (i) of this proviso. The Company, any
Subsidiary of the Company, or any Affiliate of any of them may act as Paying
Agent, Registrar or co-Registrar, and/or agent for service of notice and
demands.
The Company initially appoints the Trustee as Registrar,
Paying Agent, authenticating agent and agent for service of notice and demands.
If, at any time, the Trustee is not the Registrar, the Company shall furnish, or
cause to be furnished, to the Trustee at least seven Business Days before each
Interest Payment Date and at such other times as the Trustee may reasonably
request, the names and addresses of the Holders as they appear in the Note
Register. At the option of the Company, payment of interest may be made by check
mailed to the address of the Holders as such address appears in the Note
Register.
<PAGE> 33
26
SECTION 2.05. Paying Agent to Hold Money in Trust. Not later
than each due date of the principal, premium, if any, and interest on any Notes,
the Company shall deposit with the Paying Agent money in immediately available
funds sufficient to pay such principal, premium, if any, and interest so
becoming due. The Company shall require each Paying Agent other than the Trustee
to agree in writing that such Paying Agent shall hold in trust for the benefit
of the Holders or the Trustee all money held by the Paying Agent for the payment
of principal of, premium, if any, and interest on the Notes (whether such money
has been paid to it by the Company or any other obligor on the Notes), and such
Paying Agent shall promptly notify the Trustee of any default by the Company (or
any other obligor on the Notes) in making any such payment. The Company at any
time may require a Paying Agent to pay all money held by it to the Trustee and
account for any funds disbursed, and the Trustee may at any time during the
continuance of any payment default, upon written request to a Paying Agent,
require such Paying Agent to pay all money held by it to the Trustee and to
account for any funds disbursed. Upon doing so, the Paying Agent shall have no
further liability for the money so paid over to the Trustee. If the Company or
any Subsidiary of the Company or any Affiliate of any of them acts as Paying
Agent, it will, on or before each due date of any principal of, premium, if any,
or interest on the Securities, segregate and hold in a separate trust fund for
the benefit of the Holders a sum of money sufficient to pay such principal,
premium, if any, or interest so becoming due until such sum of money shall be
paid to such Holders or otherwise disposed of as provided in this Indenture, and
will promptly notify the Trustee of its action or failure to act.
SECTION 2.06. Transfer and Exchange. The Notes are issuable
only in registered form. A Holder may transfer a Note by written application to
the Registrar stating the name of the proposed transferee and otherwise
complying with the terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Registrar in the Note
Register. Prior to the registration of any transfer by a Holder as provided
herein, the Company, the Trustee, and any agent of the Company shall treat the
person in whose name the Note is registered as the owner thereof for all
purposes whether or not the Note shall be overdue, and neither the Company, the
Trustee, nor any such agent shall be affected by notice to the contrary.
Furthermore, any Holder of a Global Note shall, by acceptance of such Global
Note, agree that transfers of beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent) and that ownership of a beneficial interest in the
Note shall be required to be reflected in a book entry. When Notes are presented
to the Registrar or a co-Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations (including an exchange of Notes for Exchange Notes), the Registrar
shall register the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no exchanges of Notes
for Exchange Notes shall occur until a Registration Statement shall have been
declared effective by the Commission (confirmed in an Officers' Certificate
delivered to the Trustee) and that
<PAGE> 34
27
any Notes that are exchanged for Exchange Notes shall be cancelled by the
Trustee. To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Notes at the Registrar's request. No
service charge shall be made for any registration of transfer or exchange or
redemption of the Notes, but the Company may require payment of a sum sufficient
to cover any transfer tax or similar governmental charge payable in connection
therewith (other than any such transfer taxes or other similar governmental
charge payable upon exchanges pursuant to Section 2.11, 3.08 or 9.04).
The Registrar shall not be required (i) to issue, register the
transfer of or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 3.03 and ending at the close of
business on the day of such mailing, or (ii) to register the transfer of or
exchange any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
SECTION 2.07. Book-Entry Provisions for Global Notes. (a) The
U.S. Global Notes and Offshore Global Notes initially shall (i) be registered in
the name of the Depositary for such Global Notes or the nominee of such
Depositary, (ii) be delivered to the Trustee as custodian for such Depositary
and (iii) bear legends as set forth in Section 2.02.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect to any Global
Note held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Note, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Note for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Note.
(b) Transfers of a Global Note shall be limited to transfers
of such Global Note in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in a Global Note
may be transferred in accordance with the rules and procedures of the Depositary
and the provisions of Section 2.08. In addition, U.S. Physical Notes and
Offshore Physical Notes shall be transferred to all beneficial owners in
exchange for their beneficial interests in the U.S. Global Notes or the Offshore
Global Notes, respectively, if (i) the Depositary notifies the Company that it
is unwilling or unable to continue as Depositary for the U.S. Global Notes or
the Offshore Global Notes, as the case may be, and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the Registrar has received a request
to the foregoing effect from the Depositary.
<PAGE> 35
28
(c) Any beneficial interest in one of the Global Notes that is
transferred to a person who takes delivery in the form of an interest in the
other Global Note will, upon transfer, cease to be an interest in such Global
Note and become an interest in the other Global Note and, accordingly, will
thereafter be subject to all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for as long as it
remains such an interest.
(d) In connection with any transfer of a portion of the
beneficial interests in a U.S. Global Note or Offshore Global Note to beneficial
owners pursuant to paragraph (b) of this Section, the Registrar shall reflect on
its books and records the date and a decrease in the principal amount of the
U.S. Global Notes or Offshore Global Notes in an amount equal to the principal
amount of the beneficial interest in such Global Notes to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Notes or Offshore Physical Notes, as the case may be, of
like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global
Note or Offshore Global Note to beneficial owners pursuant to paragraph (b) of
this Section, the U.S. Global Note or Offshore Global Note, as the case may be,
shall be deemed to be surrendered to the Trustee for cancellation, and the
Company shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (e) of Section 2.08,
bear the legend regarding transfer restrictions applicable to the U.S. Physical
Note set forth in Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an
interest in the Offshore Global Note pursuant to paragraph (b), (d) or (e) of
this Section shall, except as otherwise provided by paragraph (e) of Section
2.08, bear the legend regarding transfer restrictions applicable to the Offshore
Physical Note set forth in Section 2.02.
(h) The registered holder of a Global Note may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Notes.
(i) Beneficial owners of interests in a U.S. Global Note may
receive U.S. Physical Notes (which shall bear the Private Placement Legend if
required by Section 2.02) in accordance with the procedures of the Depositary.
In connection with the execution,
<PAGE> 36
29
authentication and delivery of such U.S. Physical Notes, the Registrar shall
reflect on its books and records a decrease in the principal amount of the
relevant U.S. Global Note equal to the principal amount of such U.S. Physical
Notes and the Company shall execute and the Trustee shall authenticate and
deliver one or more U.S. Physical Notes having an equal aggregate principal
amount.
SECTION 2.08. Special Transfer Provisions. Unless and until a
Note is exchanged for an Exchange Note in connection with an effective
Registration Statement pursuant to the Registration Rights Agreement, the
following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited
Investors. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note to any Institutional Accredited
Investor which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any
Note, whether or not such Note bears the Private Placement Legend, if
(x) the requested transfer is after the time period referred to in Rule
144(k) under the Securities Act as in effect with respect to such
transfer or (y) the proposed transferee has delivered to the Registrar
(A) a certificate substantially in the form of Exhibit C hereto and (B)
if the aggregate principal amount of the Notes being transferred is
less than $100,000 at the time of such transfer, an opinion of counsel
acceptable to the Company that such transfer is in compliance with the
Securities Act.
(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the U.S. Global Note, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i) and
(y) instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and a decrease in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Note to be transferred, and the
Company shall execute, and the Trustee shall authenticate and deliver,
one or more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of a U.S.
Physical Note, an interest in a U.S. Global Note or an interest in an Offshore
Global Note prior to the removal of the Private Placement Legend to a QIB
(excluding Non-U.S. Persons):
(i) If the Note to be transferred consists of (x) either
(A) an interest in a Offshore Global Note prior to the removal of the
Private Placement Legend or (B) U.S. Physical Notes, the Registrar
shall register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on the form of
Note stating, or has otherwise advised the Company and the Registrar in
writing, that
<PAGE> 37
30
the sale has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided for on the
form of Note stating, or has otherwise advised the Company and the
Registrar in writing, that it is purchasing the Note for its own
account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that it
is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A or (y) an interest in the U.S. Global Notes, the
transfer of such interest may be effected only through the book entry
system maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and
the Note to be transferred consists of U.S. Physical Notes, upon
receipt by the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the U.S.
Global Notes in an amount equal to the principal amount of the U.S.
Physical Notes, to be transferred, and the Trustee shall cancel the
U.S. Physical Notes so transferred.
(c) Transfers of Interests in the Offshore Global Note or
Offshore Physical Notes. The following provisions shall apply with respect to
any transfer of interests in the Offshore Global Notes or Offshore Physical
Notes:
(i) prior to the removal of the Private Placement Legend
from a Offshore Global Note or Offshore Physical Note pursuant to
Section 2.02, the Registrar shall refuse to register such transfer
unless such transfer complies with Section 2.08(b) or Section 2.08(d),
as the case may be; and
(ii) after such removal, the Registrar shall register the
transfer of any such Note without requiring any additional
certification.
(d) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to any transfer of a Note to a
Non-U.S. Person:
(i) The Registrar shall register any proposed transfer to
any Non-U.S. Person if the Note to be transferred is a U.S. Physical
Note or an interest in the U.S. Global Note only upon receipt of a
certificate substantially in the form of Exhibit D from the proposed
transferor.
<PAGE> 38
31
(ii) (a) If the proposed Transferor is an Agent Member
holding a beneficial interest in a U.S. Global Note, upon receipt by
the Registrar of (x) the documents required by paragraph (i) and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures, the Registrar shall reflect on its books and records the
date and a decrease in the principal amount of such U.S. Global Note in
an amount equal to the principal amount of the beneficial interest in
the U.S. Global Note to be transferred, and (b) if the proposed
transferee is an Agent Member, upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the
Offshore Global Note in an amount equal to the principal amount of the
U.S. Physical Notes or the U.S. Global Note, as the case may be, to be
transferred, and the Trustee shall cancel the Physical Note, if any, so
transferred or decrease the amount of the U.S. Global Note.
(e) Private Placement Legend. Upon the transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the transfer, exchange or replacement of Notes bearing the Private
Placement Legend, the Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated by paragraphs
(a)(i)(x) or (c)(ii) of this Section 2.08 exist or (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(f) General. By its acceptance of any Note bearing the
Private Placement Legend, each Holder of such a Note acknowledges the
restrictions on transfer of such Note set forth in this Indenture and in the
Private Placement Legend and agrees that it will transfer such Note only as
provided in this Indenture. The Registrar shall not register a transfer of any
Note unless such transfer complies with the restrictions on transfer of such
Note set forth in this Indenture. In connection with any transfer of Notes,
each Holder agrees by its acceptance of the Notes to furnish the Registrar or
the Company such certifications, legal opinions or other information as either
of them may reasonably require to confirm that such transfer is being made
pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that the Registrar
shall not be required to determine (but may conclusively rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
The Registrar shall retain copies of all letters, notices and
other written communications received pursuant to Section 2.07 or this Section
2.08. The Company shall have the right to inspect and make copies of all such
letters, notices or other written
<PAGE> 39
32
communications at any reasonable time upon the giving of reasonable written
notice to the Registrar.
SECTION 2.09. Replacement Notes. If a mutilated Note is
surrendered to the Trustee or if the Holder claims that the Note has been lost,
destroyed or wrongfully taken, then, in the absence of notice to the Company or
the Trustee that such Note has been acquired by a bona fide purchaser, the
Company shall issue and the Trustee shall authenticate a replacement Note of
like tenor and principal amount; provided that the requirements of this Section
2.09 are met. If required by the Trustee or the Company, an indemnity bond must
be furnished that is sufficient in the judgment of both the Trustee and the
Company to protect the Company, the Trustee or any Agent from any loss that any
of them may suffer if a Note is replaced. The Company may charge such Holder for
the expenses of the Company and the Trustee in replacing a Note. In case any
such mutilated, lost, destroyed or wrongfully taken Note has become or is about
to become due and payable, the Company in its discretion may pay such Note
instead of issuing a new Note in replacement thereof.
Every replacement Note is an additional obligation of the
Company and shall be entitled to the benefits of this Indenture.
The provisions of this Section 2.09 are exclusive and shall
preclude (to the extent lawful) all other rights and remedies against the
Company and the Trustee with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes.
SECTION 2.10. Outstanding Notes. Notes outstanding at any time
are all Notes that have been authenticated by the Trustee except for those
cancelled by it, those delivered to it for cancellation and those described in
this Section 2.10 as not outstanding.
If a Note is replaced pursuant to Section 2.09, it ceases to
be outstanding unless and until the Trustee and the Company receive proof
satisfactory to each of them that the replaced Note is held by a bona fide
purchaser.
If the Paying Agent (other than the Company or an Affiliate of
the Company) holds on a Redemption Date or the Stated Maturity of the Notes
money sufficient to pay Notes payable on that date, then on and after that date
such Notes cease to be outstanding and interest on them shall cease to accrue.
Notes, or portions thereof, for the payment or redemption of
which moneys or U.S. Government Obligations (as provided for in Article Eight)
in the necessary amount shall have been deposited in trust with the Trustee or
with any Paying Agent (other than the Company) or shall have been set aside,
segregated and held in trust by the Company for the Holders of such Notes (if
the Company shall act as its own Paying Agent), on and after that time shall
cease to be outstanding and, in the case of redemption, interest on such Notes
shall
<PAGE> 40
33
cease to accrue, provided that if such Notes, or portions thereof, are to be
redeemed prior to the maturity thereof, notice of such redemption shall have
been given as herein provided, or provision satisfactory to the Trustee shall
have been made for giving such notice.
A Note does not cease to be outstanding because the Company or
one of its Affiliates holds such Note, provided, however, that, in determining
whether the Holders of the requisite principal amount of the outstanding Notes
have given any request, demand, authorization, direction, notice, consent or
waiver hereunder, Notes owned by the Company or any other obligor upon the Notes
or any Affiliate of the Company or of such other obligor shall be disregarded
and deemed not to be outstanding, except that, in determining whether the
Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Notes which the
Trustee has actual knowledge to be so owned shall be so disregarded. Notes so
owned which have been pledged in good faith may be regarded as outstanding if
the pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Notes and that the pledgee is not the Company or
any other obligor upon the Notes or any Affiliate of the Company or of such
other obligor.
SECTION 2.11. Temporary Notes. Until definitive Notes are
ready for delivery, the Company may prepare and execute and the Trustee shall
authenticate temporary Notes. Temporary Notes shall be substantially in the form
of definitive Notes but may have insertions, substitutions, omissions and other
variations determined to be appropriate by the Officers executing the temporary
Notes, as evidenced by their execution of such temporary Notes. If temporary
Notes are issued, the Company will cause definitive Notes to be prepared without
unreasonable delay. After the preparation of definitive Notes, the temporary
Notes shall be exchangeable for definitive Notes upon surrender of the temporary
Notes at the office or agency of the Company designated for such purpose
pursuant to Section 4.02, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Notes the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor a like principal
amount of definitive Notes of authorized denominations. Until so exchanged, the
temporary Notes shall be entitled to the same benefits under this Indenture as
definitive Notes.
SECTION 2.12. Cancellation. The Company at any time may
deliver, or cause to be delivered, Notes to the Trustee for cancellation. The
Registrar and the Paying Agent shall forward to the Trustee any Notes
surrendered to them for transfer, exchange or payment. The Trustee (and no one
else) shall cancel all Notes surrendered for transfer, exchange, payment,
replacement or cancellation and shall destroy them in accordance with its normal
procedure.
SECTION 2.13. CUSIP Numbers. The Company in issuing the Notes
may use "CUSIP," "CINS" and "ISIN" numbers (if then generally in use), and the
Trustee shall
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34
use CUSIP, CINS or ISIN numbers, as the case may be, in notices of redemption or
exchange as a convenience to Holders; provided that any such notice shall state
that no representation is made as to the correctness of such CUSIP, CINS or ISIN
numbers either as printed on the Notes or as contained in any notice of
redemption or exchange and that reliance may be placed only on the other
identification numbers printed on the Notes; and provided further that failure
to use CUSIP, CINS or ISIN numbers in any notice of redemption or exchange shall
not affect the validity or sufficiency of such notice. The Company shall
promptly notify the Trustee of any change in CUSIP numbers.
SECTION 2.14. Defaulted Interest. If the Company defaults in a
payment of interest on the Notes, it shall pay, or shall deposit with the Paying
Agent money in immediately available funds sufficient to pay the defaulted
interest, plus (to the extent lawful) any interest payable on the defaulted
interest, to the Persons who are Holders on a subsequent special record date. A
special record date, as used in this Section 2.14 with respect to the payment of
any defaulted interest, shall mean the 15th day next preceding the date fixed by
the Company for the payment of defaulted interest, whether or not such day is a
Business Day. At least 15 days before the subsequent special record date, the
Company shall mail to each Holder and to the Trustee a notice that states the
subsequent special record date, the payment date and the amount of defaulted
interest to be paid.
SECTION 2.15. Issuance of Additional Notes. The Company may,
subject to Article Four of this Indenture, issue additional Notes under this
Indenture. The Notes issued on the Closing Date and any additional Notes
subsequently issued shall be treated as a single class for all purposes under
this Indenture.
ARTICLE THREE
REDEMPTION
SECTION 3.01. Right of Redemption. (a) The Notes will be
redeemable, at the Company's option, in whole or in part, at any time or from
time to time, on or after June 1, 2002 and prior to maturity, upon not less than
30 nor more than 60 days' prior notice mailed by first class mail to each
Holder's last address as it appears in the Note Register, at the Redemption
Prices (expressed in percentages of principal amount) set forth below, plus
accrued and unpaid interest to the Redemption Date (subject to the right of
Holders of record on the relevant Regular Record Date that is prior to the
Redemption Date to receive interest due on an Interest Payment Date), if
redeemed during the 12-month period commencing June 1, of the years set forth
below:
<PAGE> 42
35
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 .......................... 105.56250%
2003 .......................... 102.78125%
2004 and thereafter................ 100.00000%
</TABLE>
(b) In addition, at any time prior to June 1, 2000, the
Company may redeem up to 35% of the principal amount of the Notes with the
proceeds of one or more Public Equity Offerings, at any time as a whole or from
time to time in part, at a Redemption Price (expressed as a percentage of
principal amount) of 111.125%; provided that after any such redemption at least
$195.0 million aggregate principal amount of Notes remains outstanding.
SECTION 3.02. Notices to Trustee. If the Company elects to
redeem Notes pursuant to Section 3.01(a) or (b), it shall notify the Trustee in
writing of the Redemption Date, the principal amount at Stated Maturity of Notes
to be redeemed and the clause of this Indenture pursuant to which the redemption
shall occur.
The Company shall give each notice provided for in this
Section 3.02 in an Officers' Certificate at least 45 days before the Redemption
Date (unless a shorter period shall be satisfactory to the Trustee).
SECTION 3.03. Selection of Notes to Be Redeemed. If less than
all of the Notes are to be redeemed at any time, the Trustee will select the
Notes, or portions thereof, for redemption in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not listed on a national securities exchange, on a
pro rata basis, by lot or by such other method as the Trustee in its sole
discretion shall deem to be fair and appropriate; provided that no Note of
$1,000 in principal amount or less shall be redeemed in part. If any Note is to
be redeemed in part only, the notice of redemption relating to such Note shall
state the portion of the principal amount thereof to be redeemed. A new Note in
principal amount equal to the unredeemed portion thereof will be issued in the
name of the Holder thereof upon cancellation of the original Note.
The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption. Notes in denominations of
$1,000 in principal amount at Stated Maturity may only be redeemed in whole. The
Trustee may select for redemption portions (equal to $1,000 in principal amount
at Stated Maturity or any integral multiple thereof) of Notes that have
denominations larger than $1,000 in principal amount at Stated Maturity.
Provisions of this Indenture that apply to Notes called for redemption also
apply
<PAGE> 43
36
to portions of Notes called for redemption. The Trustee shall notify the Company
and the Registrar promptly in writing of the Notes or portions of Notes to be
called for redemption.
SECTION 3.04. Notice of Redemption. With respect to any
redemption of Notes pursuant to Section 3.01(a) or (b), at least 30 days but not
more than 60 days before a Redemption Date the Company shall mail or cause to be
mailed, a notice of redemption by first class mail (pursuant to the requirements
of Section 11.02) to each Holder whose Notes are to be redeemed.
The notice shall identify the Notes to be redeemed and shall
state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the name and address of the Paying Agent;
(iv) that Notes called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(v) that, unless the Company defaults in making the
redemption payment, interest on Notes called for redemption ceases to
accrue on and after the Redemption Date and the only remaining right of
the Holders is to receive payment of the Redemption Price plus accrued
and unpaid interest to the Redemption Date upon surrender of the Notes
to the Paying Agent;
(vi) that, if any Note is being redeemed in part, the
portion of the principal amount (equal to $1,000 in principal amount at
Stated Maturity or any integral multiple thereof) of such Note to be
redeemed and that, on and after the Redemption Date, upon surrender of
such Note, a new Note or Notes in principal amount equal to the
unredeemed portion thereof will be reissued;
(vii) that, if any Note contains a CUSIP, CINS or ISIN
number as provided in Section 2.13, no representation is being made as
to the correctness of the CUSIP, CINS or ISIN number either as printed
on the Notes or as contained in the notice of redemption and that
reliance may be placed only on the other identification numbers printed
on the Notes; and
(viii) the aggregate principal amount at Stated Maturity of
Notes being redeemed.
<PAGE> 44
37
At the Company's request (which request may be revoked by the
Company at any time prior to the time at which the Trustee shall have given such
notice to the Holders), made in writing to the Trustee, at least 45 days (or
such shorter period as shall be satisfactory to the Trustee) before a Redemption
Date, the Trustee shall give the notice of redemption in the name and at the
expense of the Company. If, however, the Company gives such notice to the
Holders, the Company shall concurrently deliver to the Trustee an Officers'
Certificate stating that such notice has been given.
SECTION 3.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, Notes called for redemption become due and payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Notes to the
Paying Agent, such Notes shall be paid at the Redemption Price, plus accrued and
unpaid interest to the Redemption Date.
Notice of redemption shall be deemed to be given when mailed,
whether or not the Holder receives the notice. In any event, failure to give
such notice, or any defect therein, shall not affect the validity of the
proceedings for the redemption of Notes held by Holders to whom such notice was
properly given.
SECTION 3.06. Deposit of Redemption Price. On or prior to
10:00 a.m. New York City time on any Redemption Date, the Company shall deposit
with the Paying Agent (or, if the Company is acting as its own Paying Agent,
shall segregate and hold in trust as provided in Section 2.05) money in
immediately available funds sufficient to pay the Redemption Price of and
accrued and unpaid interest on all Notes to be redeemed on that date other than
Notes or portions thereof called for redemption on that date that have been
delivered by the Company to the Trustee for cancellation.
SECTION 3.07. Payment of Notes Called for Redemption. If
notice of redemption has been given in the manner provided above, the Notes or
portion of Notes specified in such notice to be redeemed shall become due and
payable on the Redemption Date at the Redemption Price stated therein, together
with accrued and unpaid interest to such Redemption Date, and on and after such
date (unless the Company shall default in the payment of such Notes at the
Redemption Price and accrued and unpaid interest to the Redemption Date, in
which case the principal, until paid, shall bear interest from the Redemption
Date at the rate prescribed in the Notes), such Notes shall cease to accrue
interest. Upon surrender of any Note for redemption in accordance with a notice
of redemption, such Note shall be paid and redeemed by the Company at the
Redemption Price, together with accrued and unpaid interest to the Redemption
Date; provided that installments of interest whose record date is prior to the
Redemption Date shall be payable to the Holders registered as such at the close
of business such record date, if any.
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SECTION 3.08. Notes Redeemed in Part. Upon surrender of any
Note that is redeemed in part, the Company shall at its expense issue and
execute and the Trustee shall authenticate and deliver for the Holder a new Note
equal in principal amount to the unredeemed portion of such surrendered Note.
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Notes. The Company shall pay the
principal of, premium, if any, and interest on the Notes on the dates and in the
manner provided in the Notes and this Indenture. An installment of principal,
premium, if any, or interest shall be considered paid on the date due if the
Trustee or Paying Agent (other than the Company, a Subsidiary of the Company, or
any Affiliate of any of them) holds as of 10:00 A.M. New York City time on the
due date money deposited by the Company in immediately available funds and
designated for and sufficient to pay the installment. If the Company or any
Subsidiary of the Company or any Affiliate of any of them, acts as Paying Agent,
an installment of principal, premium, if any, or interest shall be considered
paid on the due date if the entity acting as Paying Agent complies with the last
sentence of Section 2.05. As provided in Section 6.09, upon any bankruptcy or
reorganization procedure relative to the Company, the Trustee shall serve as the
Paying Agent and conversion agent, if any, for the Notes.
The Company shall pay interest on overdue principal, premium,
if any, and interest on overdue installments of interest, to the extent lawful,
at the rate per annum specified in the Notes.
SECTION 4.02. Maintenance of Office or Agency. The Company
will maintain an office or agency where Notes may be surrendered for
registration of transfer or exchange or for presentation for payment and where
notices and demands to or upon the Company in respect of the Notes and this
Indenture may be served. The Company will give prompt written notice to the
Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 11.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
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39
The Company hereby initially designates the Corporate Trust
Office of the Trustee as such office of the Company in accordance with Section
2.04.
SECTION 4.03. Limitation on Indebtedness. (a) The Company will
not, and will not permit any of its Restricted Subsidiaries to, Incur any
Indebtedness (other than the Notes and Indebtedness existing on the Closing
Date); provided that the Company may Incur Indebtedness if, after giving effect
to the Incurrence of such Indebtedness and the receipt and application of the
proceeds thereof, the Consolidated Leverage Ratio would be less than or equal to
5 to 1.
Notwithstanding the foregoing, the Company, and (except as
specified below) any Restricted Subsidiary, may Incur each and all of the
following:
(i) Indebtedness under one or more revolving credit or
working capital facilities in an aggregate principal amount outstanding
or available at any time not to exceed $25 million, less any amount of
Indebtedness permanently repaid as provided under Section 4.11;
(ii) Indebtedness owed to the Company or any of its Wholly
Owned Restricted Subsidiaries; provided that any subsequent issuance or
transfer of any Capital Stock which results in any such Wholly Owned
Restricted Subsidiary ceasing to be a Wholly Owned Restricted
Subsidiary or any subsequent transfer of such Indebtedness (other than
to the Company or another Wholly Owned Restricted Subsidiary) shall be
deemed, in each case, to constitute the Incurrence of such
Indebtedness;
(iii) Indebtedness issued in exchange for, or the net
proceeds of which are used to refinance or refund, then outstanding
Indebtedness, other than Indebtedness Incurred under clause (i), (ii),
(iv) or (vii) of this paragraph, and any refinancings thereof in an
amount not to exceed the amount so refinanced or refunded (plus
premiums, accrued interest, fees and expenses); provided that
Indebtedness the proceeds of which are used to refinance or refund the
Notes or Indebtedness that is pari passu with, or subordinated in right
of payment to, the Notes shall only be permitted under this clause
(iii) if (A) in case the Notes are refinanced in part or the
Indebtedness to be refinanced is pari passu with the Notes, such new
Indebtedness, by its terms or by the terms of any agreement or
instrument pursuant to which such new Indebtedness is outstanding, is
expressly made pari passu with, or subordinate in right of payment to,
the remaining Notes, (B) in case the Indebtedness to be refinanced is
subordinated in right of payment to the Notes, such new Indebtedness,
by its terms or by the terms of any agreement or instrument pursuant to
which such new Indebtedness is issued or remains outstanding, is
expressly made subordinate in right of payment to the Notes at least to
the extent that the Indebtedness to be refinanced is subordinated
<PAGE> 47
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to the Notes and (C) such new Indebtedness, determined as of the date
of Incurrence of such new Indebtedness, does not mature prior to the
Stated Maturity of the Indebtedness to be refinanced or refunded, and
the Average Life of such new Indebtedness is at least equal to the
remaining Average Life of the Indebtedness to be refinanced or
refunded; and provided further that in no event may Indebtedness of the
Company be refinanced by means of any Indebtedness of any Restricted
Subsidiary of the Company pursuant to this clause (iii);
(iv) Indebtedness (A) in respect of performance, surety or
appeal bonds provided in the ordinary course of business; (B) under
Currency Agreements and Interest Rate Agreements; provided that such
agreements do not increase the Indebtedness of the obligor outstanding
at any time other than as a result of fluctuations in foreign currency
exchange rates or interest rates or by reason of fees, indemnities and
compensation payable thereunder; or (C) arising from agreements
providing for indemnification, adjustment of purchase price or similar
obligations, or from Guarantees or letters of credit, surety bonds or
performance bonds securing any obligations of the Company or any of its
Restricted Subsidiaries pursuant to such agreements, in each case
Incurred in connection with the disposition of any business, assets or
Restricted Subsidiary of the Company (other than Guarantees of
Indebtedness Incurred by any Person acquiring all or any portion of
such business, assets or Restricted Subsidiary of the Company for the
purpose of financing such acquisition), in a principal amount not to
exceed the gross proceeds actually received by the Company or any
Restricted Subsidiary in connection with such disposition;
(v) Indebtedness Incurred to finance the cost (including
the cost of design, development, construction, installation or
integration) of inventory or equipment acquired by the Company or a
Wholly Owned Restricted Subsidiary after the Closing Date;
(vi) Indebtedness of the Company not to exceed, at any one
time outstanding, two times the Net Cash Proceeds received by the
Company after the Closing Date from the issuance and sale of its
Capital Stock (other than (x) Redeemable Stock, (y) Preferred Stock
that provides for the payment of dividends in cash and (z) Capital
Stock issued in connection with the Preferred Stock Sales) to a Person
that is not a Subsidiary of the Company, less the amount of any
Investments made pursuant to clause (vii) of the second paragraph of
Section 4.04; provided that such Indebtedness does not mature prior to
the Stated Maturity of the Notes and has an Average Life longer than
the Notes; and
(vii) Indebtedness (in addition to Indebtedness permitted
under clauses (i) through (vi) above) in an aggregate principal amount
outstanding at any time not to
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41
exceed $50 million, less any amount of such Indebtedness permanently
repaid as provided under Section 4.11.
(b) Notwithstanding any other provision of this Section 4.03,
the maximum amount of Indebtedness that the Company or a Restricted Subsidiary
may Incur pursuant to this Section 4.03 shall not be deemed to be exceeded due
solely to the result of fluctuations in the exchange rates of currencies.
(c) For purposes of determining any particular amount of
Indebtedness under this Section 4.03, (1) Guarantees, Liens or obligations with
respect to letters of credit supporting Indebtedness otherwise included in the
determination of such particular amount shall not be included and (2) any Liens
granted pursuant to the equal and ratable provisions referred to in Section 4.09
shall not be treated as Indebtedness. For purposes of determining compliance
with this Section 4.03, in the event that an item of Indebtedness meets the
criteria of more than one of the types of Indebtedness described in the above
clauses, the Company, in its sole discretion, shall classify such item of
Indebtedness and only be required to include the amount and type of such
Indebtedness in one of such clauses.
SECTION 4.04. Limitation on Restricted Payments. The Company
will not, and will not permit any Restricted Subsidiary to, directly or
indirectly, (i) declare or pay any dividend or make any distribution on its
Capital Stock (other than dividends or distributions payable solely in shares of
its or such Restricted Subsidiary's Capital Stock (other than Redeemable Stock)
of the same class held by such holders or in options, warrants or other rights
to acquire such shares of Capital Stock) held by Persons other than the Company
or any of its Wholly Owned Restricted Subsidiaries, (ii) purchase, redeem,
retire or otherwise acquire for value any shares of Capital Stock of (A) the
Company or an Unrestricted Subsidiary (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Person or (B) a
Restricted Subsidiary of the Company (including options, warrants or other
rights to acquire such shares of Capital Stock) held by any Affiliate of the
Company (other than a Wholly Owned Restricted Subsidiary) or any holder (or any
Affiliate of such holder) of 5% or more of the Capital Stock of the Company,
(iii) make any voluntary or optional principal payment, or voluntary or optional
redemption, repurchase, defeasance, or other acquisition or retirement for
value, of Indebtedness of the Company that is subordinated in right of payment
to the Notes or (iv) make any Investment, other than a Permitted Investment, in
any Person (such payments or any other actions described in clauses (i) through
(iv) being collectively "Restricted Payments") if, at the time of, and after
giving effect to, the proposed Restricted Payment: (A) a Default or Event of
Default shall have occurred and be continuing, (B) the Company could not Incur
at least $1.00 of Indebtedness under the first paragraph of Section 4.03 or (C)
the aggregate amount expended for all Restricted Payments (the amount so
expended, if other than in cash, to be determined in good faith by the Board of
Directors, whose determination shall be conclusive and evidenced by a Board
Resolution) after the date of this Indenture shall exceed the sum of (1) 50% of
<PAGE> 49
42
the aggregate amount of the Adjusted Consolidated Net Income (or, if the
Adjusted Consolidated Net Income is a loss, minus 100% of the amount of such
loss) (determined by excluding income resulting from transfers of assets by the
Company or a Restricted Subsidiary to an Unrestricted Subsidiary) accrued on a
cumulative basis during the period (taken as one accounting period) beginning on
the first day of the fiscal quarter immediately following the Closing Date and
ending on the last day of the last fiscal quarter preceding the Transaction Date
plus (2) the aggregate Net Cash Proceeds received by the Company after the
Closing Date from the issuance and sale permitted by this Indenture of its
Capital Stock (other than Redeemable Stock) to a Person who is not a Subsidiary
of the Company, or from the issuance to a Person who is not a Subsidiary of the
Company of any options, warrants or other rights to acquire Capital Stock of the
Company (in each case, exclusive of any Redeemable Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or are
required to be redeemed, prior to the Stated Maturity of the Notes) plus (3) an
amount equal to the net reduction in Investments (other than reductions in
Permitted Investments) in any Person resulting from payments of interest on
Indebtedness, dividends, repayments of loans or advances, or other transfers of
assets, in each case to the Company or any Restricted Subsidiary or from the Net
Cash Proceeds from the sale of any such Investment (except, in each case, to the
extent any such payment or proceeds is included in the calculation of Adjusted
Consolidated Net Income), or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (valued in each case as provided in the definition of
"Investments"), not to exceed the amount of Investments previously made by the
Company and any Restricted Subsidiary in such Person.
The foregoing provision shall not be violated by reason of:
(i) the payment of any dividend within 60 days after the
date of declaration thereof if, at said date of declaration, such
payment would comply with the foregoing paragraph;
(ii) the redemption, repurchase, defeasance or other
acquisition or retirement for value of Indebtedness that is
subordinated in right of payment to the Notes including premium, if
any, and accrued and unpaid interest, with the proceeds of, or in
exchange for, Indebtedness Incurred under clause (iii) of the second
paragraph of part (a) of Section 4.03;
(iii) the repurchase, redemption or other acquisition of
Capital Stock of the Company in exchange for, or out of the proceeds of
a substantially concurrent offering of, shares of Capital Stock (other
than Redeemable Stock) of the Company;
(iv) the acquisition of Indebtedness of the Company which
is subordinated in right of payment to the Notes in exchange for, or
out of the proceeds of, a
<PAGE> 50
43
substantially concurrent offering of, shares of the Capital Stock of
the Company (other than Redeemable Stock);
(v) payments or distributions to dissenting stockholders
pursuant to applicable law in connection with a consolidation, merger
or transfer of assets that complies with the provisions of Article
Five;
(vi) Investments in an aggregate amount not to exceed $25
million, in any Person the primary business of which is related,
ancillary or complementary to the businesses of the Company and its
Restricted Subsidiaries on the date of such Investments;
(vii) Investments in an aggregate amount not to exceed the
Net Cash Proceeds received by the Company after the Closing Date from
the issuance and sale of its Capital Stock (other than (x) Redeemable
Stock, (y) Preferred Stock that provides for the payment of dividends
in cash and (z) Capital Stock issued in connection with the Preferred
Stock Sales) to a Person that is not a Subsidiary of the Company;
provided that the Investment is made within 12 months after such sale
of Capital Stock;
(viii) the purchase, redemption, acquisition, cancellation
or other retirement for value of shares of Capital Stock of the Company
to the extent necessary, in the judgment of the Board of Directors of
the Company, to prevent the loss or secure the renewal or reinstatement
of any license or franchise held by the Company or any Restricted
Subsidiary from any governmental agency; and
(ix) the repurchase of the Warrants pursuant to a
Repurchase Offer; provided that, except in the case of clauses (i) and
(iv), no Default or Event of Default shall have occurred and be
continuing or occur as a consequence of the actions or payments set
forth therein.
Each Restricted Payment permitted pursuant to the preceding
paragraph (other than the Restricted Payment referred to in clause (ii) thereof
and an exchange of Capital Stock for Capital Stock or Indebtedness referred to
in clause (iii) or (iv) thereof), and the Net Cash Proceeds from any issuance of
Capital Stock referred to in clauses (iii), (iv) and (vii), shall be included in
calculating whether the conditions of clause (C) of the first paragraph of this
Section 4.04 have been met with respect to any subsequent Restricted Payments.
In the event the proceeds of an issuance of Capital Stock of the Company are
used for the redemption, repurchase or other acquisition of the Notes, or
Indebtedness that is pari passu with the Notes, then the Net Cash Proceeds of
such issuance shall be included in clause (C) of the first paragraph of this
Section 4.04 only to the extent such proceeds are not used for such redemption,
repurchase or other acquisition of Indebtedness.
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SECTION 4.05. Limitation on Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries. The Company will not, and will
not permit any Restricted Subsidiary to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (i) pay dividends or make any
other distributions permitted by applicable law on any Capital Stock of such
Restricted Subsidiary owned by the Company or any other Restricted Subsidiary,
(ii) pay any Indebtedness owed to the Company or any other Restricted
Subsidiary, (iii) make loans or advances to the Company or any other Restricted
Subsidiary or (iv) transfer any of its property or assets to the Company or any
other Restricted Subsidiary.
The foregoing provisions shall not restrict any encumbrances
or restrictions:
(i) existing on the Closing Date in this Indenture or any
other agreements in effect on the Closing Date, and any extensions,
refinancings, renewals or replacements of such agreements; provided
that the encumbrances and restrictions in any such extensions,
refinancings, renewals or replacements are no less favorable in any
material respect to the Holders than those encumbrances or restrictions
that are then in effect and that are being extended, refinanced,
renewed or replaced;
(ii) existing under or by reason of applicable law;
(iii) existing with respect to any Person or the property
or assets of such Person acquired by the Company or any Restricted
Subsidiary and existing at the time of such acquisition, which
encumbrances or restrictions are not applicable to any Person or the
property or assets of any Person other than such Person or the property
or assets of such Person so acquired;
(iv) in the case of clause (iv) of the first paragraph of
this Section 4.05, (A) that restrict in a customary manner the
subletting, assignment or transfer of any property or asset that is a
lease, license, conveyance or contract or similar property or asset,
(B) existing by virtue of any transfer of, agreement to transfer,
option or right with respect to, or Lien on, any property or assets of
the Company or any Restricted Subsidiary not otherwise prohibited by
this Indenture or (C) arising or agreed to in the ordinary course of
business, not relating to any Indebtedness, and that do not,
individually or in the aggregate, detract from the value of property or
assets of the Company or any Restricted Subsidiary in any manner
material to the Company or any Restricted Subsidiary; or
(v) with respect to a Restricted Subsidiary and imposed
pursuant to an agreement that has been entered into for the sale or
disposition of all or substantially all of the Capital Stock of, or
property and assets of, such Restricted Subsidiary.
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Nothing contained in this Section 4.05 shall prevent the
Company or any Restricted Subsidiary from (1) creating, incurring, assuming or
suffering to exist any Liens otherwise permitted in Section 4.09 or (2)
restricting the sale or other disposition of property or assets of the Company
or any of its Restricted Subsidiaries that secure Indebtedness of the Company or
any of its Restricted Subsidiaries.
SECTION 4.06. Limitation on the Issuance and Sale of Capital
Stock of Restricted Subsidiaries. The Company will not sell, and will not permit
any Restricted Subsidiary, directly or indirectly, to issue or sell, any shares
of Capital Stock of a Restricted Subsidiary (including options, warrants or
other rights to purchase shares of such Capital Stock) except (i) to the Company
or a Wholly Owned Restricted Subsidiary, (ii) issuances or sales to foreign
nationals of shares of Capital Stock of foreign Restricted Subsidiaries, to the
extent required by applicable law, (iii) if, immediately after giving effect to
such issuance or sale, neither the Company nor any of its Subsidiaries owns any
shares of Capital Stock of such Restricted Subsidiary (including options,
warrants or other rights to purchase shares of such Capital Stock) or (iv) if,
immediately after giving effect to such issuance or sale, such Restricted
Subsidiary would no longer constitute a Restricted Subsidiary and any Investment
in such Person remaining after giving effect to such issuance or sale would have
been permitted to be made under Section 4.04 if made on the date of such
issuance or sale.
SECTION 4.07. Limitation on Issuances of Guarantees by
Restricted Subsidiaries. The Company will not permit any Restricted Subsidiary,
directly or indirectly, to Guarantee any Indebtedness of the Company which is
pari passu with or subordinate in right of payment to the Notes ("Guaranteed
Indebtedness"), unless (i) such Restricted Subsidiary simultaneously executes
and delivers a supplemental indenture to this Indenture providing for a
Guarantee (a "Subsidiary Guarantee") of payment of the Notes by such Restricted
Subsidiary and (ii) such Restricted Subsidiary waives and will not in any manner
whatsoever claim or take the benefit or advantage of, any rights of
reimbursement, indemnity or subrogation or any other rights against the Company
or any other Restricted Subsidiary as a result of any payment by such Restricted
Subsidiary under its Subsidiary Guarantee; provided that this paragraph shall
not be applicable to any Guarantee of any Restricted Subsidiary that (x)
Guarantees the Indebtedness Incurred under clause (i) of the second paragraph of
Section 4.03, (y) existed at the time such Person became a Restricted Subsidiary
and (z) was not Incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari
passu with the Notes, then the Guarantee of such Guaranteed Indebtedness shall
be pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes, then the Guarantee of such Guaranteed Indebtedness
shall be subordinated to the Subsidiary Guarantee at least to the extent that
the Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a
Restricted Subsidiary shall provide by its terms that it shall be automatically
and unconditionally
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46
released and discharged upon (i) any sale, exchange or transfer, to any Person
not an Affiliate of the Company, of all of the Company's and each Restricted
Subsidiary's Capital Stock in, or all or substantially all the assets of, such
Restricted Subsidiary (which sale, exchange or transfer is not prohibited by
this Indenture) or (ii) the release or discharge of the Guarantee which resulted
in the creation of such Subsidiary Guarantee, except a discharge or release by
or as a result of payment under such Guarantee.
SECTION 4.08. Limitation on Transactions with Shareholders and
Affiliates. The Company will not, and will not permit any Restricted Subsidiary
to, directly or indirectly, enter into, renew or extend any transaction
(including, without limitation, the purchase, sale, lease or exchange of
property or assets, or the rendering of any service) with any holder (or any
Affiliate of such holder) of 5% or more of any class of Capital Stock of the
Company or with any Affiliate of the Company or any Restricted Subsidiary,
except upon fair and reasonable terms no less favorable to the Company or such
Restricted Subsidiary than could be obtained, at the time of such transaction or
at the time of the execution of the agreement providing therefor, in a
comparable arm's-length transaction with a Person that is not such a holder or
an Affiliate.
The foregoing limitation does not limit, and shall not apply
to:
(i) transactions (A) approved by a majority of the
disinterested members of the Board of Directors or (B) for which the
Company or a Restricted Subsidiary delivers to the Trustee a written
opinion of a nationally recognized investment banking firm stating that
the transaction is fair to the Company or such Restricted Subsidiary
from a financial point of view;
(ii) any transaction between the Company and any of its
Wholly Owned Restricted Subsidiaries or between Wholly Owned Restricted
Subsidiaries;
(iii) the payment of reasonable and customary regular fees
to directors of the Company who are not employees of the Company;
(iv) any payments or other transactions pursuant to any
tax-sharing agreement between the Company and any other Person with
which the Company files a consolidated tax return or with which the
Company is part of a consolidated group for tax purposes; or
(v) any Restricted Payments not prohibited by Section
4.04.
Notwithstanding the foregoing, any transaction covered by the
first paragraph of this Section 4.08 and not covered by clauses (ii) through
(iv) of this paragraph, the
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47
aggregate amount of which exceeds $1.0 million in value, must be approved or
determined to be fair in the manner provided for in clause (i)(A) or (B) above.
SECTION 4.09. Limitation on Liens. The Company will not, and
will not permit any Restricted Subsidiary to, create, incur, assume or suffer to
exist any Lien on any of its assets or properties of any character, or any
shares of Capital Stock or Indebtedness of any Restricted Subsidiary, without
making effective provision for all of the Notes and all other amounts due under
this Indenture to be directly secured equally and ratably with (or, if the
obligation or liability to be secured by such Lien is subordinated in right of
payment to the Notes, prior to) the obligation or liability secured by such
Lien.
The foregoing limitation does not apply to:
(i) Liens existing on the Closing Date;
(ii) Liens granted after the Closing Date on any assets or
Capital Stock of the Company or its Restricted Subsidiaries created in
favor of the Holders;
(iii) Liens with respect to the assets of a Restricted
Subsidiary granted by such Restricted Subsidiary to the Company or a
Wholly Owned Restricted Subsidiary to secure Indebtedness owing to the
Company or such other Restricted Subsidiary;
(iv) Liens securing Indebtedness which is Incurred to
refinance secured Indebtedness which is permitted to be Incurred under
clause (iii) of the second paragraph of Section 4.03; provided that
such Liens do not extend to or cover any property or assets of the
Company or any Restricted Subsidiary other than the property or assets
securing the Indebtedness being refinanced;
(v) Liens securing obligations under commercial bank
facilities under clause (i) of the second paragraph of Section 4.03;
provided that the aggregate amount of Indebtedness secured by any such
Liens shall not at any time exceed the amount of Indebtedness permitted
to be Incurred under clause (i) of the second paragraph of Section
4.03;
(vi) Liens securing Indebtedness Incurred under clause (v)
of the second paragraph of Section 4.03 granted after the Closing Date
on the Capital Stock of any Restricted Subsidiary; provided the sole
assets of such Restricted Subsidiary consist of (x) licenses to provide
personal communications services, in the event the inventory or
equipment acquired with such Indebtedness relates to the Company's
personal communications services business or (y) licenses to provide
cellular services, in the event the inventory or equipment acquired
with such Indebtedness relates to the Company's cellular service
business; or
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(vii) Permitted Liens.
SECTION 4.10. Limitation on Sale-Leaseback Transactions. The
Company will not, and will not permit any Restricted Subsidiary to, enter into
any sale-leaseback transaction involving any of its assets or properties whether
now owned or hereafter acquired, whereby the Company or a Restricted Subsidiary
sells or transfers such assets or properties and then or thereafter leases such
assets or properties or any part thereof or any other assets or properties which
the Company or such Restricted Subsidiary, as the case may be, intends to use
for substantially the same purpose or purposes as the assets or properties sold
or transferred.
The foregoing restriction does not apply to any sale-leaseback
transaction if:
(i) the lease is for a period, including renewal rights,
of not in excess of three years;
(ii) the lease secures or relates to industrial revenue or
pollution control bonds;
(iii) the transaction is between the Company and any Wholly
Owned Restricted Subsidiary or between Wholly Owned Restricted
Subsidiaries; or
(iv) the Company or such Restricted Subsidiary, within
twelve months after the sale or transfer of any assets or properties is
completed, applies an amount not less than the net proceeds received
from such sale in accordance with clause (A) or (B) of the first
paragraph of Section 4.11.
SECTION 4.11. Limitation on Asset Sales. The Company will not,
and will not permit any Restricted Subsidiary to, consummate any Asset Sale,
unless (i) the consideration received by the Company or such Restricted
Subsidiary is at least equal to the fair market value of the assets sold or
disposed of and (ii) at least 75% of the consideration received consists of cash
or Temporary Cash Investments. In the event and to the extent that the Net Cash
Proceeds received by the Company or any of its Restricted Subsidiaries from one
or more Asset Sales occurring on or after the Closing Date in any period of 12
consecutive months exceed $5 million, then the Company shall or shall cause the
relevant Restricted Subsidiary to (i) within twelve months after the date Net
Cash Proceeds so received exceed $5 million (A) apply an amount equal to such
excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of the
Company or any Restricted Subsidiary providing a Subsidiary Guarantee pursuant
to Section 4.07 or Indebtedness of any other Restricted Subsidiary, in each case
owing to a Person other than the Company or any of its Restricted Subsidiaries
or (B) invest an equal amount, or the amount not so applied pursuant to clause
(A), (or enter into a definitive agreement committing to so invest within twelve
<PAGE> 56
49
months after the date of such agreement), in capital assets of a nature or type
or that are used in a business (or in a company having capital assets of a
nature or type, or engaged in a business) similar or related to the nature or
type of the property and assets of, or the business of, the Company and its
Restricted Subsidiaries existing on the date of such investment (as determined
in good faith by the Board of Directors, whose determination shall be conclusive
and evidenced by a Board Resolution) and (ii) apply (no later than the end of
the twelve-month period referred to in clause (i)) such excess Net Cash Proceeds
(to the extent not applied pursuant to clause (i)) as provided in the following
paragraph of this Section 4.11. The amount of such excess Net Cash Proceeds
required to be applied (or to be committed to be applied) during such
twelve-month period as set forth in clause (i) of the preceding sentence and not
applied as so required by the end of such period shall constitute "Excess
Proceeds."
If, as of the first day of any calendar month, the aggregate
amount of Excess Proceeds not theretofore subject to an Offer to Purchase
pursuant to this Section 4.11 totals at least $5 million, the Company must
commence, not later than the fifteenth Business Day of such month, and
consummate an Offer to Purchase from the Holders on a pro rata basis an
aggregate principal amount of Notes equal to the Excess Proceeds on such date,
at a purchase price equal to 100% of the principal amount of the Notes plus, in
each case, accrued interest to the Payment Date.
SECTION 4.12. Repurchase of Notes upon a Change of Control.
The Company shall commence, within 30 days of the occurrence of a Change of
Control, and consummate an Offer to Purchase for all Notes then outstanding, at
a purchase price equal to 101% of the principal amount thereof, plus accrued
interest to the Payment Date.
SECTION 4.13. Limitation on Use of Proceeds. The Company shall
use the net proceeds from the offering of the Notes to purchase the Pledged
Securities in accordance with the provisions of the Pledge Agreement and to
partially finance the cost (including the cost of design, development,
construction, installation or integration) of inventory or equipment associated
with the Company's personal communications services system.
SECTION 4.14. Existence. Subject to Articles Four and Five of
this Indenture, the Company will do or cause to be done all things necessary to
preserve and keep in full force and effect its existence and the existence of
each of its Restricted Subsidiaries in accordance with the respective
organizational documents of the Company and each such Subsidiary and the rights
(whether pursuant to charter, partnership certificate, agreement, statute or
otherwise), licenses and franchises of the Company and each such Subsidiary;
provided that the Company shall not be required to preserve any such right,
license or franchise, or the existence of any Restricted Subsidiary, if the
maintenance or preservation thereof is no longer desirable in the conduct of the
business of the Company and its Restricted Subsidiaries taken as a whole; and
provided further that any Restricted Subsidiary
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50
may consolidate with, merge into, or sell, convey, transfer, lease or otherwise
dispose of all or part of its property and assets to the Company or any Wholly
Owned Restricted Subsidiary.
SECTION 4.15. Payment of Taxes and Other Claims. The Company
will pay or discharge and shall cause each of its Subsidiaries to pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent (i) all material taxes, assessments and governmental charges levied
or imposed upon (a) the Company or any such Subsidiary, (b) the income or
profits of any such Subsidiary which is a corporation or (c) the property of the
Company or any such Subsidiary and (ii) all material lawful claims for labor,
materials and supplies that, if unpaid, might by law become a lien upon the
property of the Company or any such Subsidiary; provided that the Company shall
not be required to pay or discharge, or cause to be paid or discharged, any such
tax, assessment, charge or claim the amount, applicability or validity of which
is being contested in good faith by appropriate proceedings and for which
adequate reserves have been established.
SECTION 4.16. Maintenance of Properties and Insurance. The
Company will cause all properties used or useful in the conduct of its business
or the business of any Restricted Subsidiary and material to the Company and its
Restricted Subsidiaries taken as a whole, to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided that nothing in
this Section 4.16 shall prevent the Company or any such Restricted Subsidiary
from discontinuing the use, operation or maintenance of any of such properties
or disposing of any of them, if such discontinuance or disposal is, in the
judgment of the Board of Directors or the board of directors of such Restricted
Subsidiary having managerial responsibility for any such property, desirable in
the conduct of the business of the Company or such Restricted Subsidiary.
The Company will provide or cause to be provided, for itself
and its Restricted Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds customarily insured against
by corporations similarly situated and owning like properties, including, but
not limited to, products liability insurance and public liability insurance,
with reputable insurers or with the government of the United States of America,
or an agency or instrumentality thereof, in such amounts, with such deductibles
and by such methods as the Company in good faith shall determine to be
reasonable and appropriate in the circumstances.
SECTION 4.17. Compliance Certificates. (a) The Company shall
deliver to the Trustee, within 45 days after the end of each fiscal quarter (90
days after the end of the last fiscal quarter of each year), an Officers'
Certificate stating whether or not the signers
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know of any Default or Event of Default that occurred during such fiscal
quarter. In the case of the Officers' Certificate delivered within 90 days of
the end of the Company's fiscal year, such certificate shall comply with the
applicable provisions of the TIA. If any of the signers of the Officers'
Certificate have knowledge of such a Default or Event of Default, the
certificate shall describe any such Default or Event of Default and its status.
The first certificate to be delivered pursuant to this Section 4.17(a) shall be
for the first fiscal quarter beginning after the execution of this Indenture.
(b) The Company shall deliver to the Trustee, within 90 days
after the end of the Company's fiscal year, a certificate signed by the
Company's independent certified public accountants stating (i) that their audit
examination has included a review of the terms of this Indenture and the Notes
as they relate to accounting matters, (ii) that they have read the most recent
Officers' Certificate delivered to the Trustee pursuant to paragraph (a) of this
Section 4.17 and (iii) whether, in connection with their audit examination,
anything came to their attention that caused them to believe that the Company
was not in compliance with any of the terms, covenants, provisions or conditions
of Article Four and Section 5.01 of this Indenture as they pertain to accounting
matters and, if any Default or Event of Default has come to their attention,
specifying the nature and period of existence thereof; provided that such
independent certified public accountants shall not be liable in respect of such
statement by reason of any failure to obtain knowledge of any such Default or
Event of Default that would not be disclosed in the course of an audit
examination conducted in accordance with generally accepted auditing standards
in effect at the date of such examination.
(c) The Company shall, so long as any of the Notes are
outstanding, deliver to the Trustee, forthwith upon any Officer becoming aware
of any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.18. Commission Reports and Reports to Holders. The
Company shall file with the Commission the annual, quarterly and other reports
and other information required by Section 13(a) or 15(d) of the Exchange Act,
regardless of whether such sections of the Exchange Act are applicable to the
Company, and shall mail or cause to be mailed copies of such reports to Holders
and the Trustee within 15 days after the date it would have been required to
file such reports with the Commission had it been subject to such sections;
provided, however, that the copies of such reports mailed to Holders may omit
exhibits, which the Company will supply to any Holder at such Holder's request.
The Company also shall comply with the other provisions of TIA Section 314(a).
SECTION 4.19. Waiver of Stay, Extension or Usury Laws. The
Company covenants (to the extent that it may lawfully do so) that it will not at
any time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law or any usury law or other law
that would prohibit or forgive the Company
<PAGE> 59
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from paying all or any portion of the principal of, premium, if any, or interest
on the Notes as contemplated herein, wherever enacted, now or at any time
hereafter in force, or that may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE FIVE
SUCCESSOR CORPORATION
SECTION 5.01. When Company May Merge, Etc. The Company shall
not consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person or permit any Person to merge with or into the
Company unless:
(i) the Company shall be the continuing Person, or the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or that acquired or leased such property
and assets of the Company shall be a corporation organized and validly
existing under the laws of the United States of America or any
jurisdiction thereof and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, all of the
obligations of the Company on all of the Notes and under this
Indenture;
(ii) immediately after giving effect to such transaction,
no Default or Event of Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction
on a pro forma basis, the Company or any Person becoming the successor
obligor of the Notes shall have a Consolidated Net Worth equal to or
greater than the Consolidated Net Worth of the Company immediately
prior to such transaction;
(iv) immediately after giving effect to such transaction
on a pro forma basis the Company, or any Person becoming the successor
obligor of the Notes, as the case may be, could Incur at least $1.00 of
Indebtedness under the first paragraph of Section 4.03; provided,
however, that this clause (iv) shall not apply to a consolidation or
merger with or into a Wholly Owned Restricted Subsidiary with a
positive net worth; provided that, in connection with any such merger
or consolidation, no consideration (other than Common Stock in the
surviving Person or the Company (or a Person that owns directly or
indirectly all of the Capital Stock of
<PAGE> 60
53
the surviving Person or the Company immediately following such
transaction)) shall be issued or distributed to the stockholders of the
Company; and
(v) the Company delivers to the Trustee an Officers'
Certificate (attaching the arithmetic computations to demonstrate
compliance with clauses (iii) and (iv)) and Opinion of Counsel, in each
case stating that such consolidation, merger or transfer and such
supplemental indenture complies with this provision and that all
conditions precedent provided for herein relating to such transaction
have been complied with;
provided, however, that clauses (iii) and (iv) above do not apply if, in the
good faith determination of the Board of Directors of the Company, whose
determination shall be evidenced by a Board Resolution, the principal purpose of
such transaction is to change the state of incorporation of the Company; and
provided further that any such transaction shall not have as one of its purposes
the evasion of the foregoing limitations.
SECTION 5.02. Successor Substituted. Upon any consolidation or
merger, or any sale, conveyance, transfer or other disposition of all or
substantially all of the property and assets of the Company in accordance with
Section 5.01 of this Indenture, the successor Person formed by such
consolidation or into which the Company is merged or to which such sale,
conveyance, transfer or other disposition is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor Person had been named
as the Company herein; provided, however, that in the case of a lease, the
Company shall not be released from the obligation to pay the principal of and
interest on the Notes.
ARTICLE SIX
DEFAULT AND REMEDIES
SECTION 6.01. Events of Default. An "Event of Default" shall
occur with respect to the Notes if:
(a) the Company defaults in the payment of principal of (or
premium, if any, on) any Note when the same becomes due and payable at
Stated Maturity, upon acceleration, redemption or otherwise;
(b) the Company defaults in the payment of interest on any
Note when the same becomes due and payable, and such default continues
for a period of 30 days; provided that a failure to make any of the
first six scheduled interest payments on the Notes on the applicable
Interest Payment Date will constitute an Event of Default with no grace
or cure period;
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54
(c) the Company defaults in the performance or breaches the
provisions of Article Five or fails to make or consummate an Offer to
Purchase in accordance with the provisions of Section 4.11 or Section
4.12;
(d) the Company defaults in the performance of or breaches any
covenant or agreement of the Company in this Indenture or under the
Notes (other than a default specified in clause (a), (b) or (c) above)
and such default or breach continues for a period of 30 consecutive
days after written notice by the Trustee or the Holders of 25% or more
in aggregate principal amount of the Notes;
(e) there occurs with respect to any issue or issues of
Indebtedness of the Company or any Significant Subsidiary having an
outstanding principal amount of $5 million or more in the aggregate for
all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (A) an event of default that has
caused the holder thereof to declare such Indebtedness to be due and
payable prior to its Stated Maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or
annulled within 30 days of such acceleration and/or (B) the failure to
make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or
extended within 30 days of such payment default;
(f) any final judgment or order (not covered by insurance) for
the payment of money in excess of $5 million in the aggregate for all
such final judgments or orders against all such Persons (treating any
deductibles, self-insurance or retention as not so covered) shall be
rendered against the Company or any Significant Subsidiary and shall
not be paid or discharged, and there shall be any period of 30
consecutive days following entry of the final judgment or order that
causes the aggregate amount for all such final judgments or orders
outstanding and not paid or discharged against all such Persons to
exceed $5 million during which a stay of enforcement of such final
judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect;
(g) a court having jurisdiction in the premises enters a
decree or order for (A) relief in respect of the Company or any
Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
(B) appointment of a receiver, liquidator, assignee, custodian,
trustee, sequestrator or similar official of the Company or any
Significant Subsidiary or for all or substantially all of the property
and assets of the Company or any Significant Subsidiary or (C) the
winding up or liquidation of the affairs of the Company or any
Significant Subsidiary and, in each case, such decree or order shall
remain unstayed and in effect for a period of 30 consecutive days;
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(h) the Company or any Significant Subsidiary (A) commences a
voluntary case under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect, or consents to the entry of an
order for relief in an involuntary case under any such law, (B)
consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar
official of the Company or any Significant Subsidiary or for all or
substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) effects any general assignment for the
benefit of creditors; or
(i) the Pledge Agreement shall cease to be in full force and
effect or enforceable in accordance with its terms, other than in
accordance with its terms.
SECTION 6.02. Acceleration. If an Event of Default (other than
an Event of Default specified in clause (g) or (h) of Section 6.01 that occurs
with respect to the Company) occurs and is continuing under this Indenture, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Notes then outstanding, by written notice to the Company (and to the Trustee if
such notice is given by the Holders), may, and the Trustee at the request of
such Holders shall, declare the principal of, premium, if any, and accrued
interest on the Notes to be immediately due and payable. Upon a declaration of
acceleration, such principal of, premium, if any, and accrued interest shall be
immediately due and payable. In the event of a declaration of acceleration
because an Event of Default set forth in clause (e) of Section 6.01 has occurred
and is continuing, such declaration of acceleration shall be automatically
rescinded and annulled if the event of default triggering such Event of Default
pursuant to clause (e) shall be remedied or cured by the Company or the relevant
Significant Subsidiary or waived by the holders of the relevant Indebtedness
within 60 days after the declaration of acceleration with respect thereto. If an
Event of Default specified in clause (g) or (h) of Section 6.01 occurs with
respect to the Company, the principal of, premium, if any, and accrued interest
on the Notes then outstanding shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder.
At any time after such a declaration of acceleration, but
before a judgment or decree for the payment of the money due has been obtained
by the Trustee, the Holders of at least a majority in aggregate principal amount
of the outstanding Notes by written notice to the Company and to the Trustee may
waive all past Defaults and rescind and annul such declaration of acceleration
and its consequences if (a) the Company has paid or deposited with the Trustee a
sum sufficient to pay (i) all sums paid or advanced by the Trustee hereunder and
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, (ii) all overdue interest on all Notes, (iii)
the principal of and premium, if any, on any Notes that have become due
otherwise than by such declaration or occurrence of acceleration and interest
thereon at the rate prescribed therefor by such Notes, and (iv) to the extent
that payment of such interest is lawful, interest upon overdue interest,
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if any, at the rate prescribed therefor by such Notes, (b) all existing Events
of Default, other than the non-payment of the principal amount of, premium, if
any, and accrued interest on the Notes that have become due solely by such
declaration of acceleration, have been cured or waived and (c) the rescission
would not conflict with any judgment or decree of a court of competent
jurisdiction.
SECTION 6.03. Other Remedies. If an Event of Default occurs
and is continuing, the Trustee may pursue any available remedy by proceeding at
law or in equity to collect the payment of principal of, premium, if any, or
interest on the Notes or to enforce the performance of any provision of the
Notes, the Pledge Agreement or this Indenture.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding.
SECTION 6.04. Waiver of Past Defaults. Subject to Sections
6.02, 6.07 and 9.02, the Holders of at least a majority in aggregate principal
amount of the outstanding Notes, by notice to the Trustee, may waive an existing
Default or Event of Default and its consequences, except a Default in the
payment of principal of, premium, if any, or interest on any Note as specified
in clause (a) or (b) of Section 6.01 (including in connection with an Offer to
Purchase) or in respect of a covenant or provision of this Indenture which
cannot be modified or amended without the consent of the Holder of each
outstanding Note affected. Upon any such waiver, such Default shall cease to
exist, and any Event of Default arising therefrom shall be deemed to have been
cured, for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other Default or Event of Default or impair any right
consequent thereto.
SECTION 6.05. Control by Majority. The Holders of at least a
majority in aggregate principal amount of the outstanding Notes, by notice to
the Trustee, may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee; provided that the Trustee may refuse to follow
any direction that conflicts with law or this Indenture, that may involve the
Trustee in personal liability, or that the Trustee determines in good faith may
be unduly prejudicial to the rights of Holders not joining in the giving of such
direction; and provided further that the Trustee may take any other action it
deems proper that is not inconsistent with any directions received from Holders
of Notes pursuant to this Section 6.05.
SECTION 6.06. Limitation on Suits. A Holder may not institute
any proceeding, judicial or otherwise, with respect to this Indenture or the
Notes, or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
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(i) such Holder has previously given to the Trustee
written notice of a continuing Event of Default;
(ii) the Holders of at least 25% in aggregate principal
amount of outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(iii) such Holder or Holders have offered to the Trustee
indemnity reasonably satisfactory to the Trustee against any costs,
liabilities or expenses to be incurred in compliance with such request;
(iv) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute any such
proceeding; and
(v) during such 60-day period, the Holders of a majority
in aggregate principal amount of the outstanding Notes have not given
the Trustee a direction that is inconsistent with such written request.
For purposes of Section 6.05 of this Indenture and this
Section 6.06, the Trustee shall comply with TIA Section 316(a) in making any
determination of whether the Holders of the required aggregate principal amount
of outstanding Notes have concurred in any request or direction of the Trustee
to pursue any remedy available to the Trustee or the Holders with respect to
this Indenture or the Notes or otherwise under the law.
A Holder may not use this Indenture to prejudice the rights of
another Holder or to obtain a preference or priority over such other Holder.
SECTION 6.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of any Holder
of a Note to receive payment of the principal amount of, premium, if any, or
interest on such Holder's Note on or after the respective due dates expressed on
such Note (including in a notice with respect to an Offer to Purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. Collection Suit by Trustee. If an Event of
Default in payment of principal, premium or interest specified in clause (a) or
(b) of Section 6.01 occurs and is continuing, the Trustee may recover judgment
in its own name and as trustee of an express trust against the Company or any
other obligor of the Notes for the whole amount of principal, premium, if any,
and accrued interest remaining unpaid, together with interest on overdue
principal, premium, if any, and, to the extent that payment of such interest is
lawful, interest on overdue installments of interest, in each case at the rate
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specified in the Notes, and such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. Trustee May File Proofs of Claim. The Trustee
may file such proofs of claim and other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.06) and the Holders allowed in any judicial proceedings relative to
the Company (or any other obligor of the Notes), its creditors or its property
and shall be entitled and empowered to collect and receive any monies,
securities or other property payable or deliverable upon conversion or exchange
of the Notes or upon any such claims and to distribute the same, and any
custodian, receiver, assignee, trustee, liquidator, sequestrator or other
similar official in any such judicial proceeding is hereby authorized by each
Holder to make such payments to the Trustee and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.06. Nothing herein contained shall be
deemed to empower the Trustee to authorize or consent to, or accept or adopt on
behalf of any Holder, any plan of reorganization, arrangement, adjustment or
composition affecting the Notes or the rights of any Holder thereof, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. Priorities. If the Trustee collects any money
pursuant to this Article Six, it shall pay out the money in the following order:
First: to the Trustee for amounts due under Section 7.06,
including payment of all compensation, expense and liabilities
incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders for amounts then due and unpaid for
principal amount of, premium, if any, and interest on the Notes in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind,
according to the amounts due and payable on such Notes for principal,
premium, if any, and interest, respectively; and
Third: to the Company or any other obligors of the Notes, as
their interests may appear, or as a court of competent jurisdiction may
direct.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Holders pursuant to this
Section 6.10.
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SECTION 6.11. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Indenture or in any suit against
the Trustee for any action taken or omitted by it as Trustee, a court in its
discretion may require the filing by any party litigant in the suit of an
undertaking to pay the costs of the suit, and the court in its discretion may
assess reasonable costs, including reasonable attorneys' fees, against any party
litigant in the suit having due regard to the merits and good faith of the
claims or defenses made by the party litigant. This Section 6.11 does not apply
to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 of this
Indenture, or a suit by Holders of more than 10% in principal amount of the
outstanding Notes.
SECTION 6.12. Restoration of Rights and Remedies. If the
Trustee or any Holder has instituted any proceeding to enforce any right or
remedy under this Indenture and such proceeding has been discontinued or
abandoned for any reason, or has been determined adversely to the Trustee or to
such Holder, then, and in every such case, subject to any determination in such
proceeding, the Company, the Trustee and the Holders shall be restored severally
and respectively to their former positions hereunder and thereafter all rights
and remedies of the Company, Trustee and the Holders shall continue as though no
such proceeding had been instituted.
SECTION 6.13. Rights and Remedies Cumulative. Except as
otherwise provided with respect to the replacement or payment of mutilated,
destroyed, lost or wrongfully taken Notes in Section 2.09, no right or remedy
herein conferred upon or reserved to the Trustee or to the Holders is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 6.14. Delay or Omission Not Waiver. No delay or
omission of the Trustee or of any Holder to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article Six or by law to the Trustee or to
the Holders may be exercised from time to time, and as often as may be deemed
expedient, by the Trustee or by the Holders, as the case may be.
ARTICLE SEVEN
TRUSTEE
SECTION 7.01. Rights of Trustee. (i) Except during the
continuance of an Event of Default,
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(a) the Trustee undertakes to perform such duties and only
such duties as are specifically set forth in this Indenture, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(b) in the absence of bad faith on its part, the Trustee
may conclusively rely, as to the truth and correctness of the
statements and certificates or opinions furnished to it and conforming
to the requirements of this Indenture; but in the case of any such
certificates or opinions which by any provision hereof are specifically
required to be furnished to the Trustee, the Trustee shall be under a
duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.
(ii) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in its exercise,
as a prudent person would exercise or use under the circumstances in the conduct
of such person's own affairs.
(iii) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
(a) this Subsection shall not be construed to limit the
effect of Subsection (i) of this Section;
(b) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it shall
be proved that the Trustee was negligent in ascertaining the pertinent
facts; and
(c) the Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of a majority in principal amount of
the outstanding Notes, relating to the time, method and place of
conducting any proceeding for exercising any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture with respect to the Notes.
(iv) Subject to TIA Sections 315(a) through (d):
(a) the Trustee may rely upon any document believed by
it to be genuine and to have been signed or presented by the proper
person. The Trustee need not investigate any fact or matter stated in
the document;
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(b) before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Section 11.04. The Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on such
certificate or opinion;
(c) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders, unless such Holders shall have
offered to the Trustee reasonable security or indemnity against the
costs, expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(d) the Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within
its rights or powers; provided that the Trustee's conduct does not
constitute negligence or bad faith;
(e) no provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to
it;
(f) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed), may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(g) the Trustee may consult with counsel and the advice of
such counsel or any opinion of counsel shall be full and complete
authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon;
(h) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
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(i) the Trustee may execute any of the trusts or powers
hereunder either directly or by or through agents or attorneys and the
Trustee shall not be responsible for any misconduct or negligence on
the part of any agent or attorney appointed with due care by it
hereunder;
(j) the Trustee may conclusively rely as to the identity and
addresses of Holders and other matters contained therein on the
register of the Notes maintained by the Registrar pursuant to Section
2.04 hereof and shall not be affected by notice to the contrary; and
(k) unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Company shall be
sufficient if signed by an Officer of the Company.
SECTION 7.02. Individual Rights of Trustee. The Trustee, in
its individual or any other capacity, may become the owner or pledgee of Notes
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not the Trustee. Any Agent may do the same with like
rights. However, the Trustee is subject to TIA Sections 310(b) and 311.
SECTION 7.03. Trustee's Disclaimer. The Trustee (i) shall not
be responsible for and makes no representation as to the validity or adequacy of
this Indenture or the Notes, (ii) shall not be accountable for the Company's use
of the proceeds from the Notes (iii) shall not be responsible for the use or
application of any money received by any Paying Agent other than the Trustee,
and (iv) shall not be responsible for any statement in the Notes other than its
certificate of authentication.
SECTION 7.04. Notice of Default. If any Default or any Event
of Default occurs and is continuing and if such Default or Event of Default is
known to a Responsible Officer of the Trustee, the Trustee shall mail to each
Holder in the manner and to the extent provided in TIA Section 313(c) notice of
the Default or Event of Default within 45 days after it occurs, unless such
Default or Event of Default has been cured or waived; provided, however, that,
except in the case of a default in the payment of the principal of, premium, if
any, or interest on any Note, the Trustee shall be protected in withholding such
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Trustee in good
faith determine that the withholding of such notice is in the interest of the
Holders.
The Trustee shall not be deemed to have knowledge of any
Default or Event of Default except (i) a default described in Section 6.01(a) or
(b) so long as the Trustee is the Paying Agent or (ii) any Default or Event of
Default of which the Trustee shall have received written notification or a
Responsible Officer charged with the administration of this
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Indenture shall have obtained actual knowledge, and such notification shall not
be deemed to include receipt of information obtained in any report or other
reports and documents furnished under Section 4.17 of this Indenture which
reports and documents the Trustee shall have no duty to examine.
SECTION 7.05. Reports by Trustee to Holders. Within 60 days
after each May 15, beginning with May 15, 1998, the Trustee shall mail to each
Holder as provided in TIA Section 313(c) a brief report dated as of such May 15,
if required by TIA Section 313(a).
A copy of each report at the time of its mailing to the
Holders of Notes shall be mailed to the Company and filed with the Commission
and each stock exchange on which the Notes are listed in accordance with TIA
Section 313(d). The Company shall promptly notify the Trustee when the Notes are
listed on any stock exchange or of any delisting thereof.
SECTION 7.06. Compensation and Indemnity. The Company shall
pay to the Trustee such compensation as shall be agreed upon in writing for its
services hereunder. The compensation of the Trustee shall not be limited by any
law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee promptly upon request for all reasonable disbursements,
expenses and advances incurred or made by it in addition to compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Trustee's agents and counsel.
The Company shall indemnify the Trustee (including its agents,
officers, directors and employees) for, and hold it harmless against, any loss
or liability or expense incurred by it without negligence or bad faith on its
part in connection with the acceptance or administration of this Indenture and
its duties under this Indenture and the Notes, including the costs and expenses
of defending itself against any claim or liability and of complying with any
process served upon it or any of its officers in connection with the exercise or
performance of any of its powers or duties under this Indenture and the Notes.
The Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity. The Company shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay reasonable fees and expenses of such counsel.
The Company need not pay for any settlements made without its consent; provided
that such consent shall not be unreasonably withheld. The Company need not
reimburse any expense or indemnity against any loss or liability incurred by the
Trustee through negligence or bad faith.
The Trustee shall have a claim prior to the Notes on all money
or property held or collected by the Trustee, in its capacity as Trustee, for
any amount owing it pursuant
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to this Section 7.06, except money or property held in trust to pay principal
of, premium, if any, and interest on particular Notes.
If the Trustee incurs expenses or renders services after the
occurrence of an Event of Default specified in clause (g) or (h) of Section
6.01, the expenses and the compensation for the services (including the
reasonable fees and expenses of its agents and counsel) will be intended to
constitute expenses of administration under Title 11 of the United States
Bankruptcy Code or any applicable federal or state law for the relief of
debtors.
To the extent that the payment of any such compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel, and
any other amounts due the Trustee under this Section 7.06 out of the estate in
any such proceeding, shall be denied for any reason, other than solely because
of the misconduct of the Trustee or its Agents, payment of the same shall be
secured by a Lien on, and shall be paid out of, any and all distributions,
dividends, money, securities and other properties that the Holders may be
entitled to receive in such proceeding whether in liquidation or under any plan
of reorganization or arrangement or otherwise.
The provisions of this Section 7.06 shall survive the
termination of this Indenture.
The Trustee shall comply with the provisions of TIA Section
313(b)(2) to the extent applicable.
SECTION 7.07. Replacement of Trustee. A resignation or removal
of the Trustee and appointment of a successor Trustee shall become effective
only upon the successor Trustee's acceptance of appointment as provided in this
Section 7.07.
The Trustee may resign by so notifying the Company in writing
at least 30 days prior to the date of the proposed resignation. The Holders of a
majority in principal amount of the outstanding Notes may remove the Trustee by
so notifying the Trustee in writing and may appoint a successor Trustee with the
consent of the Company. The Company may remove the Trustee if:
(i) the Trustee fails to comply with Section 7.09;
(ii) the Trustee is adjudged a bankrupt or an insolvent;
(iii) a receiver or other public officer takes charge of
the Trustee or its property; or
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65
(iv) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed, or if a vacancy exists
in the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in aggregate principal amount of the outstanding Notes may
appoint a successor Trustee to replace the successor Trustee appointed by the
Company. If the successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of a majority in principal amount of the outstanding Notes may petition
any court of competent jurisdiction for the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after the
delivery of such written acceptance, subject to the lien provided in Section
7.06, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the successor Trustee, (ii) the resignation or removal of the retiring
Trustee shall become effective and (iii) the successor Trustee shall have all
the rights, powers and duties of the Trustee under this Indenture. A successor
Trustee shall mail notice of its succession to each Holder.
If the Trustee fails to comply with Section 7.09, any Holder
who satisfies the requirements of TIA Section 310(b) may petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, the Trustee shall resign
immediately in the manner and with the effect provided in this Section.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.07, the Company's obligation under Section 7.06 shall continue for the
benefit of the retiring Trustee.
SECTION 7.08. Successor Trustee by Merger, Etc. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all of its corporate trust business to, another corporation or national banking
association, the resulting, surviving or transferee corporation or national
banking association without any further act shall be the successor Trustee with
the same effect as if the successor Trustee had been named as the Trustee
herein.
SECTION 7.09. Eligibility. Any Trustee serving hereunder shall
be a bank or trust company, within or without the state, which is authorized by
law to perform all of the duties imposed upon it hereby and which either (i) has
a reported capital and surplus aggregating at least $25 million or (ii) is a
wholly owned subsidiary of a bank, a trust company or a bank holding company
having a reported capital and surplus aggregating at least $25 million, and
shall at all times satisfy the requirements of TIA Section 310(a)(i).
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SECTION 7.10. Money Held in Trust. The Trustee shall not be
liable for interest on any money received by it except as the Trustee may agree
with the Company. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law and except for money held in
trust under Article Eight of this Indenture.
ARTICLE EIGHT
DISCHARGE OF INDENTURE
SECTION 8.01. Termination of Company's Obligations. Except as
otherwise provided in this Section 8.01, the Company may terminate its
obligations under the Notes and this Indenture if:
(i) all Notes previously authenticated and delivered
(other than destroyed, lost or stolen Notes that have been replaced or
Notes that are paid pursuant to Section 4.01 or Notes for whose payment
money or securities have theretofore been held in trust and thereafter
repaid to the Company, as provided in Section 8.05) have been delivered
to the Trustee for cancellation and the Company has paid all sums
payable by it hereunder; or
(ii) (A) the Notes have become due and payable, mature
within one year or all of them are to be called for redemption within
one year under arrangements satisfactory to the Trustee for giving the
notice of redemption, (B) the Company irrevocably deposits in trust
with the Trustee during such one-year period, under the terms of an
irrevocable trust agreement in form and substance satisfactory to the
Trustee, as trust funds solely for the benefit of the Holders for that
purpose, money or U.S. Government Obligations sufficient (in the
opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee), without consideration of any reinvestment of any interest
thereon, to pay, through the payment of principal and interest in
accordance with their terms not later than one day prior to the
relevant due date, principal, premium, if, any, and interest on the
Notes to maturity or redemption, as the case may be, and to pay all
other sums payable by it hereunder, (C) no Default or Event of Default
with respect to the Notes shall have occurred and be continuing on the
date of such deposit, (D) such deposit will not result in a breach or
violation of, or constitute a default under, this Indenture or any
other agreement or instrument to which the Company is a party or by
which it is bound and (E) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, in each case stating
that all conditions precedent provided for herein relating to the
satisfaction and discharge of this Indenture have been complied with.
<PAGE> 74
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With respect to the foregoing clause (i), the Company's
obligations under Section 7.06 shall survive. With respect to the foregoing
clause (ii), the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.09,
2.14, 4.01, 4.02, 7.06, 7.07, 8.04, 8.05 and 8.06 shall survive until the Notes
are no longer outstanding. Thereafter, only the Company's obligations in
Sections 7.06, 8.04, 8.05 and 8.06 shall survive. After any such irrevocable
deposit, the Trustee upon request shall acknowledge in writing the discharge of
the Company's obligations under the Notes and this Indenture except for those
surviving obligations specified above.
SECTION 8.02. Defeasance and Discharge of Indenture. The
Company will be deemed to have paid and will be discharged from any and all
obligations in respect of the Notes on the 123rd day after the date of the
deposit referred to in clause (A) of this Section 8.02, and the provisions of
this Indenture will no longer be in effect with respect to the Notes, and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging the same, except as to (i) rights of registration of transfer and
exchange, (ii) substitution of apparently mutilated, defaced, destroyed, lost or
stolen Notes, (iii) rights of Holders to receive payments of principal thereof
and interest thereon, (iv) the Company's obligations under Section 4.02, (v) the
rights, obligations and immunities of the Trustee hereunder and (vi) the rights
of the Holders as beneficiaries of this Indenture with respect to the property
so deposited with the Trustee payable to all or any of them; provided that the
following conditions shall have been satisfied:
(A) the Company has deposited with the Trustee in trust, money
and/or U.S. Government Obligations that, through the payment of
interest and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (A), money in an amount sufficient
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of this Indenture and the Notes and shall
have irrevocably instructed the Trustee to apply such money to the
payment of such principal, premium and interest;
(B) the Company has delivered to the Trustee (i) either (x) an
Opinion of Counsel to the effect that Holders will not recognize
income, gain or loss for federal income tax purposes as a result of the
Company's exercise of its option under this Section 8.02 and will be
subject to federal income tax on the same amount and in the same manner
and at the same times as would have been the case if such deposit,
defeasance and discharge had not occurred, which Opinion of Counsel
must be based upon (and accompanied by a copy of) a ruling of the
Internal Revenue Service to the same effect unless there has been a
change in applicable federal income tax law after the date of this
Indenture such that a ruling is no longer required or (y) a ruling
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directed to the Trustee received from the Internal Revenue Service to
the same effect as the aforementioned Opinion of Counsel and (ii) an
Opinion of Counsel to the effect that the creation of the defeasance
trust does not violate the Investment Company Act of 1940 and after the
passage of 123 days following the deposit (except, with respect to any
trust funds for the account of a Holder who may be deemed to be an
"insider" for purposes of the United States Bankruptcy Code, after one
year following the deposit), the trust fund will not be subject to the
effect of Section 547 of the United States Bankruptcy Code or Section
15 of the New York Debtor and Creditor Law in a case commenced by or
against the Company under either such statute, and either (I) the trust
funds will no longer remain the property of the Company (and therefore
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally) or (II) if a court were to rule under any such law in any
case or proceeding that the trust funds remained property of the
Company, (a) assuming such trust funds remained in the possession of
the Trustee prior to such court ruling to the extent not paid to the
Holders, the Trustee will hold, for the benefit of the Holders, a valid
and perfected security interest in such trust funds that is not
avoidable in bankruptcy or otherwise except for the effect of Section
552(b) of the United States Bankruptcy Code on interest on the trust
funds accruing after the commencement of a case under such statute, (b)
the Holders will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such case
or proceeding and (c) no property, rights in property or other
interests granted to the Trustee or the Holders in exchange for, or
with respect to, such trust funds will be subject to any prior rights
of holders of other Indebtedness of the Company or any of its
Subsidiaries;
(C) immediately after giving effect to such deposit on a pro
forma basis, no Event of Default, or event that after the giving of
notice or lapse of time or both would become an Event of Default, shall
have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the date of such deposit, and
such deposit shall not result in a breach or violation of, or
constitute a default under, any other agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries is bound;
(D) if at such time the Notes are listed on a national
securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Notes will not be delisted as
a result of such deposit, defeasance and discharge; and
(E) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.02 have been complied with.
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Notwithstanding the foregoing, prior to the end of the 123-day
(or one year) period referred to in clause (B)(ii) of this Section 8.02, none of
the Company's obligations under this Indenture shall be discharged. Subsequent
to the end of such 123-day (or one year) period with respect to this Section
8.02, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.09, 2.14,
4.01, 4.02, 7.06, 7.07, 8.04, 8.05 and 8.06 shall survive until the Notes are no
longer outstanding. Thereafter, only the Company's obligations in Sections 7.06,
8.05 and 8.06 shall survive. If and when a ruling from the Internal Revenue
Service or an Opinion of Counsel referred to in clause (B)(i) of this Section
8.02 is able to be provided specifically without regard to, and not in reliance
upon, the continuance of the Company's obligations under Section 4.01, then the
Company's obligations under such Section 4.01 shall cease upon delivery to the
Trustee of such ruling or Opinion of Counsel and compliance with the other
conditions precedent provided for herein relating to the defeasance contemplated
by this Section 8.02.
After any such irrevocable deposit, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
the Notes and this Indenture except for those surviving obligations in the
immediately preceding paragraph.
SECTION 8.03. Defeasance of Certain Obligations. The Company
may omit to comply with any term, provision or condition set forth in clauses
(iii) and (iv) of Section 5.01 and Sections 4.03 through 4.17, and clause (d) of
Section 6.01 with respect to such clauses (iii) and (iv) of Section 5.01 and
Sections 4.03 through 4.17, and clauses (e) and (f) of Section 6.01 shall be
deemed not to be Events of Default, in each case with respect to the outstanding
Notes if:
(i) the Company has deposited with the Trustee in trust,
money and/or U.S. Government Obligations that, through the payment of
interest and principal in respect thereof in accordance with their
terms, will provide, not later than one day before the due date of any
payment referred to in this clause (i), money in an amount sufficient
in the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof delivered to
the Trustee to pay the principal of, premium, if any, and accrued
interest on the Notes on the Stated Maturity of such payments in
accordance with the terms of this Indenture and the Notes and shall
have irrevocably instructed the Trustee to apply such money to the
payment of such principal, premium and interest;
(ii) immediately after giving effect to such deposit on a
pro forma basis, no Event of Default, or event that after the giving of
notice or lapse of time or both would become an Event of Default, shall
have occurred and be continuing on the date of such deposit or during
the period ending on the 123rd day after the date of such deposit, and
such deposit shall not result in a breach or violation of, or
constitute a
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default under, any other agreement or instrument to which the Company
or any of its Subsidiaries is a party or by which the Company or any of
its Subsidiaries is bound;
(iii) the Company has delivered to the Trustee an Opinion
of Counsel to the effect that (A) the creation of the defeasance trust
does not violate the Investment Company Act of 1940, (B) the Holders
will not recognize income, gain or loss for federal income tax purposes
as a result of such deposit and defeasance of certain obligations and
will be subject to federal income tax on the same amount and in the
same manner and at the same times as would have been the case if such
deposit and defeasance had not occurred and (C) after the passage of
123 days following the deposit (except, with respect to any trust funds
for the account of any Holder who may be deemed to be an "insider" for
purposes of the United States Bankruptcy Code, after one year following
the deposit), the trust funds will not be subject to the effect of
Section 547 of the United States Bankruptcy Code or Section 15 of the
New York Debtor and Creditor Law in a case commenced by or against the
Company under either such statute, and either (I) the trust funds will
no longer remain the property of the Company (and therefore will not be
subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally)
or (II) if a court were to rule under any such law in any case or
proceeding that the trust funds remained property of the Company, (a)
assuming such trust funds remained in the possession of the Trustee
prior to such court ruling to the extent not paid to the Holders, the
Trustee will hold, for the benefit of the Holders, a valid and
perfected security interest in such trust funds that is not avoidable
in bankruptcy or otherwise except for the effect of Section 552(b) of
the United States Bankruptcy Code on interest on the trust funds
accruing after the commencement of a case under such statute, (b) the
Holders will be entitled to receive adequate protection of their
interests in such trust funds if such trust funds are used in such case
or proceeding and (c) no property, rights in property or other
interests granted to the Trustee or the Holders in exchange for, or
with respect to, such trust funds will be subject to any prior rights
of holders of other Indebtedness of the Company or any of its
Subsidiaries;
(iv) at such time the Notes are listed on a national
securities exchange, the Company has delivered to the Trustee an
Opinion of Counsel to the effect that the Notes will not be delisted as
a result of such deposit, defeasance and discharge; and
(v) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, in each case stating that all
conditions precedent provided for herein relating to the defeasance
contemplated by this Section 8.03 have been complied with.
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SECTION 8.04. Application of Trust Money. Subject to Sections
8.05 and 8.06, the Trustee or Paying Agent shall hold in trust money or U.S.
Government Obligations deposited with it pursuant to Section 8.01, 8.02 or 8.03,
as the case may be, and shall apply the deposited money and the money from U.S.
Government Obligations in accordance with the Notes and this Indenture to the
payment of principal of, premium, if any, and interest on the Notes; but such
money need not be segregated from other funds except to the extent required by
law.
SECTION 8.05. Repayment to Company. Subject to Sections 7.06,
8.01, 8.02 and 8.03, the Trustee and the Paying Agent shall promptly pay to the
Company upon request set forth in an Officers' Certificate any excess money held
by them at any time and thereupon shall be relieved from all liability with
respect to such money. The Trustee and the Paying Agent shall pay to the Company
upon written request any money held by them for the payment of principal,
premium, if any, or interest that remains unclaimed for two years; provided that
the Trustee or such Paying Agent before being required to make any payment may
cause to be published at the expense of the Company once in a newspaper of
general circulation in the City of New York and, in the event the Notes are
listed on the Luxembourg Stock Exchange, in Luxembourg, or mail to each Holder
entitled to such money at such Holder's address (as set forth in the Note
Register) notice that such money remains unclaimed and that after a date
specified therein (which shall be at least 30 days from the date of such
publication or mailing) any unclaimed balance of such money then remaining will
be repaid to the Company. After payment to the Company, Holders entitled to such
money must look to the Company for payment as general creditors unless an
applicable law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with
Section 8.01, 8.02 or 8.03, as the case may be, by reason of any legal
proceeding or by reason of any order or judgment of any court or governmental
authority enjoining, restraining or otherwise prohibiting such application, the
Company's obligations under this Indenture and the Notes shall be revived and
reinstated as though no deposit had occurred pursuant to Section 8.01, 8.02 or
8.03, as the case may be, until such time as the Trustee or Paying Agent is
permitted to apply all such money or U.S. Government Obligations in accordance
with Section 8.01, 8.02 or 8.03, as the case may be; provided that, if the
Company has made any payment of principal of, premium, if any, or interest on
any Notes because of the reinstatement of its obligations, the Company shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
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ARTICLE NINE
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.01. Without Consent of Holders. The Company, when
authorized by a resolution of its Board of Directors, and the Trustee may amend
or supplement this Indenture or the Notes without notice to or the consent of
any Holder:
(1) to cure any ambiguity, defect or inconsistency;
(2) to comply with Article Five;
(3) to comply with any requirements of the Commission in
connection with the qualification of this Indenture under the TIA;
(4) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee;
(5) to provide for uncertificated Notes in addition to or in
place of certificated Notes;
(6) to add one or more subsidiary guarantees on the terms
required by this Indenture; or
(7) to make any change that does not adversely affect the
rights of any Holder.
SECTION 9.02. With Consent of Holders. Subject to Sections
6.04 and 6.07 and without prior notice to the Holders, the Company, when
authorized by its Board of Directors (as evidenced by a Board Resolution), and
the Trustee may amend this Indenture, the Notes and the Pledge Agreement with
the written consent of the Holders of not less than a majority in principal
amount of the Notes then outstanding, and the Holders of not less than a
majority in principal amount of the Notes then outstanding by written notice to
the Trustee may waive future compliance by the Company with any provision of
this Indenture, the Notes or the Pledge Agreement.
Notwithstanding the provisions of this Section 9.02, without
the consent of each Holder affected, an amendment or waiver, including a waiver
pursuant to Section 6.04, may not:
(i) change the Stated Maturity of the principal of, or
any installment of interest on, any Note;
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(ii) reduce the principal of, or premium, if any, or
interest on, any Note or adversely affect any right of repayment at the
option of any Holder;
(iii) change the place or currency of payment of principal
of, or premium, if any, or interest on, any Note;
(iv) impair the right to institute suit for the
enforcement of any payment on or after the Stated Maturity (or, in the
case of a redemption, on or after the Redemption Date) of any Note;
(v) reduce the above-stated percentage of outstanding
Notes the consent of whose Holders is necessary to modify or amend this
Indenture;
(vi) waive a default in the payment of principal of,
premium, if any, or interest on the Notes;
(vii) reduce the percentage or aggregate principal amount
of outstanding Notes the consent of whose Holders is necessary for
waiver of compliance with certain provisions of this Indenture or for
waiver of certain defaults;
(viii) modify Article Ten or the Pledge Agreement in a
manner that adversely affects the rights of any Holder in any material
respect; or
(ix) modify any of the provisions of this Section 9.02,
except to increase any such percentage or to provide that certain other
provisions of this Indenture cannot be modified or waived without the
consent of the Holder of each outstanding Note affected thereby.
It shall not be necessary for the consent of the Holders under
this Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
After an amendment, supplement or waiver under this Section
9.02 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. The Company will
mail supplemental indentures to Holders upon request. Any failure of the Company
to mail such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture or waiver.
SECTION 9.03. Revocation and Effect of Consent. Until an
amendment or waiver becomes effective, a consent to it by a Holder is a
continuing consent by the Holder and every subsequent Holder of a Note or
portion of a Note that evidences the same debt as
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the Note of the consenting Holder, even if notation of the consent is not made
on any Note. However, any such Holder or subsequent Holder may revoke the
consent as to its Note or portion of its Note. Such revocation shall be
effective only if the Trustee receives the notice of revocation before the date
the amendment, supplement or waiver becomes effective. An amendment, supplement
or waiver shall become effective on receipt by the Trustee of written consents
from the Holders of the requisite percentage principal amount of the outstanding
Notes.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then,
notwithstanding the last two sentences of the immediately preceding paragraph,
those persons who were Holders at such record date (or their duly designated
proxies) and only those persons shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such persons continue to be Holders after such record date. No such consent
shall be valid or effective for more than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Holder unless it is of the type described in any of clauses (i)
through (v) of Section 9.02. In case of an amendment or waiver of the type
described in clauses (i) through (v) of Section 9.02, the amendment or waiver
shall bind each Holder who has consented to it and every subsequent Holder of a
Note that evidences the same indebtedness as the Note of the consenting Holder.
SECTION 9.04. Notation on or Exchange of Notes. If an
amendment, supplement or waiver changes the terms of a Note, the Trustee may
require the Holder to deliver it to the Trustee. The Trustee may place an
appropriate notation on the Note about the changed terms and return it to the
Holder and the Trustee may place an appropriate notation on any Note thereafter
authenticated. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Note shall issue and the Trustee shall authenticate
a new Note that reflects the changed terms. Failure to make the appropriate
notation or issue a new Note shall not affect the validity and effect of such
amendment, supplement or waiver.
SECTION 9.05. Trustee to Sign Amendments, Etc. The Trustee
shall be entitled to receive, and shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of any amendment, supplement or
waiver authorized pursuant to this Article Nine is authorized or permitted by
this Indenture. Subject to the preceding sentence, the Trustee shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
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SECTION 9.06. Conformity with Trust Indenture Act. Every
supplemental indenture executed pursuant to this Article Nine shall conform to
the requirements of the TIA as then in effect.
ARTICLE TEN
SECURITY
SECTION 10.01. Security. (a) On the Closing Date, the Company
shall (i) enter into the Pledge Agreement and comply with the terms and
provisions thereof and (ii) purchase the Pledged Securities to be pledged to the
Trustee for the benefit of the Holders in such amount as will be sufficient upon
receipt of scheduled interest and/or principal payments of such Pledged
Securities, in the opinion of a nationally recognized firm of independent public
accountants selected by the Company, to provide for payment in full of the first
six scheduled interest payments due on the Notes. The Pledged Securities shall
be pledged by the Company to the Trustee for the benefit of the Holders and
shall be held by the Trustee in the Pledge Account pending disposition pursuant
to the Pledge Agreement.
In the event the Exchange Offer is not consummated and the
Shelf Registration Statement is not declared effective on or prior to December
10, 1997, and the interest rate on the Notes is increased by .5% per annum as
required by this Indenture, the Company shall purchase and deliver to the
Trustee additional Pledged Securities in such amount as will be sufficient upon
receipt of scheduled interest and/or principal payments of all Pledged
Securities thereafter held in the Pledged Account, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company, to provide payment for the first six scheduled interest payments due on
the Notes (assuming the additional .5% per annum remains in effect for the
entire period). The additional Pledged Securities shall be pledged by the
Company to the Trustee for the benefit of the Holders and shall be held by the
Trustee in the Pledged Account.
(b) Each Holder, by its acceptance of a Note, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms, and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company will do or cause to be
done all such acts and things as may be necessary or proper, or as may be
required by the provisions of the Pledge Agreement, to assure and confirm to the
Trustee the security interest in the Pledged Securities contemplated hereby, by
the Pledge Agreement or any part thereof, as from time to time constituted, so
as to render the same available for the security and benefit of this Indenture
and of the Notes secured hereby, according to the intent and purposes herein
expressed. The Company shall take, or shall cause to be taken, upon
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request of the Trustee, any and all actions reasonably required to cause the
Pledge Agreement to create and maintain, as security for the obligations of the
Company under this Indenture and the Notes, valid and enforceable first priority
liens in and on all the Pledged Securities, in favor of the Trustee, superior to
and prior to the rights of third Persons and subject to no other Liens.
(c) The release of any Pledged Securities pursuant to the
Pledge Agreement will not be deemed to impair the security under this Indenture
in contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Company shall cause TIA Section 314(d) relating to
the release of property or securities from the Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge
Agreement to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an officer of the Company, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent engineer, appraiser or
other expert selected by the Company.
(d) The Company shall cause TIA Section 314(b), relating to
opinions of counsel regarding the Lien under the Pledge Agreement, to be
complied with. The Trustee may, to the extent permitted by Sections 7.01 and
7.02 hereof, accept as conclusive evidence of compliance with the foregoing
provisions the appropriate statements contained in such instruments.
(e) The Trustee may, in its sole discretion and without the
consent of the Holders, on behalf of the Holders, take all actions it deems
necessary or appropriate in order to (i) enforce any of the terms of the Pledge
Agreement and (ii) collect and receive any and all amounts payable in respect of
the obligations of the Company thereunder. The Trustee shall have power to
institute and to maintain such suits and proceedings as the Trustee may deem
expedient to preserve or protect its interests and the interests of the Holders
in the Pledged Securities (including power to institute and maintain suits or
proceedings to restrain the enforcement of or compliance with any legislative or
other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders or of the Trustee).
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ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01. Trust Indenture Act of 1939. This Indenture is
subject to the provisions of the TIA that are required to be a part of this
Indenture and shall, to the extent applicable, be governed by such provisions.
SECTION 11.02. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery addressed as
follows:
if to the Company:
InterCel, Inc.
1233 O.G. Skinner Drive
West Point, GA 31833
Telecopier No.: (706) 645-9523
Attention: Chief Financial Officer
with a copy to: (which shall not constitute notice)
Nelson Mullins Riley & Scarborough, L.L.P.
First Union Plaza, Suite 1400
999 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopier No.: (404) 817-6050
Attention: Glenn W. Sturm
if to the Trustee:
Bankers Trust Company
4 Albany Street
New York, New York 10006
Telecopier No.: (212) 250-6961
Attention: Corporate Trust and Agency Group
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with a copy to: (which shall not constitute notice)
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 W. 55th Street
New York, New York 10019
Telecopier No.: (212) 424-8500
Attention: David P. Bicks
The Company or the Trustee by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders) shall be deemed to have been duly given: at the time delivered by hand,
if personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when receipt
acknowledged, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by
first class mail (certified or registered, return receipt requested) to its
address shown on the register kept by the Registrar and shall be sufficiently
given to such Holder if so mailed or delivered within the time presented. Any
notice or communication shall also be so mailed to any Person described in TIA
Section 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders.
Except for a notice to the Trustee, which is deemed given only when received,
and except as otherwise provided in this Indenture, if a notice or communication
is mailed in the manner provided in this Section 11.02, it is duly given,
whether or not the addressee receives it.
Holders may communicate pursuant to TIA Section 312(b) with
other Holders with respect to their rights under this Indenture or the Notes.
The Company, the Trustee, the Registrar and anyone else shall have the
protection of TIA Section 312(c).
SECTION 11.03. Certificate and Opinion As to Conditions
Precedent. Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall furnish to the Trustee:
(i) an Officers' Certificate reasonably satisfactory to
the Trustee stating that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
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(ii) an Opinion of Counsel reasonably satisfactory to the
Trustee stating that, in the opinion of such Counsel, all such
conditions precedent have been complied with.
SECTION 11.04. Statements Required in Certificate or Opinion.
Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(i) a statement that the person making such certificate
or opinion has read such covenant or condition;
(ii) a brief statement as to the nature and scope of the
examination or investigation upon which the statement or opinion
contained in such certificate or opinion is based;
(iii) a statement that, in the opinion of such person, he
has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(iv) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with, and
such other opinions as the Trustee may reasonably request; provided,
however, that, with respect to matters of fact, an Opinion of Counsel
may rely on an Officers' Certificate or certificates of public
officials.
SECTION 11.05. Acts of Holders. (a) Any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders may be embodied in and evidenced
by one or more instruments of substantially similar tenor signed by such Holders
in person or by an agent duly appointed in writing; and, except as herein
otherwise expressly provided, such action shall become effective when such
instrument or instruments are delivered to the Trustee and, where it is hereby
expressly required, to the Company. Proof of execution of any such instrument or
of a writing appointing any such agent shall be sufficient for any purpose of
this Indenture and conclusive in favor of the Trustee and the Company, if made
in the manner provided in this Section.
(b) The ownership of Notes shall be proved by the Note
Register.
(c) Any request, demand, authorization, direction, notice,
consent, waiver or other action by the Holder of any Note shall bind every
future Holder of the same Note or the Holder of every Note issued upon the
transfer thereof or in exchange therefor or in lieu thereof, in respect of
anything done, suffered or omitted to be done by the Trustee, any
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Paying Agent or the Company in reliance thereon, whether or not notation of such
action is made upon such Note.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver of other act, the
Company may, at its option, by or pursuant to a Board Resolution, fix in advance
a record date for the determination of such Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other act,
but the Company shall have no obligation to do so. Notwithstanding Trust
Indenture Act Section 316(c), any such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
more than 30 days prior to the first solicitation of Holders generally in
connection therewith and no later than the date such solicitation is completed.
If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other act may be given
before or after such record date, but only the Holders of record at the close of
business on such record date shall be deemed to be Holders for purposes of
determining whether Holders of the requisite proportion of Notes then
outstanding have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other act, and for this
purpose the Notes then outstanding shall be computed as of such record date;
provided that no such request, demand, authorization, direction, notice,
consent, waiver or other act by the Holders on such record date shall be deemed
effective unless it shall become effective pursuant to the provisions of this
Indenture not later than six months after the record date.
SECTION 11.06. Rules by Trustee, Paying Agent or Registrar.
The Trustee may make reasonable rules for action by or at a meeting of Holders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 11.07. Payment Date Other Than a Business Day. If an
Interest Payment Date, Redemption Date, Payment Date for an Offer to Purchase,
Stated Maturity or date of maturity of any Note shall not be a Business Day at
any place of payment, then payment of principal of, premium, if any, or interest
on such Note, as the case may be, need not be made on such date, but may be made
on the next succeeding Business Day at such place of payment with the same force
and effect as if made on the Interest Payment Date, Payment Date for an Offer to
Purchase, or Redemption Date, or at the Stated Maturity or date of maturity of
such Note; provided that no interest shall accrue for the period from and after
such Interest Payment Date, Payment Date for an Offer to Purchase, Redemption
Date, Stated Maturity or date of maturity, as the case may be.
SECTION 11.08. Governing Law. This Indenture and the Notes
shall be governed by the laws of the State of New York. The Trustee, the Company
and the Holders
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agree to submit to the jurisdiction of the courts of the State of New York in
any action or proceeding arising out of or relating to this Indenture or the
Notes.
SECTION 11.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or debt
agreement of the Company or any Subsidiary of the Company except the Pledge
Agreement. Any such indenture, loan or debt agreement may not be used to
interpret this Indenture.
SECTION 11.10. No Recourse Against Others. No recourse for the
payment of the principal of, premium, if any, or interest on any of the Notes,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company contained in
this Indenture, the Pledge Agreement or in any of the Notes, or because of the
creation of any Indebtedness represented thereby, shall be had against any
incorporator or against any past, present or future partner, shareholder, other
equityholder, officer, director, employee or controlling person, as such, of the
Company or of any successor Person, either directly or through the Company or
any successor Person, whether by virtue of any constitution, statute or rule of
law, or by the enforcement of any assessment or penalty or otherwise; it being
expressly understood that all such liability is hereby expressly waived and
released as a condition of, and as a consideration for, the execution of this
Indenture and the issue of the Notes.
SECTION 11.11. Successors. All agreements of the Company in
this Indenture and the Notes shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successor.
SECTION 11.12. Duplicate Originals. The parties may sign any
number of copies of this Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
SECTION 11.13. Separability. In case any provision in this
Indenture or in the Notes shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 11.14. Table of Contents, Headings, Etc. The Table of
Contents, Cross-Reference Table and headings of the Articles and Sections of
this Indenture have been inserted for convenience of reference only, are not to
be considered a part hereof and shall in no way modify or restrict any of the
terms and provisions hereof.
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ARTICLE TWELVE
MEETINGS OF HOLDERS
SECTION 12.01. Purposes for Which Meetings May Be Called.
A meeting of Holders may be called at any time and from time
to time pursuant to the provisions of this Article Twelve for any of the
following purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to waive or to consent to the
waiving of any Default or Event of Default hereunder and its
consequences, or to take any other action authorized to be taken by
Holders pursuant to any of the provisions of Article Six;
(b) to remove the Trustee or appoint a successor Trustee
pursuant to the provisions of Article Seven;
(c) to consent to an amendment, supplement or waiver pursuant
to the provisions of Section 9.02; or
(d) to take any other action authorized to be taken by or on
behalf of the Holders of any specified aggregate principal amount of
the Notes under any other provision of this Indenture, or authorized or
permitted by law.
SECTION 12.02. Manner of Calling Meetings.
The Trustee may at any time call a meeting of Holders to take
any action specified in Section 12.01, to be held at such time and at such place
in The City of New York, New York or elsewhere as the Trustee will determine.
Notice of every meeting of Holders, setting forth the time and place of such
meeting and in general terms the action proposed to be taken at such meeting,
will be mailed by the Trustee, first-class postage prepaid, to the Company and
to the Holders at their last addresses as they will appear on the registration
books of the Registrar not less than 10 nor more than 60 days prior to the date
fixed for a meeting.
Any meeting of Holders will be valid without notice if the
Holders of all outstanding Notes are present in Person or by proxy, or if notice
is waived before or after the meeting by the Holders of all outstanding Notes,
and if the Company and the Trustee are either present by duly authorized
representatives or have, before or after the meeting, waived notice.
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SECTION 12.03. Call of Meetings by the Company or Holders.
In case at any time the Company, pursuant to a Board
Resolution, or the Holders of not less than 10% in aggregate principal amount of
the outstanding Notes will have requested the Trustee to call a meeting of
Holders to take any action specified in Section 12.01, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee will not have mailed the notice of such meeting within
20 days after receipt of such request, then the Company or the Holders of Notes
in the amount above specified may determine the time and place in The City of
New York, New York or elsewhere for such meeting and may call such meeting for
the purpose of taking such action, by mailing or causing to be mailed notice
thereof as provided in Section 12.02, or by causing notice thereof to be
published at least once in each of two successive calendar weeks (on any
Business Day during such week) in a newspaper or newspapers printed in the
English language, customarily published at least five days a week of a general
circulation in The City of New York, State of New York and, in the event the
Notes are listed on the Luxembourg Stock Exchange, in Luxembourg, the first such
publication to be not less than 10 nor more than 60 days prior to the date fixed
for the meeting.
SECTION 12.04. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Holders, a Person
will (i) be a registered Holder of one or more Notes, or (ii) be a Person
appointed by an instrument in writing as proxy for the registered Holder or
Holders of Notes. The only Persons who will be entitled to be present or to
speak at any meeting of Holders will be the Persons entitled to vote at such
meeting and their counsel and any representatives of the Trustee and its counsel
and any representatives of the Company and their counsel.
SECTION 12.05. Quorum; Action.
The Persons entitled to vote a majority in principal amount of
the outstanding Notes shall constitute a quorum. In the absence of a quorum
within 30 minutes of the time appointed for any such meeting, the meeting shall,
if convened at the request of Holders of Notes, be dissolved. In any other case
the meeting may be adjourned for a period of not less than 10 days as determined
by the chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at any such adjourned meeting, such adjourned meeting may be
further adjourned for a period of not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such adjourned meeting.
Notice of the reconvening of any adjourned meeting shall be given as provided in
Section 12.02, except that such notice need be given only once and not less than
five days prior to the date on which the meeting is scheduled to be reconvened.
Notice of the reconvening of an adjourned meeting shall state expressly the
percentage of the principal amount of the outstanding Notes which shall
constitute a quorum.
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Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in principal
amount of the outstanding Notes at the time shall constitute a quorum for the
taking of any action set forth in the notice of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at
which a quorum is present as aforesaid, any action or matter, except as
otherwise specified herein, shall be effectively passed and decided if passed or
decided by the Persons entitled to vote not less than a majority in principal
amount of outstanding Notes represented and voting at such meeting.
Any action or matter passed or decision taken at any meeting
of Holders of Notes duly held in accordance with this Section 12.05 shall be
binding on all the Holders of Notes, whether or not present or represented at
the meeting.
SECTION 12.06. Regulations May Be Made by Trustee; Conduct of
the Meeting; Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
action by or any meeting of Holders, in regard to proof of the holding of Notes
and of the appointment of proxies, and in regard to the appointment and duties
of inspectors of votes, and submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it will think appropriate. Such regulations may fix a
record date and time for determining the Holders of record of Notes entitled to
vote at such meeting, in which case those and only those Persons who are Holders
of Notes at the record date and time so fixed, or their proxies, will be
entitled to vote at such meeting whether or not they will be such Holders at the
time of the meeting.
The Trustee will, by an instrument in writing, appoint a
temporary chairman of the meeting, unless the meeting will have been called by
the Company or by Holders as provided in Section 12.03, in which case the
Company or the Holders calling the meeting, as the case may be, will in like
manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting will be elected by vote of the Holders of a majority in
principal amount of the Notes represented at the meeting and entitled to vote.
At any meeting each Holder or proxy will, subject to the
provisions of Section 12.04 hereof, be entitled to one vote for each $1,000
principal amount of Notes held or represented by him or her; provided, however,
that no vote will be cast or counted at any meeting in respect of any Notes
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding. The chairman may adjourn any such meeting if he is unable to
determine whether any Holder or proxy will be entitled to vote at such meeting.
The chairman of the meeting will have no right to vote other than by virtue of
Notes held by him or
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instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Holders. Any meeting of Holders duly called pursuant to the
provisions of Section 12.02 or Section 12.03 may be adjourned from time to time
by vote of the Holders of a majority in aggregate principal amount of the Notes
represented at the meeting and entitled to vote, and the meeting may be held as
so adjourned without further notice.
SECTION 12.07. Voting at the Meeting and Record to Be Kept.
The vote upon any resolution submitted to any meeting of
Holders will be by written ballots on which will be subscribed the signatures of
the Holders of Notes or/of their representatives by proxy and the principal
amount of the Notes voted by the ballot. The permanent chairman of the meeting
will appoint two inspectors of votes, who will count all votes cast at the
meeting for or against any resolution and will make and file with the secretary
of the meeting their verified written reports in duplicate of all votes cast at
the meeting. A record in duplicate of the proceedings of each meeting of Holders
will be prepared by the secretary of the meeting and there will be attached to
such record the original reports of the inspectors of votes on any vote by
ballot taken thereat and affidavits by one or more Persons having knowledge of
the facts, setting forth a copy of the notice of the meeting and showing that
such notice was mailed as provided in Section 12.02. The record will be signed
and verified by the affidavits of the permanent chairman and the secretary of
the meeting and one of the duplicates will be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
Any record so signed and verified will be conclusive evidence
of the matters therein stated.
SECTION 12.08. Exercise of Rights of Trustee or Holders May
Not Be Hindered or Delayed by Call of Meeting.
Nothing contained in this Article Twelve will be deemed or
construed to authorize or permit, by reason of any call of a meeting of Holders
or any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Holders under any of the provisions of this
Indenture or of the Notes.
SECTION 12.09. Procedures Not Exclusive.
The procedures set forth in this Article Twelve are not
exclusive and the rights and obligations of the Company, the Trustee and the
Holders under other Articles of this Indenture (including, without limitation,
Articles Six, Seven, Eight and Nine) will in no way be limited by the provisions
of this Article Twelve.
<PAGE> 93
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the date first written above.
INTERCEL, INC.,
as Issuer
By: /s/ Allen E. Smith
----------------------------------------
Name: Allen E. Smith
Title: President and Chief Executive
Officer
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Sandra J. Shaffer
----------------------------------------
Name:
Title:
<PAGE> 94
EXHIBIT A
[FACE OF NOTE]
INTERCEL, INC.
11 1/8% Senior Notes Due 2007
[CUSIP] [CINS] [__________]
No. $_________
INTERCEL INC., a Delaware corporation (the "Company", which
term includes any successor under the Indenture hereinafter referred to), for
value received, promises to pay to _____________, or its registered assigns, the
principal sum of ____________ ($____) on June 1, 2007.
Interest Payment Dates: June 1, and December 1, commencing
December 1, 1997.
Regular Record Dates: May 15 and November 15.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE> 95
A-2
IN WITNESS WHEREOF, the Company has caused this Note to be
signed manually or by facsimile by its duly authorized officers.
Date: June 10, 1997 INTERCEL, INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
(Trustee's Certificate of Authentication)
This is one of the 11 1/8% Senior Notes due 2007 described in the
within-mentioned Indenture.
BANKERS TRUST COMPANY,
as Trustee
By:
------------------------------------
Authorized Signatory
<PAGE> 96
A-3
[REVERSE SIDE OF NOTE]
INTERCEL, INC.
11 1/8% Senior Note Due 2007
1. Principal and Interest.
The Company will pay the principal of this Note on June 1,
2007.
The Company promises to pay interest on the principal amount
of this Note on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of
record of the Notes at the close of business on the May 15 or November 15
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing December 1, 1997.
If an exchange offer registered under the Securities Act is
not consummated and a shelf registration statement under the Securities Act with
respect to resales of the Notes is not declared effective by the Commission, on
or before December 10, 1997 in accordance with the terms of the Registration
Rights Agreement dated as of June 10, 1997 between the Company and Morgan
Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith Incorporated
and Oppenheimer & Co., Inc., the annual interest rate borne by the Notes shall
be increased by 0.5% from the rate shown above accruing from December 10, 1997,
payable in cash semiannually, in arrears, on each June 1 and December 1,
commencing June 1, 1998, until the exchange offer is completed or the shelf
registration statement is declared effective. The Holder of this Note is
entitled to the benefits of such Registration Rights Agreement.
Interest on the Notes will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from June 10,
1997; provided that, if there is no existing default in the payment of interest
and this Note is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at a rate borne by the Notes.
<PAGE> 97
A-4
2. Method of Payment.
The Company will pay interest (except defaulted interest) on
the principal amount of the Notes as provided above on each June 1 and December
1 to the persons who are Holders (as reflected in the Note Register at the close
of business on the May 15 and November 15 immediately preceding the Interest
Payment Date), in each case, even if the Note is cancelled on registration of
transfer, registration of exchange, redemption or repurchase after such record
date; provided that, with respect to the payment of principal, the Company will
make payment to the Holder that surrenders this Note to a Paying Agent on or
after June 1, 2007.
The Company will pay principal, premium, if any, and as
provided above, interest in money of the United States that at the time of
payment is legal tender for payment of public and private debts. However, the
Company, at its option, may pay principal, premium, if any, and interest by its
check payable in such money. It may mail an interest check to a Holder's
registered address (as reflected in the Note Register). If a payment date is a
date other than a Business Day at a place of payment, payment may be made at
that place on the next succeeding day that is a Business Day and no interest
shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as authenticating agent,
Paying Agent and Registrar. The Company may change any authenticating agent,
Paying Agent or Registrar without notice. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent, Registrar or co-Registrar.
4. Indenture; Limitations.
The Company issued the Notes under an Indenture dated as of
June 10, 1997 (the "Indenture"), between the Company and Bankers Trust Company,
as trustee (the "Trustee"). Capitalized terms herein are used as defined in the
Indenture unless otherwise indicated. The terms of the Notes include those
stated in the Indenture and those made part of the Indenture by reference to the
Trust Indenture Act. The Notes are subject to all such terms, and Holders are
referred to the Indenture and the Trust Indenture Act for a statement of all
such terms. To the extent permitted by applicable law, in the event of any
inconsistency between the terms of this Note and the terms of the Indenture, the
terms of the Indenture shall control.
<PAGE> 98
A-5
The Notes are unsecured senior obligations of the Company. The
Company may, subject to Article Four of the Indenture, issue additional Notes
under the Indenture.
5. Redemption.
The Notes will be redeemable, at the Company's option, in
whole or in part, at any time or from time to time, on or after June 1, 2002 and
prior to maturity, upon not less than 30 nor more than 60 days' prior notice
mailed by first class mail to each Holder's last address as it appears in the
Note Register, at the Redemption Prices (expressed in percentages of principal
amount) set forth below, plus accrued and unpaid interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
that is prior to the Redemption Date to receive interest due on an Interest
Payment Date), if redeemed during the 12-month period commencing June 1, of the
years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- ----------
<S> <C>
2002 .......................... 105.56250%
2003 .......................... 102.78125%
2004 and thereafter................ 100.00000%
</TABLE>
In addition, at any time prior to June 1, 2000, the Company
may redeem up to 35% of the principal amount of the Notes with the proceeds of
one or more Public Equity Offerings, at any time as a whole or from time to time
in part, at a Redemption Price (expressed as a percentage of principal amount)
of 111.125%; provided that after any such redemption at least $195.0 million
aggregate principal amount of Notes remains outstanding.
Notice of any optional redemption will be mailed at least 30
days but not more than 60 days before the Redemption Date to each Holder of
Notes to be redeemed at his last address as it appears in the Note Register.
Notes in denominations larger than $1,000 may be redeemed in part. On and after
the Redemption Date, interest ceases to accrue on Notes or portions of Notes
called for redemption, unless the Company defaults in the payment of the
Redemption Price.
<PAGE> 99
A-6
6. Repurchase upon Change of Control.
Upon the occurrence of any Change of Control, each Holder
shall have the right to require the repurchase of its Notes by the Company in
cash pursuant to the offer described in the Indenture at a purchase price equal
to 101% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of purchase (the "Change of Control Payment").
A notice of such Change of Control will be mailed within 30
days after any Change of Control occurs to each Holder at his last address as it
appears in the Note Register. Notes in denominations larger than $1,000 may be
sold to the Company in part. On and after the Payment Date, interest ceases to
accrue on Notes or portions of Notes surrendered for purchase by the Company,
unless the Company defaults in the payment of the Change of Control Payment.
7. Denominations; Transfer; Exchange.
The Notes are in registered form without coupons in
denominations of $1,000 of principal amount and multiples of $1,000 in excess
thereof. A Holder may register the transfer or exchange of Notes in accordance
with the Indenture. The Registrar may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and to pay any taxes and
fees required by law or permitted by the Indenture. The Registrar need not
register the transfer or exchange of any Notes selected for redemption. Also, it
need not register the transfer or exchange of any Notes for a period of 15 days
before the day of the mailing of a notice of redemption of Notes selected for
redemption.
8. Persons Deemed Owners.
A Holder shall be treated as the owner of a Note for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its written request. After that, Holders
entitled to the money must look to the Company for payment, unless an abandoned
property law designates another Person, and all liability of the Trustee and
such Paying Agent with respect to such money shall cease.
<PAGE> 100
A-7
10. Discharge Prior to Redemption or Maturity.
If the Company deposits with the Trustee money or U.S.
Government Obligations sufficient to pay the then outstanding principal of,
premium, if any, and accrued interest on the Notes (a) to redemption or
maturity, the Company will be discharged from the Indenture and the Notes,
except in certain circumstances for certain sections thereof, and (b) to the
Stated Maturity, the Company will be discharged from certain covenants set forth
in the Indenture.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Notes may
be amended or supplemented with the consent of the Holders of at least a
majority in principal amount of the Notes then outstanding, and any existing
default or compliance with any provision may be waived with the consent of the
Holders of at least a majority in principal amount of the Notes then
outstanding. Without notice to or the consent of any Holder, the parties thereto
may amend or supplement the Indenture or the Notes to, among other things, cure
any ambiguity, defect or inconsistency and make any change that does not
adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Restricted Subsidiaries, among other things, to Incur
additional Indebtedness, make Restricted Payments, use the proceeds from Asset
Sales, suffer to exist restrictions on the ability of Restricted Subsidiaries to
make certain payments to the Company, issue Capital Stock of Restricted
Subsidiaries, engage in transactions with Affiliates, suffer to exist or incur
Liens, Guarantee Indebtedness of the Company or merge, consolidate or transfer
substantially all of its assets. Within 45 days after the end of each fiscal
quarter (90 days after the end of the last fiscal quarter of each year), the
Company shall deliver to the Trustee an Officers' Certificate stating whether or
not the signers know of any Default or Event of Default under such restrictive
covenants.
13. Successor Persons.
When a successor person or other entity assumes all the
obligations of its predecessor under the Notes and the Indenture, the
predecessor person will be released from those obligations.
<PAGE> 101
A-8
14. Defaults and Remedies.
The following events constitute "Event of Default" with
respect to the Notes under the Indenture: (a) default in the payment of the
principal of (or premium, if any, on) any Note when the same becomes due and
payable at Stated Maturity, upon acceleration, redemption or otherwise; (b)
default in the payment of interest on any Note when the same becomes due and
payable, and such default continues for a period of 30 days; provided that a
failure to make any of the first six scheduled interest payments on the Notes on
the applicable Interest Payment Date will constitute an Event of Default with no
grace or cure period; (c) default in the performance or breaches the provisions
of Article V or the failure to make or consummate an Offer to Purchase in
accordance with the provisions of Section 4.11 or Section 4.12 of the Indenture;
(d) default in the performance of or breach of any covenant or agreement of the
Company in the Indenture or under the Notes (other than a default specified in
clause (a), (b) or (c) above) and such default or breach continues for a period
of 30 consecutive days after written notice by the Trustee or the Holders of 25%
or more in aggregate principal amount of the Notes; (e) there occurs with
respect to any issue or issues of Indebtedness of the Company or any Significant
Subsidiary having an outstanding principal amount of $5 million or more in the
aggregate for all such issues of all such Persons, whether such Indebtedness now
exists or shall hereafter be created, (A) an event of default that has caused
the holder thereof to declare such Indebtedness to be due and payable prior to
its Stated Maturity and such Indebtedness has not been discharged in full or
such acceleration has not been rescinded or annulled within 30 days of such
acceleration and/or (B) the failure to make a principal payment at the final
(but not any interim) fixed maturity and such defaulted payment shall not have
been made, waived or extended within 30 days of such payment default; (f) any
final judgment or order (not covered by insurance) for the payment of money in
excess of $5 million in the aggregate for all such final judgments or orders
against all such Persons (treating any deductibles, self-insurance or retention
as not so covered) shall be rendered against the Company or any Significant
Subsidiary and shall not be paid or discharged, and there shall be any period of
30 consecutive days following entry of the final judgment or order that causes
the aggregate amount for all such final judgments or orders outstanding and not
paid or discharged against all such Persons to exceed $5 million during which a
stay of enforcement of such final judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect; (g) a court having jurisdiction in
the premises enters a decree or order for (A) relief in respect of the Company
or any Significant Subsidiary in an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, (B)
appointment of a receiver, liquidator, assignee, custodian, trustee,
sequestrator or similar official of the Company or any Significant Subsidiary or
for all or substantially all of the property and assets of the Company or any
Significant Subsidiary or (C) the winding up or liquidation of the affairs of
the Company or any Significant Subsidiary and, in each case, such decree or
order shall remain unstayed and
<PAGE> 102
A-9
in effect for a period of 30 consecutive days; (h) the Company or any
Significant Subsidiary (A) commences a voluntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect, or
consents to the entry of an order for relief in an involuntary case under any
such law, (B) consents to the appointment of or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator or similar official of
the Company or any Significant Subsidiary or for all or substantially all of the
property and assets of the Company or any Significant Subsidiary or (C) effects
any general assignment for the benefit of creditors; or (i) the Pledge Agreement
shall cease to be in full force and effect or enforceable in accordance with its
terms, other than in accordance with its terms.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Notes may declare all the Notes to be due and payable.
If a bankruptcy or insolvency default with respect to the Company occurs and is
continuing, the Notes automatically become due and payable. Holders may not
enforce the Indenture or the Notes except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Notes. Subject to certain limitations, Holders of at least a
majority in principal amount of the Notes then outstanding may direct the
Trustee in its exercise of any trust or power.
15. Security.
The Company has entered into the Pledge Agreement and
purchased and pledged to the Trustee for the benefit of the Holders Pledged
Securities in an amount sufficient upon receipt of scheduled interest and
principal payments on such securities to provide for payment in full of the
first six scheduled interest payments due on the Notes. The Pledged Securities
will be pledged by the Company to the Trustee for the benefit of the Holders and
will be held by the Trustee in the Pledge Account pending disbursement pursuant
to the Pledge Agreement.
16. Trustee Dealings with the Company.
The Trustee under the Indenture, in its individual or any
other capacity, may make loans to, accept deposits from and perform services for
the Company or its Affiliates and may otherwise deal with the Company or its
Affiliates as if it were not the Trustee.
<PAGE> 103
A-10
17. No Recourse Against Others.
No incorporator or any past, present or future partner,
shareholder, other equity holder, officer, director, employee or controlling
person as such, of the Company or of any successor Person shall have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder by accepting a Note expressly waives and releases all such
liability. The waiver and release are a condition of, and part of the
consideration for the issuance of the Notes.
18. Authentication.
This Note shall not be valid until the Trustee or
authenticating agent signs the certificate of authentication on the other side
of this Note.
19. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to InterCel,
Inc., 1233 O.G. Skinner Drive, West Point, GA 31833, Attention: Chief Financial
Officer.
<PAGE> 104
A-11
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
________________________________________________________________________________
Please print or typewrite name and address including zip code of assignee
________________________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing _____________________________ attorney to transfer said Note on the
books of the Company with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES OTHER THAN EXCHANGE NOTES,
UNLEGENDED OFFSHORE GLOBAL NOTES AND
UNLEGENDED OFFSHORE PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior to the
date which is the earlier of (i) the date the shelf registration statement is
declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933
provided by Rule 144A thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with
(a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Note and the
Indenture.
<PAGE> 105
A-12
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Note in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.08 of the Indenture shall have
been satisfied.
Date: ______________ ______________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the
face of the within-mentioned instrument in
every particular, without alteration or any
change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933 and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: _____________
______________________________________________
NOTICE: To be executed by an executive officer
<PAGE> 106
A-13
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Note purchased by the Company
pursuant to Section 4.11 or Section 4.12 of the Indenture, check the Box: |_|
If you wish to have a portion of this Note purchased by the
Company pursuant to Section 4.11 or Section 4.12 of the Indenture, state the
amount:
$_____________________.
Date: ______________
Your Signature: ________________________________________________________________
(Sign exactly as your name appears on the other side of this
Note)
Signature Guarantee:(1) _________________________________
- --------------------
(1) The Holder's signature must be guaranteed by a member firm of a
registered national securities exchange or of the National Association of
Securities Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Exchange Act.
<PAGE> 107
EXHIBIT B
Form of Certificate
____________, ____
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: InterCel Inc. (the "Company")
11 1/8% Senior Notes due 2007 (the "Notes")
Dear Sirs:
This letter relates to U.S. $ ______ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of
the Indenture dated as of June 10, 1997 (the "Indenture") relating to the Notes,
we hereby certify that we are (or we will hold such securities on behalf of) a
person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933. Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an identical principal
amount of Notes, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
-----------------------------------------
Authorized Signature
<PAGE> 108
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
____________, ____
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: InterCel Inc. (the "Company")
11 1/8% Senior Notes due 2007 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of $____________
aggregate principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is
subject to certain restrictions and conditions set forth in the Indenture dated
as of June 10, 1997 (the "Indenture"), relating to the Notes, and the
undersigned agrees to be bound by, and not to resell, pledge or otherwise
transfer the Notes except in compliance with, such restrictions and conditions
and the Securities Act of 1933 (the "Securities Act").
2. We understand that the offer and sale of the Notes have not
been registered under the Securities Act, and that the Notes may not be offered
or sold except as permitted in the following sentence. We agree, on our own
behalf and on behalf of any accounts for which we are acting as hereinafter
stated, that if we should sell any Notes, we will do so only (A) to the Company
or any subsidiary thereof, (B) in accordance with Rule 144A under the Securities
Act to a "qualified institutional buyer" (as defined therein), (C) to an
institutional "accredited investor" (as defined below) that, prior to such
transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to
you and to the Company a signed letter substantially in the form of this letter,
(D) outside the United States in accordance with Rule 904 of Regulation S under
the Securities Act, (E) pursuant to the exemption from
<PAGE> 109
C-2
registration provided by Rule 144 under the Securities Act, or (F) pursuant to
an effective registration statement under the Securities Act, and we further
agree to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
3. We understand that, on any proposed resale of any Notes, we
will be required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend to the
foregoing effect.
4. We are an institutional "accredited investor" (as defined
in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment in the Notes, and
we and any accounts for which we are acting are each able to bear the economic
risk of our or its investment.
5. We are acquiring the Notes purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------------
Authorized Signature
<PAGE> 110
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
____________, ____
Bankers Trust Company
4 Albany Street
New York, New York 10006
Attention: Corporate Trust and Agency Group
Re: InterCel Inc. (the "Company")
11 1/8% Senior Notes due 2007 (the "Notes")
Dear Sirs:
In connection with our proposed sale of U.S.$ ______ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of 1933
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the
United States;
(2) at the time the buy order was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the
United States in contravention of the requirements of Rule 903(b) or Rule 904(b)
of Regulation S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade
the registration requirements of the U.S. Securities Act of 1933.
<PAGE> 111
D-2
You and the Company are entitled to rely upon this letter and
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
--------------------------
Authorized Signature
<PAGE> 1
EXHIBIT 4(i)
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated June 10, 1997
between
INTERCEL, INC.
and
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
OPPENHEIMER & CO., INC.
- --------------------------------------------------------------------------------
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into June 10, 1997, between INTERCEL, INC., a Delaware corporation
(the "Company"), and MORGAN STANLEY & CO. INCORPORATED, MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED and OPPENHEIMER & CO., INC.
(collectively, the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement
dated June 5, 1997, between the Company and the Placement Agents (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agents
of an aggregate of $300,000,000 principal amount of the Company's 11 1/8% Senior
Notes due 2007 (the "Securities"). In order to induce the Placement Agents to
enter into the Placement Agreement, the Company has agreed to provide to the
Placement Agents and their direct and indirect transferees the registration
rights set forth in this Agreement. The execution of this Agreement is a
condition to the closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended
from time to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"Closing Date" shall mean the Closing Date as defined in the
Placement Agreement.
"Company" shall have the meaning set forth in the preamble to
this Agreement and shall also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Securities for Registrable Securities pursuant to Section
2(a) hereof.
"Exchange Offer Registration" shall mean a registration under
the 1933 Act effected pursuant to Section 2(a) hereof.
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"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such
registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by
reference therein.
"Exchange Securities" shall mean securities issued by the
Company under the Indenture containing terms identical to the
Securities (except that the Exchange Securities will not contain
restrictions on transfer) and to be offered to Holders of Securities in
exchange for Securities pursuant to the Exchange Offer.
"Holder" shall mean the Placement Agents, for so long as they
own any Registrable Securities, and each of their successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Securities under the Indenture; provided that for purposes
of Sections 4 and 5 of this Agreement, the term "Holder" shall include
Participating Broker-Dealers (as defined in Section 4(a)).
"Indenture" shall mean the Indenture relating to the
Securities to be dated as of the Closing Date between the Company and
Bankers Trust Company, trustee, and as the same may be amended from
time to time in accordance with the terms thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Securities;
provided that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company or any of its affiliates (as
such term is defined in Rule 405 under the 1933 Act) (other than the
Placement Agents or subsequent holders of Registrable Securities if
such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Securities) shall not be
counted in determining whether such consent or approval was given by
the Holders of such required percentage or amount.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency or
political subdivision thereof.
"Placement Agents" shall have the meaning set forth in the
preamble to this Agreement.
"Placement Agreement" shall have the meaning set forth in the
preamble to this Agreement.
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"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and any
such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by
a Shelf Registration Statement, and by all other amendments and
supplements to such prospectus, and in each case including all material
incorporated by reference therein.
"Registrable Securities" shall mean the Securities; provided,
however, that the Securities shall cease to be Registrable Securities
(i) when a Registration Statement with respect to such Securities shall
have been declared effective under the 1933 Act and such Securities
shall have been disposed of pursuant to such Registration Statement,
(ii) when such Securities have been sold to the public pursuant to Rule
144(k) (or any similar provision then in force, but not Rule 144A)
under the 1933 Act or (iii) when such Securities shall have ceased to
be outstanding.
"Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this
Agreement, including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state securities or blue sky laws (including reasonable
fees and disbursements of counsel for any underwriters or Holders in
connection with blue sky qualification of any of the Exchange
Securities or Registrable Securities), (iii) all expenses of any
Persons in preparing or assisting in preparing, word processing,
printing and distributing any Registration Statement, any Prospectus,
any amendments or supplements thereto, any underwriting agreements,
securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi)
the fees and disbursements of the Trustee and its counsel, (vii) the
fees and disbursements of counsel for the Company and, in the case of a
Shelf Registration Statement, the fees and disbursements of one counsel
for the Holders (which counsel shall be selected by the Majority
Holders and which counsel may also be counsel for the Placement Agents)
and (viii) the fees and disbursements of the independent public
accountants of the Company, including the expenses of any special
audits or "cold comfort" letters required by or incident to such
performance and compliance, but excluding fees and expenses of counsel
to the underwriters (other than fees and expenses set forth in clause
(ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.
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"Registration Statement" shall mean any registration statement
of the Company that covers any of the Exchange Securities or
Registrable Securities pursuant to the provisions of this Agreement and
all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all material
incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected
pursuant to Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of
Section 2(b) of this Agreement which covers all of the Registrable
Securities (but no other securities unless approved by the Holders
whose Registrable Securities are covered by such Shelf Registration
Statement) on an appropriate form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein,
all exhibits thereto and all material incorporated by reference
therein.
"Trustee" shall mean the trustee with respect to the
Securities under the Indenture.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Securities are sold to an
Underwriter (as hereinafter defined) for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or
applicable interpretation of the Staff of the SEC, the Company shall use its
best efforts to cause to be filed an Exchange Offer Registration Statement
covering the offer by the Company to the Holders to exchange all of the
Registrable Securities for Exchange Securities and to have such Registration
Statement remain effective until the closing of the Exchange Offer. The Company
shall commence the Exchange Offer promptly after the Exchange Offer Registration
Statement has been declared effective by the SEC and use its best efforts to
have the Exchange Offer consummated not later than 60 days after such effective
date. The Company shall commence the Exchange Offer by mailing the related
exchange offer Prospectus and accompanying documents to each Holder stating, in
addition to such other disclosures as are required by applicable law:
<PAGE> 6
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(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities
validly tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 business days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Security
exchanged pursuant to the Exchange Offer will be required to surrender
such Registrable Security, together with the enclosed letters of
transmittal, to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice
prior to the close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last Exchange
Date, by sending to the institution and at the address (located in the
Borough of Manhattan, The City of New York) specified in the notice a
telegram, telex, facsimile transmission or letter setting forth the
name of such Holder, the principal amount of Registrable Securities
delivered for exchange and a statement that such Holder is withdrawing
his election to have such Securities exchanged.
As soon as practicable after the last Exchange Date, the
Company shall:
(i) accept for exchange Registrable Securities or portions
thereof tendered and not validly withdrawn pursuant to the Exchange
Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Securities or portions thereof so accepted
for exchange by the Company and issue, and cause the Trustee to
promptly authenticate and mail to each Holder, an Exchange Security
equal in principal amount to the principal amount of the Registrable
Securities surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agents of the names and addresses of the Holders to whom the
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Exchange Offer is made, and the Placement Agents shall have the right, subject
to applicable law, to contact such Holders and otherwise facilitate the tender
of Registrable Securities in the Exchange Offer.
(b) In the event that (i) the Company determines that the
Exchange Offer Registration provided for in Section 2(a) above is not available
or may not be consummated as soon as practicable after the last Exchange Date
because it would violate applicable law or the applicable interpretations of the
Staff of the SEC, (ii) the Exchange Offer is not for any other reason
consummated by December 10, 1997 or (iii) the Exchange Offer has been completed
and in the opinion of counsel for the Placement Agents a Registration Statement
must be filed and a Prospectus must be delivered by the Placement Agents in
connection with any offering or sale of Registrable Securities, the Company
shall use its best efforts to cause to be filed as soon as practicable after
such determination, date or notice of such opinion of counsel is given to the
Company, as the case may be, a Shelf Registration Statement providing for the
sale by the Holders of all of the Registrable Securities and to have such Shelf
Registration Statement declared effective by the SEC. In the event the Company
is required to file a Shelf Registration Statement solely as a result of the
matters referred to in clause (iii) of the preceding sentence, the Company shall
use its best efforts to file and have declared effective by the SEC both an
Exchange Offer Registration Statement pursuant to Section 2(a) with respect to
all Registrable Securities and a Shelf Registration Statement (which may be a
combined Registration Statement with the Exchange Offer Registration Statement)
with respect to offers and sales of Registrable Securities held by the Placement
Agents after completion of the Exchange Offer. The Company agrees to use its
best efforts to keep the Shelf Registration Statement continuously effective
until the expiration of the period referred to in Rule 144(k) with respect to
all Registrable Securities covered by the Shelf Registration Statement or such
shorter period that will terminate when all of the Registrable Securities
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. The Company further agrees to supplement or amend the
Shelf Registration Statement if required by the rules, regulations or
instructions applicable to the registration form used by the Company for such
Shelf Registration Statement or by the 1933 Act or by any other rules and
regulations thereunder for shelf registration or if reasonably requested by a
Holder with respect to information relating to such Holder, and to use its best
efforts to cause any such amendment to become effective and such Shelf
Registration Statement to become usable as soon as thereafter practicable. The
Company agrees to furnish to the Holders of Registrable Securities copies of any
such supplement or amendment promptly after its being used or filed with the
SEC.
(c) The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.
<PAGE> 8
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(d) An Exchange Offer Registration Statement pursuant to
Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b)
hereof will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that, if, after it has been declared
effective, the offering of Registrable Securities pursuant to a Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have become effective during the
period of such interference until the offering of Registrable Securities
pursuant to such Registration Statement may legally resume. As provided for in
the Indenture, in the event the Exchange Offer is not consummated and the Shelf
Registration Statement is not declared effective on or prior to December 10,
1997, the interest rate on the Securities (and the Exchange Securities) will
increase by an additional .5% per annum until the Exchange Offer is consummated
or the Shelf Registration Statement is declared effective.
(e) Without limiting the remedies available to the Placement
Agents and the Holders, the Company acknowledges that any failure by the Company
to comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Placement Agents or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Placement Agents or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect
to the Registration Statements pursuant to Section 2(a) and Section 2(b) hereof,
the Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on
the appropriate form under the 1933 Act, which form (x) shall be
selected by the Company and (y) shall, in the case of a Shelf
Registration, be available for the sale of the Registrable Securities
by the selling Holders thereof and (z) shall comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith, and use its best efforts to cause such Registration
Statement to become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may be
necessary to keep such Registration Statement effective for the
applicable period and cause each Prospectus to be supplemented by any
required prospectus supplement and, as so supplemented, to
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be filed pursuant to Rule 424 under the 1933 Act; to keep each
Prospectus current during the period described under Section 4(3) and
Rule 174 under the 1933 Act that is applicable to transactions by
brokers or dealers with respect to the Registrable Securities or
Exchange Securities;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, to counsel for the Placement Agents,
to counsel for the Holders and to each Underwriter of an Underwritten
Offering of Registrable Securities, if any, without charge, as many
copies of each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents as such
Holder or Underwriter may reasonably request, in order to facilitate
the public sale or other disposition of the Registrable Securities; and
the Company consents to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the
selling Holders of Registrable Securities and any such Underwriters in
connection with the offering and sale of the Registrable Securities
covered by and in the manner described in such Prospectus or any
amendment or supplement thereto in accordance with applicable law;
(d) use its best efforts to register or qualify the
Registrable Securities under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable Securities
covered by a Registration Statement shall reasonably request in writing
by the time the applicable Registration Statement is declared effective
by the SEC, to cooperate with such Holders in connection with any
filings required to be made with the National Association of Securities
Dealers, Inc. and do any and all other acts and things which may be
reasonably necessary or advisable to enable such Holder to consummate
the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder; provided, however, that the Company
shall not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(d), (ii) file any general
consent to service of process or (iii) subject itself to taxation in
any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Securities, counsel for the Holders and counsel for the
Placement Agents promptly and, if requested by any such Holder or
counsel, confirm such advice in writing (i) when a Registration
Statement has become effective and when any post-effective amendment
thereto has been filed and becomes effective, (ii) of any request by
the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become
effective, (iii) of the issuance by the SEC or any state securities
authority of any stop order suspending the effectiveness of a
<PAGE> 10
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Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, between the effective date of a Registration
Statement and the closing of any sale of Registrable Securities covered
thereby, the representations and warranties of the Company contained in
any underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to the offering cease to be true and
correct in all material respects or if the Company receives any
notification with respect to the suspension of the qualification of the
Registrable Securities for sale in any jurisdiction or the initiation
of any proceeding for such purpose, (v) of the happening of any event
during the period a Shelf Registration Statement is effective which
makes any statement made in such Registration Statement or the related
Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to
make the statements therein not misleading and (vi) of any
determination by the Company that a post-effective amendment to a
Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at
the earliest possible moment and provide immediate notice to each
Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any restrictive legends and
enable such Registrable Securities to be in such denominations
(consistent with the provisions of the Indenture) and registered in
such names as the selling Holders may reasonably request at least two
business days prior to the closing of any sale of Registrable
Securities;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use its best
efforts to prepare and file with the SEC a supplement or post-effective
amendment to a Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the
Registrable Securities, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Company agrees to notify the
Holders to suspend use of the Prospectus as promptly as practicable
after
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the occurrence of such an event, and the Holders hereby agree to
suspend use of the Prospectus until the Company has amended or
supplemented the Prospectus to correct such misstatement or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus
after initial filing of a Registration Statement, provide copies of
such document to the Placement Agents and their counsel (and, in the
case of a Shelf Registration Statement, the Holders and their counsel)
and make such of the representatives of the Company as shall be
reasonably requested by the Placement Agents or their counsel (and, in
the case of a Shelf Registration Statement, the Holders or their
counsel) available for discussion of such document, and shall not at
any time file or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a Prospectus or any document which is to be incorporated
by reference into a Registration Statement or a Prospectus, of which
the Placement Agents and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) shall not have
previously been advised and furnished a copy or to which the Placement
Agents or their counsel (and, in the case of a Shelf Registration
Statement, the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Securities or
Registrable Securities, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Securities or Registrable Securities, as
the case may be, cooperate with the Trustee and the Holders to effect
such changes to the Indenture as may be required for the Indenture to
be so qualified in accordance with the terms of the TIA and execute,
and use its best efforts to cause the Trustee to execute, all documents
as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Securities, any Underwriter participating in any disposition pursuant
to such Shelf Registration Statement, and attorneys and accountants
designated by the Holders, at reasonable times and in a reasonable
manner, all financial and other records, pertinent documents and
properties of the Company, and cause the respective officers, directors
and employees of the
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Company to supply all information reasonably requested by any such
representative, Underwriter, attorney or accountant in connection with
a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its best efforts
to cause all Registrable Securities to be listed on any securities
exchange or any automated quotation system on which similar securities
issued by the Company are then listed if requested by the Majority
Holders, to the extent such Registrable Securities satisfy applicable
listing requirements;
(o) use its best efforts to cause the Exchange Securities or
Registrable Securities, as the case may be, to be rated by two
nationally recognized statistical rating organizations (as such term is
defined in Rule 436(g)(2) under the 1933 Act);
(p) if reasonably requested by any Holder of Registrable
Securities covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment such
information with respect to such Holder as such Holder reasonably
requests to be included therein and (ii) make all required filings of
such Prospectus supplement or such post-effective amendment promptly
following receipt by the Company of notification of the matters to be
incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in connection
therewith (including those requested by the Holders of a majority of
the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities including,
but not limited to, an Underwritten Offering and in such connection,
(i) to the extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Securities with
respect to the business of the Company and its subsidiaries, the
Registration Statement, Prospectus and documents incorporated by
reference or deemed incorporated by reference, if any, in each case, in
form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested, (ii) obtain opinions of counsel to the Company (which
counsel and opinions, in form, scope and substance, shall be reasonably
satisfactory to the Holders and such Underwriters and their respective
counsel) addressed to each selling Holder and Underwriter of
Registrable Securities, covering the matters customarily covered in
opinions requested in underwritten offerings, (iii) obtain "cold
comfort" letters from the independent certified public accountants of
the Company (and, if necessary, any other certified public accountant
of any subsidiary of the Company, or of any business acquired by the
Company for which financial statements and financial data are or are
required to be included in the Registration Statement) addressed to
each selling Holder and Underwriter of Registrable Securities, such
letters to be in customary form and
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covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings, and (iv) deliver
such documents and certificates as may be reasonably requested by the
Holders of a majority in principal amount of the Registrable Securities
being sold or the Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause
(i) above and to evidence compliance with any customary conditions
contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Securities to furnish to the Company such
information regarding the Holder and the proposed distribution by such Holder of
such Registrable Securities as the Company may from time to time reasonably
request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(e)(v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If the Company shall give any
such notice to suspend the disposition of Registrable Securities pursuant to a
Registration Statement, the Company shall extend the period during which the
Registration Statement shall be maintained effective pursuant to this Agreement
by the number of days during the period from and including the date of the
giving of such notice to and including the date when the Holders shall have
received copies of the supplemented or amended Prospectus necessary to resume
such dispositions. The Company may give any such notice only twice during any
365 day period and any such suspensions may not exceed 30 days for each
suspension and there may not be more than two suspensions in effect during any
365 day period.
The Holders of Registrable Securities covered by a Shelf
Registration Statement who desire to do so may sell such Registrable Securities
in an Underwritten Offering. In any such Underwritten Offering, the investment
banker or investment bankers and manager or managers (the "Underwriters") that
will administer the offering will be selected by the Majority Holders of the
Registrable Securities included in such offering.
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4. Participation of Broker-Dealers in Exchange Offer.
(a) The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Securities for its own account in the
Exchange Offer in exchange for Securities that were acquired by such
broker-dealer as a result of market-making or other trading activities (a
"Participating Broker-Dealer"), may be deemed to be an "underwriter" within the
meaning of the 1933 Act and must deliver a prospectus meeting the requirements
of the 1933 Act in connection with any resale of such Exchange Securities.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration Statement
includes a plan of distribution containing a statement to the above effect and
the means by which Participating Broker- Dealers may resell the Exchange
Securities, without naming the Participating Broker-Dealers or specifying the
amount of Exchange Securities owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery obligation
under the 1933 Act in connection with resales of Exchange Securities for their
own accounts, so long as the Prospectus otherwise meets the requirements of the
1933 Act.
(b) In light of the above, notwithstanding the other
provisions of this Agreement, the Company agrees that the provisions of this
Agreement as they relate to a Shelf Registration shall also apply to an Exchange
Offer Registration to the extent, and with such reasonable modifications thereto
as may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Securities by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration Statement,
as would otherwise be contemplated by Section 3(i), for a period
exceeding 180 days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3 of this
Agreement) and Participating Broker-Dealers shall not be authorized by
the Company to deliver and shall not deliver such Prospectus after such
period in connection with the resales contemplated by this Section 4;
and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer Registration,
to the extent not required by the positions of the Staff of the SEC or
the 1933 Act and the rules and regulations thereunder, will be in
conformity with the reasonable request to the Company by the Placement
Agents or with the reasonable request in writing to the Company by one
or more broker-dealers who certify to the Placement Agents and the
Company in writing that they anticipate that they will be Participating
Broker-Dealers; and provided
<PAGE> 15
14
further that, in connection with such application of the Shelf
Registration procedures set forth in Section 3 to an Exchange Offer
Registration, the Company shall be obligated (x) to deal only with one
entity representing the Participating Broker- Dealers, which shall be
Morgan Stanley & Co. Incorporated unless it elects not to act as such
representative, (y) to pay the fees and expenses of only one counsel
representing the Participating Broker-Dealers, which shall be counsel
to the Placement Agents unless such counsel elects not to so act and
(z) to cause to be delivered only one, if any, "cold comfort" letter
with respect to the Prospectus in the form existing on the last
Exchange Date and with respect to each subsequent amendment or
supplement, if any, effected during the period specified in clause (i)
above.
(c) The Placement Agents shall have no liability to the
Company or any Holder with respect to any reasonable request that it may make
pursuant to Section 4(b) above.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the
Placement Agents, each Holder and each person, if any, who controls any
Placement Agent or any Holder within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act, or is under common control with, or is
controlled by, any Placement Agent or any Holder, from and against all losses,
claims, damages and liabilities (including, without limitation, any reasonable
legal or other expenses reasonably incurred by the Placement Agents, any Holder
or any such controlling or affiliated person in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or alleged
omission to state therein a material fact necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
except insofar as such losses, claims, damages or liabilities are caused by any
such untrue statement or omission or alleged untrue statement or omission based
upon information relating to the Placement Agents or any Holder furnished to the
Company in writing by the Placement Agents or any selling Holder expressly for
use therein. In connection with any Underwritten Offering permitted by Section
3, the Company will also indemnify the Underwriters, if any, selling brokers,
dealers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the 1933 Act and the 1934 Act) to
<PAGE> 16
15
the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Placement Agents and the other
selling Holders, and each of their respective directors, officers who sign the
Registration Statement and each Person, if any, who controls the Company, any
Placement Agent and any other selling Holder within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act to the same extent as
the foregoing indemnity from the Company to the Placement Agents and the
Holders, but only with reference to information relating to such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either paragraph (a) or paragraph (b) above,
such person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agents and all
persons, if any, who control any Placement Agent within the meaning of either
Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the fees and
expenses of more than one separate firm (in addition to any local counsel) for
the Company, its directors, its officers who sign the Registration Statement and
each person, if any, who controls the Company within the meaning of either such
Section and (c) the fees and expenses of more than one separate firm (in
addition to any local counsel) for all Holders and all persons, if any, who
control any Holders within the meaning of either such Section, and that all such
fees and expenses shall be reimbursed as they are incurred. In such case
involving the Placement Agents and persons who control any Placement Agent, such
firm shall be designated in writing by Morgan Stanley & Co. Incorporated. In
such case involving the Holders and such persons who control Holders, such firm
shall be designated in writing by the Majority Holders. In all other cases, such
firm shall be designated by the
<PAGE> 17
16
Company. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel (which request shall include a reasonably detailed statement
of the fees and expenses so incurred) as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party for such fees and expenses of
counsel in accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened proceeding in respect
of which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such proceeding.
(d) If the indemnification provided for in paragraph (a) or
paragraph (b) of this Section 4 is unavailable to an indemnified party or
insufficient in respect of any losses, claims, damages or liabilities, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative fault
of the indemnifying party or parties on the one hand and of the indemnified
party or parties on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective number
of Registrable Securities of such Holder that were registered pursuant to a
Registration Statement.
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in paragraph (d) above shall be
deemed to include, subject to the limitations set forth above, any legal or
other expenses
<PAGE> 18
17
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Securities
were sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by or on behalf
of the Placement Agents, any Holder or any person controlling any Placement
Agent or any Holder, or by or on behalf of the Company, its officers or
directors or any person controlling the Company, (iii) acceptance of any of the
Exchange Securities and (iv) any sale of Registrable Securities pursuant to a
Shelf Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered
into, and on or after the date of this Agreement will not enter into, any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not in any way
conflict with and are not inconsistent with the rights granted to the holders of
the Company's other issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or consent; provided, however, that no amendment, modification,
supplement, waiver or consents to any departure from the provisions of Section 5
hereof shall be effective as against any Holder of Registrable Securities unless
consented to in writing by such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the
<PAGE> 19
18
most current address given by such Holder to the Company by means of a notice
given in accordance with the provisions of this Section 6(c), which address
initially is, with respect to the Placement Agents, the address set forth in the
Placement Agreement; and (ii) if to the Company, initially at the Company's
address set forth in the Placement Agreement and thereafter at such other
address, notice of which is given in accordance with the provisions of this
Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to the Trustee, at
the address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Placement Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement and such person shall be entitled to receive the benefits hereof. The
Placement Agents (in their capacity as Placement Agents) shall have no liability
or obligation to the Company with respect to any failure by a Holder to comply
with, or any breach by any Holder of, any of the obligations of such Holder
under this Agreement.
(e) Purchases and Sales of Securities. The Company shall not,
and shall use its best efforts to cause its affiliates (as defined in Rule 405
under the 1933 Act) not to, purchase and then resell or otherwise transfer any
Securities.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Placement Agents, on the other hand, and any Holder shall have the
right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
<PAGE> 20
19
(g) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE> 21
20
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
INTERCEL, INC.
By: /s/ Allen E. Smith
---------------------------------
Name: Allen E. Smith
Title: President and
Chief Executive Officer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
OPPENHEIMER & CO., INC.
By Morgan Stanley & Co. Incorporated
By: /s/ Robert Shepardson
--------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4(j)
COLLATERAL PLEDGE AND SECURITY AGREEMENT
This COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "Pledge
Agreement") is made and entered into as of June 10, 1997 by INTERCEL, INC., a
Delaware corporation (the "Pledgor"), having its principal office at 1233 O.G.
Skinner Drive, West Point, Georgia 31833 in favor of BANKERS TRUST COMPANY, a
banking corporation duly organized and existing under the laws of the State of
New York, having an office at 4 Albany Street, New York, New York, 10006, as
trustee (the "Trustee") for the holders (the "Holders") of the Notes (as defined
herein) issued by the Pledgor under the Indenture referred to below.
WITNESSETH
WHEREAS, the Pledgor and Bankers Trust Company, as Trustee,
have entered into that certain indenture dated as of the date hereof (as
amended, restated, supplemented or otherwise modified from time to time, the
"Indenture"), pursuant to which the Pledgor is issuing on the date hereof
$300,000,000 in aggregate principal amount of 11 1/8% Senior Notes due 2007 (the
"Notes"); and
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to
(i) purchase or cause the purchase of Pledged Securities (as defined herein) in
an amount that will be sufficient upon receipt of scheduled interest and
principal payments in respect thereof to provide for the payment of the first
six scheduled interest payments due on the Notes and (ii) place such Pledged
Securities (as defined herein) (or cause them to be placed) in an account held
by the Trustee for the benefit of Holders of the Notes; and
WHEREAS, to secure the obligations of the Pledgor under the
Indenture and the Notes to pay in full each of the first six scheduled interest
payments on the Notes and to secure repayment of the principal, premium (if any)
and interest on the Notes in the event that the Notes become due and payable
prior to such time as the first six scheduled interest payments thereon shall
have been paid in full (the "Obligations"), the Pledgor has agreed to (i) pledge
to the Trustee for its benefit and the ratable benefit of the Holders of the
Notes, a security interest in the Pledged Securities (as defined herein) and
related collateral and (ii) execute and deliver this Pledge Agreement in order
to secure the payment and performance by the Pledgor of all the Obligations.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to such terms in the Indenture. Unless otherwise defined herein
or in the Indenture, terms used in Articles 8 or 9 of the Uniform Commercial
Code ("UCC") as in effect in the State of New York are used herein as therein
defined and terms used in Revised Article 8, as such term is defined in 31
C.F.R. ss. 357.2, as modified by the amendments promulgated at 61 Fed. Reg.
43,628 (Aug. 23, 1996) ("Revised Article 8"), are used herein ase therein
defined.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and in order to induce the Holders of the Notes to purchase the
Notes, the Pledgor hereby agrees with the Trustee, for the benefit of the
Trustee and for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. The Pledgor
hereby pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing first priority
security interest in and to all of the Pledgor's right, title and interest in,
to and under the following (hereinafter collectively referred to as the
"Collateral"), whether characterized as investment property, general intangibles
or otherwise: (a) the United States Treasury securities identified by CUSIP No.
in Annex 1 to Exhibit A to this Pledge Agreement (the "Pledged Securities"), (b)
any and all applicable security entitlements to the Pledged Securities, (c) the
Bankers Trust Company account in the name of "Bankers Trust Company, as Trustee
for the benefit of the holders of the 11 1/8% Senior Notes Due 2007 of InterCel,
Inc. Collateral Pledge Account", Administrative Account No. 23333 (the "Pledge
Account") established and maintained by the Trustee pursuant to this Pledge
Agreement, (d) any and all related securities accounts in which security
entitlements to the Pledged Securities are carried and (e) all proceeds of any
and all of the foregoing Collateral (including, without limitation, proceeds
that constitute property of the types described in clauses (a) - (d) of this
Section 1) and, to the extent not otherwise included, all cash.
In the event the Exchange Offer is not consummated and the
Shelf Registration Statement is not declared effective on or prior to December
10, 1997, and the interest rate on the Notes is increased by .5% per annum as
required by the Indenture, the Company shall purchase and deliver to the Trustee
additional Pledged Securities in such amount as will be sufficient upon receipt
of scheduled interest and/or principal payments of all Pledged Securities
thereafter held in the Pledged Account, in the opinion of a nationally
recognized firm of independent public accountants selected by the Company, to
provide payment for the first six scheduled interest payments due on the Notes
(assuming the additional .5% per annum remains in effect for the entire period).
The additional Pledged Securities shall be pledged by the Company to the Trustee
for the benefit of the Holders and shall be held by the Trustee in the Pledged
Account.
SECTION 2. Security for Obligation. This Pledge Agreement
secures the prompt and complete payment and performance when due (whether at
stated maturity, by acceleration or otherwise) of all the Obligations.
SECTION 3. Delivery of Collateral; Pledge Account; Interest.
(a) The Pledged Securities shall be pledged and transferred to the Trustee and
the Trustee shall
<PAGE> 3
3
become the holder of a security entitlement to the Pledged Securities, through
action by the Federal Reserve Bank of New York ("FRBNY") or another securities
intermediary, as confirmed (in writing or electronically or otherwise in
accordance with standard industry practice) to the Trustee by FRBNY or such
other securities intermediary (i) indicating by book-entry that the Pledged
Securities or a security entitlement thereto has been credited to the Trustee's
account, or (ii) acquiring the Pledged Securities or a security entitlement
thereto for the Trustee and accepting the same for credit to a securities
account of the Trustee.
(b) Prior to or concurrently with the execution and delivery
hereof and prior to the transfer to the Trustee of the Pledged
Securities (or acquisition by the Trustee of any security entitlement
thereto), as provided in subsection (a) of this Section 3, the Trustee
shall establish the Pledge Account on its books as an account
segregated from all other custodial or collateral accounts at its
office at 4 Albany Street, New York, New York, 10006, Attention:
Corporate Trustee Administration Department. Upon transfer of the
Pledged Securities to the Trustee (or the Trustee's acquisition of a
security entitlement thereto), as confirmed to the Trustee by FRBNY or
another securities intermediary, the Trustee shall make appropriate
book entries indicating that the Pledged Securities and/or such
security entitlement have been credited to and are held in the Pledge
Account. Subject to the other terms and conditions of this Pledge
Agreement, all funds or other property held by the Trustee pursuant to
this Pledge Agreement shall be held in the Pledge Account subject
(except as expressly provided in Sections 4(a), (b) and (c) hereof) to
the exclusive dominion and control of the Trustee and exclusively for
the benefit of the Trustee and for the ratable benefit of the Holders
of the Notes and segregated from all other funds or other property
otherwise held by the Trustee.
(c) All Collateral shall be retained in the Pledge
Account pending disbursement pursuant to the terms hereof.
(d) Concurrently with the execution and delivery of this
Pledge Agreement the Trustee is delivering to the Pledgor, Morgan
Stanley & Co. Incorporated, Merrill Lynch, Pierce, Fenner & Smith
Incorporated and Oppenheimer & Co., Inc., a duly executed certificate,
in the form of Exhibit A hereto, of an officer of the Trustee,
confirming the Trustee's establishment and maintenance of the Pledge
Account and its receipt and holding of the Pledged Securities or a
security entitlement thereto and the crediting of the Pledged
Securities or such security entitlement to the Pledged Account, all in
accordance with this Pledge Agreement.
(e) Concurrently with the execution and delivery of this
Pledge Agreement, the Pledgor is delivering to the Trustee
acknowledgement copies or stamped receipt copies of proper financing
statements, duly filed on or before the Closing Date (as
<PAGE> 4
4
defined in the Indenture) under the UCC of the State of Georgia,
covering the Collateral described in this Pledge Agreement.
SECTION 4. Disbursements. (a) Three business days prior to the
due date of any of the first six scheduled interest payments on the Notes, the
Pledgor may, pursuant to written instructions given by the Pledgor to the
Trustee (an "Issuer Order"), direct the Trustee to release from the Pledge
Account and pay to the Holders of the Notes proceeds sufficient to provide for
payment in full of such interest then due on the Notes. Upon receipt of an
Issuer Order, the Trustee will release funds in an amount sufficient to provide
for the payment of the interest on the Notes in accordance with the Company
Order and the payment provisions of the Indenture to the Holders of the Notes
from (and to the extent of) proceeds of the Pledged Securities in the Pledge
Account. Nothing in this Section 4 shall affect the Trustee's rights to apply
the Collateral to the payments of amounts due on the Notes upon acceleration
thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of
funds other than the Pledge Account ("Pledgor Funds"), the Pledgor may,
after payment in full of such interest payment, direct the Trustee
pursuant to an Issuer Order to release to the Pledgor or to another
party at the direction of the Pledgor (the "Pledgor's Designee")
proceeds from the Pledge Account in an amount less than or equal to the
amount of Pledgor Funds applied to such interest payment. Upon receipt
by the Trustee of such Issuer Order and provided the Trustee has
received such interest payment, the Trustee shall pay over to the
Pledgor or the Pledgor's Designee, as the case may be, the requested
amount from proceeds in the Pledge Account as soon as practicable.
(c) If at any time the principal of and interest on the
Pledged Securities exceeds 100% of the amount sufficient, in the
written opinion of a nationally recognized firm of independent
accountants selected by the Pledgor and delivered to the Trustee, to
provide for payment in full of the remaining first six scheduled
interest payments due on the Notes, the Pledgor may direct the Trustee
to release any such excess amount to the Pledgor or to such other party
as the Pledgor may direct. Upon receipt of an Issuer Order (which shall
include a certificate from such nationally recognized firm of
independent accountants stating the amount by which the Pledged
Securities exceeds the amount required to be held in the Pledge
Account) the Trustee shall pay over to the Pledgor or the Pledgor's
Designee, as the case may be, any such excess amount.
(d) Upon payment in full of the first six scheduled interest
payments on the Notes, the security interest in the Collateral
evidenced by this Pledge Agreement will automatically terminate and be
of no further force and effect and the Collateral shall promptly be
paid over and transferred to the Pledgor. Furthermore, upon the release
<PAGE> 5
5
of any Collateral from the Pledge Account in accordance with the terms
of this Pledge Agreement, whether upon release of Collateral to Holders
as payment of interest or otherwise, the security interest evidenced by
this Pledge Agreement in such released Collateral will automatically
terminate and be of no further force and effect.
(e) At least three Business Days prior to the due date of each
of the first six scheduled interest payments on the Notes, the Pledgor
shall give the Trustee notice (by Issuer Order) as to whether such
interest payment will be made pursuant to Section 4(a) or 4(b) and the
respective amounts of interest that will be paid from the Pledge
Account and from Pledgor Funds. Any Pledgor Funds to be used to make
any interest payment shall be delivered to the Trustee, in immediately
available funds, prior to 10 a.m. on such interest payment date. If no
such notice is given or such Pledgor Funds have not been so delivered,
the Trustee will act pursuant to Section 4(a) as if it had received an
Issuer Order pursuant thereto for the payment in full of the interest
then due from the Pledge Account.
(f) The Trustee shall liquidate Collateral in the Pledge
Account (pursuant to written instructions from Pledgor) in order to
make any scheduled payment of interest unless there are sufficient
funds in the Pledge Account on such interest payment date.
(g) Nothing contained in Section 1, Section 3, this Section 4
or any other provision of this Pledge Agreement shall (i) afford the
Pledgor any right to issue entitlement orders with respect to any
security entitlement to the Pledged Securities or any securities
account in which any such security entitlement may be carried, or
otherwise afford the Pledgor control of any such security entitlement
or (ii) otherwise give rise to any rights of Pledgor with respect to
the Pledged Securities, any security entitlement thereto or any
securities account in which any such security entitlement may be
carried, other than the Pledgor's rights under this Pledge Agreement as
the beneficial owner of collateral pledged to and subject to the
exclusive dominion and control (except as expressly provided in
Sections 4(a), (b) and (c) hereof) of the Trustee in its capacity as
such (and not as a securities intermediary). The Pledgor acknowledges,
confirms and agrees that the Trustee is an entitlement holder of the
security entitlements to the Pledged Securities solely as Trustee for
the Holders of the Notes and not as a securities intermediary.
<PAGE> 6
6
SECTION 5. Representations and Warranties. The Pledgor hereby
represents and warrants that:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge
Agreement will not contravene any provision of applicable law or the
Certificate of Incorporation of the Pledgor or any material agreement
or other material instrument binding upon the Pledgor or any of its
subsidiaries or any judgment, order or decree of any governmental body,
agency or court having jurisdiction over the Pledgor or any of its
subsidiaries, or result in the creation or imposition of any Lien on
any assets of the Pledgor, except for the security interests granted
under this Pledge Agreement; no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required (i) for the performance by the Pledgor of its obligations
under this Pledge Agreement, (ii) for the pledge by the Pledgor of the
Collateral pursuant to this Pledge Agreement or (iii) except for any
such consents, approvals, authorizations or orders required to be
obtained by the Trustee (or the Holders) for reasons other than the
consummation of this transaction, for the exercise by the Trustee of
the rights provided for in this Pledge Agreement or the remedies in
respect of the Collateral pursuant to this Pledge Agreement.
(b) The Pledgor is the beneficial owner of the Collateral,
free and clear of any Lien or claims of any person or entity (except
for the security interests granted under this Pledge Agreement). No
financing statement covering the Pledgor's interest in the Pledged
Securities is on file in any public office, other than the financing
statements filed pursuant to this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly
executed and delivered by the Pledgor and constitutes a valid and
binding agreement of the Pledgor, enforceable against the Pledgor in
accordance with its terms, except as (i) the enforceability hereof may
be limited by bankruptcy, insolvency, fraudulent conveyance,
preference, reorganization, moratorium or similar laws now or hereafter
in effect relating to or affecting creditors' rights or remedies
generally, (ii) the availability of equitable remedies may be limited
by equitable principles of general applicability, (iii) the exculpation
provisions and rights to indemnification hereunder may be limited by
U.S. federal and state securities laws and public policy considerations
and (iv) the waiver of rights and defenses contained in Section 11(b),
Section 14.11 and Section 14.15 hereof may be limited by applicable
law.
(d) Upon the transfer to the Trustee of the Pledged Securities
and the acquisition by the Trustee of a security entitlement thereto,
in accordance with Section 3, the pledge of and grant of a security
interest in the Collateral securing the payment of the Obligations for
the benefit of the Trustee and the Holders of the Notes will
<PAGE> 7
7
constitute a first priority perfected security interest in such
Collateral, enforceable as such against all creditors of the Pledgor
(and any persons purporting to purchase any of the Collateral from the
Pledgor).
(e) There are no legal or governmental proceedings pending or,
to the best of the Pledgor's knowledge, threatened to which the Pledgor
or any of its subsidiaries is a party or to which any of the properties
of the Pledgor or any such subsidiary is subject that would materially
adversely affect the power or ability of the Pledgor to perform its
obligations under this Pledge Agreement or to consummate the
transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge
Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 6. Further Assurances. The Pledgor will, promptly upon
request by the Trustee, execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Trustee, deliver any instruments to the Trustee and take any
other actions that are necessary or, in the opinion of the Trustee, desirable to
perfect, continue the perfection of, or protect the first priority of the
Trustee's security interest in and to the Collateral, to protect the Collateral
against the rights, claims, or interests of third persons (other than any such
rights, claims or interests created by or arising through the Trustee) or to
effect the purposes of this Pledge Agreement. The Pledgor also hereby authorizes
the Trustee to file any financing or continuation statements in the United
States with respect to the Collateral without the signature of the Pledgor (to
the extent permitted by applicable law). The Pledgor will promptly pay all
reasonable costs incurred in connection with any of the foregoing within 45 days
of receipt of an invoice therefor. The Pledgor also agrees, whether or not
requested by the Trustee, to take all actions that are necessary to perfect or
continue the perfection of, or to protect the first priority of, the Trustee's
security interest in and to the Collateral, including the filing of all
necessary financing and continuation statements, and to protect the Collateral
against the rights, claims or interests of third persons (other than any such
rights, claims or interests created by or arising through the Trustee).
SECTION 7. Covenants. The Pledgor covenants and agrees with
the Trustee and the Holders of the Notes that from and after the date of this
Pledge Agreement until the earlier of payment in full in cash of the
Obligations:
<PAGE> 8
8
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to,
any of the Collateral or its beneficial interest therein, and (ii) it
will not create or permit to exist any Lien or other adverse interest
in or with respect to its beneficial interest in any of the Collateral
(except for the security interests granted under this Pledge
Agreement); and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the Trustee's right to sell or otherwise dispose of the
Collateral or (ii) fail to pay or discharge any tax, assessment or levy
of any nature with respect to its beneficial interest in the Collateral
not later than five days prior to the date of any proposed sale under
any judgment, writ or warrant of attachment with respect to such
beneficial interest.
SECTION 8. Power of Attorney. In addition to all of the powers
granted to the Trustee pursuant to the Indenture, the Pledgor hereby appoints
and constitutes the Trustee as the Pledgor's attorney-in-fact (with full power
of substitution) to exercise to the fullest extent permitted by law all of the
following powers upon and at any time after the occurrence and during the
continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Trustee in its sole reasonable discretion, and such
payments made by the Trustee to become part of the Obligations of the Pledgor to
the Trustee, due and payable immediately upon demand. The Trustee's authority
under this Section 8 shall include, without limitation, the authority to endorse
and negotiate any checks or instruments representing proceeds of Collateral in
the name of the Pledgor, execute and give receipt for any certificate of
ownership or any document constituting Collateral, transfer title to any item of
Collateral, sign the Pledgor's name on all financing statements (to the extent
permitted by applicable law) or any other documents deemed necessary or
appropriate by the Trustee to preserve, protect or perfect the security interest
in the Collateral and to file the same, prepare, file and sign the Pledgor's
name on any notice of Lien, and to take any other actions arising from or
incident to the powers granted to the Trustee in this Pledge Agreement. This
power of attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 9. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order to
preserve and protect the security interest of the Trustee and the Holders of the
Notes in and to the Collateral granted hereby and shall not be interpreted to,
and shall not impose any duties on the Trustee in connection therewith other
than those expressly provided herein or imposed under applicable law. Except as
provided by applicable law or by the Indenture, the Trustee shall
<PAGE> 9
9
be deemed to have exercised reasonable care in the custody and preservation of
the Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which the Trustee accords similar property held by
the Trustee for similar accounts, it being understood that the Trustee in its
capacity as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Collateral, whether or not the Trustee has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral or any loss on any investment.
SECTION 10. Indemnity. The Pledgor shall indemnify, hold
harmless and defend the Trustee and its directors, officers, agents and
employees, from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs, reasonable
investigative fees and costs, and reasonable legal fees and damages arising from
the Trustee's performance as Trustee under this Pledge Agreement, except to the
extent that such claim, action, obligation, liability or expense is directly
attributable to the bad faith, gross negligence or wilful misconduct of such
indemnified person.
SECTION 11. Remedies Upon Event of Default. If any Event of
Default under the Indenture or default hereunder (any such Event of Default or
default being referred to in this Pledge Agreement as an "Event of Default")
shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in
addition to all other rights given by law or by this Pledge Agreement
or the Indenture, all of the rights and remedies with respect to the
Collateral of a secured party under the UCC in effect in the State of
New York at that time. In addition, with respect to any Collateral that
shall then be in or shall thereafter come into the possession or
custody of the Trustee, the Trustee may sell or cause the same to be
sold at any broker's board or at public or private sale, in one or more
sales or lots, at such price or prices as the Trustee may deem best,
for cash or on credit or for future delivery, without assumption of any
credit risk. The purchaser of any or all Collateral so sold shall
thereafter hold the same absolutely, free from any claim, encumbrance
or right of any kind whatsoever created by or through the Pledgor.
Unless any of the Collateral threatens, in the reasonable judgment of
the Trustee, to decline speedily in value or is or becomes of a type
sold on a recognized market, the Trustee will give the Pledgor
reasonable notice of the time and place of any public sale thereof, or
of the time after which any private sale or other intended disposition
is to be made. Any sale of the Collateral conducted in conformity with
reasonable commercial practices of banks, insurance companies,
commercial finance companies, or other financial institutions disposing
of property similar to the Collateral shall be deemed to be
commercially reasonable. Any requirements of reasonable notice shall be
met if such notice is mailed to the Pledgor as provided in Section 14.1
hereof at least ten (10) days before
<PAGE> 10
10
the time of the sale or disposition. The Trustee or any Holder of Notes
may, in its own name or in the name of a designee or nominee, buy any
of the Collateral at any public sale and, if permitted by applicable
law, at any private sale. All expenses (including court costs and
reasonable attorneys' fees, expenses and disbursements) of, or incident
to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other disposition of the
Collateral.
(b) The Pledgor further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Collateral pursuant to this Section 11 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgor further agrees that a breach of any of the covenants contained
in this Section 11 will cause irreparable injury to the Trustee and the
Holders of the Notes, that the Trustee and the Holders of the Notes
have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 11
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no
Event of Default has occurred.
SECTION 12. Expenses. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 13. Security Interest Absolute. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the
Indenture or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment
of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from the
Indenture;
(c) any exchange, surrender, release or non-perfection
of any Liens on any other collateral for all or any of the
Obligations; or
<PAGE> 11
11
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Pledgor in respect of the Obligations or of this
Pledge Agreement.
SECTION 14. Miscellaneous Provisions.
Section 14.1. Notices. Any notice or communication given
hereunder shall be sufficiently given if in writing and delivered in person or
mailed by first class mail, commercial courier service or telecopier
communication, addressed as follows:
if to the Pledgor:
InterCel, Inc.
1233 O.G. Skinner Drive
West Point, GA 31833
Fax: (706) 645-9922
Attention: Chief Financial Officer
if to the Trustee:
Bankers Trust Company
4 Albany Street
New York, NY 10006
Fax: (212) 250-6961
Attention: Corporate Trust and Agency Group
Section 14.2. No Adverse Interpretation of Other Agreements.
This Pledge Agreement may not be used to interpret another pledge, security or
debt agreement of the Pledgor or any subsidiary thereof. No such pledge,
security or debt agreement (other than the Indenture) may be used to interpret
this Pledge Agreement.
Section 14.3. Severability. The provisions of this Pledge
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in whole or in part in any jurisdiction, then such
invalidity or unenforceability shall affect in that jurisdiction only such
clause or provision, or part thereof, and shall not in any manner affect such
clause or provision in any other jurisdiction or any other clause or provision
of this Pledge Agreement in any jurisdiction.
Section 14.4. Headings. The headings in this Pledge Agreement
have been inserted for convenience of reference only, are not to be considered a
part hereof and shall in no way modify or restrict any of the terms or
provisions hereof.
<PAGE> 12
12
Section 14.5. Counterpart Originals. This Pledge Agreement may
be signed in two or more counterparts, each of which shall be deemed an
original, but all of which shall together constitute one and the same agreement.
Section 14.6. Benefits of Pledge Agreement. Nothing in this
Pledge Agreement, express or implied, shall give to any person, other than the
parties hereto and their successors hereunder, and the Holders of the Notes, any
benefit or any legal or equitable right, remedy or claim under this Pledge
Agreement.
Section 14.7. Amendments, Waivers and Consents. Any amendment
or waiver of any provision of this Pledge Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge Agreement shall be
effective only if made or duly given in compliance with all of the terms and
provisions of the Indenture, and neither the Trustee nor any Holder of Notes
shall be deemed, by any act, delay, indulgence, omission or otherwise, to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default or in any breach of any of the terms and conditions hereof.
Failure of the Trustee or any Holder of Notes to exercise, or delay in
exercising, any right, power or privilege hereunder shall not preclude any other
or further exercise thereof or the exercise of any other right, power or
privilege. A waiver by the Trustee or any Holder of Notes of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy that the Trustee or such Holder of Notes would otherwise have on any
future occasion. The rights and remedies herein provided are cumulative, may be
exercised singly or concurrently and are not exclusive of any rights or remedies
provided by law.
Section 14.8. Interpretation of Agreement. To the extent a
term or provision of this Pledge Agreement conflicts with the Indenture, the
Indenture shall control with respect to the subject matter of such term or
provision. Acceptance of or acquiescence in a course of performance rendered
under this Pledge Agreement shall not be relevant to determine the meaning of
this Pledge Agreement even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity for objection.
Section 14.9. Continuing Security Interest; Termination. (a)
This Pledge Agreement shall create a continuing security interest in and to the
Collateral and shall, unless otherwise provided in this Pledge Agreement, remain
in full force and effect until the payment in full in cash of the Obligations.
This Pledge Agreement shall be binding upon the Pledgor, its transferees,
successors and assigns, and shall inure, together with the rights and remedies
of the Trustee hereunder, to the benefit of the Trustee, the Holders of the
Notes and their respective successors, transferees and assigns.
(b) This Pledge Agreement (other than Pledgor's
obligations under Sections 10 and 12) shall terminate upon the payment in full
in cash of the Obligations. At
<PAGE> 13
13
such time, the Trustee shall, pursuant to an Issuer Order, reassign and
redeliver to the Pledgor all of the Collateral hereunder that has not been
sold, disposed of, retained or applied by the Trustee in accordance with the
terms of this Pledge Agreement and the Indenture and take all actions that are
necessary to release the security interest created by this Pledge Agreement in
and to the Collateral, including the execution and delivery of all termination
statements necessary to terminate any financing or continuation statements
filed with respect to the Collateral. Such reassignment and redelivery shall be
without warranty by or recourse to the Trustee in its capacity as such, except
as to the absence of any Liens on the Collateral created by or arising through
the Trustee, and shall be at the reasonable expense of the Pledgor.
Section 14.10. Survival of Representations and Covenants. All
representations, warranties and covenants of the Pledgor contained herein shall
survive the execution and delivery of this Pledge Agreement, and shall terminate
only upon the termination of this Pledge Agreement.
Section 14.11. Waivers. The Pledgor waives presentment and
demand for payment of any of the Obligations, protest and notice of dishonor or
default with respect to any of the Obligations, and all other notices to which
the Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
Section 14.12. Authority of the Trustee. (a) The Trustee shall
have and be entitled to exercise all powers hereunder that are specifically
granted to the Trustee by the terms hereof, together with such powers as are
reasonably incident thereto. The Trustee may perform any of its duties hereunder
or in connection with the Collateral by or through agents or employees and shall
be entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge Agreement or the Indenture, neither the Trustee nor any director,
officer, employee, attorney or agent of the Trustee shall be liable to the
Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee, hereunder, except for its own bad faith, gross negligence
or willful misconduct, and the Trustee shall not be responsible for the
validity, effectiveness or sufficiency hereof or of any document or security
furnished pursuant hereto. The Trustee and its directors, officers, employees,
attorneys and agents shall be entitled to rely on any communication, instrument
or document believed by it or them to be genuine and correct and to have been
signed or sent by the proper person or persons.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge Agreement with respect to any
action taken by the Trustee or the exercise or non-exercise by the Trustee of
any option, right, request, judgment or other right or remedy provided for
herein or resulting or arising out of this Pledge Agreement shall, as between
the Trustee and the Holders of the Notes, be governed
<PAGE> 14
14
by the Indenture and by such other agreements with respect thereto as may exist
from time to time among them, but, as between the Trustee and the Pledgor, the
Trustee shall be conclusively presumed to be acting as agent for the Holders of
the Notes with full and valid authority so to act or refrain from acting, and
the Pledgor shall not be obligated or entitled to make any inquiry respecting
such authority.
Section 14.13 Final Expression. This Pledge Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Pledge
Agreement and is intended as a complete and exclusive statement of the terms and
conditions thereof.
Section 14.14. Rights of Holders of the Notes. No Holder of
Notes shall have any independent rights hereunder other than those rights
granted to individual Holders of the Notes pursuant to Section 6.07 of the
Indenture; provided that nothing in this subsection shall limit any rights
granted to the Trustee under the Notes or the Indenture.
Section 14.15. GOVERNING LAW; SUBMISSION TO JURISDICTION;
WAIVER OF JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE
GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY
DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE
NOTES IN CONNECTION WITH THIS PLEDGE AGREEMENT, AND WHETHER ARISING IN CONTRACT,
TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING: THE MATTERS IDENTIFIED IN 31
C.F.R. PART 357, 61 FED. REG. 43626 AUG. 23, 1996), INCLUDING REVISED ARTICLE 8,
SHALL BE GOVERNED SOLELY BY THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HAS APPOINTED CT CORPORATION SYSTEM, 1633
BROADWAY, NEW YORK, NY 10019 AS ITS AGENT FOR SERVICE OF PROCESS IN ANY SUIT,
ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS
BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR
STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS
CAPACITY AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE
THE RIGHT, TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE
PLEDGOR OR THE COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD
FAITH (AND HAVING
<PAGE> 15
15
PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS THE CASE
MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE PLEDGOR
AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS IN ANY
PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR
(EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE
TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS
BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS THE CASE MAY BE, THAT SUCH
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE TRUSTEE OR SUCH
HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER
OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED
AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR
TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY
OR PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR
DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS
OF THE NOTES ON THE OTHER HAND.
<PAGE> 16
IN WITNESS WHEREOF, the Pledgor and the Trustee have each
caused this Pledge Agreement to be duly executed and delivered as of the date
first above written.
Pledgor:
INTERCEL, INC.
By: /s/ Allen E. Smith
-------------------------------
Name: Allen E. Smith
Title: President and
Chief Executive Officer
Trustee:
BANKERS TRUST COMPANY,
as Trustee
By: /s/ Sandra J. Shaffer
-------------------------------
Name: Sandra J. Shaffer
Title: Assistant Vice President
<PAGE> 17
EXHIBIT A
BANKERS TRUST COMPANY
OFFICER'S CERTIFICATE
Pursuant to Section 3(d) of the Collateral Pledge and Security
Agreement (the "Pledge Agreement") dated as of June 10, 1997 between InterCel,
Inc. (the "Pledgor") and Bankers Trust Company as trustee (the "Trustee") for
the holders of the Pledgor's 11 1/8% Senior Notes Due 2007, the undersigned
officer of the Trustee, on behalf of the Trustee, makes the following
certifications to the Pledgor, Morgan Stanley & Co. Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Oppenheimer & Co., Inc. Capitalized
terms used and not defined in this Officer's Certificate have the meanings set
forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and
delivery of this Officer's Certificate, the Trustee has established with
National Financial Services Corporation, as securities intermediary ("NFSC"), a
securities account in the name of "Bankers Trust Company, as Trustee for the
benefit of the holders of the 11 1/8% Senior Notes Due 2007 of InterCel, Inc.,
Collateral Pledge Account," with respect to which the Trustee is the entitlement
holder and through which the Trustee has acquired a security entitlement to the
United States Treasury securities identified in Annex 1 to this Officer's
Certificate (the "Pledged Securities") and has made appropriate book entries in
its records establishing that the Pledged Securities and the Trustee's
securities entitlement thereto have been credited to and are held in the Bankers
Trust Company's Administrative Account No. 23333 entitled "Bankers Trust
Company, as Trustee for the benefit of the holders of the 11 1/8% Senior Notes
Due 2007 of InterCel, Inc., Collateral Pledge Account" (the "Pledge Account").
2. The Trustee has established and maintained and will
maintain the Pledge Account and all securities entitlements and other positions
carried in the Pledge Account solely in its capacity as Trustee and has not
asserted and will not assert any claim to or interest in the Pledge Account or
any such securities entitlements or other positions except in such capacity.
3. The Trustee has acquired its security entitlement to the
Pledged Securities for value and without notice to a Responsible Officer (as
defined in the Indenture) of any adverse claim thereto. Without limiting the
generality of the foregoing, the Pledged Securities are not and the Trustee's
security entitlement to the Pledged Securities is not, to the Trustee's
knowledge, subject to any Lien granted by the Trustee in favor of any securities
intermediary (including, without limitation, NFSC or the Federal Reserve Bank of
New York) through which the Trustee derives its security entitlement to the
Pledged Securities.
<PAGE> 18
4. The Trustee has not caused or permitted the Pledged
Securities or its security entitlement thereto to become subject to any Lien
created by or arising through the Trustee.
IN WITNESS WHEREOF, the undersigned officer has executed this
Officer's Certificate on behalf of Bankers Trust Company as Trustee this 10th
day of June, 1997.
------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4(k)
CERTIFICATE OF AMENDMENT
OF
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
POWERTEL, INC.
****
Powertel, Inc. (formerly InterCel, Inc.) (the "Corporation"), a
corporation organized and existing under the General Corporation Law of the
State of Delaware, does hereby certify as follows:
FIRST: That in accordance with the requirements of Section 242 of the
General Corporation Law of the State of Delaware, the Board of Directors of the
Corporation, acting by written consent signed by all of the directors of the
Corporation pursuant to Section 141(f) of the General Corporation Law of the
State of Delaware, duly adopted resolutions: (i) proposing and declaring
advisable an amendment which would extend the earliest possible conversion date
for the Series B Convertible Preferred Stock, par value $0.01 per share (the
"Series B Preferred Stock"), to March 14, 2002; (ii) proposing and declaring
advisable the following amendment to the Certificate of Designations, Powers,
Preferences and Relative Participating or Other Rights and the Qualifications,
Limitations or Restrictions Thereof, of Series B Convertible Preferred Stock
(the "Series B Certificate"); and (iii) recommending that such amendment be
submitted to the stockholders of the Corporation for consideration, action and
approval.
SECOND: That Section 7(a) of the Series B Certificate is hereby amended
to read in its entirety as follows:
"Section 7. Conversion. Holders of shares of Series B Preferred Stock
shall have the right to convert all or a portion of such shares into shares of
Common Stock, as follows:
(a) Subject to and upon compliance with the provisions of this
Section (7), a holder of shares of Series B Preferred Stock shall have
the right, at his, her or its option, at any time after March 14, 2002,
to convert such shares, in whole or in part, into the number of fully
paid and nonassessable shares of Common Stock (calculated as to each
conversion to the nearest 1/100th of a share) obtained by dividing the
aggregate liquidation preference of such shares by the Conversion Price
and by surrender of such shares so to be converted by the holder
thereof, such surrender to be made in the manner provided in paragraph
(b) of this Section (7); provided, however, that the right to convert
shares called for redemption pursuant to Section (5) shall terminate at
the close of business on the date fixed for such redemption, unless the
Corporation shall default in making prompt payment of the amount
payable upon such redemption. Any share of Series B Preferred Stock may
be converted, at the request of its holder, in part into Common Stock.
If a part of a share of Series B Preferred Stock is converted, then the
Corporation will convert such share into the requested shares of Common
Stock (subject to paragraph (c) of this Section (7)) and issue a
fractional share of Series B Preferred Stock evidencing the remaining
interest of such holder."
<PAGE> 2
THIRD: That, pursuant to Section 242 of the General Corporation Law of
the State of Delaware, the aforesaid amendment to the Series B Certificate was
duly adopted by the stockholders of the Corporation at the annual meeting of
stockholders held on May 21, 1997.
FOURTH: That, pursuant to Section 242 of the General Corporation Law of
the State of Delaware and Section 9(b) of the Series B Certificate, the
aforesaid amendment to the Series B Certificate was duly adopted by the sole
stockholder of all the outstanding shares of Series B Preferred Stock, acting by
written consent in accordance with Section 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, InterCel, Inc. has caused this Certificate of
Amendment to the Series B Certificate to be signed by Allen E. Smith, its
President, and attested by Lorena G. Turner, its Assistant Secretary, on June
24, 1997.
By: /s/ Allen E. Smith
-----------------------
Allen E. Smith
President
Attest:
/s/ Lorena G. Turner
- -------------------------------
Lorena G. Turner
Assistant Secretary
<PAGE> 1
EXHIBIT 4(l)
AMENDED
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.
***
InterCel, Inc., a Delaware corporation (the "Company"), does hereby
certify that: (i) no shares of Series C Convertible Preferred Stock, par value
$0.01 per share (the "Series C Preferred Stock") was issued or outstanding as of
the date hereof; and (ii) the following resolution amending the terms of the
Certificate of Designations, Powers, Preferences and Relative Participating or
Other Rights and the Qualifications, Limitations or Restrictions thereof of
Series C Convertible Preferred Stock (the "Series C Certificate") was duly
adopted by the Board of Directors of the Company by unanimous written consent
pursuant to authority conferred upon the Board of Directors by the Restated
Certificate of Incorporation (as amended) of the Company and by Section 151(g)
of the General Corporation Law of the State of Delaware:
RESOLVED, that, pursuant to Section 151(g) of the Delaware General
Corporation Law, the Board adopts and approves an amendment to the Series C
Certificate to replace the definition of "Conversion Price" in Section 2 in its
entirety with the following:
"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)."
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment of the Series C Certificate to be signed by Allen E. Smith, its
President, and attested by Lorena G. Turner, its Assistant Secretary, on May
31, 1997.
By: /s/ Allen E. Smith
-----------------------
Allen E. Smith
President
Attest:
/s/ Lorena G. Turner
- ---------------------------
Lorena G. Turner
Assistant Secretary
<PAGE> 1
EXHIBIT 4(m)
AMENDED
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.
***
InterCel, Inc., a Delaware corporation (the "Company"), does hereby
certify that: (i) no shares of Series D Convertible Preferred Stock, par value
$0.01 per share (the "Series D Preferred Stock"), was issued or outstanding on
the date hereof; and (ii) the following resolution amending the terms of the
Certificate of Designations, Powers, Preferences and Relative Participating or
Other Rights and the Qualifications, Limitations or Restrictions Thereof, of
Series D Convertible Preferred Stock (the "Series D Certificate") was duly
adopted by the Board of Directors of the Company by unanimous written consent
pursuant to authority conferred upon the Board of Directors by the Restated
Certificate of Incorporation (as amended) of the Company and by Section 151(g)
of the General Corporation Law of the State of Delaware:
RESOLVED, that, pursuant to Section 151(g) of the Delaware General
Corporation Law, the Board adopts and approves an amendment to the Series D
Certificate to replace the definition of "Conversion Price" in Section 2 in its
entirety with the following:
"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)."
RESOLVED, that, pursuant to Section 151(g) of the Delaware General
Corporation Law, the Board adopts and approves an amendment to the Series D
Certificate to replace Section 7(a) in its entirety with the following:
"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 March 14, 2002,
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
<PAGE> 2
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."
IN WITNESS WHEREOF, the Company has caused this Certificate of
Amendment of the Series D Certificate to be signed by Allen E. Smith, its
President, and attested by Lorena G. Turner, its Assistant Secretary, on May
31, 1997.
By: /s/ Allen E. Smith
-----------------------
Allen E. Smith
President
Attest:
/s/ Lorena G. Turner
- -----------------------
Lorena G. Turner
Assistant Secretary
<PAGE> 1
EXHIBIT 10(a)
EXECUTION COPY
- --------------------------------------------------------------------------------
------------------------------------------
STOCK PURCHASE AGREEMENT
------------------------------------------
BETWEEN
-------
INTERCEL, INC.
AND
---
THE HUFF ALTERNATIVE
INCOME FUND, L.P.
DATED AS OF MAY 23, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
TABLES OF CONTENTS
<TABLE>
<S> <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......................................... 8
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........................................................... 12
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
SECTION 5.4 Notice of Developments...................................................... 14
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
SECTION 5.5 Registration Rights......................................................... 15
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........................................... 16
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............................................................. 20
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.................................................................. 25
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
ANNEX IV.....................................................................................IV-1
</TABLE>
ii
<PAGE> 4
THIS STOCK PURCHASE AGREEMENT, dated as of May 23, 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
Certificate of Designation filed with the Secretary of State of the State of
Delaware on March 13, 1997, a copy of which is attached as Annex I, as amended
or to be amended as set forth in Annex IV.
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 May 23, 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 formerly 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 former 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" means the Certificate of Designation for
the Preferred Stock as filed with the Secretary of State of the State of
Delaware on March 13, 1997 and attached hereto as Annex I, as amended or to be
amended as set forth in Annex IV hereto.
"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 May 20, 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
2
<PAGE> 6
by the Seller of High Yield Debt instruments for aggregate gross proceeds of not
less than $100 million.
"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, the 1997 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.
3
<PAGE> 7
"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).
"High Yield Debt" means the issue of high yield debt instruments
proposed to be sold by the Seller pursuant to the Debt Offering Memorandum.
4
<PAGE> 8
"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.
"Preferred Stock" has the meaning specified in the recitals to this
Agreement.
"Purchase Price" has the meaning specified in Section 2.2.
5
<PAGE> 9
"Purchaser" has the meaning specified in the preamble to this
Agreement.
"Reference Balance Sheet" means the unaudited consolidated balance
sheet (including the related notes and schedules thereto) of the Seller, dated
as of March 31, 1997, a copy of which the Seller has provided to the Purchaser
prior to the execution of this Agreement.
"Reference Balance Sheet Date" means March 31, 1997.
"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).
6
<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" means the audited annual consolidated
financial statements and the notes and schedules thereto for the year ended
December 31, 1996.
"1997 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"). The
parties agree that the Closing Date shall be the date on which pricing of the
offering of the High Yield Debt is scheduled to occur between the Seller and the
lead placement agent under the Debt Offering Memorandum, which date is currently
contemplated to be on or about June 4, 1997. The Seller agrees to provide the
Purchaser notice of any change in the date on which such pricing is scheduled to
occur as soon as reasonably practicable after such new pricing date is
established and, in any event, at least two (2) days prior to such new pricing
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 deliver or cause to be delivered to the Purchaser the opinions,
certificates and other documents required to be delivered pursuant to Section
6.2. and to the Escrow Agent, stock certificate(s) evidencing the Shares duly
registered in the name of the Purchaser.
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SECTION 2.6 Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller the opinions, certificates and other
documents required to be delivered pursuant to Section 6.1, 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 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 May 20, 1997, (i)
26,865,099 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
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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 March 31,
1997 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 March 31, 1997 contained in the
Seller's unaudited quarterly consolidated financial statements and the notes and
schedules thereto for the quarter ended March 31, 1997 (the "1997 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,
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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 Amendment to 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
Reports on Form 10-K for the fiscal years ended December 31, 1995 and 1996, (B)
its Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June
30, 1996, September 30, 1996 and March 31, 1997, (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 March 31, 1997 there has not been any change,
occurrence or circumstance in the Business, results of operations or financial
condition of the Seller or any
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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, the 1996
Financial Statements, the 1997 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, the 1997 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 Statement, or the 1997 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 1996 Financial Statements and the
1997 Financial
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Statements, and the most recent drafts of 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 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
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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.
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 Amendment
to the Certificate of Designation, a copy of which is attached as Annex IV
hereto, with the Secretary of State of the
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State of Delaware in accordance with the Delaware General Corporation Law and
cause the Certificate of Designation, as amended, 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.
(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.
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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 beginning on the date of this Agreement
and 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.
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(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
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
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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) 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 (and applicable power of attorney) 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
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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;
(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;
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(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;
(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, as amended, 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 of the Secretary or
Assistant Secretary of the Seller 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.
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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 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
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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. The provisions of this Article VII shall survive the Closing and
any termination of this Agreement.
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
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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 June 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
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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 $15,000 (not including the $15,807 invoiced to Seller by
Purchaser's outside counsel for services rendered in connection with the Stock
Purchase Agreement dated as of March 14, 1997 between the Seller and Purchaser,
which agreement was terminated by the parties pursuant to the Termination
Agreement dated as of April 30, 1997).
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.
1233 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.
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(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.
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.
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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.
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:
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(i) Copies of Seller' 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;
(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
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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
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
27
<PAGE> 31
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.
(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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<PAGE> 32
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/ Fred G. Astor
-------------------------------------------
Name: Fred G. Astor
Title: Executive Vice President and
Chief Financial 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 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 reasonable discretion,
that effecting the registration at such time might (i) adversely affect a
<PAGE> 34
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 aggregate period of six months, or for such
shorter period that will terminate when all Shares
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<PAGE> 35
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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<PAGE> 36
(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 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.
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<PAGE> 37
(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 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
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<PAGE> 38
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> 39
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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<PAGE> 40
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> 41
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
III-3
<PAGE> 42
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> 43
(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(b)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of June 5, 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").
WITNESSETH:
WHEREAS, the Purchaser and the Seller have entered into a
Stock Purchase Agreement, dated as of May 23, 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 draft of which (dated as of May 20, 1997)
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 Escrow Amount and the Certificate have been delivered to the Escrow Agent
pursuant to this Agreement. Furthermore, such notice shall provide that, upon
the delivery by the Seller and the lead placement 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. 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
the next sentence. 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 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.
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<PAGE> 3
(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 June 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); 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
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<PAGE> 4
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.
(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
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<PAGE> 5
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 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
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<PAGE> 6
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 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.
1233 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.
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<PAGE> 7
(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
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.
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<PAGE> 8
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.
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.
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<PAGE> 9
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)
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<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:
Title:
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
BANKERS TRUST COMPANY
By: /s/ Sandra J. Shaffer
-----------------------
Name:
Title:
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<PAGE> 1
EXHIBIT 10(c)
EXECUTION COPY
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STOCK PURCHASE AGREEMENT
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BETWEEN
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INTERCEL, INC.
AND
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SCANA COMMUNICATIONS, INC.
DATED AS OF MAY 23, 1997
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TABLES OF CONTENTS
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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............................................ 8
SECTION 2.6 Closing Deliveries by the Purchaser......................................... 8
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................................................ 9
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........................................................ 12
SECTION 3.11 Full Disclosure............................................................. 12
SECTION 3.13 Private Placement........................................................... 12
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................................................................. 13
SECTION 4.3 Governmental Consents and Approvals......................................... 13
SECTION 4.4 Litigation.................................................................. 13
SECTION 4.5 Investment Purpose.......................................................... 13
SECTION 4.6 Accredited Investor......................................................... 14
SECTION 4.7 Brokers..................................................................... 14
ARTICLE V ADDITIONAL AGREEMENTS............................................................. 14
SECTION 5.1 Filing of Certificate of Designation........................................ 14
SECTION 5.2 Treatment of Shares as Equity............................................... 14
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SECTION 5.3 Regulatory and Other Authorizations: Notices
and Consents................................................................ 14
SECTION 5.4 Notice of Developments...................................................... 15
SECTION 5.5 Registration Rights......................................................... 15
SECTION 5.6 Resale Restrictions......................................................... 15
SECTION 5.7 Registration of Shares...................................................... 15
SECTION 5.9 Certain Information......................................................... 16
SECTION 5.10 Conduct of Business of the Seller........................................... 16
SECTION 5.11 Further Action.............................................................. 16
ARTICLE VI CONDITIONS TO CLOSING................................................................. 17
SECTION 6.1 Conditions to Obligations of the Seller..................................... 17
SECTION 6.2 Conditions to Obligations of the Purchaser.................................. 18
ARTICLE VII INDEMNIFICATION....................................................................... 19
SECTION 7.1 Survival of Representations and Warranties.................................. 19
SECTION 7.2 Indemnification............................................................. 20
SECTION 7.3 Limits on Indemnification................................................... 22
ARTICLE VIII TERMINATION AND WAIVER................................................................ 22
SECTION 8.1 Termination................................................................. 22
SECTION 8.2 Effect of Termination....................................................... 23
SECTION 8.3 Waiver...................................................................... 23
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.................................................................... 25
SECTION 9.5 Severability................................................................ 25
SECTION 9.6 Entire Agreement............................................................ 25
SECTION 9.7 Assignment.................................................................. 25
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........................................................ 26
EXHIBITS
EXHIBIT 2.4 Form of Escrow Agreement
ANNEXES
ANNEX I.......................................................................................I-1
ANNEX II.....................................................................................II-1
ANNEX III...................................................................................III-1
ANNEX IV.....................................................................................IV-1
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THIS STOCK PURCHASE AGREEMENT, dated as of May 23, 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
Certificate of Designation filed with the Secretary of State of the State of
Delaware on March 13, 1997, a copy of which is attached as Annex I hereto, as
amended or to be amended as set forth in Annex IV.
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 May 23, 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
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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.
"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 formerly 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 former 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" means the Certificate of Designation for
the Preferred Stock as filed with the Secretary of State of the State of
Delaware on March 13, 1997 and attached hereto as Annex I, as amended or to be
amended as set forth in Annex IV hereto.
"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.
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"Debt Offering Memorandum" means the draft (as of May 20, 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.
"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, the 1997 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
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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.
"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
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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.
"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.
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"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.
"Reference Balance Sheet" means the unaudited consolidated balance
sheet (including the related notes and schedules thereto) of the Seller, dated
as of March 31, 1997, a copy of which the Seller has provided to the Purchaser
prior to the execution of this Agreement.
"Reference Balance Sheet Date" means March 31, 1997.
"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.
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"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).
"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" means the audited annual consolidated
financial statements and the notes and schedules thereto for the year ended
December 31, 1996.
"1997 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"). The
parties agree that the Closing Date shall be the date on which pricing of the
offering of the High Yield Debt is scheduled to occur between the Seller and the
lead placement agent under the Debt Offering Memorandum, which date is currently
contemplated to be on or about June 4, 1997. The Seller agrees to provide the
Purchaser notice of any change in the date on which such pricing is scheduled to
occur as soon as reasonably practicable after such new pricing date is
established and, in any event, at least two (2) days prior to such new pricing
date.
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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 deliver or cause to be delivered to the Purchaser the opinions,
certificates and other documents required to be delivered pursuant to Section
6.2, and to the Escrow Agent, stock certificate(s) evidencing the Shares duly
registered in the name of the Purchaser.
SECTION 2.6 Closing Deliveries by the Purchaser. At the Closing, the
Purchaser shall deliver to the Seller the opinions, certificates and other
documents required to be delivered pursuant to Section 6.1, 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 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
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(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 May 20, 1997, (i)
26,865,099 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 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 March 31,
1997 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 March 31, 1997 contained in
the Seller's unaudited quarterly consolidated financial statements and the notes
and schedules thereto for the quarter ended March 31, 1997 (the "1997 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.
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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.
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 Amendment to 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
Reports on Form 10-K for the fiscal years ended December 31, 1996 and 1995, (B)
its Quarterly Reports on Form 10-Q for the periods ended March 31, 1996, June
30, 1996, September 30, 1996 and March 31, 1997, (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
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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 known or reasonably expected, individually or in the aggregate, to be
material in amount).
(d) Since March 31, 1997 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, the 1996
Financial Statements or the 1997 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, the 1997 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 or the 1997 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
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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 1996 Financial Statements and the
1997 Financial Statements, and the most recent drafts of 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
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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 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.
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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 Amendment
to the Certificate of Designation, a copy of which is attached as Annex IV
hereto, with the Secretary of State of the State of Delaware in accordance with
the Delaware General Corporation Law and cause the Certificate of Designation,
as amended, 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
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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.
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.
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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:
(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.
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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;
(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
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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:
(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,
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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 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, as amended, 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 of the Secretary or
Assistant Secretary of the Seller dated within twenty-four hours of the Closing
Date; and
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(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 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
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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 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
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<PAGE> 25
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. The provisions of this Article VII shall survive the Closing and
any termination of this Agreement.
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
(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
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proceeds therefrom shall not have occurred on or prior to June 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 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
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<PAGE> 27
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 (including but not limited to
such fees and disbursements of Purchaser's counsel incurred in connection with
the Stock Purchase Agreement dated as of March 14, 1997 between the Seller and
the Purchaser, which agreement was terminated by the parties pursuant to the
Termination Agreement dated as of April 30, 1997).
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.
1233 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
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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 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,
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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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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/ Fred G. Astor
--------------------------------
Name: Fred G. Astor
Title: Executive Vice President
and Chief Financial
Officer
SCANA COMMUNICATIONS, INC.
BY: /s/ Kevin B. Marsh
--------------------------------
Name: Kevin B. Marsh
Title: Vice President and
Chief Financial
Officer
27
<PAGE> 31
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> 32
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> 34
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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<PAGE> 35
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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<PAGE> 36
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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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> 39
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> 40
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> 41
(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(d)
ESCROW AGREEMENT
THIS ESCROW AGREEMENT, dated as of June 5, 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").
WITNESSETH:
WHEREAS, the Purchaser and the Seller have entered into a
Stock Purchase Agreement, dated as of May 23, 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 draft of which (dated as of May 20, 1997)
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 Escrow Amount and the Certificate have been delivered to the Escrow Agent
pursuant to this Agreement. Furthermore, such notice shall provide that, upon
the delivery by the Seller and the lead placement 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. 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
the next sentence. 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 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.
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<PAGE> 3
(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 June 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); 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
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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.
(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
-4-
<PAGE> 5
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 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
-5-
<PAGE> 6
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 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.
1233 O.G. Skinner Drive
West Point, Georgia 31833
Telecopy: (706) 645-2329
Attention: Fred G. Astor, Jr.
-6-
<PAGE> 7
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
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.
-7-
<PAGE> 8
(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.
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
-8-
<PAGE> 9
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:
Title:
SCANA COMMUNICATIONS, INC.
By: /s/ Kevin B. Marsh
--------------------------------
Name: Kevin B. Marsh
Title: Vice President and
Chief Financial
Officer
BANKERS TRUST COMPANY
By: /s/ Sandra J. Shaffer
--------------------------------
Name:
Title: Assistant Vice President
-10-
<PAGE> 1
EXHIBIT 10(e)
AMENDMENT NO. 2 TO THE
CREDIT AGREEMENT
Dated as of March 31, 1997
AMENDMENT NO. 2 TO THE CREDIT AGREEMENT ("this Amendment") among Powertel,
Inc. (formerly known as InterCel PCS Services, Inc.), a Delaware corporation
(the "Borrower"), and Ericsson Project Finance A.B. ("Ericsson") as Lender and
Ericsson, as agent (the "Agent") for the Lenders.
PRELIMINARY STATEMENTS:
(1) The Borrower, the Lender and the Agent are parties to the
Credit Agreement dated as of March 4, 1996, as amended by Amendment
No. 1 dated as of October 31, 1996 (the "Credit Agreement").
Capitalized terms not otherwise defined in this Amendment have the
same meanings as specified in the Credit Agreement.
(2) The Borrower intends to incur additional Debt in connection
with (a) the acquisition of certain PCS licenses obtained in a
recent auction conducted by the Federal Communications Commission
for the 10 MHz D, E and F block PCS licenses and (b) the build out
and operation of PCS systems in the Basic Trading Areas ("BTA")
corresponding to those licenses. The Borrower has therefore
requested changes to the covenants of the Credit Agreement to
reflect the incurrence of such additional Debt by the Borrower.
SECTION 1. Amendments to the Credit Agreement. The Credit Agreement is,
effective as of the date hereof, and subject to the satisfaction of the
conditions precedent set forth in Section 2 hereof, hereby amended as follows:
(a) The following definitions are added in alphabetical order to
Section 1.01 of the Credit Agreement:
"Capital Expenditures" means any payments which are made by a
Person for, or in connection with, the rental, lease, purchase,
construction or use of any real or personal property the value or
cost of which, under GAAP,
<PAGE> 2
should be capitalized and appear on such Person's balance sheet in
the category of property, plant or equipment, without regard to
the manner in which such payments or the instrument pursuant to
which they are made are characterized by such Person or any other
Person.
"Debt Service" means, for any period, the sum of all principal
payments scheduled to be made by the Borrower in respect of Debt
during such period plus Interest Expense for such period.
"Interest Expense" means for any period, the aggregate amount of
interest, commitment, agency and other fees paid or required to be
paid in cash by InterCel and its Subsidiaries in respect of all
Debt.
(b) Section 6.01 is amended by replacing the period at the end of
clause (s) thereof with "; or" and the following:
(t) InterCel shall fail to maintain, for each period ending on
the last day of each fiscal quarter of InterCel as set forth
on Schedule 6.01(t), a ratio of Consolidated EBITDA for such
period multiplied by 4 to Consolidated Debt Service for such
period multiplied by 4 of not less than the ratio set forth
for such period on such schedule; or
(u) InterCel shall permit the ratio of Consolidated Total Debt as
of the last day of each fiscal quarter of InterCel as set
forth on Schedule 6.01(u) to Consolidated EBITDA for such
period multiplied by 4 to be greater than the ratio set forth
for such period on such schedule; or
(v) InterCel and its Subsidiaries shall make any Capital
Expenditures that would cause the aggregate cumulative amount
of all such Capital Expenditures made by InterCel and its
Subsidiaries commencing January 1, 1997 to exceed the amount
set forth on Schedule 6.01(v) as of the end of each period
set forth on such schedule;"
(c) The schedules to the Credit Agreement are amended as follows:
(i) Schedule 6.01(o) is deleted in its entirety and
replaced with Annex A attached hereto.
(ii) Schedule 6.01(q) is deleted in its entirety and
replaced with Annex B attached hereto.
(iii)Schedule 6.01(r) is deleted in its entirety and
replaced with Annex C attached hereto.
<PAGE> 3
(iv) Schedule 6.01(s) is deleted in its entirety and
replaced with Annex D attached hereto.
(v) Schedule 6.01(t) is added to the Credit Agreement in
the form of Annex E attached hereto.
(vi) Schedule 6.01(u) is added to the Credit Agreement in
the form of Annex F attached hereto.
(vii)Schedule 6.01(v) is added to the Credit Agreement in
the form of Annex G attached hereto.
SECTION 2. Conditions of Effectiveness. This Amendment shall become
effective as of the date first written when, and only when, the Agent shall
have received (a) counterparts of this Amendment executed by the Borrower and
Ericsson and (b) a consent executed by each Loan Party in substantially the
form of Annex H attached hereto. The effectiveness of this Amendment is
conditioned upon the accuracy of the factual matters described herein. This
Amendment is subject to the provisions of Section 8.01 of the Amended Credit
Agreement.
SECTION 3. Representations and Warranties of the Borrower.
(a) The execution, delivery and performance by the Borrower of this
Amendment are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action and do not (i)
contravene the Borrower's charter or by-laws, (ii) violate any law,
rule or regulation (including, without limitation, Regulation X of
the Board of Governors of the Federal Reserve System), or any order,
writ, judgment, injunction, decree, determination or award, binding
on or affecting the Borrower or any of its Subsidiaries or any of
their properties the effect of which would not have a Material
Adverse Effect, or (iii) conflict with or result in the breach of,
or constitute a default under, any contract, loan agreement,
indenture, mortgage, deed of trust, lease or other instrument
binding on or affecting the Borrower, any of its Subsidiaries or any
of their properties except where such conflict would not have a
Material Adverse Effect.
(b) No authorization or approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body or any
other third party is required for the due execution, delivery or
performance by the Borrower of this Amendment.
(c) This Amendment has been duly executed and delivered by the
Borrower. This Amendment is a legal, valid and binding obligation
of the Borrower in accordance with its terms.
<PAGE> 4
SECTION 4. Reference to and Effect on the Credit Agreement.
(a) The Credit Agreement, as specifically amended by this
Amendment, is and shall continue to be in full force and effect and
is hereby in all respects ratified and confirmed.
(b) The execution, delivery and effectiveness of this Amendment
shall not, except as expressly provided herein, operate as a waiver
of any right, power or remedy of any Lender or the Agent under the
Credit Agreement, nor constitute a waiver of any provision of the
Credit Agreement.
SECTION 5. Costs, Expenses. The Borrower agrees to pay on demand all
reasonable costs and expenses of the Agent in connection with the preparation,
execution, delivery and negotiation of this Amendment and the other instruments
and documents to be delivered hereunder (including, without limitation, the
reasonable fees and expenses of counsel for the Agent).
SECTION 6. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute but on and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 7. Governing Law. This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first written above.
POWERTEL, INC.
By: /s/ Fred G. Astor
-------------------------------------
Title: Executive Vice President and
Chief Operating Officer
ERICSSON PROJECT FINANCE A.B.
By: /s/ Stephan Almquist; Ossie Everum
-------------------------------------
Title:
<PAGE> 5
ANNEX A
Schedule 6.01(o)
Minimum PCS Revenue
<TABLE>
<CAPTION>
Quarter
Ending 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
- ------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar N/A 7,300,000 25,000,000 43,000,000 80,000,000 107,000,000 129,000,000 141,000,000 155,000,000 169,000,000
30-Jun N/A 10,600,000 32,000,000 67,000,000 95,000,000 115,000,000 129,000,000 145,000,000 158,000,000 170,000,000
30-Sep N/A 14,500,000 38,000,000 73,000,000 101,000,000 122,000,000 137,000,000 155,000,000 169,000,000 181,000,000
31-Dec 2,000,000 19,000,000 44,000,000 82,000,000 110,000,000 133,000,000 150,000,000 169,000,000 184,000,000 197,000,000
</TABLE>
<PAGE> 6
ANNEX B
Schedule 6.01(q)
Minimum Consolidated Net Worth
<TABLE>
<CAPTION>
QUARTER ENDING 1996 1997 1998 1999 2000
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
31-Mar N/A 307,000,000 212,000,000 15,000,000 (163,000,000)
30-Jun N/A 346,000,000 163,000,000 (36,000,000) (190,000,000)
30-Sep N/A 305,000,000 114,000,000 (86,000,000) (217,000,000)
31-Dec 347,000,000 261,000,000 65,000,000 (137,000,000) (244,000,000)
QUARTER ENDING 2001 2002 2003 2004 2005
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
31-Mar (249,000,000) (254,000,000) (184,000,000) (51,000,000) 119,000,000
30-Jun (255,000,000) (240,000,000) (153,000,000) (11,000,000) 168,000,000
30-Sep (261,000,000) (227,000,000) (123,000,000) 30,000,000 217,000,000
31-Dec (267,000,000) (214,000,000) (92,000,000) 71,000,000 266,000,000
</TABLE>
<PAGE> 7
ANNEX C
Schedule 6.01(r)
Maximum Ratio of Total Consolidated Liabilities to Total Consolidated Assets
<TABLE>
<CAPTION>
QUARTER ENDING 1996 1997 1998 1999 2000
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
31-Mar N/A 0.70:1.00 1.10:1.00 1.30:1.00 1.40:1.00
30-Jun N/A 0.80:1.00 1.10:1.00 1.30:1.00 1.40:1.00
30-Sep N/A 0.80:1.00 1.10:1.00 1.30:1.00 1.40:1.00
31-Dec 1.00:1.00 0.80:1.00 1.10:1.00 1.30:1.00 1.40:1.00
QUARTER ENDING 2001 2002 2003 2004 2005
- -------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
31-Mar 1.40:1.00 1.40:1.00 1.30:1.00 1.20:1.00 1.10:1.00
30-Jun 1.40:1.00 1.40:1.00 1.30:1.00 1.20:1.00 1.10:1.00
30-Sep 1.40:1.00 1.40:1.00 1.30:1.00 1.20:1.00 1.10:1.00
31-Dec 1.40:1.00 1.30:1.00 1.20:1.00 1.10:1.00 1.00:1.00
</TABLE>
<PAGE> 8
ANNEX D
Schedule 6.01(s)
Minimum PCS Subscribers
<TABLE>
<CAPTION>
Quarter Ending 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
- ---------------- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
31-Mar N/A 30,000 110,000 290,000 510,000 700,000 840,000 960,000 1,060,000 1,150,000
30-Jun N/A 45,000 140,000 340,000 560,000 730,000 870,000 980,000 1,090,000 1,170,000
30-Sep N/A 65,000 170,000 400,000 610,000 770,000 900,000 1,010,000 1,110,000 1,190,000
31-Dec 5,000 85,000 200,000 460,000 660,000 810,000 930,000 1,040,000 1,140,000 1,210,000
</TABLE>
<PAGE> 9
ANNEX E
Schedule 6.01(t)
Ratio of Consolidated EBITDA to Consolidated Debt Service
<TABLE>
<CAPTION>
QUARTER ENDING 1999 2000 2001 2002 2003 2004 2005
- -------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar N/A 1.00:4.00 3.00:4.00 1.00:1.00 1.25:1.00 1.50:1.00 0.50:1.00
30-Jun N/A 1.00:1.00 1.00:1.00 1.00:1.00 1.25:1.00 1.50:1.00 0.50:1.00
30-Sep 1.00:8.00 1.00:1.00 1.00:1.00 1.00:1.00 1.25:1.00 1.50:1.00 0.50:1.00
31-Dec 1.00:4.00 1.00:1.00 1.00:1.00 1.00:1.00 1.25:1.00 1.50:1.00 0.50:1.00
</TABLE>
<PAGE> 10
ANNEX F
Schedule 6.01(u)
Ratio of Consolidated Total Debt to Annualized Consolidated EBITDA
<TABLE>
<CAPTION>
QUARTER ENDING 1999 2000 2001 2002 2003 2004 2005
- -------------- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
31-Mar N/A 50.00:1.00 9.00:1.00 7.00:1.00 5.00:1.00 4.00:1.00 4.00:1.00
30-Jun N/A 14.00:1.00 8.00:1.00 6.00:1.00 5.00:1.00 4.00:1.00 4.00:1.00
30-Sep 175.00:1.00 10.00:1.00 7.00:1.00 6.00:1.00 5.00:1.00 4.00:1.00 4.00:1.00
31-Dec 70.00:1.00 10.00:1.00 7.00:1.00 6.00:1.00 5.00:1.00 4.00:1.00 4.00:1.00
</TABLE>
<PAGE> 11
ANNEX G
Schedule 6.01(v)
Maximum Aggregate Capital Expenditures
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 2004 2005
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Capital Expenditures 772,300,000 841,200,000 893,900,000 971,600,000 1,045,300,000 1,084,800,000 1,162,300,000
</TABLE>
<PAGE> 12
CONSENT
Dated as of March 31, 1997
The undersigned, InterCel, Inc., a Delaware corporation, as Guarantor
under the Parent Guaranty dated October 31, 1996 (the "Parent Guaranty") in
favor of the Agent and, for its benefit and the benefit of the Lenders parties
to the Credit Agreement referred to in the foregoing Amendment, hereby consents
to such Amendment and hereby confirms and agrees that (a) notwithstanding the
effectiveness of such Amendment, the Parent Guaranty is, and shall continue to
be, in full force and effect and is hereby ratified and confirmed in all
respects, and (b) the Collateral Documents to which InterCel, Inc. is a party
and all of the Collateral described therein do, and shall continue to, secure
the payment of all of the Secured Obligations (in each case, as defined
therein).
InterCel, Inc.
By: /s/ Edward C. Horner
-----------------------------
Title: Chief Operating Officer
<PAGE> 13
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel/Atlanta, Inc., a Delaware corporation, as
Guarantor under the Subsidiary Guaranty dated October 31, 1996 (the "Subsidiary
Guaranty") in favor of the Agent and, for its benefit and the benefit of the
Lenders parties to the Credit Agreement referred to in the foregoing Amendment,
hereby consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Subsidiary Guaranty
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects, and (b) the Collateral Documents to which
Powertel/Atlanta, Inc. is a party and all of the Collateral described therein
do, and shall continue to, secure the payment of all of the Secured Obligations
(in each case, as defined therein).
Powertel/Atlanta, Inc.
By: /s/ Edward C. Horner
--------------------------------
Title: Chief Operating Officer
<PAGE> 14
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel Atlanta Licenses, Inc., a Delaware corporation,
as Guarantor under the Subsidiary Guaranty dated October 31, 1996 (the
"Subsidiary Guaranty") in favor of the Agent and, for its benefit and the
benefit of the Lenders parties to the Credit Agreement referred to in the
foregoing Amendment, hereby consents to such Amendment and hereby confirms and
agrees that (a) notwithstanding the effectiveness of such Amendment, the
Subsidiary Guaranty is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects, and (b) the Collateral
Documents to which Powertel Atlanta Licenses, Inc. is a party and all of the
Collateral described therein do, and shall continue to, secure the payment of
all of the Secured Obligations (in each case, as defined therein).
Powertel Atlanta Licenses, Inc.
By: /s/ Edward C. Horner
-------------------------------
Title: Chief Operating Officer
<PAGE> 15
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel/Birmingham, Inc., a Missouri corporation, as
Guarantor under the Subsidiary Guaranty dated October 31, 1996 (the "Subsidiary
Guaranty") in favor of the Agent and, for its benefit and the benefit of the
Lenders parties to the Credit Agreement referred to in the foregoing Amendment,
hereby consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Subsidiary Guaranty
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects, and (b) the Collateral Documents to which
Powertel/Birmingham, Inc. is a party and all of the Collateral described
therein do, and shall continue to, secure the payment of all of the Secured
Obligations (in each case, as defined therein).
Powertel/Birmingham, Inc.
By: /s/ Edward C. Horner
-------------------------------
Title: Chief Operating Officer
<PAGE> 16
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel Birmingham Licenses, Inc., a Colorado
corporation, as Guarantor under the Subsidiary Guaranty dated October 31, 1996
(the "Subsidiary Guaranty") in favor of the Agent and, for its benefit and the
benefit of the Lenders parties to the Credit Agreement referred to in the
foregoing Amendment, hereby consents to such Amendment and hereby confirms and
agrees that (a) notwithstanding the effectiveness of such Amendment, the
Subsidiary Guaranty is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects, and (b) the Collateral
Documents to which Powertel Birmingham Licenses, Inc. is a party and all of the
Collateral described therein do, and shall continue to, secure the payment of
all of the Secured Obligations (in each case, as defined therein).
Powertel Birmingham Licenses, Inc.
By: /s/ Edward C. Horner
------------------------------
Title: Chief Operating Officer
<PAGE> 17
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel/Jacksonville, Inc., a Delaware corporation, as
Guarantor under the Subsidiary Guaranty dated October 31, 1996 (the "Subsidiary
Guaranty") in favor of the Agent and, for its benefit and the benefit of the
Lenders parties to the Credit Agreement referred to in the foregoing Amendment,
hereby consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Subsidiary Guaranty
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects, and (b) the Collateral Documents to which
Powertel/Jacksonville, Inc. is a party and all of the Collateral described
therein do, and shall continue to, secure the payment of all of the Secured
Obligations (in each case, as defined therein).
Powertel/Jacksonville, Inc.
By: /s/ Edward C. Horner
------------------------------
Title: Chief Operating Officer
<PAGE> 18
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel Jacksonville Licenses, Inc., a Delaware
corporation, as Guarantor under the Subsidiary Guaranty dated October 31, 1996
(the "Subsidiary Guaranty") in favor of the Agent and, for its benefit and the
benefit of the Lenders parties to the Credit Agreement referred to in the
foregoing Amendment, hereby consents to such Amendment and hereby confirms and
agrees that (a) notwithstanding the effectiveness of such Amendment, the
Subsidiary Guaranty is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects, and (b) the Collateral
Documents to which Powertel Jacksonville Licenses, Inc. is a party and all of
the Collateral described therein do, and shall continue to, secure the payment
of all of the Secured Obligations (in each case, as defined therein).
Powertel Jacksonville Licenses, Inc.
By: /s/ Edward C. Horner
------------------------------
Title: Chief Operating Officer
<PAGE> 19
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel/Memphis, Inc., a Delaware corporation, as
Guarantor under the Subsidiary Guaranty dated October 31, 1996 (the "Subsidiary
Guaranty") in favor of the Agent and, for its benefit and the benefit of the
Lenders parties to the Credit Agreement referred to in the foregoing Amendment,
hereby consents to such Amendment and hereby confirms and agrees that (a)
notwithstanding the effectiveness of such Amendment, the Subsidiary Guaranty
is, and shall continue to be, in full force and effect and is hereby ratified
and confirmed in all respects, and (b) the Collateral Documents to which
Powertel/Memphis, Inc. is a party and all of the Collateral described therein
do, and shall continue to, secure the payment of all of the Secured Obligations
(in each case, as defined therein).
Powertel/Memphis, Inc.
By: /s/ Edward C. Horner
-------------------------------
Title: Chief Operating Officer
<PAGE> 20
CONSENT
Dated as of March 31, 1997
The undersigned, Powertel Memphis Licenses, Inc., a Delaware corporation,
as Guarantor under the Subsidiary Guaranty dated October 31, 1996 (the
"Subsidiary Guaranty") in favor of the Agent and, for its benefit and the
benefit of the Lenders parties to the Credit Agreement referred to in the
foregoing Amendment, hereby consents to such Amendment and hereby confirms and
agrees that (a) notwithstanding the effectiveness of such Amendment, the
Subsidiary Guaranty is, and shall continue to be, in full force and effect and
is hereby ratified and confirmed in all respects, and (b) the Collateral
Documents to which Powertel Memphis Licenses, Inc. is a party and all of the
Collateral described therein do, and shall continue to, secure the payment of
all of the Secured Obligations (in each case, as defined therein).
Powertel Memphis Licenses, Inc.
By: /s/ Edward C. Horner
--------------------------------
Title: Chief Operating Officer
<PAGE> 1
EXHIBIT 10(f)
EXECUTION
POWERTEL, INC.
AMENDMENT NO. 3
TO THE CREDIT AGREEMENT
This AMENDMENT NO. 3 TO THE CREDIT AGREEMENT (this
"AMENDMENT") is dated as of June 26, 1997, and entered into by and among
POWERTEL PCS, INC., a Delaware corporation (formerly known as InterCel PCS
Services, Inc. and Powertel, Inc.) (the "BORROWER"), the financial institutions
listed on the signature pages hereof ("LENDERS"), and ERICSSON INC., as agent
for Lenders ("AGENT") and, for purposes of Section 5 hereof only, the other
Loan Parties listed on the signature pages hereof, and is made with reference
to that certain Credit Agreement, dated as of March 4, 1996, as amended by that
certain Amendment No. 1 to the Credit Agreement dated as of October 31, 1996
and that certain Amendment No. 2 to the Credit Agreement dated as of March 31,
1997 (as so amended, the "CREDIT AGREEMENT"), by and among the Borrower,
Lenders and Agent. Capitalized terms used herein without definition shall have
the same meanings herein as set forth in the Credit Agreement.
RECITALS
WHEREAS, the Borrower and Lenders desire to amend the Credit
Agreement (i) to modify certain financial covenants and ratios applicable to
the Borrower and (ii) to make certain other amendments as set forth below;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO CERTAIN DEFINITIONS AND AMENDMENTS TO
SECTION 1: PROVISIONS RELATING TO DEFINED TERMS
A. References in the Credit Agreement, exhibits thereto
and any other Loan Documents (i) to "Powertel, Inc." shall be deleted and
"Powertel PSC, Inc." substituted therefor; and (ii) to "InterCel, Inc." and
"InterCel" shall be deleted and "Powertel, Inc." and "Powertel," respectively,
substituted therefor.
1
<PAGE> 2
B. Subsection 1.01 of the Credit Agreement is hereby
amended by adding thereto the following definitions, which shall be inserted in
proper alphabetical order:
""ATLANTA MTA" means the MTA for Atlanta, Georgia.
"INTEREST PERIOD" means a three-month period."
C. Subsection 1.01 of the Credit Agreement is hereby
further amended by deleting the definitions of "Eurodollar Rate" and "License
Subsidiaries" therefrom in their entirety and substituting the following
therefor:
"EURODOLLAR RATE" means for any Interest Period, the rate of
interest per annum equal to the rate per annum obtained by dividing
(a) the rate for deposits in U.S. dollars for a period equal to such
Interest Period commencing on the first day of such Interest Period
(i) appearing on page 3750 of the Telerate service as of 11:00 a.m.
(London time) two (2) business days prior to the beginning of such
Interest Period; provided however that in the event such rate does not
appear on page 3750 of the Telerate service (or otherwise on such
service), such rate shall be the rate per annum equal to the rate at
which deposits in U.S. dollars are offered by the principal office of
Citibank, N.A. in London, England to prime banks in the London
interbank market at 11:00 a.m. (London time) two (2) business days
before the first day of such Interest Period (rounded upward to the
nearest 1/16th of 1%), in each case for a period equal to the Interest
Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such period.
"LICENSE SUBSIDIARY" means each of Powertel Jacksonville
Licenses, Inc., Powertel Memphis Licenses, Inc., Powertel Birmingham
Licenses, Inc., Powertel Atlanta Licenses, Inc., and any other Person
established solely for the purpose of holding the Licenses now or
hereafter acquired or owned by the Borrower and its Subsidiaries,
which Person shall be a wholly owned Subsidiary of the Borrower."
1.2 AMENDMENT TO SECTION 2.02: MAKING THE ADVANCES
Section 2.02(a) of the Credit Agreement is hereby amended by
deleting the first three sentences thereof in their entirety and substituting
the following therefor:
"Each Borrowing shall be in a minimum amount of
$5,000,000 and shall be made on notice, given not later than
11:00 A.M. (New York City time) on the third Business Day
prior to the date of the proposed Borrowing to the Agent,
which shall give to each Lender prompt notice thereof by telex
or telecopier. Each such notice of a Borrowing (a
2
<PAGE> 3
"Notice of Borrowing") shall be deemed a request by the
Borrower to finance the payment of an invoice or invoices
delivered by Ericsson pursuant to the Equipment Purchase
Agreement. Each Notice of Borrowing shall be by telephone,
confirmed immediately in writing, or telex or telecopier, in
substantially the form of Exhibit B hereto, specifying therein
the requested (i) date of such Borrowing, (ii) aggregate
amount of such Borrowing, and (iii) identifying the invoices
to be financed with the proceeds of such Borrowing; provided
that if the Borrower elects to pay an invoice and subsequently
finance such invoice with a Borrowing, such Borrowing must
occur within ninety days of the date of the invoice being
financed."
1.3 AMENDMENTS TO SECTION 2.04: PREPAYMENTS
A. Section 2.04(a) of the Credit Agreement is hereby
amended by deleting the last sentence thereof and substituting the
following therefor:
"Each such prepayment shall be applied to reduce the
scheduled installments due pursuant to Section 2.03 of the
Advances being prepaid (i) first in inverse order of maturity
to installments due after December 31, 2005 to the full extent
thereof and (ii) second ratably to installments due on or
before December 31, 2005."
B. Section 2.04(b) of the Credit Agreement is hereby
amended by deleting clause (iv) thereof in its entirety and amending
clause (iii) thereof to read in its entirety as follows:
"(iii) All prepayments under this Section 2.04(b) shall be
made together with accrued interest to the date of such
prepayment on the principal amount prepaid and shall be
applied to reduce the scheduled installments due pursuant to
Section 2.03 hereof in inverse order of maturity."
1.4 AMENDMENTS TO SECTION 2.05: INTEREST
A. Section 2.05(a)(i) and Section 2.05(c) of the Credit
Agreement are each hereby amended by deleting the references contained
therein to "each calendar quarter" and substituting therefor "each
Interest Period."
B. Section 2.05(d) of the Credit Agreement is hereby
deleted in its entirety and the following substituted therefor:
"(d) Compensation for Breakage or Noncommencement of
Interest Periods. The Borrower shall compensate each Lender,
upon request of that Lender (which request shall set forth the
basis for
3
<PAGE> 4
requesting such amounts), for all reasonable losses, expenses
and liabilities (including any interest paid by that Lender to
lenders of funds borrowed by it to make or carry its Advances
and any loss, expense or liability sustained by that Lender in
connection with the liquidation or reemployment of such funds)
which that Lender may sustain (i) if for any reason (other
than a default by that Lender) a borrowing of any Advances
bearing interest at the Eurodollar Rate does not occur on a
date specified therefor in a Notice of Borrowing or a
telephonic request for borrowing, (ii) if any prepayment
(including prepayments pursuant to Section 2.04(b)) or other
principal payment of any Advance bearing interest at the
Eurodollar Rate occurs on a date prior to the last day of an
Interest Period applicable to that Advance, (iii) if any
prepayment of an Advance bearing interest at the Eurodollar
Rate is not made on any date specified in a notice of
prepayment given by the Borrower, or (iv) as a consequence of
any other default by the Borrower in the repayment of any
Advances bearing interest at the Eurodollar Rate when required
by the terms of this Agreement."
1.5 AMENDMENTS TO SECTION 4: THE BORROWER'S
REPRESENTATIONS AND WARRANTIES
A. Section 4.01(h) of the Credit Agreement is hereby
amended by deleting the parenthetical "(other than the Disclosed
Litigation)" therefrom.
B. Subsection 4.01(l) is hereby amended to read in its
entirety as follows:
"(l) The operations and properties of each Loan
Party and each of its Subsidiaries comply in all material
respects with all applicable Environmental Laws and no
circumstances exist, no event or condition has occurred and is
continuing with respect to the Borrower or any of its
Subsidiaries relating to compliance with any Environmental
Laws or any release of hazardous materials which, individually
or in the aggregate, has had or will have a Material Adverse
Effect, and no circumstances exist that could cause any
property of any Loan Party or any Subsidiary thereof to be
subject to any restrictions on ownership, occupancy, use or
transferability under any Environmental Law except where the
failure to so comply would not have a Material Adverse
Effect."
1.6 AMENDMENT TO SECTION 5.01: AFFIRMATIVE COVENANTS
Section 5.01 of the Credit Agreement is hereby amended by
adding the following Section 5.01(m) thereto:
4
<PAGE> 5
"(m) License Subsidiaries. All Licenses now
or hereafter owned by the Borrower and its
Subsidiaries shall be owned and held by License
Subsidiaries, which License Subsidiaries shall (i) at
all times be wholly owned Subsidiaries of the
Borrower or a wholly owned Subsidiary of the
Borrower, (ii) shall have executed and delivered a
Subsidiary Guaranty, and (iii) and all of the
outstanding capital stock of such License
Subsidiaries shall be pledged to the Agent to secure
the Obligations hereunder. License Subsidiaries
shall not engage in any business other than the
holding of the Licenses and the performance of their
respective obligations under their respective
Subsidiary Guaranties. License Subsidiaries shall
not own any assets other than the Licenses."
1.7 AMENDMENTS TO SECTION 5.03: REPORTING REQUIREMENTS
A. Section 5.03(b) is hereby amended to delete
the references to "Section 6.01(o) through 6.01(r)" contained
therein and to substitute therefor "Section 6.01(o) through
6.01(v)."
B. Section 5.03(c) is hereby amended to delete
the references contained therein to "Section 6.01(o) through
6.01(r)" and "Section 6.01(o) through 6.01(p)" and to
substitute therefor "Sections 6.01(o) through 6.01(v)."
1.8 AMENDMENTS TO SECTION 6.01. EVENTS OF DEFAULT
A. Section 6.01(p) of the Credit Agreement is
hereby deleted in its entirety and the following is
substituted therefor: "[Intentionally left blank]."
B. Section 6.01(r) of the Credit Agreement is
hereby deleted in its entirety and the following is
substituted therefor: "[Intentionally left blank]."
1.9 AMENDMENT TO SECTION 8.01
Section 8.01 of the Credit Agreement is hereby amended by
deleting the phrase "and other Debt owing to any other Person" at the end of
clause (iii) thereof.
1.10 MODIFICATION OF SCHEDULES
(a) Schedule I to the Credit Agreement is hereby
deleted in its entirety and replaced with a new Schedule I in
the form of Annex A hereto.
5
<PAGE> 6
(b) Schedule 6.01(o) to the Credit Agreement is
hereby deleted in its entirety and replaced with a new
Schedule 6.01(o) in the form of Annex B hereto.
(c) Schedule 6.01(p) to the Credit Agreement is
hereby deleted in its entirety.
(d) Schedule 6.01(q) to the Credit Agreement is
hereby deleted in its entirety and replaced with a new
Schedule 6.01(q) in the form of Annex C to this Amendment.
(e) Schedule 6.01(r) to the Credit Agreement is
hereby deleted in its entirety.
(f) Schedule 6.01(s) to the Credit Agreement is
hereby deleted in its entirety and replaced with a new
Schedule 6.01(s) in the form of Annex D to this Amendment.
(g) Schedule 6.01(t) is hereby deleted in its
entirety and replaced with a new Schedule 6.01(t) in the form
attached as Annex E to this Amendment.
(h) Schedule 6.01(u) to the Credit Agreement is
hereby deleted in its entirety and replaced with a new
Schedule 6.01(u) in the form of Annex F to this Amendment.
(i) Schedule 6.01(v) to the Credit Agreement is
hereby deleted in its entirety and replaced with a new
Schedule 6.01(v) in the form of Annex G to this Amendment.
1.11 MODIFICATION OF EXHIBIT
Exhibit A to the Credit Agreement is hereby deleted in its
entirety and replaced with a new Exhibit A in the form of Annex H to this
Amendment.
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Amendment shall become effective only upon
the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "THIRD
AMENDMENT EFFECTIVE DATE"):
A. On or before the Third Amendment Effective Date, the
Borrower and the Loan Parties shall deliver to Lenders (or to Agent for Lenders
with sufficient originally executed copies for each Lender and its counsel)
fully executed copies of this Amendment.
6
<PAGE> 7
B. Lenders and their respective counsel shall have
received originally executed copies of a favorable written opinion of in-house
counsel for the Borrower, in form and substance reasonably satisfactory to
Agent and its counsel, dated as of the Third Amendment Effective Date with
respect to (i) the due incorporation, good standing, and corporate power and
authority of the Borrower and Powertel, Inc. (formerly InterCel, Inc.) and (ii)
the due authorization, execution and delivery and enforceability of the Amended
Agreement (as hereinafter defined) by the Borrower and the Guaranty Amendment
(as hereinafter defined) by Powertel, Inc. and as to such other matters as
Agent acting on behalf of Lenders may reasonably request (including without
limitation that such amendments do not conflict with the terms of any material
agreements of the Borrower or Powertel, Inc.).
C. On or before the Third Amendment Effective Date,
Powertel, Inc. shall have delivered an amendment to the Parent Guaranty (the
"GUARANTY AMENDMENT") in substantially in the form of Annex I to this
Amendment.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE
BORROWER
In order to induce Lenders to enter into this Amendment and to
amend the Credit Agreement in the manner provided herein, the Borrower
represents and warrants to each Lender that the following statements are true,
correct and complete:
(a) The execution, delivery and performance by the
Borrower of this Amendment and the Loan Documents, as amended hereby, to which
it is a party are within the Borrower's corporate powers, have been duly
authorized by all necessary corporate action and do not (i) contravene the
Borrower's charter or bylaws, (ii) violate any law, rule or regulation
(including, without limitation, Regulation X of the Board of Governors of the
Federal Reserve System), or any order, writ, judgment, injunction, decree,
determination or award, binding on or affecting the Borrower or any of its
Subsidiaries or any of their properties, the effect of which would have a
Material Adverse Effect, or (iii) conflict with or result in the breach of, or
constitute a default under, any contract, loan agreement, indenture, mortgage,
deed of trust, lease or other instrument binding on or affecting the Borrower,
or any of its Subsidiaries or any of their properties except where such
conflict would not have a Material Adverse Effect.
(b) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any other third party is required for the due execution, delivery or
performance by the Borrower of this Amendment or any of the Loan Documents, as
amended hereby, to which it is a party.
(c) This Amendment has been duly executed and delivered
by the Borrower. This Amendment and each of the other Loan Documents, as
amended
7
<PAGE> 8
hereby, to which the Borrower is a party are legal, valid and binding
obligations of the Borrower enforceable against the Borrower in accordance with
their respective terms.
(d) Except as disclosed on Annex J hereto, the
representations and warranties contained in Article IV of the Credit Agreement
are and will be true, correct and complete in all material respects on and as
of the Third Amendment Effective Date to the same extent as though made on and
as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
(e) No event has occurred and is continuing or will
result from the consummation of the transactions contemplated by this Amendment
that would constitute a Default.
SECTION 5. ACKNOWLEDGEMENT AND CONSENT BY CREDIT SUPPORT
PARTIES.
Powertel, Inc. is a party to the Parent Guaranty, each
Operating Subsidiary is party to a Subsidiary Guaranty and a Subsidiary
Security Agreement, and each License Subsidiary is party to a Subsidiary
Guaranty. Powertel, Inc., the Operating Subsidiaries and the License
Subsidiaries are referred to herein collectively as the "CREDIT SUPPORT
PARTIES" and the Parent Guaranty, the Subsidiary Guaranties and the Subsidiary
Security Agreements are herein collectively referred to as the "CREDIT SUPPORT
DOCUMENTS."
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Amendment
and consents to the Amendment of the Credit Agreement effected pursuant to this
Amendment. Each Credit Support Party hereby confirms that each Credit Support
Document to which it is a party or otherwise bound and all Collateral
encumbered thereby will continue to guaranty or secure, as the case may be, to
the fullest extent possible the payment and performance of all the "Guaranteed
Obligations" and "Secured Obligations," as the case may be (in each case as
such terms are defined in the applicable Credit Support Document), including
without limitation the Obligations of the Borrower now or hereafter existing
under or in respect of the Amended Agreement (as hereinafter defined) and the
Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Amendment. Each Credit Support Party
acknowledges and agrees that (i) notwithstanding the conditions to
effectiveness set forth in this Amendment, such
8
<PAGE> 9
Credit Support Party is not required by the terms of the Credit Agreement or
any other Loan Document to consent to the amendments of the Credit Agreement
effected pursuant to this Amendment and (ii) nothing in the Credit Agreement,
this Amendment or any other Loan Document should be deemed to require the
consent of such Credit Support Party to any future amendments to the Credit
Agreement.
SECTION 6. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND
THE OTHER LOAN DOCUMENTS.
(i) On and after the Third Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
referring to the Credit Agreement shall mean and be a reference to the
Credit Agreement as amended by this Amendment (the "AMENDED
AGREEMENT").
(ii) Except as specifically amended by this Amendment, the
Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. The Borrower agrees to pay on
demand all costs and expenses of the Agent in connection with the preparation,
execution, and delivery and administration, modification and amendment of this
Amendment and the other instruments and documents to be delivered hereunder
(including, without limitation, the reasonable fees and expenses of counsel for
the Agent).
C. HEADINGS. Section and subsection headings in this
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Amendment for any other purpose or be given any
substantive effect.
D. APPLICABLE LAW. THIS AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL
OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES.
9
<PAGE> 10
E. COUNTERPARTS; EFFECTIVENESS. This Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Amendment (other than the
provisions of Section 1 hereof, the effectiveness of which is governed by
Section 2 hereof) shall become effective upon the execution of a counterpart
hereof by the Borrower, Required Lenders and each of the Credit Support Parties
and receipt by the Borrower and Agent of written or telephonic notification of
such execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
10
<PAGE> 11
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
POWERTEL PCS, INC.
By: /s/ Fred G. Astor
---------------------------------------
Title: Executive Vice President
------------------------------------
and Chief Financial Officer
ERICSSON INC., as Agent
By: /s/ Joseph Hagan
---------------------------------------
Title: Vice President - Finance
------------------------------------
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as a Lender
/s/ John E. Urban
-------------------------------------------
Authorized Signatory
For purposes of Section 5 of this Amendment
only:
POWERTEL, INC.
By: /s/ Fred G. Astor
---------------------------------------
Title: Executive Vice President
------------------------------------
and Chief Financial Officer
POWERTEL/JACKSONVILLE, INC.
POWERTEL/MEMPHIS, INC.
POWERTEL/BIRMINGHAM, INC.
POWERTEL/ATLANTA, INC.
POWERTEL/JACKSONVILLE LICENSES, INC.
POWERTEL/MEMPHIS LICENSES, INC.
POWERTEL/BIRMINGHAM LICENSES, INC.
S-1
<PAGE> 12
POWERTEL/ATLANTA LICENSES, INC.
By: /s/ Allen Smith
-----------------------------------
Allen Smith
President of each of the foregoing
S-2
<PAGE> 13
ANNEX A
SCHEDULE I
Commitments
<TABLE>
<CAPTION>
Name of Lender Commitment
-------------- ----------
<S> <C>
Goldman Sachs Credit Partners L.P. $165,000,000
</TABLE>
A-1
<PAGE> 14
ANNEX B
SCHEDULE 6.01(O)
Minimum PCS Revenue
<TABLE>
<CAPTION>
Fiscal Quarter Ended Minimum PCS Revenue
-------------------- -------------------
<S> <C>
June 30, 1997 $8,400,000
September 30, 1997 $11,400,000
December 31, 1997 $15,000,000
March 31, 1998 $21,000,000
June 30, 1998 $26,900,000
September 30, 1998 $32,000,000
December 31, 1998 $37,000,000
March 31, 1999 $35,100,000
June 30, 1999 $54,700,000
September 30, 1999 $59,600,000
December 31, 1999 $67,000,000
March 31, 2000 $72,000,000
June 30, 2000 $85,500,000
September 30, 2000 $90,900,000
December 31, 2000 $99,000,000
March 31, 2001 $101,300,000
June 30, 2001 $108,900,000
September 30, 2001 $115,500,000
December 31, 2001 $126,000,000
March 31, 2002 $123,800,000
June 30, 2002 $123,800,000
September 30, 2002 $131,500,000
December 31, 2002 $144,000,000
March 31, 2003 $137,600,000
June 30, 2003 $141,500,000
September 30, 2003 $151,300,000
December 31, 2003 $164,900,000
March 31, 2004 $152,500,000
June 30, 2004 $155,500,000
September 30, 2004 $166,300,000
December 31, 2004 $181,100,000
March 31, 2005 $167,300,000
June 30, 2005 $168,300,000
September 30, 2005 $179,200,000
December 31, 2005 $195,000,000
</TABLE>
B-1
<PAGE> 15
ANNEX C
SCHEDULE 6.01(Q)
Net Worth
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED NET WORTH MINIMUM
-------------------- -----------------
<S> <C>
June 30, 1997 $ 346,000,000
September 30, 1997 $ 305,000,000
December 31, 1997 $ 261,000,000
March 31, 1998 $ 208,500,000
June 30, 1998 $ 156,000,000
September 30, 1998 $ 103,500,000
December 31, 1998 $ 51,000,000
March 31, 1999 $ (12,750,000)
June 30, 1999 $ (76,500,000)
September 30, 1999 $(140,250,000)
December 31, 1999 $(204,000,000)
March 31, 2000 $(247,500,000)
June 30, 2000 $(291,000,000)
September 30, 2000 $(334,500,000)
December 31, 2000 $(378,000,000)
March 31, 2001 $(397,000,000)
June 30, 2001 $(416,000,000)
September 30, 2001 $(435,000,000)
December 31, 2001 $(454,000,000)
March 31, 2002 $(451,500,000)
June 30, 2002 $(449,000,000)
September 30, 2002 $(446,500,000)
December 31, 2002 $(444,000,000)
March 31, 2003 $(422,500,000)
June 30, 2003 $(401,000,000)
September 30, 2003 $(379,500,000)
December 31, 2003 $(358,000,000)
March 31, 2004 $(317,500,000)
June 30, 2004 $(277,000,000)
September 30, 2004 $(236,500,000)
December 31, 2004 $(196,000,000)
March 31, 2005 $(136,000,000)
June 30, 2005 $ (76,000,000)
September 30, 2005 $ (16,000,000)
December 31, 2005 $ 44,000,000
</TABLE>
C-1
<PAGE> 16
ANNEX D
SCHEDULE 6.01(S)
Subscribers
<TABLE>
<CAPTION>
Fiscal Quarter Ended Number of Subscribers
-------------------- ---------------------
<S> <C>
June 30, 1997 38,000
September 30, 1997 54,500
December 31, 1997 71,000
March 31, 1998 95,000
June 30, 1998 120,000
September 30, 1998 150,000
December 31, 1998 188,000
March 31, 1999 218,000
June 30, 1999 260,000
September 30, 1999 305,000
December 31, 1999 374,000
March 31, 2000 425,000
June 30, 2000 475,000
September 30, 2000 525,000
December 31, 2000 600,000
March 31, 2001 600,000
June 30, 2001 600,000
September 30, 2001 600,000
December 31, 2001 600,000
March 31, 2002 600,000
June 30, 2002 600,000
September 30, 2002 600,000
December 31, 2002 600,000
March 31, 2003 600,000
June 30, 2003 600,000
September 30, 2003 600,000
December 31, 2003 600,000
March 31, 2004 600,000
June 30, 2004 600,000
September 30, 2004 600,000
December 31, 2004 600,000
March 31, 2005 600,000
June 30, 2005 600,000
September 30, 2005 600,000
December 31, 2005 600,000
</TABLE>
D-1
<PAGE> 17
ANNEX E
SCHEDULE 6.01(T)
Ratio of Consolidated EBITDA to Consolidated Debt Service
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 1997 N/A
June 30, 1997 N/A
September 30, 1997 N/A
December 31, 1997 N/A
March 31, 1998 N/A
June 30, 1998 N/A
September 30, 1998 N/A
December 31, 1998 N/A
March 31, 1999 N/A
June 30, 1999 N/A
September 30, 1999 N/A
December 31, 1999 N/A
March 31, 2000 N/A
June 30, 2000 N/A
September 30, 2000 N/A
December 31, 2000 N/A
March 31, 2001 N/A
June 30, 2001 N/A
September 30, 2001 N/A
December 31, 2001 0.90:1
March 31, 2002 0.90:1
June 30, 2002 1.00:1
September 30, 2002 1.00:1
December 31, 2002 1.00:1
March 31, 2003 1.10:1
June 30, 2003 1.15:1
September 30, 2003 1.20:1
December 31, 2003 1.25:1
March 31, 2004 1.25:1
June 30, 2004 1.25:1
September 30, 2004 1.25:1
December 31, 2004 1.25:1
March 31, 2005 N/A
June 30, 2005 N/A
September 30, 2005 N/A
December 31, 2005 N/A
</TABLE>
E-1
<PAGE> 18
ANNEX F
SCHEDULE 6.01(U)
Ratio of Consolidated Total Debt to Annualized Consolidated EBITDA.
<TABLE>
<CAPTION>
Fiscal Quarter Ended Ratio
-------------------- -----
<S> <C>
March 31, 1997 N/A
June 30, 1997 N/A
September 30, 1997 N/A
December 31, 1997 N/A
March 31, 1998 N/A
June 30, 1998 N/A
September 30, 1998 N/A
December 31, 1998 N/A
March 31, 1999 N/A
June 30, 1999 N/A
September 30, 1999 N/A
December 31, 1999 N/A
March 31, 2000 N/A
June 30, 2000 N/A
September 30, 2000 N/A
December 31, 2000 16.00:1
March 31, 2001 14.00:1
June 30, 2001 12.00:1
September 30, 2001 10.00:1
December 31, 2001 8.00:1
March 31, 2002 7.50:1
June 30, 2002 7.00:1
September 30, 2002 6.50:1
December 31, 2002 6.00:1
March 31, 2003 5.75:1
June 30, 2003 5.50:1
September 30, 2003 5.25:1
December 31, 2003 5.00:1
March 31, 2004 4.75:1
June 30, 2004 4.50:1
September 30, 2004 4.25:1
December 31, 2004 4.00:1
March 31, 2005 4.00:1
June 30, 2005 4.00:1
September 30, 2005 4.00:1
December 31, 2005 4.00:1
</TABLE>
F-1
<PAGE> 19
ANNEX G
SCHEDULE 6.01(V)
Maximum Aggregate Capital Expenditures
<TABLE>
<CAPTION>
Year Total
---- -----
<S> <C>
1997 N/A
1998 N/A
1999 $796,000,000
2000 $857,000,000
2001 $910,000,000
2002 $982,000,000
2003 $1,075,000,000
2004 $1,115,000,000
2005 $1,180,000,000
</TABLE>
G-1
<PAGE> 20
ANNEX H
EXHIBIT A
[FORM OF PROMISSORY NOTE]
PROMISSORY NOTE
$___________ Dated: _________
FOR VALUE RECEIVED, the undersigned, POWERTEL PCS, INC., a
Delaware corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_____________ (the "Lender") for the account of its Lending Office (as defined
in the Credit Agreement referred to below) the aggregate principal amount of
the Advances (as defined in the Credit Agreement referenced below) owing to the
Lender by the Borrower pursuant to the Credit Agreement dated as of March 4,
1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"; terms defined therein being used herein as therein defined)
among the Borrower, the Lender and certain other lenders party thereto, and
Ericsson Inc. as Agent for the Lenders, on the dates and in the amounts
specified in the Credit Agreement.
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal
amount is paid in full, at such interest rates, and payable at such times, as
are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Ericsson Inc., as Agent, at 740 East Campbell Road,
Richardson Texas 75081, in same day funds. Each Advance owing to the Lender by
the Borrower and the maturity thereof, and all payments made on account of
principal thereof, shall be recorded by the Lender and, prior to any transfer
hereof, endorsed on the grid attached hereto, which is part of this Promissory
Note.
This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Credit Agreement. The Credit Agreement,
among other things, (i) provides for the making of Advances by the Lender to
the Borrower from time to time in an aggregate amount not to exceed at any time
outstanding the U.S. dollar amount first above mentioned, the indebtedness of
the Borrower resulting from each Advance being evidenced by this Promissory
Note, and (ii) contains provisions for acceleration of the maturity hereof upon
the happening of certain stated events and also for prepayments on account of
principal hereof prior to the maturity hereof upon
H-1
<PAGE> 21
the terms and conditions therein specified. The obligations of the Borrower
under this Promissory Note, and the obligations of the other Loan Parties under
the Loan Documents, are secured by the Collateral as provided in the Loan
Documents.
POWERTEL PCS, INC.
By __________________________
Title:
H-2
<PAGE> 22
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
AMOUNT OF UNPAID
AMOUNT OF PRINCIPAL PAID PRINCIPAL NOTATION
DATE ADVANCE OR PREPAID BALANCE MADE BY
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------
</TABLE>
H-3
<PAGE> 23
ANNEX I
[FORM OF AMENDMENT TO PARENT GUARANTY]
POWERTEL, INC.
FIRST AMENDMENT TO GUARANTY
This FIRST AMENDMENT TO PARENT GUARANTY (this "AMENDMENT") is
dated as of June 26, 1997, and entered into by POWERTEL, INC. (formerly
InterCel, Inc.) (the "GUARANTOR") in favor of Secured Parties (as defined in
the Credit Agreement referred to below) and is made with reference to that
certain Guaranty, dated October 31, 1996, made by the Guarantor in favor of the
Secured Parties, as defined in that certain Credit Agreement, dated as of March
4, 1996, by and among POWERTEL PCS, INC. (formerly known as InterCel PCS
Services, Inc. and Powertel, Inc.), the Lenders party thereto and Ericsson
Inc., as Agent for the Lenders (said Credit Agreement as it may be amended,
modified or supplemented from time to time, the "CREDIT AGREEMENT").
Capitalized terms used herein without definition shall have the meanings given
such terms in the Guaranty or Credit Agreement as applicable.
RECITALS
WHEREAS, the Lenders have agreed to make certain amendments
requested by the Borrower to the Credit Agreement; and
WHEREAS, it is a condition precedent to the effectiveness of
such amendments that the Guarantor execute and deliver this Amendment to the
Guaranty;
NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to enter into the amendments to the Credit Agreement, the
Guarantor hereby agrees as follows:
SECTION 1. AMENDMENTS TO THE GUARANTY
A. Section 6(a) of the Guaranty is hereby amended by
adding the following proviso at the end thereof:
"provided, however, for purposes of compliance with this
Section 6(a), (i) the reference to "Closing Date" contained in
Clause (C)(2) of Section 4.04 of said Indenture shall be
deemed to mean the effective date of that certain
I-1
<PAGE> 24
Amendment No. 3 to the Credit Agreement, dated as of June 26,
1997, by and among the Borrower, Secured Parties, Agent and
the other Loan Parties, and (ii) "Restricted Payments" as
defined in Section 4.04 of said Indenture shall be deemed to
include any voluntary or optional principal payment, or
voluntary or optional redemption, repurchase, defeasance, or
other acquisition or retirement for value which is not
required to be made pursuant to the terms of said Indenture
(which shall be deemed to include without limitation any offer
to purchase said notes upon a sale of assets), of any of the
12% Senior Discount Notes due 2006 (whether issued pursuant to
the Indenture dated February 7, 1996 or April 19, 1996) or the
11-1/8% Senior Notes due 2007 of the Guarantor.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE
GUARANTOR
The Guarantor represents and warrants to each Secured Party
that the following statements are true, correct and complete:
(a) The execution, delivery and performance by the
Guarantor of this Amendment and the Guaranty, as amended hereby, are within the
Guarantor's corporate power, have been duly authorized by all necessary
corporate action and do not (i) contravene the Guarantor's charter or bylaws
(ii) violate any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award, the effect of which would have a Material
Adverse Effect, (iii) conflict with or result in a breach of, or constitute a
default under, any contract, loan agreement, indenture, mortgage, deed of
trust, lease or other instrument binding on or affecting the Guarantor, any of
its Subsidiaries or any of their respective properties, the effect of which
would have a Material Adverse Effect or (iv) except for the Liens created under
the Loan Documents, result in or require the creation or imposition of any Lien
upon or with respect to any of the properties of the Guarantor or any of its
Subsidiaries.
(b) No authorization or approval or other action by, and
no notice to or filing with, any governmental authority or regulatory body or
any third party is required for the execution, delivery, recordation, filing or
performance by the Guarantor of this Amendment or the Guaranty, as amended
hereby.
(c) This Amendment has been duly executed and delivered by
the Guarantor. This Amendment and the Guaranty, as amended hereby, are the
legal, valid and binding obligations of the Guarantor enforceable against the
Guarantor in accordance with their respective terms.
(d) The representations and warranties contained in
Section 5 of the Guaranty are true, correct and complete in all material
respects as of the date hereof to the same extent as though made on and as of
such date, except to the extent such
I-2
<PAGE> 25
representations and warranties specifically related to an earlier date, in
which case they were true, correct and complete in all material respects on and
as of such earlier date.
SECTION 3. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE GUARANTY AND THE OTHER
LOAN DOCUMENTS. On and after the date hereof, each reference to the Guaranty
contained in any of the Loan Documents shall mean and be a reference to the
Guaranty as amended by this Amendment. Except as specifically amended by this
Amendment, the Guaranty shall remain in full force and effect and is hereby
ratified and confirmed by the Guarantor.
B. APPLICABLE LAW. This Amendment and the rights and
obligations of the parties hereunder shall be governed by, and shall be
construed and enforced in accordance with, the internal laws of the State of
New York (including without limitation Section 5-1401 of the General
Obligations Law of the State of New York), without regard to conflicts of law
principles.
IN WITNESS WHEREOF, the Guarantor has caused this Amendment to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.
POWERTEL, INC.
By: __________________________
Title: ________________________
I-3
<PAGE> 26
ANNEX J
EXCEPTION TO SECTION 3(D)
Powertel/Birmingham, Inc. ("Powertel/Birmingham") has been
served with a complaint filed on April 4, 1997 by American Page One, Inc d/b/a
American Mobile Wireless Communications ("Plaintiff") in the Circuit Court of
Macon County, Alabama. Plaintiff claims that Powertel/Birmingham has breached
its agency contract and has committed other torts with respect to Plaintiff by
failing to accurately track Plaintiff's account with respect to inventory
invoicing and commissions, failing to pay timely commissions, failing to
provide services to Plaintiff's customers in a competent and accurate manner,
billing Plaintiff's customers inaccurately and in excessive amounts, and making
false representations with regard to its customer service and operational
capabilities. Plaintiff is seeking unspecified damages. The Borrower believes
the Plaintiff's claims are without merit and intends to defend itself
vigorously. The Borrower does not believe that this lawsuit is reasonably
likely to be decided adversely to the Borrower or Powertel/Birmingham.
J-1
<PAGE> 1
EXHIBIT 12
POWERTEL, INC.
STATEMENT REGARDING COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS, EXCEPT RATIO)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1997
---------------------
<S> <C>
Earnings before income taxes and
cumulative effect of change in accounting
principle................................. $ (29,566)
Add (deduct):
Fixed charges.......................... $ 15,079
Interest capitalized................... $ (6,701)
---------------------
Earnings as adjusted......................... $ (21,188)
=====================
Fixed Charges:
Interest expense....................... $ 7,431
Capitalized interest................... $ 6,701
Debt issuance costs.................... $ 373
Rent expense (1/3 of total)............ $ 574
---------------------
$ 15,079
=====================
Ratio of earnings to fixed charges........... $ -
=====================
Deficiency................................... $ 36,267
=====================
</TABLE>
<PAGE> 1
EXHIBIT 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our firm) included in or made a part of this
registration statement and to the incorporation by reference in this
registration statement of our reports dated February 3, 1997 (except for Note
14, as to which the date was March 13, 1997) included in the Powertel, Inc.
(formerly known as InterCel, Inc.) and subsidiaries' Annual Report on
Form 10-K for the year ended December 31, 1996.
/s/ Arthur Andersen LLP
Atlanta, Georgia
July 15, 1997
<PAGE> 1
EXHIBIT 25
_____________________________________________________________________________
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF
1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ___________
______________________________
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
(Exact name of trustee as specified in its charter)
<S> <C> <C>
NEW YORK 13-4941247
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
FOUR ALBANY STREET
NEW YORK, NEW YORK 10006
(Address of principal (Zip Code)
executive offices)
BANKERS TRUST COMPANY
LEGAL DEPARTMENT
130 LIBERTY STREET, 31ST FLOOR
NEW YORK, NEW YORK 10006
(212) 250-2201
(Name, address and telephone number of agent for service)
_________________________________
</TABLE>
<TABLE>
<S> <C>
POWERTEL, INC. (FORMERLY INTERCEL, INC.)
(Exact name of obligor as specified in its charter)
DELAWARE 58-1944750
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) Identification no.)
</TABLE>
<TABLE>
<S> <C>
1233 O.G. SKINNER DRIVE 31833
WEST POINT, GA (Zip Code)
(Address of principal executive offices)
11 1/8% SENIOR NOTES DUE 2007
(Title of the indenture securities)
</TABLE>
<PAGE> 2
ITEM 1.GENERAL INFORMATION.
Furnish the following information as to the trustee.
(a) Name and address of each examining or supervising
authority to which it is subject.
NAME ADDRESS
---- -------
Federal Reserve Bank (2nd District) New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
New York State Banking Department Albany, NY
(b) Whether it is authorized to exercise corporate trust
powers.
Yes.
ITEM 2.AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the Trustee, describe each such
affiliation.
None.
ITEM 3.-15. NOT APPLICABLE
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<S> <C>
EXHIBIT 1 - Restated Organization Certificate of Bankers Trust Company dated August 7, 1990, Certificate of
Amendment of the Organization Certificate of Bankers Trust Company dated June 21, 1995 -
Incorporated herein by reference to Exhibit 1 filed with Form T-1 Statement, Registration
No. 33-65171, and Certificate of Amendment of the Organization Certificate of Bankers Trust Company
dated March 20, 1996, copy attached.
EXHIBIT 2 - Certificate of Authority to commence business - Incorporated herein by reference to Exhibit
2 filed with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 3 - Authorization of the Trustee to exercise corporate trust powers - Incorporated herein by
reference to Exhibit 2 filed with Form T-1 Statement, Registration No. 33-21047.
EXHIBIT 4 - Existing By-Laws of Bankers Trust Company, as amended on February 18, 1997, copy attached.
</TABLE>
-2-
<PAGE> 3
<TABLE>
<S> <C>
EXHIBIT 5 - Not applicable.
EXHIBIT 6 - Consent of Bankers Trust Company required by Section 321(b)
of the Act. - Incorporated herein by reference to Exhibit 4
filed with Form T-1 Statement, Registration No. 22-18864.
EXHIBIT 7 - A copy of the latest report of condition of Bankers Trust
Company dated as of March 31, 1997.
EXHIBIT 8 - Not Applicable.
EXHIBIT 9 - Not Applicable.
</TABLE>
-3-
<PAGE> 4
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Bankers Trust Company, a corporation organized and
existing under the laws of the State of New York, has duly caused this
statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in The City of New York, and State of New York,
on the 8th day of July, 1997.
BANKERS TRUST COMPANY
By: /s/ Sandra Shaffer
--------------------------------
Sandra Shaffer
Assistant Vice President
-4-
<PAGE> 5
Legal Title of Bank: Bankers Trust Company Call Date: 3/31/97
ST-BK: 36-4840 FFIEC 031
Address: 130 Liberty Street Vendor ID: D
CERT: 00623 Page RC-1
City, State ZIP: New York, NY 10006
11
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL AND STATE-CHARTERED
SAVINGS BANKS MARCH 31, 1997
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, reported the amount outstanding as of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
<TABLE>
<CAPTION>
---------
| C400 |
-----------------
- ------------------------------------------------
Dollar Amounts in Thousands | RCFD Bil Mil Thou
- ------------------------------------------------------
|
- -------
ASSETS
| ////////////////// |
<S> <C> <C>
1. Cash and balances due from depository institutions (from Schedule RC-A):
| ////////////////// |
a. Noninterest-bearing balances and currency and coin(1)
.................. | 0081
1,589,000|1.a.
b. Interest-bearing balances(2)
...................................... | 0071
2,734,000|1.b.
2. Securities:
| ////////////////// |
a. Held-to-maturity securities (from Schedule RC-B, column A)
.................. | 1754 0
|2.a.
b. Available-for-sale securities (from Schedule RC-B, column
D)................ | 1773
4,433,000|2.b.
3 Federal funds sold and securities purchased under agreements to resell
| 1350 26,490,000|3
4. Loans and lease financing receivables:
| ////////////////// |
a. Loans and leases, net of unearned income (from Schedule RC-C)
RCFD 2122 15,941,000 | ////////////////// |4.a.
b. LESS: Allowance for loan and lease losses..................
..RCFD 3123 708,000 | ////////////////// |4.b.
c. LESS: Allocated transfer risk reserve......................
..RCFD 3128 0 | ////////////////// |4.c.
d. Loans and leases, net of unearned income,
| ////////////////// |
allowance, and reserve (item 4.a minus 4.b and 4.c)
.......................... | 2125
15,233,000|4.d.
5. Assets held in trading accounts
..............................................
| 3545 38,115,000|5.
6. Premises and fixed assets (including capitalized leases)
.............................. | 2145
924,000|6.
7. Other real estate owned (from Schedule RC-M)
................................. | 2150
188,000|7.
8. Investments in unconsolidated subsidiaries and associated companies
(from Schedule RC-M) | 2130 175,000|8.
9. Customers' liability to this bank on acceptances outstanding
................. | 2155
618,000|9.
</TABLE>
<PAGE> 6
<TABLE>
<S> <C>
10. Intangible assets (from Schedule RC-M)
...................................... | 2143
17,000|10.
11. Other assets (from Schedule RC-F)
........................................... | 2160
4,424,000|11.
12. Total assets (sum of items 1 through 11)
...................................... | 2170
94,940,000|12.
- ----------------------
</TABLE>
__________________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE> 7
Legal Title of Bank: Bankers Trust Company
Call Date: 3/31/97 ST-BK: 36-4840 FFIEC
031
Address: 130 Liberty Street
Vendor ID: D CERT: 00623 Page RC-2
City, State ZIP: New York, NY 10006
12
FDIC Certificate No.: | 0 | 0 | 6 | 2 | 3
SCHEDULE RC--CONTINUED
<TABLE>
<CAPTION>
- ------------------------------------------------
Dollar
- ------------------------------------------------------
Amounts in Thousands | //////// Bil Mil Thou
- ----------------------------------------------------------
|
- -----
LIABILITIES
| ////////////////// |
<S> <C> <C>
13. Deposits:
| ////////////////// |
a. In domestic offices (sum of totals of columns A and C from Schedule
RC-E, part I) | RCON 2200 14,450,000 |13.a.
(1) Noninterest-bearing(1)........RCON 6631
2,917,000...... | ////////////////// |13.a.(1)
(2) Interest-bearing...... .......RCON 6636
11,533,000...... | ////////////////// |13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs
(from Schedule RC-E | ////////////////// |
part II)
| RCFN 2200 23,456,000 |13.b.
(1) Noninterest-bearing...........RCFN 6631
1,062,000 | ////////////////// |13.b.(1)
(2) Interest-bearing..............RCFN 6636
22,394,000 | ////////////////// |13.b.(2)
14. Federal funds purchased and securities sold under agreements to
repurchase | RCFD 2800 15,195,000 |14
15. a. Demand notes issued to the U.S. Treasury
............................... | RCON 2840
0 |15.a.
b. Trading liabilities (from Schedule RC-
D)........................................| RCFD 3548
18,911,000 |15.b.
16. Other borrowed money: (includes mortgage indebtedness nd
obligations under | ////////////////// |
capitalized leases): | ////////////////// |
a. With original maturity of one year or less
..................................... | RCFD 2332
7,701,000 |16.a.
b. With original maturity of more than one year
................................ | RCFD 2333
4,438,000 |16.b.
17. Not applicable
................... |
|17.
18. Bank's liability on acceptances executed and outstanding
....................... | RCFD 2920 618,000
|18.
19. Subordinated notes and debentures
......................................... | RCFD 3200
1,226,000 |19.
20. Other liabilities (from Schedule RC-G)
................................... | RCFD 2930
3,971,000 |20.
21. Total liabilities (sum of items 13 through 20)
.............................. | RCFD 2948
89,966,000 |21.
| ////////////////// |
22. Not applicable
| R22/
EQUITY CAPITAL
| ////////////////// |
</TABLE>
<PAGE> 8
<TABLE>
<S> <C> <C>
23. Perpetual preferred stock and related surplus
...................................... | RCFD 3838
600,000 |23.
24. Common stock
..............................................................| RCFD
3230 1,002,000 |24.
25. Surplus (exclude all surplus related to preferred stock)
................................ .| RCFD 3839 540,000
|25.
26. a. Undivided profits and capital reserves
..................................... .| RCFD 3632
3,241,000 |26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities.......... . | RCFD 8434 ( 31,000)
|26.b.
27. Cumulative foreign currency translation adjustments
.............................. | RCFD 3284 (
378,000) |27.
28. Total equity capital (sum of items 23 through 27)
................................ | RCFD 3210
4,974,000 |28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of
items 21, 22, | //////////////////
|
and 28)
..............................................................................
| RCFD 3300 94,940,000 |29.
---------------------------------------
Memorandum
To be reported only with the March Report of
Condition.
1. Indicate in the box at the right the number of the statement below
that best describes the
most comprehensive level of auditing work performed for the bank
by independent external Number
-----------------------
auditors as of any date during 1996
.....................................................| RCFD 6724
1 | M.1
- --------------------
1 = Independent audit of the bank conducted in accordance
4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified
external auditors (may be required by state chartering
public accounting firm which submits a report on the bank
authority)
2 = Independent audit of the bank's parent holding company
5 =Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing
auditors
standards by a certified public accounting firm which
6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company
auditors
(but not on the bank separately)
7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in
8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
______________________
(1) Including total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE> 9
State of New York,
Banking Department
I, PETER M. PHILBIN, Deputy Superintendent of Bank of the State of New
York, DO HEREBY APPROVE the annexed Certificate entitled "CERTIFICATE OF
AMENDMENT OF THE ORGANIZATION CERTIFICATE OF BANKERS TRUST COMPANY UNDER
SECTION 8005 OF THE BANKING LAW," dated March 20, 1996, providing for an
increase in authorized capital stock from $1,351,666,670 consisting of
85,166,667 shares with a par value of $10 each designated as Common Stock and
500 shares with a par value of $1,000,000 each designated as Series Preferred
Stock to $1,501,666,670 consisting of 100,166,667 shares with a par value of
$10 each designated as Common Stock and 500 shares with a par value of
$1,000,000 each designated as Series Preferred Stock.
WITNESS, my hand and official seal of the Banking Department at the City of New
York,
this 21ST day of MARCH in the Year of our Lord one
thousand nine hundred and NINETY-SIX.
Peter M. Philbin
------------------------------
Deputy Superintendent of Banks
<PAGE> 10
CERTIFICATE OF AMENDMENT
OF THE
ORGANIZATION CERTIFICATE
OF BANKERS TRUST
Under Section 8005 of the Banking Law
_____________________________
We, James T. Byrne, Jr. and Lea Lahtinen, being respectively a Managing
Director and an Assistant Secretary of Bankers Trust Company, do hereby
certify:
1. The name of the corporation is Bankers Trust Company.
2. The organization certificate of said corporation was filed by the
Superintendent of Banks on the 5th of march, 1903.
3. The organization certificate as heretofore amended is hereby amended
to increase the aggregate number of shares which the corporation shall have
authority to issue and to increase the amount of its authorized capital stock
in conformity therewith.
4. Article III of the organization certificate with reference to the
authorized capital stock, the number of shares into which the capital stock
shall be divided, the par value of the shares and the capital stock
outstanding, which reads as follows:
"III. The amount of capital stock which the corporation is
hereafter to have is One Billion, Three Hundred Fifty One Million,
Six Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars
($1,351,666,670), divided into Eighty-Five Million, One Hundred
Sixty-Six Thousand, Six Hundred Sixty-Seven (85,166,667) shares
with a par value of $10 each designated as Common Stock and 500
shares with a par value of One Million Dollars ($1,000,000) each
designated as Series Preferred Stock."
is hereby amended to read as follows:
"III. The amount of capital stock which the corporation is
hereafter to have is One Billion, Five Hundred One Million, Six
Hundred Sixty-Six Thousand, Six Hundred Seventy Dollars
($1,501,666,670), divided into One Hundred Million, One Hundred
Sixty Six Thousand, Six Hundred Sixty-Seven (100,166,667) shares
with a par value of $10 each designated as Common Stock and 500
shares with a par value of One Million Dollars ($1,000,000) each
designated as Series Preferred Stock."
<PAGE> 11
6. The foregoing amendment of the organization certificate was
authorized by unanimous written consent signed by the holder of all outstanding
shares entitled to vote thereon.
IN WITNESS WHEREOF, we have made and subscribed this certificate this 20th
day of March , 1996.
James T. Byrne, Jr.
------------------------------
James T. Byrne, Jr.
Managing Director
Lea Lahtinen
------------------------------
Lea Lahtinen
Assistant Secretary
State of New York )
) ss:
County of New York )
Lea Lahtinen, being fully sworn, deposes and says that she is an Assistant
Secretary of Bankers Trust Company, the corporation described in the foregoing
certificate; that she has read the foregoing certificate and knows the contents
thereof, and that the statements herein contained are true.
Lea Lahtinen
- ----- -----------------------------
Lea Lahtinen
Sworn to before me this 20th day
of March, 1996.
Sandra L. West
- --------------------------
Notary Public
SANDRA L. WEST
Notary Public State of New York Counterpart filed in the
No. 31-4942101 Office of the Superintendent of
Qualified in New York County Banks, State of New York,
Commission Expires September 19, 1996 This 21st day of March, 1996
<PAGE> 12
BY-LAWS
FEBRUARY 18, 1997
BANKERS TRUST COMPANY
NEW YORK
<PAGE> 13
BY-LAWS
OF
BANKERS TRUST COMPANY
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Company shall be
held at the office of the Company in the Borough of Manhattan, City of New
York, on the third Tuesday in January of each year, for the election of
directors and such other business as may properly come before said meeting.
SECTION 2. Special meetings of stockholders other than those regulated by
statute may be called at any time by a majority of the directors. It shall be
the duty of the Chairman of the Board, the Chief Executive Officer or the
President to call such meetings whenever requested in writing to do so by
stockholders owning a majority of the capital stock.
SECTION 3. At all meetings of stockholders, there shall be present, either in
person or by proxy, stockholders owning a majority of the capital stock of the
Company, in order to constitute a quorum, except at special elections of
directors, as provided by law, but less than a quorum shall have power to
adjourn any meeting.
SECTION 4. The Chairman of the Board or, in his absence, the Chief Executive
Officer or, in his absence, the President or, in their absence, the senior
officer present, shall preside at meetings of the stockholders and shall direct
the proceedings and the order of business. The Secretary shall act as
secretary of such meetings and record the proceedings.
ARTICLE II
DIRECTORS
SECTION 1. The affairs of the Company shall be managed and its corporate
powers exercised by a Board of Directors consisting of such number of
directors, but not less than ten nor more than twenty-five, as may from time to
time be fixed by resolution adopted by a majority of the directors then in
office, or by the stockholders. In the event of any increase in the number of
directors, additional directors may be elected within the limitations so fixed,
either by the stockholders or within the limitations imposed by law, by a
majority of directors then in office. One-third of the number of directors, as
fixed from time to time, shall constitute a quorum. Any one or more members of
the Board of Directors or any Committee thereof may participate in a meeting of
the Board of Directors or Committee thereof by means of a conference telephone
or similar communications equipment which allows all persons participating
<PAGE> 14
in the meeting to hear each other at the same time. Participation by such
means shall constitute presence in person at such a meeting.
All directors hereafter elected shall hold office until the next annual meeting
of the stockholders and until their successors are elected and have qualified.
No person who shall have attained age 72 shall be eligible to be elected or
re-elected a director. Such director may, however, remain a director of the
Company until the next annual meeting of the stockholders of Bankers Trust New
York Corporation (the Company's parent) so that such director's retirement will
coincide with the retirement date from Bankers Trust New York Corporation.
No Officer-Director who shall have attained age 65, or earlier relinquishes his
responsibilities and title, shall be eligible to serve as a director.
SECTION 2. Vacancies not exceeding one-third of the whole number of the Board
of Directors may be filled by the affirmative vote of a majority of the
directors then in office, and the directors so elected shall hold office for
the balance of the unexpired term.
SECTION 3. The Chairman of the Board shall preside at meetings of the Board of
Directors. In his absence, the Chief Executive Officer or, in his absence,
such other director as the Board of Directors from time to time may designate
shall preside at such meetings.
SECTION 4. The Board of Directors may adopt such Rules and Regulations for the
conduct of its meetings and the management of the affairs of the Company as it
may deem proper, not inconsistent with the laws of the State of New York, or
these ByLaws, and all officers and employees shall strictly adhere to, and be
bound by, such Rules and Regulations.
SECTION 5. Regular meetings of the Board of Directors shall be held from time
to time on the third Tuesday of the month. If the day appointed for holding
such regular meetings shall be a legal holiday, the regular meeting to be held
on such day shall be held on the next business day thereafter. Special
meetings of the Board of Directors may be called upon at least two day's notice
whenever it may be deemed proper by the Chairman of the Board or, the Chief
Executive Officer or, in their absence, by such other director as the Board of
Directors may have designated pursuant to Section 3 of this Article, and shall
be called upon like notice whenever any three of the directors so request in
writing.
SECTION 6. The compensation of directors as such or as members of committees
shall be fixed from time to time by resolution of the Board of Directors.
<PAGE> 15
ARTICLE III
COMMITTEES
SECTION 1. There shall be an Executive Committee of the Board consisting of
not less than five directors who shall be appointed annually by the Board of
Directors. The Chairman of the Board shall preside at meetings of the
Executive Committee. In his absence, the Chief Executive Officer or, in his
absence, such other member of the Committee as the Committee from time to time
may designate shall preside at such meetings.
The Executive Committee shall possess and exercise to the extent permitted by
law all of the powers of the Board of Directors, except when the latter is in
session, and shall keep minutes of its proceedings, which shall be presented to
the Board of Directors at its next subsequent meeting. All acts done and
powers and authority conferred by the Executive Committee from time to time
shall be and be deemed to be, and may be certified as being, the act and under
the authority of the Board of Directors.
A majority of the Committee shall constitute a quorum, but the Committee may
act only by the concurrent vote of not less than one-third of its members, at
least one of whom must be a director other than an officer. Any one or more
directors, even though not members of the Executive Committee, may attend any
meeting of the Committee, and the member or members of the Committee present,
even though less than a quorum, may designate any one or more of such directors
as a substitute or substitutes for any absent member or members of the
Committee, and each such substitute or substitutes shall be counted for quorum,
voting, and all other purposes as a member or members of the Committee.
SECTION 2. There shall be an Audit Committee appointed annually by resolution
adopted by a majority of the entire Board of Directors which shall consist of
such number of directors, who are not also officers of the Company, as may from
time to time be fixed by resolution adopted by the Board of Directors. The
Chairman shall be designated by the Board of Directors, who shall also from
time to time fix a quorum for meetings of the Committee. Such Committee shall
conduct the annual directors' examinations of the Company as required by the
New York State Banking Law; shall review the reports of all examinations made
of the Company by public authorities and report thereon to the Board of
Directors; and shall report to the Board of Directors such other matters as it
deems advisable with respect to the Company, its various departments and the
conduct of its operations.
In the performance of its duties, the Audit Committee may employ or retain,
from time to time, expert assistants, independent of the officers or personnel
of the Company, to make studies of the Company's assets and liabilities as the
Committee may request and to make an examination of the accounting and auditing
methods of the Company and its system of internal protective controls to the
extent considered necessary or advisable in order to determine that the
operations of the Company, including its fiduciary departments, are being
audited by the General Auditor in such a manner as to provide prudent and
adequate protection. The Committee also may direct the General
<PAGE> 16
Auditor to make such investigation as it deems necessary or advisable with
respect to the Company, its various departments and the conduct of its
operations. The Committee shall hold regular quarterly meetings and during the
intervals thereof shall meet at other times on call of the Chairman.
SECTION 3. The Board of Directors shall have the power to appoint any other
Committees as may seem necessary, and from time to time to suspend or continue
the powers and duties of such Committees. Each Committee appointed pursuant to
this Article shall serve at the pleasure of the Board of Directors.
ARTICLE IV
OFFICERS
SECTION 1. The Board of Directors shall elect from among their number a
Chairman of the Board and a Chief Executive Officer, and shall also elect a
President, a Senior Vice Chairman, one or more Vice Chairmen, one or more
Executive Vice Presidents, one or more Senior Managing Directors, one or more
Managing Directors, one or more Senior Vice Presidents, one or more Vice
Presidents, one or more General Managers, a Secretary, a Controller, a
Treasurer, a General Counsel, one or more Associate General Counsels, a General
Auditor, a General Credit Auditor, and one or more Deputy Auditors, who need
not be directors. The officers of the corporation may also include such other
officers or assistant officers as shall from time to time be elected or
appointed by the Board. The Chairman of the Board or the Chief Executive
Officer or, in their absence, the President, the Senior Vice Chairman or any
Vice Chairman, may from time to time appoint assistant officers. All officers
elected or appointed by the Board of Directors shall hold their respective
offices during the pleasure of the Board of Directors, and all assistant
officers shall hold office at the pleasure of the Board or the Chairman of the
Board or the Chief Executive Officer or, in their absence, the President, the
Senior Vice Chairman or any Vice Chairman. The Board of Directors may require
any and all officers and employees to give security for the faithful
performance of their duties.
SECTION 2. The Board of Directors shall designate the Chief Executive Officer
of the Company who may also hold the additional title of Chairman of the Board,
President, Senior Vice Chairman or Vice Chairman and such person shall have,
subject to the supervision and direction of the Board of Directors or the
Executive Committee, all of the powers vested in such Chief Executive Officer
by law or by these By-Laws, or which usually attach or pertain to such office.
The other officers shall have, subject to the supervision and direction of the
Board of Directors or the Executive Committee or the Chairman of the Board or,
the Chief Executive Officer, the powers vested by law or by these By-Laws in
them as holders of their respective offices and, in addition, shall perform
such other duties as shall be assigned to them by the Board of Directors or the
Executive Committee or the Chairman of the Board or the Chief Executive
Officer.
The General Auditor shall be responsible, through the Audit Committee to the
Board of Directors for the determination of the program of the internal audit
function and the evaluation of the adequacy of the system of internal controls.
Subject to the Board of Directors, the General Auditor shall have and may
exercise all the powers and shall perform
<PAGE> 17
all the duties usual to such office and shall have such other powers as may be
prescribed or assigned to him from time to time by the Board of Directors or
vested in him by law or by these By-Laws. He shall perform such other duties
and shall make such investigations, examinations and reports as may be
prescribed or required by the Audit Committee. The General Auditor shall have
unrestricted access to all records and premises of the Company and shall
delegate such authority to his subordinates. He shall have the duty to report
to the Audit Committee on all matters concerning the internal audit program and
the adequacy of the system of internal controls of the Company which he deems
advisable or which the Audit Committee may request. Additionally, the General
Auditor shall have the duty of reporting independently of all officers of the
Company to the Audit Committee at least quarterly on any matters concerning the
internal audit program and the adequacy of the system of internal controls of
the Company that should be brought to the attention of the directors except
those matters responsibility for which has been vested in the General Credit
Auditor. Should the General Auditor deem any matter to be of special
importance, he shall report thereon forthwith to the Audit Committee. The
General Auditor shall report to the Chief Financial Officer only for
administrative purposes.
The General Credit Auditor shall be responsible to the Chief Executive Officer
and, through the Audit Committee, to the Board of Directors for the systems of
internal credit audit, shall perform such other duties as the Chief Executive
Officer may prescribe, and shall make such examinations and reports as may be
required by the Audit Committee. The General Credit Auditor shall have
unrestricted access to all records and may delegate such authority to
subordinates.
SECTION 3. The compensation of all officers shall be fixed under such plan or
plans of position evaluation and salary administration as shall be approved
from time to time by resolution of the Board of Directors.
SECTION 4. The Board of Directors, the Executive Committee, the Chairman of
the Board, the Chief Executive Officer or any person authorized for this
purpose by the Chief Executive Officer, shall appoint or engage all other
employees and agents and fix their compensation. The employment of all such
employees and agents shall continue during the pleasure of the Board of
Directors or the Executive Committee or the Chairman of the Board or the Chief
Executive Officer or any such authorized person; and the Board of Directors,
the Executive Committee, the Chairman of the Board, the Chief Executive Officer
or any such authorized person may discharge any such employees and agents at
will.
<PAGE> 18
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
SECTION 1. The Company shall, to the fullest extent permitted by Section 7018
of the New York Banking Law, indemnify any person who is or was made, or
threatened to be made, a party to an action or proceeding, whether civil or
criminal, whether involving any actual or alleged breach of duty, neglect or
error, any accountability, or any actual or alleged misstatement, misleading
statement or other act or omission and whether brought or threatened in any
court or administrative or legislative body or agency, including an action by
or in the right of the Company to procure a judgment in its favor and an action
by or in the right of any other corporation of any type or kind, domestic or
foreign, or any partnership, joint venture, trust, employee benefit plan or
other enterprise, which any director or officer of the Company is servicing or
served in any capacity at the request of the Company by reason of the fact that
he, his testator or intestate, is or was a director or officer of the Company,
or is serving or served such other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise in any capacity, against
judgments, fines, amounts paid in settlement, and costs, charges and expenses,
including attorneys' fees, or any appeal therein; provided, however, that no
indemnification shall be provided to any such person if a judgment or other
final adjudication adverse to the director or officer establishes that (i) his
acts were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 2. The Company may indemnify any other person to whom the Company is
permitted to provide indemnification or the advancement of expenses by
applicable law, whether pursuant to rights granted pursuant to, or provided by,
the New York Banking Law or other rights created by (i) a resolution of
stockholders, (ii) a resolution of directors, or (iii) an agreement providing
for such indemnification, it being expressly intended that these By-Laws
authorize the creation of other rights in any such manner.
SECTION 3. The Company shall, from time to time, reimburse or advance to any
person referred to in Section 1 the funds necessary for payment of expenses,
including attorneys' fees, incurred in connection with any action or proceeding
referred to in Section 1, upon receipt of a written undertaking by or on behalf
of such person to repay such amount(s) if a judgment or other final
adjudication adverse to the director or officer establishes that (i) his acts
were committed in bad faith or were the result of active and deliberate
dishonesty and, in either case, were material to the cause of action so
adjudicated, or (ii) he personally gained in fact a financial profit or other
advantage to which he was not legally entitled.
SECTION 4. Any director or officer of the Company serving (i) another
corporation, of which a majority of the shares entitled to vote in the election
of its directors is held by the Company, or (ii) any employee benefit plan of
the Company or any corporation referred to in clause (i) in any capacity shall
be deemed to be doing so at the request of the Company. In all other cases,
the provisions of this Article V will apply (i) only if the person serving
another corporation or any partnership, joint venture, trust, employee
<PAGE> 19
benefit plan or other enterprise so served at the specific request of the
Company, evidenced by a written communication signed by the Chairman of the
Board, the Chief Executive Officer or the President, and (ii) only if and to
the extent that, after making such efforts as the Chairman of the Board, the
Chief Executive Officer or the President shall deem adequate in the
circumstances, such person shall be unable to obtain indemnification from such
other enterprise or its insurer.
SECTION 5. Any person entitled to be indemnified or to the reimbursement or
advancement of expenses as a matter of right pursuant to this Article V may
elect to have the right to indemnification (or advancement of expenses)
interpreted on the basis of the applicable law in effect at the time of
occurrence of the event or events giving rise to the action or proceeding, to
the extent permitted by law, or on the basis of the applicable law in effect at
the time indemnification is sought.
SECTION 6. The right to be indemnified or to the reimbursement or advancement
of expense pursuant to this Article V (i) is a contract right pursuant to which
the person entitled thereto may bring suit as if the provisions hereof were set
forth in a separate written contract between the Company and the director or
officer, (ii) is intended to be retroactive and shall be available with respect
to events occurring prior to the adoption hereof, and (iii) shall continue to
exist after the rescission or restrictive modification hereof with respect to
events occurring prior thereto.
SECTION 7. If a request to be indemnified or for the reimbursement or
advancement of expenses pursuant hereto is not paid in full by the Company
within thirty days after a written claim has been received by the Company, the
claimant may at any time thereafter bring suit against the Company to recover
the unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled also to be paid the expenses of prosecuting such
claim. Neither the failure of the Company (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of or
reimbursement or advancement of expenses to the claimant is proper in the
circumstance, nor an actual determination by the Company (including its Board
of Directors, independent legal counsel, or its stockholders) that the claimant
is not entitled to indemnification or to the reimbursement or advancement of
expenses, shall be a defense to the action or create a presumption that the
claimant is not so entitled.
SECTION 8. A person who has been successful, on the merits or otherwise, in
the defense of a civil or criminal action or proceeding of the character
described in Section 1 shall be entitled to indemnification only as provided in
Sections 1 and 3, notwithstanding any provision of the New York Banking Law to
the contrary.
<PAGE> 20
ARTICLE VI
SEAL
SECTION 1. The Board of Directors shall provide a seal for the Company, the
counterpart dies of which shall be in the charge of the Secretary of the
Company and such officers as the Chairman of the Board, the Chief Executive
Officer or the Secretary may from time to time direct in writing, to be affixed
to certificates of stock and other documents in accordance with the directions
of the Board of Directors or the Executive Committee.
SECTION 2. The Board of Directors may provide, in proper cases on a specified
occasion and for a specified transaction or transactions, for the use of a
printed or engraved facsimile seal of the Company.
ARTICLE VII
CAPITAL STOCK
SECTION 1. Registration of transfer of shares shall only be made upon the
books of the Company by the registered holder in person, or by power of
attorney, duly executed, witnessed and filed with the Secretary or other proper
officer of the Company, on the surrender of the certificate or certificates of
such shares properly assigned for transfer.
ARTICLE VIII
CONSTRUCTION
SECTION 1. The masculine gender, when appearing in these By-Laws, shall be
deemed to include the feminine gender.
ARTICLE IX
AMENDMENTS
SECTION 1. These By-Laws may be altered, amended or added to by the Board of
Directors at any meeting, or by the stockholders at any annual or special
meeting, provided notice thereof has been given.
<PAGE> 1
EXHIBIT 99(a)
LETTER OF TRANSMITTAL
FOR
TENDER OF ALL OUTSTANDING
11 1/8% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
11 1/8% SENIOR NOTES DUE 2007
OF
POWERTEL, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997 (THE "EXPIRATION DATE"),
UNLESS EXTENDED BY POWERTEL, INC.
- --------------------------------------------------------------------------------
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
BANKERS TRUST COMPANY
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY OVERNIGHT COURIER:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Group
Nashville, Tennessee 37229-2737 123 Washington Street, 1st Floor 648 Grassmere Park Road
(registered or certified New York, New York 10006 Nashville, Tennessee 37211
mail recommended)
</TABLE>
Facsimile Transmission:
(615) 835-3701
Confirm by Telephone:
(615) 835-3572
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt of the Prospectus dated ,
1997 (the "Prospectus") of Powertel, Inc. ("Powertel") which, together with this
Letter of Transmittal (the "Letter of Transmittal"), constitutes Powertel's
offer (the "Exchange Offer") to exchange $1,000 in principal amount of new
11 1/8% Senior Notes Due 2007 (the "New Notes") of Powertel for each $1,000 in
principal amount of outstanding 11 1/8% Senior Notes Due 2007 (the "Old Notes")
of Powertel. The terms of the New Notes are identical in all material respects
(including principal amount, interest rate and maturity) to the terms of the Old
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the New Notes will have been registered under the Securities Act of 1933,
as amended (the "Securities Act"), and, therefore, will not bear legends
restricting the transfer thereof.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement dated as of June 10, 1997 (the "Registration Rights Agreement"), and
all Old Notes validly tendered will be accepted for exchange. Any Old Notes not
tendered will remain outstanding and continue to accrue interest, but will not
retain any rights under the Registration Rights Agreement. Holders electing to
have Old Notes exchanged pursuant to the Exchange Offer will be required to
surrender such Old Notes, together with this Letter of Transmittal, to the
Exchange Agent at the address specified herein prior to the close of business on
the Expiration Date. Holders will be entitled to withdraw their election at any
time prior to 5:00 p.m., New York City time on the Expiration Date by sending to
the
<PAGE> 2
Exchange Agent at the address specified herein a facsimile transmission or
letter setting forth the name of such Holder, the principal amount of Old Notes
delivered for exchange and a statement that such Holder is withdrawing this
election to have such Old Notes exchanged.
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW.
THE INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE
FOLLOWED. QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE
PROSPECTUS AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
List below the Old Notes to which this Letter of Transmittal relates.
If the space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
- --------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Name(s) and Addresses Aggregate Principal
of Registered Holder(s) Certificate Amount Represented Principal Amount
(Please fill in) Number(s) by Notes Tendered
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total
- --------------------------------------------------------------------------------
* Unless otherwise indicated, the holder will be deemed to have tendered
the full aggregate principal amount represented by Old Notes. See Instruction 2.
- --------------------------------------------------------------------------------
</TABLE>
This Letter of Transmittal is to be used if certificates for Old Notes
are to be forwarded herewith.
Unless the context requires otherwise, the term "Holder" for purposes
of this Letter of Transmittal means any person in whose name Old Notes are
registered or any other person who has obtained a properly completed bond power
and any other required documents from the registered holder.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other documents required hereby to the Exchange
Agent on or prior to the Expiration Date may tender their Old Notes according to
the guaranteed delivery procedure set forth in the Prospectus under the captions
"The Exchange Offer -- Terms of the Exchange Offer -- Procedures for Tendering
Old Notes" and "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed
Delivery Procedures."
<PAGE> 3
|| CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
Name of Eligible Institution that Guaranteed Delivery:
|| CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name:
--------------------------------------------------------------
Address:
--------------------------------------------------------------
<PAGE> 4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to Powertel the above-described principal amount of
Old Notes. Subject to, and effective upon, the acceptance for exchange of the
Old Notes tendered herewith, the undersigned hereby exchanges, assigns and
transfers to, or upon the order of, Powertel all right, title and interest in
and to such Old Notes. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent as the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that said Exchange Agent acts as the agent
of the undersigned in connection with the Exchange Offer) to cause the Old Notes
to be assigned, transferred and exchanged. The undersigned represents and
warrants that it has full power and authority to tender, exchange, assign and
transfer the Old Notes and to acquire New Notes issuable upon the exchange of
such tendered Old Notes, and that, when the same are accepted for exchange,
Powertel will acquire good and unencumbered title to the tendered Old Notes,
free and clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The undersigned also warrants that it will, upon
request, execute and deliver any additional documents deemed by Powertel to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Old Notes or to transfer ownership of such Old Notes on the account
books maintained by The Depository Trust Company.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer -- Conditions of the Exchange
Offer." The undersigned recognizes that as a result of these conditions (which
may be waived, in whole or in part, by Powertel) as more particularly set forth
in the Prospectus, Powertel may not be required to exchange any of the Old Notes
tendered hereby and, in such event, the Old Notes not exchanged will be returned
to the undersigned at the address shown below the signature of the undersigned.
By tendering, each Holder of Old Notes represents to Powertel that: (i)
the New Notes acquired pursuant to the Exchange Offer are being obtained in the
ordinary course of business of the person receiving such New Notes, whether or
not such person is such Holder; (ii) neither the Holder of Old Notes nor any
such other person has an arrangement or understanding with any person to
participate in the distribution of such New Notes; (iii) if the Holder is not a
broker-dealer or is a broker-dealer but will not receive New Notes for its own
account in exchange for Old Notes, neither the Holder nor any such other person
is engaged in or intends to participate in a distribution of the New Notes; and
(iv) neither the Holder nor any such other person is an "affiliate" of Powertel
within the meaning of Rule 405 under the Securities Act or, if such Holder is an
"affiliate," such Holder will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable. If the
tendering Holder is a broker-dealer (whether or not it is also an "affiliate" of
Powertel within the meaning of Rule 405 under the Securities Act) that will
receive New Notes for its own account in exchange for Old Notes, it acknowledges
that it will deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of such New Notes. By acknowledging that it will
deliver and by delivering a prospectus meeting the requirements of the
Securities Act in connection with any resale of such New Notes, the undersigned
is not deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
All authority herein conferred or agreed to be conferred shall survive
the death, bankruptcy or incapacity of the undersigned, and every obligation of
the undersigned hereunder shall be binding upon the heirs, personal
representatives, executors, administrators, successors, assigns, trustees in
bankruptcy and other legal representatives of the undersigned. Tendered Old
Notes may be withdrawn at any time prior to 5:00 p.m., New York City Time on the
Expiration Date by following the procedures set forth herein.
Certificates for all New Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, in each case
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned.
<PAGE> 5
TENDERING HOLDER(S) SIGN HERE
---------------------------------------
---------------------------------------
Signature(s) of Holder(s)
Date: , 1997
--------------------
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) for Old Notes or by any person(s) authorized to become registered
Holder(s) by endorsements and documents transmitted herewith. If signature by a
trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
please set forth the full title of such person.) See Instruction 3.
Name(s):
----------------------------------
----------------------------------
(Please Print)
Capacity
(full title):
-----------------------------------------------------------
Address:
-----------------------------------------------------------
(Including Zip Code)
Area Code and
Telephone No.:
-----------------------------------------------------------
Tax Id. No.:
-----------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTION 3)
Authorized Signature:
-----------------------------------------------------------
Name:
-----------------------------------------------------------
Title:
-----------------------------------------------------------
Address:
-----------------------------------------------------------
Name of Firm:
-----------------------------------------------------------
Area Code and
Telephone No.:
-----------------------------------------------------------
Dated: , 1997
---------------------------
<PAGE> 6
- --------------------------------------------------------------------------------
PAYOR'S NAME: POWERTEL, INC.
- --------------------------------------------------------------------------------
SUBSTITUTE Name (If joint names, list first and circle the name of the
FORM W-9 person or entity whose number you enter in Part I below.)
------------------------------------------------------------
Address
Department of
the Treasury
------------------------------------------------------------
Internal Revenue City, state and zip code
Service
------------------------------------------------------------
PART I - PLEASE PROVIDE YOUR TAXPAYER Social Security
IDENTIFICATION NUMBER ("TIN") IN THE Number or Employer
BOX AT RIGHT AND CERTIFY BY SIGNING Identification Number
AND DATING BELOW
------------------------------------------------------------
PART II - If exempt from backup
withholding, check the box to
the right. Also provide your
TIN in Part I and sign and date
this form in Part III. | |
------------------------------------------------------------
PART III - Under penalties of perjury, I certify that:
1. The number shown on this form is my correct taxpayer
identification number (or I am waiting for a number to
be issued to me), AND
2. I am not subject to backup withholding: (a) I am exempt
from backup withholding; or (b) I have not been notified
by the Internal Revenue Service that I am subject to
backup withholding as a result of a failure to report
all interest or dividends; or (c) the IRS has notified
me that I am no longer subject to backup withholding.
-----------------------------------------------------------
CERTIFICATION INSTRUCTIONS. You must cross out item 2
above if you have been notified by the IRS that you are
currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
SIGNATURE DATE:
---------------------- ---------------
- -------------------------------------------------------------------------------
Note: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE
OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF
TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
Certificates for all physically delivered Old Notes, as well as a properly
completed and duly executed copy of this Letter of Transmittal or facsimile
thereof, and any other documents required by this Letter of Transmittal, must be
received by the Exchange Agent at any of its addresses set forth herein on or
prior to the Expiration Date.
THE METHOD OF DELIVERY OF OLD NOTES, THIS LETTER OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF
THE HOLDER AND, EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. INSTEAD OF DELIVERY BY
MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE.
Holders whose Old Notes are not immediately available or who cannot
deliver their Old Notes and all other required documents to the Exchange Agent
on or prior to the Expiration Date may tender their Old Notes pursuant to the
guaranteed delivery procedure set forth in the Prospectus under "The Exchange
Offer -- Terms of the Exchange Offer -- Guaranteed Delivery Procedures."
Pursuant to such procedure: (i) such tender must be made by or through an
Eligible Institution (as defined in Instruction 3); (ii) on or prior to the
Expiration Date, the Exchange Agent must have received from such Eligible
Institution a letter or facsimile transmission setting forth the name and
address of the tendering Holder, the name(s) in which such Old Notes are
registered and the certificate number(s) of the Old Notes to be tendered; and
(iii) all tendered Old Notes as well as this Letter of Transmittal and all other
documents required by this Letter of Transmittal must be received by the
Exchange Agent within three New York Stock Exchange trading days after the date
of execution of such letter, telex or facsimile transmission, all as provided in
the Prospectus under the caption "The Exchange Offer -- Terms of the Exchange
Offer -- Guaranteed Delivery Procedures."
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS. Tenders of Old Notes will be accepted
in denominations of $1,000 and integral multiples in excess thereof. If less
than the entire principal amount of Old Notes evidenced by a submitted
certificate is tendered, the tendering Holder must fill in the principal amount
tendered in the column entitled "Principal Amount Tendered." A newly issued
certificate for the principal amount of Old Notes submitted but not tendered
will be sent to such Holder as soon as practicable after the Expiration Date.
All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated. To withdraw a tender of Old Notes in the
Exchange Offer, a written or facsimile transmission notice of withdrawal must be
received by the Exchange Agent at its address set forth herein prior to 5:00
p.m., New York City time, on the Expiration Date. Any such notice of withdrawal
must: (i) specify the name of the person having deposited the Old Notes to be
withdrawn (the "Depositor"); (ii) identify the Old Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Old
Notes); (iii) contain a statement that such holder is withdrawing its election
to have such Old Notes exchanged; (iv) be signed by the Holder in the same
manner as the original signature on the Letter of Transmittal by which such Old
Notes were tendered (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee with respect
to the Old Notes register the transfer of such Old Notes in the name of the
person withdrawing the tender; and (v) specify the name in which any such Old
Notes are to be registered, if different from that of the Depositor. If Old
Notes have been tendered pursuant to the procedure for book-entry transfer, any
notice of withdrawal must specify the name and number of the account at the
book-entry transfer facility. All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
Powertel, whose determination shall be final and binding on all parties. Any Old
Notes so withdrawn will be deemed not to have been validly tendered for purposes
of the Exchange Offer and no New Notes will be issued with respect thereto
unless the Old Notes so withdrawn are validly retendered. Any Old Notes which
have been tendered but which are not accepted for
<PAGE> 8
exchange will be returned to the Holder thereof without cost to such Holder as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described herein at any time prior to the business day prior
to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES. If this Letter of Transmittal is signed
by the registered Holder(s) of the Old Notes tendered hereby, the signature must
correspond with the name(s) as written on the face of certificates without
alteration, enlargement or any change whatsoever.
If tendered Old Notes are registered in the name of the signer of the
Letter of Transmittal and the New Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (including any participant in The Depository Trust Company
(also referred to as a book-entry facility) whose name appears on a security
listing as the owner of Old Notes), the signature of such signer need not be
guaranteed. In any other case, the tendered Old Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to Powertel
and duly executed by the registered holder and the signature on the endorsement
or instrument of transfer must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States or an "eligible guarantor institution" as
defined by Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended
(any of the foregoing hereinafter referred to as an "Eligible Institution").
If the New Notes or Old Notes not exchanged are to be delivered to an
address other than that of the registered holder appearing on the note register
for the Old Notes, the signature in the Letter of Transmittal must be guaranteed
by an Eligible Institution.
Endorsements on certificates or signatures on separate written
instruments of transfer or exchange required by this Instruction 3 must be
guaranteed by an Eligible Institution.
If any of the Old Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it
will be necessary to complete, sign and submit as many separate copies of this
Letter of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders of Old Notes listed and tendered hereby, no endorsements of certificates
or separate written instruments of transfer or exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to Powertel and duly executed by the registered Holder or
Holders, in either case signed exactly as the name or names of the registered
Holder or Holders appear(s) on the Old Notes.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by Powertel, proper evidence
satisfactory to Powertel of their authority so to act must be submitted.
4. TRANSFER TAXES. Powertel shall pay all transfer taxes, if any,
applicable to the exchange of Old Notes pursuant to the Exchange Offer. If,
however, certificates representing New Notes, or Old Notes for principal amounts
not tendered or accepted for exchange, are to be delivered to, or are to be
issued in the name of, any person other than the registered Holder of the Old
Notes tendered hereby, or if a transfer tax is imposed for any reason other than
the exchange of Old Notes pursuant to the Exchange Offer, then the amount of any
such transfer taxes (whether imposed on the registered Holder or any other
person) will be payable by the tendering Holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering Holder.
<PAGE> 9
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS. Powertel reserves the absolute right to
waive, in whole or in part, any of the conditions to the Exchange Offer set
forth in the Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED NOTEs. Any Holder whose
Old Notes have been mutilated, lost, stolen or destroyed should contact the
Exchange Agent at the address indicated above for further instructions.
7. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions
relating to the procedure for tendering and other questions relating to the
Exchange Offer, as well as requests for assistance or additional copies of the
Prospectus and this Letter of Transmittal, may be directed to the Exchange Agent
at the address and telephone number set forth above and in the Prospectus.
8. IRREGULARITIES. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of Letters of Transmittal
or Old Notes will be resolved by Powertel, whose determination will be final and
binding. Powertel reserves the absolute right to reject any or all Letters of
Transmittal or tenders that are not in proper form or the acceptance of which
would, in the opinion of Powertel's counsel, be unlawful. Powertel also reserves
the right to waive any irregularities or conditions of tender as to the
particular Old Notes covered by any Letter of Transmittal or tendered pursuant
to such Letter of Transmittal. None of Powertel, the Exchange Agent or any other
person will be under any duty to give notification of any defects or
irregularities in tenders or incur any liability for failure to give any such
notification. Powertel's interpretation of the terms and conditions of the
Exchange Offer shall be final and binding.
9. DEFINITIONS. Capitalized terms used in this Letter of
Transmittal and not otherwise defined have the meanings given in the Prospectus.
10. TAX IDENTIFICATION NUMBER. Federal income tax law requires
that a holder of any Old Notes which are accepted for exchange must provide
Powertel (as payor) with its correct taxpayer identification number ("TIN"),
which, in the case of a holder who is an individual, is his or her social
security number. If Powertel is not provided with the correct TIN, the holder
may be subject to a $50 penalty imposed by the Internal Revenue Service. (If
withholding results in an overpayment of taxes, a refund may be obtained.)
Certain holders (including, among others, all corporations and certain foreign
individuals) are not subject to these backup withholding and reporting
requirements; however, these holders still must submit the Substitute Form W-9.
See the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" for additional instructions.
To prevent backup withholding, each tendering holder must provide such
holder's correct TIN by completing the Substitute Form W-9 set forth herein,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the Internal Revenue
Service that such holder is subject to backup withholding as a result of failure
to report all interest or dividends or (ii) the Internal Revenue Service has
notified the holder that such holder is no longer subject to backup withholding.
The Form must be signed, even if the holder is exempt from backup withholding.
If the Old Notes are registered in more than one name or are not in the name of
the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for information on which TIN to
report.
Powertel reserves the right in its sole discretion to take whatever
steps are necessary to comply with its obligation regarding backup withholding.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE THEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
<PAGE> 1
EXHIBIT 99(B)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
11 1/8% SENIOR NOTES DUE 2007
IN EXCHANGE FOR
11 1/8% SENIOR NOTES DUE 2007
OF
POWERTEL, INC.
Registered holders of outstanding 11 1/8% Senior Notes Due 2007 (the
"Old Notes") of Powertel, Inc. ("Powertel") who wish to tender their Old Notes
in exchange for a like principal amount of 11 1/8% Senior Notes Due 2007 (the
"New Notes") of Powertel and, in each case, whose Old Notes are not immediately
available or who cannot deliver their Old Notes and Letter of Transmittal (and
any other documents required by the Letter of Transmittal) to Bankers Trust
Company (the "Exchange Agent") prior to the Expiration Date may use this Notice
of Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight delivery) or mailed to the Exchange Agent. See "The Exchange Offer --
Terms of the Exchange Offer -- Guaranteed Delivery Procedures" in the
Prospectus.
- -------------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1997 (the "EXPIRATION DATE"),
UNLESS EXTENDED BY POWERTEL, INC.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
BANKERS TRUST COMPANY
BY MAIL: BY HAND: BY OVERNIGHT COURIER:
<S> <C> <C>
BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc.
Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group
P.O. Box 292737 Receipt & Delivery Window Reorganization Group
Nashville, Tennessee 37229-2737 123 Washington Street, 1st Floor 648 Grassmere Park Road
(registered or certified New York, New York 10006 Nashville, Tennessee 37211
mail recommended)
</TABLE>
Facsimile Transmission:
(615) 835-3701
Confirm by Telephone:
(615) 835-3572
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN
AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution, such signature guarantee must appear in
the applicable space provided on the Letter of Transmittal for Guarantee of
Signatures.
<PAGE> 2
Ladies & Gentlemen:
The undersigned hereby tender(s) to Powertel upon the terms and subject
to the conditions set forth in the Exchange Offer and the Letter of Transmittal,
receipt of which is hereby acknowledged, the aggregate principal amount of Old
Notes set forth below pursuant to the guaranteed delivery procedures set forth
in the Prospectus.
The undersigned understands that tenders of Old Notes will be accepted
only in principal amounts equal to $1,000 or integral multiples thereof. Tenders
of Old Notes may also be withdrawn if the Exchange Offer is terminated without
any such Old Notes being exchanged thereunder or as otherwise provided in the
Prospectus.
All authority herein conferred or agreed to be conferred by this Notice
of Guaranteed Delivery shall survive the death, bankruptcy or incapacity of the
undersigned and every obligation of the undersigned under this Notice of
Guaranteed Delivery shall be binding upon the heirs, personal representatives,
executors, administrators, successors, assigns, trustees in bankruptcy and other
legal representatives of the undersigned.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- ---------------------------------------------------------------------------------------------------------------
<S> <C>
Signature(s) of Registered Owner(s) or Name(s) of Registered Holder(s):
Authorized Signatory:
----------------------- -------------------------------------------------
- ------------------------------------------- -------------------------------------------------
Principal Amount of Old Notes Tendered: Address(es):
-------------------------------------
- ------------------------------------------- -------------------------------------------------
Certificate No(s). of Old Notes (if available): Area Code and Telephone No.:
- ------------------------------------------- -------------------------------------------------
Date:
- ------------------------------------------- -------------------------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered
holder(s) of Old Notes exactly as its (their) name(s) appear on certificates for
Old Notes or on a security position listing the owners of Old Notes, or by
person(s) authorized to become registered Holder(s) by endorsements and
documents transmitted with this Notice of Guaranteed Delivery. If signature is
by a trustee, executor, administrator, guardian, attorney-in-fact, officer or
other person acting in a fiduciary or representative capacity, such person must
provide the following information.
PLEASE PRINT NAME(S) AND ADDRESS(ES)
Name(s):
------------------------------------------------------------------
Capacity: ------------------------------------------------------------------
------------------------------------------------------------------
Address(es): ------------------------------------------------------------------
------------------------------------------------------------------
DO NOT SEND OLD NOTES WITH THIS FORM. OLD NOTES SHOULD BE SENT TO THE
EXCHANGE AGENT TOGETHER WITH A PROPERLY COMPLETED AND DULY
EXECUTED LETTER OF TRANSMITTAL.
- --------------------------------------------------------------------------------
<PAGE> 3
- --------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc., a
commercial bank or trust company having an office or corespondent in the United
States or an "eligible guarantor institution" as defined by Rule 17Ad-15 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act") (any of the
foregoing hereinafter referred to as an "Eligible Institution"), hereby (a)
represents that each holder of Old Notes on whose behalf this tender is being
made "own(s)" the Old Notes covered hereby within the meaning of Rule 14e-4
under the Exchange Act, (b) represents that such tender of Old Notes complies
with such Rule 14e-4, and (c) guarantees that, within three New York Stock
Exchange trading days from the date of this Notice of Guaranteed Delivery, a
properly completed and duly executed Letter of Transmittal (or a facsimile
thereof), together with certificates representing the Old Notes covered hereby
in proper form for transfer and required documents will be deposited by the
undersigned with the Exchange Agent.
THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF
TRANSMITTAL AND OLD NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME
SET FORTH ABOVE AND THAT FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE
UNDERSIGNED.
Name of Firm: Authorized Signature:
--------------------------
Address:
-------------------------- -----------------------------------
Name:
-------------------------- -----------------------------
Area Code and Telephone No.: Title:
----------- -----------------------------
Date:
-----------------------------
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 99(c)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens (i.e.,
000-00-0000). Employer identification numbers have nine digits separated by
only one hyphen (i.e., 00-0000000). The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY OR EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT NUMBER OF
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. An individual's account................................. The individual
2. Two or more individuals (joint account)................. The actual owner of the account or, if combined
funds, any one of the individuals(1)
3. Husband and wife (joint account)........................ The actual owner of the account or, if joint funds,
either person(1)
4. Custodian account of a minor (Uniform Gift
to Minors Act)........................................ The minor(2)
5. Adult and minor (joint account)......................... The adult or, if the minor is the only contributor,
the minor(1)
6. Account in the name of guardian or committee for a
designated ward, minor or incompetent person.......... The ward, minor or incompetent person (3)
7. a. The usual revocable savings trust account
(grantor is also trustee)......................... The grantor-trustee(1)
b. So-called trust account that is not a legal
or valid trust under state law.................... The actual owner(1)
8. Sole proprietorship account............................. The owner(4)
9. A valid trust, estate or pension trust.................. The legal entity(5) (Do not furnish the identifying
number of the personal representative or trustee
unless the legal entity itself is not designated in the
account title.)
10. Corporate account....................................... The corporation
11. Religious, charitable or educational organization
account............................................... The organization
12. Partnership account..................................... The partnership
13. Association, club or other tax-exempt
organization.......................................... The organization
14. A broker or registered nominee.......................... The broker or nominee
15. Account with the Department of Agriculture in the
name of a public entity (such as a state or local
government, school district or prison) that
receives agricultural program payments................ The public entity
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- ---------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate or pension
trust.
Note: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE> 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know
your number, obtain Form SS-5, Application for A Social Security Number Card,
or Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
-- A corporation.
-- A financial institution.
-- An organization exempt from tax under Section 501(a) of the
Internal Revenue Code or an individual retirement plan.
-- The United States or any agency or instrumentality thereof.
-- A State, the District of Columbia, a possession of the
United States or any subdivision or instrumentality thereof.
-- A foreign government, a political subdivision of a foreign
government or any agency or instrumentality thereof.
-- An international organization or any agency or
instrumentality thereof.
-- A dealer in securities or commodities required to register
in the United States or a possession of the United States.
-- A real estate investment trust.
-- A common trust fund operated by a bank under Section 584(a)
of the Internal Revenue Code.
-- An exempt charitable remainder trust or a non-exempt trust
described in Section 4947(a)(1) of the Internal Revenue Code.
-- An entity registered at all times under the Investment
Company Act of 1940.
-- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
-- Payments to nonresident aliens subject to withholding under
Section 1441 of the Internal Revenue Code.
-- Payments to partnerships not engaged in a trade or business
in the United States and which have at least one nonresident
partner.
-- Payments of patronage dividends where the amount renewed is
not paid in money.
-- Payments made by certain foreign organizations.
-- Payments made to a nominee.
<PAGE> 3
Payments of interest not generally subject to backup withholding include the
following:
-- Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this
interest is $600 or more and is paid in the course of the
payer's trade or business and you have not provided your
correct taxpayer identification number to the payer.
-- Payments of tax-exempt interest (including exempt-interest
dividends under Section 852 of the Internal Revenue Code).
-- Payments described in Section 6049(b)(5) of the Internal
Revenue Code to non-resident aliens.
-- Payments on tax-free covenant bonds under Section 1451 of the
Internal Revenue Code.
-- Payments made by certain foreign organizations.
-- Payments made to a nominee.
Exempt payees described above must still complete the Substitute Form
W-9 enclosed herewith to avoid possible erroneous backup withholding. FILE THIS
FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE EXEMPT
ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE
INTEREST, DIVIDENDS OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends and patronage
dividends, that are not subject to information reporting are also not subject
to backup withholding. For details, see the regulations under Sections 6041,
6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N of the Internal Revenue Code.
PRIVACY ACT NOTICE. Section 6109 of the Internal Revenue Code requires
most recipients of dividend, interest, or other payments to give taxpayer
identification numbers to payers who must report the payments to the Internal
Revenue Service. The Internal Revenue Service uses the numbers for
identification purposes and to help verify the accuracy of the recipient's tax
return. Payers must be given the numbers whether or not recipients are required
to file tax returns. Payers must generally withhold 31% of taxable interest,
dividend and certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.
If you fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure which is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO
WITHHOLDING. If you make a false statement with no reasonable basis which
results in no imposition of backup withholding, you are subject to a penalty of
$500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
<PAGE> 1
EXHIBIT 99(d)
POWERTEL, INC.
OFFER TO EXCHANGE
ITS
11 1/8% SENIOR NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/8% SENIOR NOTES DUE 2007
TO: BROKERS, DEALERS, COMMERCIAL BANKS,
TRUST COMPANIES AND OTHER NOMINEES:
Powertel, Inc. (the "Company") is offering to exchange (the "Exchange
Offer"), upon and subject to the terms and conditions set forth in the
Prospectus dated , 1997 (the "Prospectus") and the enclosed Letter
of Transmittal (the "Letter of Transmittal"), its registered 11 1/8% Senior
Notes Due 2007 (the "New Notes") for any and all of its outstanding 11 1/8%
Senior Notes Due 2007 (the "Old Notes"). The Exchange Offer is being made in
order to satisfy certain obligations of the Company contained in the
Registration Rights Agreement dated as of June 10, 1997 between the Company
and the other signatories thereto.
We are requesting that you contact your clients for whom you hold Old
Notes regarding the Exchange Offer. For your information and for forwarding to
your clients for whom you hold Old Notes registered in your name or in the name
of your nominee, or who hold Old Notes registered in their own names, we are
enclosing the following documents:
1. Prospectus dated , 1997;
2. The Letter of Transmittal for your use and for the information of
your clients;
3. A Notice of Guaranteed Delivery to be used to accept the Exchange
Offer if certificates for Old Notes are not immediately available or time will
not permit all required documents to reach the Exchange Agent prior to the
Expiration Date (as defined below) or if the procedure for book-entry transfer
cannot be completed on a timely basis;
4. A form of letter which may be sent to your clients for whose account
you hold Old Notes registered in your name or the name of your nominee, with
space provided for obtaining such clients' instructions with regard to the
Exchange Offer;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. Return envelopes addressed to Bankers Trust Company, the Exchange
Agent, for the Old Notes.
YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00
P.M., NEW YORK CITY TIME, ON , 1997 (THE "EXPIRATION DATE"), UNLESS
EXTENDED BY THE COMPANY. THE OLD NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER
MAY BE WITHDRAWN AT ANY TIME BEFORE 5:00 P.M., NEW YORK CITY TIME, ON THE
EXPIRATION DATE IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH IN THE LETTER OF
TRANSMITTAL.
To participate in the Exchange Offer, a duly executed and properly
completed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees and any other required documents, should be sent to the
Exchange Agent and certificates representing the Old Notes should be delivered
to the Exchange Agent, all in accordance with the instructions set forth in the
Letter of Transmittal and Prospectus.
<PAGE> 2
If holders of Old Notes wish to tender, but it is impracticable for
them to forward their certificates for Old Notes prior to the expiration of the
Exchange Offer or to comply with the book-entry transfer procedures on a timely
basis, a tender may be effected by following the guaranteed delivery procedures
described in the Prospectus under "The Exchange Offer -- Terms of the Exchange
Offer -- Guaranteed Delivery Procedures."
The Company will, upon request, reimburse brokers, dealers, commercial
banks and trust companies for reasonable and necessary costs and expenses
incurred by them in forwarding the Prospectus and the related documents to the
beneficial owners of Old Notes held by them as nominee or in a fiduciary
capacity. The Company will pay or cause to be paid all stock transfer taxes
applicable to the exchange of Old Notes pursuant to the Exchange Offer, except
as set forth in Instruction 4 of the Letter of Transmittal.
Any inquiries you may have with respect to the Exchange Offer, or
requests for additional copies of the enclosed materials, should be directed to
the Exchange Agent for the Old Notes, at its address and telephone number set
forth on the front of the Letter of Transmittal.
Very truly yours,
POWERTEL, INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
OTHER PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU
OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF
EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL.
Enclosures
<PAGE> 1
EXHIBIT 99(e)
POWERTEL, INC.
OFFER TO EXCHANGE
ITS
11 1/8% SENIOR NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/8% SENIOR NOTES DUE 2007
To Our Clients:
Enclosed for your consideration are the Prospectus dated ,
1997 (the "Prospectus") and the related Letter of Transmittal (which together
with the Prospectus constitute the "Exchange Offer") in connection with the
offer by Powertel, Inc., a Delaware corporation (the "Company"), to exchange its
11 1/8% Senior Notes due 2007 (the "New Notes") for any and all of its
outstanding 11 1/8% Senior Notes due 2007 (the "Old Notes"), upon the terms and
subject to the conditions set forth in the Exchange Offer.
We are the registered holder of Old Notes held for your account. An
exchange of the Old Notes can be made only by us as the registered holder and
pursuant to your instructions. The Letter of Transmittal is furnished to you for
your information only and cannot be used by you to exchange the Old Notes held
by us for your account. The Exchange Offer provides a procedure for holders to
tender by means of guaranteed delivery.
We request information as to whether you wish us to exchange any or all
of the Old Notes held by us for your account upon the terms and subject to the
conditions of the Exchange Offer.
Your attention is directed to the following:
1. The New Notes will be exchanged for the Old Notes at the rate of
$1,000 principal amount of New Notes for each $1,000 principal amount of Old
Notes. The New Notes will bear interest (as do the Old Notes) at a rate equal to
111/8% per annum from their date of issuance. Interest on the New Notes is
payable semi-annually on June 1 and December 1, commencing December 1, 1997.
Holders of Old Notes that are accepted for exchange will receive, in cash,
accrued interest thereon to, but not including, the date of issuance of the New
Notes. Such interest will be paid with the first interest payment on the New
Notes. Interest on the Old Notes accepted for exchange will cease to accrue on
the day prior to the issuance of the New Notes. The form and terms of the New
Notes are the same in all material respects as the form and terms of the Old
Notes (which they replace) except that the New Notes have been registered under
the Securities Act of 1933, as amended (the "Securities Act").
2. Based on interpretations by the staff of the Securities and Exchange
Commission (the "SEC"), New Notes issued pursuant to the Exchange Offer in
exchange for Old Notes may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act or a "broker" or "dealer" registered under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) without compliance with the registration
and prospectus delivery provisions of the Securities Act provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such New Notes.
3. The Exchange Offer is not conditioned on any minimum principal
amount of Old Notes being tendered.
4. Notwithstanding any other term of the Exchange Offer, the Company
will not be required to accept for exchange, or exchange New Notes for, any Old
Notes not theretofore accepted for exchange, and may terminate or amend the
Exchange Offer as provided herein before the acceptance of such Old Notes, if
any of the conditions described in the Prospectus under "The Exchange Offer --
Conditions of the Exchange Offer" exist.
5. Tendered Old Notes may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on , 1997 by following the procedures set forth
in the Letter of Transmittal.
<PAGE> 2
6. Any transfer taxes applicable to the exchange of the Old Notes
pursuant to the Exchange Offer will be paid by the Company, except as otherwise
provided in Instruction 4 of the Letter of Transmittal.
If you wish to have us tender any or all of your Old Notes, please so
instruct us by completing, detaching and returning to us the instruction form
attached hereto. An envelope to return your instructions is enclosed. If you
authorize a tender of your Old Notes, the entire principal amount of Old Notes
held for your account will be tendered unless otherwise specified on the
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf by the Expiration Date.
The Exchange Offer is not being made to, nor will tenders be accepted
from or on behalf of, holders of the Old Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable securities law.
<PAGE> 3
POWERTEL, INC.
OFFER TO EXCHANGE
ITS
11 1/8% SENIOR NOTES DUE 2007
FOR ANY AND ALL OF ITS OUTSTANDING
11 1/8% SENIOR NOTES DUE 2007
INSTRUCTION TO REGISTERED HOLDER FROM BENEFICIAL OWNER
The undersigned acknowledge(s) receipt of your letter and the enclosed
Prospectus and the related Letter of Transmittal in connection with the Exchange
Offer by the Company to exchange New Notes for Old Notes.
This will instruct you to tender the principal amount of Old Notes
indicated below held by you for the account of the undersigned, upon the terms
and subject to the conditions set forth in the Prospectus and the related Letter
of Transmittal.
The undersigned represents that: (i) the New Notes acquired pursuant to
the Exchange Offer are being obtained in the ordinary course of its business;
(ii) it is not participating, does not intend to participate, and has no
arrangement or understanding with any person to participate, in the distribution
of such New Notes; and (iii) it is not an "affiliate," as defined under Rule 405
of the Securities Act, of the Company or, if it is an affiliate, that it will
comply with the registration and prospectus delivery requirements of the
Securities Act to the extent applicable.
If the undersigned is a "broker" or "dealer" registered under the
Exchange Act that acquired Old Notes for its own account pursuant to its
market-making or other trading activities (other than Old Notes acquired
directly from the Company), the undersigned understands and acknowledges that it
may be deemed to be an "underwriter" within the meaning of the Securities Act
and, therefore, must deliver a prospectus relating to the New Notes meeting the
requirements of the Securities Act in connection with any resales by it of New
Notes acquired for its own account in the Exchange Offer. Notwithstanding the
foregoing, the undersigned does not thereby admit that it is an "underwriter"
within the meaning of the Securities Act.
You are hereby instructed to tender all Old Notes held for the account
of the undersigned unless otherwise indicated below:
[ ] Do not tender any Old Notes.
[ ] Tender Old Notes in the principal amount of ________________.
SIGNATURE:
--------------------------------------------
Name of Beneficial Owner (please print)
By:
---------------------------------------
Signature
---------------------------------------
Address
---------------------------------------
Zip Code
---------------------------------------
Area Code and Telephone Number
Dated: , 1997
---------------------------
